##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549




---

Form 10-K

|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934    
|  
|   |  | For the fiscal year ended December 31,
    2003                                             
|  
|OR
|  
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR
    15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-25849



---

OneSource Information Services, Inc.

(Exact name of registrant as specified in its
charter)


|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|Delaware                                                           |  | 04-3204522                              
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer
    Identification No.)

300 Baker Avenue Concord, MA 01742


(Address of principal executive offices,
including zip code)


Registrants telephone number, including
area code:

(978) 318-4300


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

None


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

Common Stock, par value $0.01 per
share


Rights to purchase Series A Junior
Participating Preferred 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 þ          No o

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. o

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

The aggregate
market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the
common equity was last sold, or the average bid and asked price
of such common equity, as of the last business day of the most
recently completed second fiscal quarter (June 30, 2003)
was approximately $52 million.

As of
March 18, 2004,the Registrant had 11,647,768 shares
of common stock outstanding, $.01 par value.

DOCUMENTS INCORPORATED BY REFERENCE:

OneSource
Information Services, Inc. (OneSource) intends to
file its proxy statement pursuant to Regulation 14A within
120 days of the end of the fiscal year ended
December 31, 2003. Portions of the proxy statement are
incorporated by reference into Part III of this Form 10-K.
In addition, OneSource has filed a Registration Statement on
Form S-1, File No. 333-73263.



---






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TABLE OF CONTENTS

|                                                   |  |                                                                                                                       |    |      |    | 
|-------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                                                   |  |                                                                                                                       |    | Page
|                                                   |  |                                                                                                                       |    |     
|PART I                                            
|Item 1.                                            |  | Business                                                                                                              |    |      | 2  | 
|Item 2.                                            |  | Properties                                                                                                            |    |      | 13 | 
|Item 3.                                            |  | Legal Proceedings                                                                                                     |    |      | 13 | 
|Item 4.                                            |  | Submission of Matters to a
    Vote of Security Holders                                                               |    |      | 13 | 
|PART II                                           
|Item 5.                                            |  | Market for Registrants
    Common Equity, Related Stockholder Matters, and Issuer Purchases
    of Equity Securities |    |      | 14 | 
|Item 6.                                            |  | Selected Financial Data                                                                                               |    |      | 15 | 
|Item 7.                                            |  | Managements Discussion
    and Analysis of Financial Condition and Results of Operations                             |    |      | 16 | 
|Item 7A.                                           |  | Quantitative and Qualitative
    Disclosure About Market Risk                                                         |    |      | 38 | 
|Item 8.                                            |  | Financial Statements and
    Supplementary Data                                                                       |    |      | 38 | 
|Item 9.                                            |  | Changes in and Disagreements
    With Accountants on Accounting and Financial Disclosure                              |    |      | 39 | 
|Item 9A.                                           |  | Controls and Procedures                                                                                               |    |      | 39 | 
|PART III                                          
|Item 10.                                           |  | Directors and Executive
    Officers of the Registrant                                                                |    |      | 39 | 
|Item 11.                                           |  | Executive Compensation                                                                                                |    |      | 39 | 
|Item 12.                                           |  | Security Ownership of
    Certain Beneficial Owners and Management and Related Stockholder
    Matters                |    |      | 39 | 
|Item 13.                                           |  | Certain Relationships and
    Related Transactions                                                                    |    |      | 39 | 
|Item 14.                                           |  | Principal Accountant Fees
    and Services                                                                            |    |      | 40 | 
|PART IV                                           
|Item 15.                                           |  | Exhibits, Financial
    Statement Schedules, and Reports on Form 8-K                                                  |    |      | 40 | 
|Signatures                                         |  |                                                                                                                       | 44 |     
|EX-10.15 Agreement with Silicon Valley Bank 1/8/04
|EX-10.16 Form of Change of Control Agreement      
|EX-14.01 Code of Business Conduct and Ethics      
|EX-23.02 Consent of PricewaterhouseCoopers LLP    
|EX-31.01 Section 302 CEO Certification            
|EX-31.02 Section 302 CFO Certification            
|EX-32.01 Section 906 CEO Certification            
|EX-32.02 Section 906 CFO Certification            



1



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##### Table of Contents






PART I




Item 1.     Business

Except for historical information contained
herein, the matters discussed in this Annual Report on
Form 10-K are forward-looking statements that involve risks
and uncertainties. OneSource makes such forward-looking
statements under the provision of the Safe Harbor
section of the Private Securities Litigation Reform Act of 1995.
Any forward-looking statements should be considered in light of
the factors described below in Part II, Item 7 under
Certain Factors that May Affect Future Results.
Actual results may vary materially from those projected,
anticipated or indicated in any forward-looking statements. In
this Annual Report on Form 10-K, the words
anticipates, believes,
expects, intends, future,
could, and similar words or expressions (as well as
other words or expressions referencing future events, conditions
or circumstances) identify forward-looking statements.

General

OneSource provides primarily Web-based business
and financial information products to professionals who need
quick access to timely and reliable company, industry, and
market intelligence. OneSources primary products, the
OneSource® Business BrowserSM products, are
password-protected, subscription-based products that provide
sales, marketing, finance, and management professionals and
consultants with industry and company profiles, research
reports, media accounts, executive listings and biographies, and
financial information on over 1.7 million public and
private companies. OneSource customers access this information
over the Internet using standard Web browsers. As a Web-based
solution, the Business Browser product line does not require the
purchase of additional computer hardware by the customer.
OneSource also distributes its CorpTech® high-technology
company database as part of the Business Browser product line,
as part of a separate Web-based product, as part of CD Roms, as
printed directories, and through third party distributors. In
addition, OneSource provides fee-based consulting services to
customers who seek to integrate content from OneSource products
into their internal software platforms and applications such as
intranets, portals, and customer relationship management
systems. These fee-based services include helping customers
apply OneSources proprietary classification system, the
Global Business TaxonomyTM system, which organizes
and links customers internal data with content from
OneSource products, and assisting customers in designing and
building customer information applications.

OneSource uses the Global Business Taxonomy
system to associate, link, and integrate over
2,500 disparate sources of information on public and
private companies worldwide that are made available from more
than 30 information providers and the OneSource CorpTech
high-technology database. Each information source provides its
database to OneSource with identifiers for companies unique to
that source. The information providers provide both textual
information, such as news, business and trade articles, SEC
filings, executive listings and profiles, industry intelligence,
and analyst reports; and numeric information, such as company
financial statements, financial ratios, stock quotes, and
industry statistics.

The OneSource product line also includes the
AppLinkSM software development kit. The Applink
software development kit lets OneSource customers access content
from OneSource Business Browser products in HTML and XML formats
via their internal applications. These customer applications may
be internally developed or utilize third party software, and
typically apply to corporate intranets, portals, or customer
relationship platforms. OneSource has formed a number of
alliances to enhance the integration and marketing of content
from Business Browser products with third party software
platforms. OneSource believes that the capability of its
customers to access, use, and integrate information from
Business Browser products with their own internal applications
is an important trend and requirement.

OneSource products and services are designed to
address the information needs of leading professional and
financial services firms, technology companies, and other large
organizations. OneSources primary target market consists
of Global 5000 business-to-business companies in the technology,
professional services, and financial services industries with at
least 500 employees and $250 million or more in sales, and
that employ large direct sales forces. Representative customers
include Deloitte & Touche LLP, Hewlett Packard

2



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Company, Oracle Corporation, Bank One
Corporation, and Sun Microsystems, Inc. OneSource customers use
the OneSource products for such purposes as account prospecting
and management (i.e., business development), competitive and
peer analysis, company tracking and monitoring, and company and
industry research.


As of December 31, 2003, 750 organizations
subscribed to the Business Browser product line, compared to 812
organizations as of December 31, 2002. Customers for
Business Browser products had an average annualized contract
value of $70,297 per customer as of December 31, 2003,
compared to an average annualized contract value of $69,058 per
customer as of December 31, 2002. As of December 31,
2003, 45 organizations licensed the AppLink software
development kit compared to 51 organizations as of
December 31, 2002. Customers for the AppLink software
development kit generated, on average, approximately $380,000
and $345,000 each in annualized contract value as of
December 31, 2003 and 2002, respectively.

The aggregate annualized contract value of
Business Browser product contracts was $52.7 million as of
December 31, 2003 and $56.1 million as of
December 31, 2002. Of this $52.7 million,
$47.6 million was attributable to those customers that were
under contract as of both December 31, 2002 and 2003. The
renewal rate for subscribers of the Business Browser product
line as of December 31, 2003 was 78% calculated on a dollar
basis, whereas the renewal rate for those subscribers to the
AppLink software development kit as of December 31, 2003
was 81% calculated on a dollar basis (annualized contract value
is described in more detail in Part II,
Item 7  Managements Discussion and
Analysis of Financial Condition and Results of Operations).

OneSources business is not seasonal to any
significant extent. As a percentage of total invoiced fees,
invoiced fees in the fourth quarter of the fiscal year have
exceeded invoiced fees in other quarters for the corresponding
fiscal year. However, this percentage does not represent
seasonality to any significant extent. During the fourth quarter
of fiscal years 2003, 2002, and 2001, OneSource invoiced 36%,
34%, and 31% of total invoiced fees for each fiscal year,
respectively. OneSource attributes this primarily to the
budgeting cycles of its customers.

OneSources principal executive offices are
located at 300 Baker Avenue, Concord, Massachusetts, 01742, and
its telephone number is (978) 318-4300. OneSources
common stock is traded on the NASDAQ National Market System
under the symbol ONES. OneSources Internet
address is www.onesource.com, and OneSource maintains a
website at that address. OneSource makes available on or through
its website, without charge, its annual reports on
Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and amendments to those reports on the
day such material is electronically filed with the United States
Securities and Exchange Commission or if not reasonably
practical on that day, on the first business day following
electronic filing with the United States Securities and Exchange
Commission.

Recent Significant Developments

On October 3, 2003, OneSource announced that
it had received an unsolicited letter from ValueAct Capital
Partners, L.P. and its affiliates (ValueAct
Capital) expressing an interest in acquiring
OneSources business. OneSources board of directors
subsequently formed a special committee of outside directors to
evaluate OneSources strategic options to maximize
shareholder value. The special committee engaged Morgan Stanley
& Co. and Portico Capital Securities LLC to assist it in
this review. On January 13, 2004, ValueAct Capital amended
its Schedule 13D indicating that it was not in a position
to refresh its level of interest until OneSource announced its
fourth quarter and year-end 2003 financial results.

On February 5, 2004, OneSource announced
that as part of the special committees evaluation of
strategic options, discussions were held with potential
acquirers, and the future operating plans and prospects of
OneSource were reviewed. A number of organizations expressed
interest in OneSource, but none of these discussions led to a
final offer to acquire OneSource. As a result, the special
committee concluded its active evaluation of strategic options.
In connection with this review of strategic options, both the
board of directors and Dan Schimmel, president and chief
executive officer and director of OneSource, determined that new
executive leadership would be in the best interest of OneSource
and its shareholders. As a result, OneSource accepted the
resignation of Dan Schimmel effective as of February 5,
2004. OneSources current chairman Martin Kahn was
appointed executive chairman and chief executive officer on an
interim basis.

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On February 9, 2004, OneSource announced
that it received a letter from ValueAct Capital indicating that
it was prepared to offer to acquire all of the outstanding
shares of OneSource not already owned by ValueAct Capital at a
cash price of $8.10 per share on the terms and conditions
contained in a merger agreement enclosed with the letter.

On February 18, 2004, OneSource announced
that it had entered into a merger agreement with affiliates of
ValueAct Capital. Under the agreement, each share of common
stock of OneSource outstanding at the time of the merger (other
than shares held by ValueAct Capital), will be converted into
the right to receive $8.40 per share in cash. ValueAct Capital
held an approximate 32% ownership interest in OneSource,
according to its filing on February 9, 2004 with the
Securities and Exchange Commission. The transaction is expected
to close in the second quarter of 2004. On February 17,
2004, OneSources Rights Agreement with American Stock
Transfer & Trust Company, dated as of October 7, 2003,
was amended to exempt the proposed transaction.

During the first quarter of 2004, OneSource
incurred approximately $0.5 million to $0.7 million in
expenses in connection with the execution of the merger
agreement with affiliates of ValueAct Capital. These expenses
include legal fees, accounting fees, and compensation for
members of the special committee. In addition, severance costs
for OneSources previous chief executive officer, which
were recorded in the first quarter of 2004, include cash
payments of approximately $0.5 million and non-cash
compensation expense of $56,000 related to the modification of
stock options.

Industry Trends

During the past several years, the direct access
to, and the purchasing decisions for, business information
products have increasingly migrated from centralized information
specialists to core operating functions in corporations. This
has led to the availability of more information products
throughout corporations and has increased direct access to these
products by end-users.

The spread of information products throughout
corporations has created opportunities for companies with
knowledge of business information and the requisite skills and
experience in integrating such information to assist customers
in better leveraging their internal and external information
sources. It has also empowered end-users to require that
information products are designed and developed to work with
their existing applications and business processes, and that the
information itself is the most relevant to perform their
functions.

This underlying trend is directly affected by the
substantial investments that corporations have made in various
software applications such as customer relationship management
platforms, enterprise information portals, and various desktop
applications. Business information solutions now must be
designed to consider these applications of choice as the
prerequisite user work modes and environments. OneSource
believes that the companies that solve these particular problems
of delivering products and services that operate effectively
with these third party applications and that satisfy the data
requirements of end-users functions will ultimately
succeed and be the leaders in the business information industry.

Business Strategy

OneSources goal is to be the leading
provider of business information solutions to Global 5000
companies. It plans to achieve that goal through a number of
core business strategies as follows:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Evolve and develop products that support the
    functions, applications, and business processes of
    end-users.OneSources product
    strategy is to provide end-users with the information they need,
    when they need it, and in the applications they use. OneSource
    believes that the productivity and efficiency of workers such as
    sales people, loan officers, and management consultants are
    enhanced with time saved or additional revenue earned through
    the use of effective, easy-to-use, and customizable business
    information products. Two primary themes drive OneSources
    product strategy:



| |   |                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Continue to enhance Business Browser
    products Today, Business
    Browser products comprise the majority of Web-based revenues. In
    2003, OneSource added an Executives module to help

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | end-users better search and find executive names
    in the Business Browser products. In addition, OneSource
    enhanced the export function and the support for and breadth of
    corporate relationships contained in the Business Browser
    product line. OneSource also expanded the volume of company
    profiles, executives, and industry information in the Business
    Browser products and introduced an enhanced offering for UK
    financial and professional services customers. OneSource
    expects to continue to selectively invest in Business Browser
    products to provide new features, functions, and content.                                                                               
|
| |  | Introduce evolved and new
    products At the same time
    while serving Business Browser customers, OneSource will
    continue to evolve and introduce products that address the needs
    of customers who seek solutions that are flexible and
    customizable and that integrate with the software applications,
    business processes, and tasks of end-users. During the past
    year, OneSource introduced an XML-based version of the AppLink
    software development kit and the new CatalystSM
    modules that support Siebel eBusiness and Microsoft Office
    software applications. OneSource expects evolved and new
    products to contribute an increasing portion of future revenues
    and growth.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Provide the right and best information content
    in support of the roles and requirements of
    end-users.OneSource spends
    considerable time in acquiring, integrating, and managing its
    content sources and ensuring that critical fields of data such
    as executive and financial data are available to serve the
    specific roles and tasks of end-users. Despite the amount of
    information available through the Internet, OneSource believes
    that business professionals seek, and will pay for, high quality
    data that will both save time and enhance decision-making.
    Therefore, OneSource considers information quality to be a high
    priority, and OneSource strives to obtain accurate, complete,
    and timely information. During the past year, OneSource took
    steps both on its own and with its data suppliers to add to the
    breadth, depth, and quality of the content in its products.                                                                                                                                                                                                                                                                          
|
| |  | Continue to leverage OneSources core
    competency in integrating company-related business
    information.The OneSource Global
    Business Taxonomy system allows OneSource to easily and
    effectively classify business information and tie together
    internal and external sources of business information. In 2003,
    OneSource implemented a new text-based tagging convention as
    part of the Global Business Taxonomy system. This new capability
    provides users the ability to search and receive more
    information related to such categories as topics, industries,
    executives, and geographies. OneSource plans to continue to
    extend the capabilities of the Global Business Taxonomy system.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | Align and train sales, marketing, and customer
    support teams to optimally serve OneSources primary target
    market.During the last two years,
    OneSource has taken a number of steps to enhance how its sales,
    marketing, and support teams serve Global 5000 customers. This
    included focusing the sales, marketing, and support teams on the
    high technology, professional services, and financial services
    industries. Sales representatives and product marketing managers
    with respective experience in selling and marketing to these
    industries were recruited during the past year to better serve
    OneSources primary target market. In addition, in 2003,
    OneSources professional services consulting team began
    building and deploying applications that integrate content from
    the Business Browser products with customers systems,
    data, and applications. Further, OneSources customer
    support team initiated a number of campaigns with existing
    customers to enhance product usage, including offering more
    training programs and initiatives to help ensure customers
    maximize the value of their OneSource products and solutions.

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Products

The OneSource Business Browser product line is
designed to be a comprehensive, efficient, and easy-to-use
business and financial information resource for professionals
who require quick access to reliable company, industry, and
market intelligence. OneSource customers generally use the
Business Browser products for such purposes as account
prospecting and management (i.e., business development),
competitive and peer analysis, company tracking and monitoring,
and company and industry research.

The Business Browser products integrate over
2,500 sources of business information from more than
30 business and financial information providers. These
sources include textual information, such as company profiles,
news, business and trade articles, SEC filings, executive
listings and biographies, industry intelligence, and analyst
reports; and numeric information, such as company financial
statements, stock quotes, and industry statistics. OneSource
uses its Global Business Taxonomy system to sort, categorize,
link, and integrate information on over 1.7 million
worldwide public and private companies.

Business Browser products are accessible to
licensed users through a standard Web browser that is readily
available and generally familiar to users. OneSource customers
require minimal installation and systems support, and users can
access the Business Browser products at any time via the
Internet. In addition, the AppLink software development kit and
Catalyst modules enable licensed subscribers the option to
access Business Browser content via their corporate intranets,
portals, or customer relationship platforms.

OneSource concentrates on the functional uses of
the business and financial information that it integrates and
makes available to users. The Business Browser product line has
been designed for use not only by traditional users of business
information, but also throughout an organization, including
sales forces, professional service and consulting staffs,
marketing and new business development executives, financial
analysts, and purchasing personnel. OneSource applies its
knowledge of how business professionals use information in order
to transform raw, disparate data into information that is
integrated, meaningful, and actionable. OneSource specializes in
integrating and presenting information in such a manner that the
user can efficiently interpret, analyze, and problem solve.
OneSource uses the feedback of its users in deriving and
enhancing its products user interface and functionality in
order to make its products easy to use, and to enable users to
become productive quickly with minimal training.

The Business Browser product line delivers
information in an integrated format. This allows customers to
obtain different types of information from multiple sources
through a single, easy-to-use interface. Business Browser
products organize data around business applications, and
transform raw, disparate data into meaningful, actionable
information, delivered according to the characteristics that
users have defined and in the custom formats, tables, and
reports that users require. Users that wish to perform detailed
analysis can also easily transfer certain quantitative data into
spreadsheets or other desktop tools, such as contact management
software.

Examples of some of the core functions of the
Business Browser product line are as follows:



| |   |                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------
| |  | profile a public or private company for a
    business summary, current news, financial reports, corporate
    affiliations, and executive listings;
|
| |  | research an industry to measure a market, list
    major participants, or review articles or reports on market
    share and trends;                
|
| |  | identify companies by industry, geography, size,
    or other key characteristics;                                                                  
|
| |  | research a topic and find the latest news,
    analyst reports, and trade information;                                                              
|
| |  | learn whos who in the executive arena; and                                                                                                         
|
| |  | track the latest news and product information on
    competitors.                                                                                   

The Business Browser product line is generally
available to a specified number of users in a customer
organization at a fixed annual subscription fee that declines on
a per-user basis as the total number of users

6



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##### Table of Contents



increases. OneSource also offers an
enterprise-wide license that allows for an unlimited number of
Business Browser product users within the customers
organization for a fixed annual subscription fee.


The Business Browser product line includes:

GLOBAL BUSINESS BROWSER. Global Business Browser
was introduced because business professionals require global
perspectives to complement detailed coverage of local markets.
Global Business Browser is available in four editions. Global
Business Browser  US Edition is an integrated
information resource that delivers integrated information on
over 435,000 North American and global companies. Global
Business Browser  European Edition includes both
European and global content with over 488,000 companies
profiled. Global Business Browser  UK Edition is an
integrated resource including both United Kingdom and global
content with more than 500,000 companies profiled. Global
Business Browser  Asia Pacific Edition is an
integrated resource including both Asia Pacific and global
content with approximately 346,000 companies profiled.

US BUSINESS BROWSER. US Business Browser is
focused specifically on public and private companies in the
United States and Canada. It contains a subset of business,
financial, and industry information from Global Business
Browser  US Edition. It covers approximately 339,000
public and private companies in the United States and Canada.
OneSource makes available in-depth content on approximately
3,600 Canadian companies for an additional subscription fee.
OneSource also makes available in-depth content on approximately
295,000 small and mid-market United States and Canadian
companies for an additional subscription fee.

EUROPEAN BUSINESS BROWSER. European Business
Browser provides users with an integrated database on more than
405,000 public and private companies across Europe, including
approximately 50,000 United Kingdom companies. It contains
a subset of business, financial, and industry information from
Global Business Browser  European Edition. European
Business Browser is available in two configurations, European
Business Browser Select and European Business Browser Standard.
European Business Browser Select comprises a subset of the
content and functionality that European Business Browser
Standard contains. European Business Browser Select contains a
fewer number of financial variables that are available for
screening purposes and financial information only for the
current year. European Business Browser Standard contains up to
3 years of detailed financial information for European
companies and up to 5 years for United Kingdom companies.

UK BUSINESS BROWSER. UK Business Browser is an
integrated source of information on up to 400,000 public and
private companies in the United Kingdom. It contains a subset of
business, financial, and industry information from Global
Business Browser  UK Edition. UK Business Browser is
available in two configurations, a 100,000 companies edition and
a 400,000 companies edition. OneSource makes available copies of
registered filings for approximately 2.0 million United
Kingdom public and private organizations at no additional
subscription fee. OneSource also makes available in-depth
content on approximately 60,000 United Kingdom public
sector and partnership entities for an additional subscription
fee. OneSource also makes available in-depth content that
details the information technology and telecommunications
infrastructure of approximately 25,000 United Kingdom companies
for an additional subscription fee.

US COMPANY BROWSER. US Company Browser is focused
specifically on public and private companies in the United
States and Canada. It comprises a subset of the business and
financial information and functionality that US Business Browser
contains. It covers approximately 339,000 companies in the
United States and Canada. OneSource also makes available
in-depth content on small and mid-market United States and
Canadian companies for an additional subscription fee.

Additional Applications

Three additional optional applications that are
available for Business Browser products for additional
subscription fees are as follows:

BUSINESS BROWSER AP. Business Browser AP is an
advanced Web-based quantitative analysis tool available as an
add-on option with all of the Business Browser products other
than European Business

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##### Table of Contents



Browser. Business Browser AP lets users screen
across a wide range of public company financial statement items,
ratios, growth rates, and other criteria. It also allows users
to produce detailed quantitative reports of their own design.
Business Browser AP also enhances the readability of documents
filed with the Securities and Exchange Commission by removing
confusing computer codes, formatting tables for easy viewing and
printing, and allowing users to export tables to spreadsheets.


APPLINK SOFTWARE DEVELOPMENT KIT. The AppLink
software development kit consists of software that allows
customers to easily access Business Browser content, such as
company profiles, news, business and trade articles, analyst
reports, executive biographies, industry intelligence, and
financial data, in HTML and XML formats without use of the
Business Browser product interface and for use with
customers intranet or other third party software
applications such as prospect and customer databases, sales
force automation tools, enterprise reporting software and
corporate Web applications. No special client software, other
than a standard Web browser and dedicated servers, are necessary.

CATALYST MODULES. The Catalyst modules consist of
software that allows customers to easily access Business Browser
content, such as company profiles, news, business and trade
articles, analyst reports, executive biographies, industry
intelligence, and financial data, in HTML and XML formats
without use of the Business Browser product interface and
primarily for use with Siebel and Microsoft software
applications.

Revenues contributed by Web-based products during
each of the last three fiscal years were as follows:
$55.4 million for the year ended December 31, 2003;
$55.7 million for the year ended December 31, 2002;
and $56.3 million for the year ended December 31,
2001. For the years ended December 31, 2003, 2002, and
2001, Web-based products were 97%, 96% and 95%, respectively, of
total revenues.

Other Products and Services

The CorpTech high-technology database is designed
to be a comprehensive, efficient, and easy-to-use source of
information on high-technology companies. The CorpTech
high-technology database provides in-depth profiles on more than
50,000 technology companies in the United States. The CorpTech
high-technology database is available via CD Rom and printed
directories and through a website located at
www.corptech.com. This website offers several options for
customers including downloadable report lists that are based on
such criteria as geography and companies of interest in a
particular industry, company profile reports on a pay-per-view
basis, and a subscription-based offering in which the fee varies
based on the functionality selected and whether the licensee is
a library or other entity type.

OneSource also provides fee-based consulting
services to customers who seek to integrate content from
Business Browser products into their internal software platforms
and applications such as intranets, portals, and customer
relationship management systems. These fee-based services
include helping customers to apply OneSources proprietary
classification system, which organizes and links customers
internal data with content from OneSource products, and
assisting customers in designing and building custom information
applications.

Product Development and Content

OneSource employs two teams, the Product
Development Team and the Content Team, which contribute to the
(i) commercialization, research, and development of
OneSource products and their underlying technology platforms,
and (ii) evaluation, licensing, integration, and management
of the data in the OneSource products.

The Product Development Team (formerly the
Products and Solutions Team) consists of product managers,
development engineers, quality assurance engineers, and
architects. Product managers specify the functionality, user
interface, product workflow, format and look of reports, and
information designated for the OneSource products. Product
managers also supervise the delivery and maintenance of the
OneSource products. Development engineers develop, deploy, and
maintain the functionality and core technologies of the
OneSource products. Quality assurance engineers ensure software
quality, monitor and analyze the software development process,
and recommend improvements. Development engineers and quality
assurance engineers work closely with product managers to ensure
that functionality and support requirements are understood,

8



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prioritized, and developed according to agreed
upon time frames and requirements. Architects provide overall
technical design and research and qualify third party software
such as database engines, operating systems and platforms, and
industry standards such as HTML, XML, and Simple Object Access
Protocol.


The Content Team consists of content managers,
content licensing personnel, content engineers, and content
integration specialists. Content managers analyze and evaluate
third party data sources for inclusion in OneSource products,
specify the business parameters for loading and integrating
data, and manage data vendor relationships. Content licensing
personnel negotiate redistribution terms with information
providers and maintain the business relationship. Content
engineers receive content feeds from information providers and
write data loaders based on content management specifications to
facilitate data integration into the OneSource products. Content
integration specialists maintain and enhance the Global Business
Taxonomy system, update corporate family and executive content,
and provide fee-based services to customers that seek to
integrate Business Browser content with their internal systems
and applications. The Content Team seeks to select the best
possible information providers for each type of content;
effectively standardize, integrate, and add value to this
content for the OneSource products; and strategically link each
item of information to all relevant company information included
in the OneSource products.

Operating expenses relating to platform and
product development during each of the last three fiscal years
were as follows: $10.6 million for the year ended
December 31, 2003; $10.0 million for the year ended
December 31, 2002; and $8.4 million for the year ended
December 31, 2001. For the year ended December 31,
2004, OneSource plans to decrease its spending in platform and
product research and development slightly compared to the prior
year. For the years ended December 31, 2003, 2002 and 2001,
capitalized software development costs which were primarily
associated with the development of OneSources new products
and platforms were $3.9 million, $1.9 million, and
$0.8 million, respectively. OneSource anticipates
capitalized software development costs will be approximately
$3.0 million to $3.5 million in 2004.

Information and Providers

OneSource Business Browser products integrate a
selection of financial, company, industry, executive, and
news-related content from over 2,500 sources, more than 30
information providers, and OneSources proprietary CorpTech
high-technology company database. OneSource enters into
contracts with its information providers in order to license
their information. These license agreements allow OneSource to
integrate and distribute the information as part of OneSource
on-line products.

OneSources contracts with its information
providers are generally for terms of at least one year and
automatically renew if not canceled by either party as of the
end of any term. In addition, these contracts allow for
termination under certain circumstances including contract
breaches. Certain limited contracts with information providers
also allow for the use of their information for a predetermined
period of time at no additional cost to OneSource after
termination of the contract. Royalties under OneSources
contracts with its information providers are typically
calculated as a fixed fee, as a flat percentage of the amount
that OneSource invoices its customers, or as a calculated fee
based upon revenue growth of OneSource products compared to
prior periods. Royalties are generally paid to information
providers on a quarterly basis.

The information contained in the OneSource
Business Browser products is updated at varying frequencies
depending on the nature of the data. For example, news-related
information is updated frequently throughout the day whereas
portions of the information databases on company and executive
profiles are updated on either a weekly, monthly, quarterly,
semi-annual, or annual basis. Regardless, OneSource attempts to
ensure that the information contained in its products is updated
no less frequently than each information provider makes the
information available to its own customers or to other
distributors.

Alternative supply sources generally exist for
the information that OneSource licenses from information
providers. However, consolidation in the information industry is
an ongoing trend, and there is no assurance that alternative
supply sources will continue to exist. The nature and relative
importance of any given database in the Business Browser
products varies. OneSource attempts to secure longer-term rights
for databases where alternative sources are limited. Some of the
companies that supply OneSource with information include the
United States and United Kingdom business units of Dun &
Bradstreet, Inc. (a subsidiary of The Dun &

9



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Bradstreet Corporation), The Gale Group (a
Thomson Corporation subsidiary), Thomson Financial, Inc. (a
Thomson Corporation subsidiary), and Reuters Research Inc. (a
subsidiary of Reuters Group PLC).


Intellectual Property

OneSource considers its copyrights, trademarks,
trade secrets, trade names, service marks, databases, software,
and other intellectual property to be proprietary, and relies on
contractual restrictions and a combination of copyright,
trademark, trade secret, patent, and confidentiality safeguards
to ensure adequate protection. OneSource believes that the
following intellectual property is important to its business:
the Business Browser product line; the Global Business Taxonomy
system; the trade secrets and source code relating to OneSource
products; the OneSource name and logo; the OneSource product and
brand names; the CorpTech high-technology company database; and
the OneSource and CorpTech websites and elements therein.

OneSource is licensed to access and use certain
technology and other intellectual property that are owned and
controlled by third parties. OneSources contracts with its
technology and information providers typically contain
warranties from the providers that the licensed technology or
data do not infringe any third party proprietary right. The
technology and information providers agree to defend, indemnify,
and hold OneSource harmless with respect to any third party
claim alleging that the licensed technology or data infringes
any proprietary right of any third party. OneSource believes
these industry standard warranties and indemnities are
sufficient to protect it from claims of infringement relating to
the intellectual property that it licenses, but there can be no
assurance that these warranties and indemnities will be adequate.

OneSource has filed and/or registered trademarks
and service marks in the United States, Canada, and Europe, and
has registered copyrights in the United States. OneSource
believes that its intellectual property does not infringe upon
the proprietary rights of third parties.

Alliances

OneSource identifies and forms alliances with
other companies in order to extend the possibilities for access
to the information from OneSource products by ensuring
compatibility with and the integration of such information with
other third party software applications. These applications
generally focus on corporate intranets, portals, and customer
relationship management platforms. In addition, the alliances
intend to increase marketing reach and awareness.

In 2003, OneSource integrated its products for
use with 2003 versions of Microsoft Word and Excel software and
in support of Microsofts Office Systems 2003 marketing
launch. OneSource also renewed its alliance with Siebel Systems,
Inc., a supplier of e-business applications software.

Examples of other alliances that OneSource has
formed include those with the following corporations: Pivotal
Corporation, a provider of customer relationship management,
business marketing, and service solutions; ONYX Software
Corporation, a provider of enterprise-wide customer-centric
e-business solutions; and Microsoft Business Solutions
Corporation (a subsidiary of Microsoft Corporation), a provider
of business management software. OneSource believes that its
ability to provide access to its products through other third
party applications is a component to its growth strategy, and it
expects to continue to selectively form alliances in the future.

Customers

OneSource does not rely upon any single customer,
or a few customers, such that a loss of any one or a few
customers would have a material effect on OneSources
business. As of December 31, 2003, OneSource had 750
customers. In 2003, no one customer contributed more than 3% of
annual revenues, and as of December 31, 2003, 295 customers
comprised 80% of annualized contract value. OneSources
primary target market consists of Global 5000 companies and
specifically business-to-business companies in the technology,
professional services, and financial services industries with
not less than 500 employees and $250 million or more in
sales, and that employ large sales forces. As of
December 31, 2003, approximately 68%, or

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$36.0 million, of total annualized contract
value for OneSource Business Browser products came from Global
5000 customers. In addition, as of December 31, 2003,
approximately 32%, or $17.1 million, of total annualized
contract value for OneSource Business Browser products came from
customers who subscribe to the OneSource AppLink software
development kit.


Sales and Marketing

OneSource markets its products through a field
and telephonic sales force and a support and marketing staff.
Sales and marketing employees are located primarily in the
United States and the United Kingdom. OneSource also has formed
alliances to help in the promotion and marketing of its products.

During fiscal year 2003, OneSource incurred
selling and marketing expense of $17.1 million, compared to
$16.5 million incurred during fiscal year 2002 and
$18.4 million incurred during fiscal year 2001. OneSource
expects that selling and marketing expense will decrease
slightly during fiscal year 2004.

Customer Service and Support

OneSource provides support to customers worldwide
through instant messaging, electronic mail, telephone, and its
website. OneSource support representatives assist customers
regarding OneSource product issues including customized
applications built using the AppLink software development kit.
OneSource support representatives also assist customers with
various administrative and technical tasks such as managing
product trials, training and registering users, managing usage,
promoting product-related awareness, and configuring custom
registration pages on the Internet for OneSource product
registration. In addition to employing customer support
personnel, OneSource also maintains a customer support portion
of its website that provides product-related support for
customers.

Website Technology and Operations

OneSource makes its on-line products available
through a hosting facility managed by SAVVIS Communications
Corporation (formerly Cable & Wireless U.S.A., Inc.). The
hosting facility was moved in fiscal year 2003 from Medford,
Massachusetts to Waltham, Massachusetts. SAVVIS Communications
Corporation provides facilities and facilities management
services including continuous monitoring, multiple high-volume
access lines to the Internet, uninterrupted power supplies,
generators, physical security, and protection from disaster.
OneSources on-line products are generally available
twenty-four hours a day, seven days a week, excluding scheduled
maintenance.

OneSource also has a production data center at
its corporate headquarters located in Concord, Massachusetts.
This data center is used to process data feeds from information
providers, distribute this data to the live site, and serve as
the physical facility where all of OneSources
pre-production/development and internal computing resources are
located. OneSource has taken a number of steps to keep its data
center operational in the event of emergency. These steps
include the use of a diesel standby generator, an automatic
FM200 fire suppression system, and uninterruptible power
supplies and electrical power filters. Redundant cooling
capacity is also in place. All systems are under maintenance
contracts. Additionally, there are separate security and access
restrictions as well as in-house operations staff.

Competition

The business information products and services
industry is intensely competitive and rapidly evolving. Several
of OneSources information providers compete against each
other and in some cases with OneSource. OneSource faces direct
or indirect competition from numerous companies, including the
following:



| |   |                                                                                                                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | large, well-established business and financial
    information providers, such as Dow Jones & Co., Pearson PLC,
    Reuters Group PLC, and McGraw-Hill Companies Inc.;                                                                                                                                        
|
| |  | aggregators of business and financial
    information, such as LexisNexis Group (a Reed Elsevier Plc
    subsidiary), The Dialog Corporation (a Thomson Corporation
    subsidiary), Factiva (a Dow Jones & Co. subsidiary), Alacra,
    Inc., Capital IQ, Inc., and Bureau Van Dijk Computer
    Services SA;

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| |   |                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | providers of company information, such as Thomson
    Financial, Inc. (a Thomson Corporation subsidiary), Hemscott
    Group Ltd. (a Finmedia Ltd. subsidiary), and Hoovers, Inc. (a
    subsidiary of The Dun & Bradstreet Corporation);
|
| |  | providers of sales, marketing, and credit
    information, such as Dun & Bradstreet, Inc. (a subsidiary of
    The Dun & Bradstreet Corporation) and infoUSA Inc.; and                                                                   
|
| |  | Web retrieval and Web portal
    companies and other free or low-cost mass market on-line
    information services, such as Yahoo! Inc., AOL-Time Warner,
    Inc., MarketWatch.com, Inc., Google, Inc., and TheStreet.com,
    Inc.   

Several of these competitors offer products or
services similar to those of OneSource and in some cases at
lower prices. The principal competitive factors in the business
information products and services industry are availability of
comprehensive, timely, integrated, and reliable business and
financial information; product ease of use; professional
service, support, and training capabilities; financial,
technical, administrative, and marketing resources; brand
recognition; vendor reputations; timely development and
introduction of new products and product enhancements; and
product price/performance characteristics. Based on reported
operating results, industry reports, and other publicly
available information, many of OneSources competitors have
longer operating histories, greater name recognition, larger
customer bases, and greater financial, technical, and marketing
resources. OneSource differentiates itself from its competitors
through its product features, ease of use, target market,
geographic focus, data integration capabilities, professional
services expertise, corporate selling skills, and customer
service and support.

Laws and Government Regulations

OneSource is subject, both directly and
indirectly, to laws and government regulations relating to the
Internet and OneSources Web-based information products.
There are currently few laws or government regulations directly
applicable to Web-based information products or the Internet.
Some existing laws we believe may be applicable to Web-based
information or the Internet, albeit indirectly, are those that
relate to, but are not limited to, property rights, libel, and
personal privacy. However, due to the increasing use of the
Internet for information-based solutions and company and
industry research, laws and government regulations may be
adopted that are directly applicable to Web-based information
products and the Internet. For example, these laws and
government regulations may address user privacy, taxation, and
product quality. In order to comply with such laws and
government regulations and maintain its competitive position in
the business information products and services industry,
OneSource may need to increase expenditures and adjust its
pricing structure.

Employees

As of December 31, 2003, OneSource employed
264 employees (including 256 full-time employees and
8 part-time employees), compared to 242 at the end of
fiscal year 2002 (including 232 full-time employees and 10
part-time employees). OneSource employees are not represented by
any collective bargaining organization. OneSource has never
experienced a work stoppage, and believes that its relationships
with its employees are generally satisfactory.

Geographic Information

OneSource conducts its business globally through
two geographic locations: the United States and the United
Kingdom. OneSource had revenues of $41.0 million,
$42.0 million, and $44.1 million from the United
States business, and $16.3 million, $15.7 million, and
$14.9 million from the United Kingdom business, for the
years ended December 31, 2003, 2002, and 2001, respectively.

The operations in the United Kingdom are subject
to the usual risks inherent in doing business in countries
outside of the United States, including potentially higher
costs, unanticipated regulatory changes, political instability,
terrorism, difficulties in staffing and managing operations,
adverse tax consequences, currency and exchange rate
fluctuations, and seasonal reductions in business activity. In
addition, the impact

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of cultural differences may result in product and
service offerings that may not satisfy the needs of OneSource
customers and that may not be profitable. Further, possible
nationalization, expropriation, and unique laws pertaining to
the collection and provision of certain types of information on
individuals (e.g., the Data Protection Act) may hinder
operations out of the United Kingdom location.





Item 2.Properties

OneSources headquarters are currently
located in approximately 50,900 square feet of office space
located in Concord, Massachusetts. The office space has been
leased through June 2004. This lease includes an option to renew
the lease at the then current market rental rate for another
five years. OneSource leases additional office space in New
York, New York; San Francisco, California; Woking, England; and
London, England. In 2004, OneSource made the New York office
space available for sublet through September 29, 2007,
which is the end of the lease. OneSource believes that its
existing facilities are adequate to meet current requirements,
and that suitable additional or substitute space will be
available as needed.

OneSource deems the buildings and equipment used
in its operations (whether owned or leased), generally to be in
good condition and adequate for the purposes for which they are
used.




Item 3.Legal
Proceedings

OneSource and its directors were named as
defendants in two purported class action lawsuits filed in the
Delaware Court of Chancery in February 2004, entitled
Hoffacker v. OneSource Information Services, Inc., et
al., Filing ID No. 3140593, and Pennsylvania Avenue
Funds v. Kamin, et al., Filing ID No. 3141683,
respectively. The complaints allege, among other things, that
the defendants breached their fiduciary duties in entering into
the proposed transaction with affiliates of ValueAct Capital.
The complaints seek unspecified damages and injunctive relief.
OneSource and its directors believe the claims to be without
merit and intend to defend against them vigorously.






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

No matters were submitted to a vote of our
security holders during the fourth quarter of the year ended
December 31, 2003.

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PART II






|        |                                                                                                                      
|------- | ---------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity,
    Related Stockholder Matters, and Issuer Purchases of Equity
    Securities

OneSources common stock is traded on the
NASDAQ National Market System under the symbol ONES.
Public trading of OneSources common stock commenced on
May 19, 1999.



|    |                             
|--- | ----------------------------
|(A) | Market Price of Common Stock

The following table sets forth the high and low
closing prices as reported by the NASDAQ National Market for the
periods indicated.

|               |  |      |       |      |  |      |      |     |  |   |       |  |  |   |      | 
|-------------- |  | ---- | ----- | ---- |  | ---- | ---- | --- |  | - | ----- |  |  | - | ---- | 
|               |  |      |       |     
|               |  | 2003 |       | 2002
|               |  |      |       |     
|               |  | High |       | Low  |  | High |      | Low
|               |  |      |       |      |  |      |      |    
|First quarter  |  | $    | 8.00  |      |  | $    | 5.25 |     |  | $ | 10.36 |  |  | $ | 6.02 | 
|Second quarter |  | $    | 8.60  |      |  | $    | 5.71 |     |  | $ | 8.40  |  |  | $ | 6.45 | 
|Third quarter  |  | $    | 8.57  |      |  | $    | 7.28 |     |  | $ | 6.90  |  |  | $ | 5.42 | 
|Fourth quarter |  | $    | 10.50 |      |  | $    | 8.15 |     |  | $ | 7.67  |  |  | $ | 5.15 | 

The quotations represent inter-dealer quotations,
without adjustments for retail markups, markdowns, or
commissions, and may not necessarily represent actual
transactions. The number of record holders of OneSources
common stock at March 18, 2004 was 59.



|    |                                                        
|--- | -------------------------------------------------------
|(B) | Use of Proceeds from Sales of Registered
    Securities

OneSource has not declared or paid any cash
dividends on its common stock and presently intends to retain
its future earnings, if any, to fund the development and growth
of its business. OneSource does not anticipate paying any cash
dividends in the foreseeable future.

In May 1999, OneSource completed an initial
public offering, (the Offering) of 3,636,000 shares
of its common stock, of which 2,500,000 shares were issued and
sold by OneSource, and 1,136,000 shares were issued and
sold by certain stockholders of OneSource.

The net proceeds to OneSource from the Offering,
after deducting underwriting discounts and commissions and other
offering expenses, was approximately $27.0 million.

The net proceeds from the Offering, less
$6.8 million used to pay off long-term debt and
$7.6 million used to acquire Corporate Technology
Information Services, Inc., have been invested in interest
bearing, investment grade securities.



|    |                                            
|--- | -------------------------------------------
|(C) | Recent Sales of Unregistered
    Securities

OneSource has not sold any securities in 2003,
2002, and 2001 that were not registered under the Securities Act
of 1933.

14



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##### Table of Contents





|    |                                                                       
|--- | ----------------------------------------------------------------------
|(D) | Securities Authorized for Issuance Under
    Equity Compensation Plans

The following table provides information
regarding our equity compensation plans approved and not
approved by stockholders as of December 31, 2003:

|                                                           |  |                         |           |                      |  |                          |      |  |  |  |         |    
|---------------------------------------------------------- |  | ----------------------- | --------- | -------------------- |  | ------------------------ | ---- |  |  |  | ------- | ---
|                                                           |  |                         |           |                      |  | (C)                     
|                                                           |  | (A)                     |           | (B)                  |  | Number of securities    
|                                                           |  | Number of securities to |           | Weighted average     |  | remaining available for 
|                                                           |  | be issued upon exercise |           | exercise price of    |  | future issuance         
|                                                           |  | of outstanding options, |           | outstanding options, |  | (excluding securities   
|Plan Category                                              |  | warrants and rights     |           | warrants and rights  |  | reflected in column (A))
|                                                           |  |                         |           |                      |  |                         
|Equity compensation plans approved by stockholders         |  |                         | 2,528,477 |                      |  | $                        | 7.82 |  |  |  | 951,506 | (1)
|Equity compensation plans not approved by
    stockholders |  |                         |          |                      |  |                          |     |  |  |  |        |    
|                                                           |  |                         |           |                      |  |                          |      |  |  |  |         |    
|Total                                                      |  |                         | 2,528,477 |                      |  | $                        | 7.82 |  |  |  | 951,506 |    
|                                                           |  |                         |           |                      |  |                          |      |  |  |  |         |    



---



|    |                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Excludes 129,016 shares available for future
    issuance as of December 31, 2003 under the OneSource 1999
    Employee Stock Purchase Plan, which was terminated effective
    February 29, 2004.

Additional information with respect to our equity
compensation plans appears in this Annual Report on
Form 10-K in the Notes to Consolidated Financial Statements
under the caption Stock Plans on page F-16, and
is incorporated by reference.




Item 6.     Selected
Financial Data

The consolidated statement of income data
provided for the years ended December 31, 2003, 2002, and
2001, and the consolidated balance sheet data as of
December 31, 2003 and 2002, are derived from, and are
qualified by reference to, OneSources audited consolidated
financial statements, which are included elsewhere in this
Annual Report on Form 10-K. The consolidated statement of
income data for the years ended December 31, 2000 and 1999,
and the consolidated balance sheet data as of December 31,
2001, 2000, and 1999, are derived from audited consolidated
financial statements, which are not included in this Annual
Report on Form 10-K. The following consolidated financial
data should be read in conjunction with the Consolidated
Financial Statements and the Notes thereto and
Managements Discussion and Analysis of Financial
Condition and Results of Operations included elsewhere in
this Annual Report on Form 10-K.

|                          |                                            |                                       |        |        |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |        |        |  
|------------------------- | ------------------------------------------ | ------------------------------------- | ------ | ------ | ------ | ---- | ------ | ------ | ------ | ---- | ------ | ------ | ------ | - | ------ | ------ | ------ | - | ------ | ------ | ------ | -
|                          |                                            |                                      
|                          |                                            | Year ended December 31,              
|                          |                                            |                                      
|                          |                                            | 2003                                  |        | 2002   |        | 2001 |        | 2000   |        | 1999
|                          |                                            |                                       |        |        |        |      |        |        |        |     
|                          |                                            |                                      
|                          |                                            | (In thousands, except per share data)
|Statement of Income Data: |                                            |                                       |        |        |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|Revenues                  |                                            | $                                     | 57,284 |        |        | $    | 57,750 |        |        | $    | 59,017 |        |        | $ | 51,889 |        |        | $ | 35,548 |       
|Cost of revenues          |                                            |                                       | 18,228 |        |        |      | 18,064 |        |        |      | 18,496 |        |        |   | 17,909 |        |        |   | 14,809 |       
|                          |                                            |                                       |        |        |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|                          | Gross profit                               |                                       |        | 39,056 |        |      |        | 39,686 |        |      |        | 40,521 |        |   |        | 33,980 |        |   |        | 20,739 |       
|                          |                                            |                                       |        |        |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|Operating expenses:       |                                            |                                       |        |        |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|                          | Selling and marketing                      |                                       |        | 17,135 |        |      |        | 16,467 |        |      |        | 18,447 |        |   |        | 20,519 |        |   |        | 13,254 |       
|                          | Platform and product development           |                                       |        | 10,574 |        |      |        | 10,040 |        |      |        | 8,360  |        |   |        | 8,842  |        |   |        | 7,996  |       
|                          | General and administrative                 |                                       |        | 7,308  |        |      |        | 6,156  |        |      |        | 5,889  |        |   |        | 5,079  |        |   |        | 5,474  |       
|                          | Amortization of acquired intangible assets |                                       |        | 327    |        |      |        | 427    |        |      |        | 460    |        |   |        | 460    |        |   |        | 261    |       
|                          | Restructuring                              |                                       |        |       |        |      |        |       |        |      |        | 660    |        |   |        |       |        |   |        |       |       
|                          | Amortization of goodwill                   |                                       |        |       |        |      |        |       |        |      |        | 1,020  |        |   |        | 1,043  |        |   |        | 115    |       
|                          |                                            |                                       |        |        |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|                          |                                            | Total operating expenses              |        |        | 35,344 |      |        |        | 33,090 |      |        |        | 34,836 |   |        |        | 35,943 |   |        |        | 27,100 |  
|                          |                                            |                                       |        |        |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|                          |                                            | Income (loss) from operations         |        |        | 3,712  |      |        |        | 6,596  |      |        |        | 5,685  |   |        |        | (1,963 | ) |        |        | (6,361 | )
|Interest income, net      |                                            |                                       | 363    |        |        |      | 437    |        |        |      | 853    |        |        |   | 887    |        |        |   | 47     |       
|Other income(1)           |                                            |                                       |       |        |        |      |       |        |        |      |       |        |        |   | 2,000  |        |        |   | 2,000  |       
|                          |                                            |                                       |        |        |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       

15



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##### Table of Contents



|                                            |         |                                                     |       |        |       |      |       |        |       |      |       |        |       |  |    |        |     |  |     |       |        |  
|------------------------------------------- | ------- | --------------------------------------------------- | ----- | ------ | ----- | ---- | ----- | ------ | ----- | ---- | ----- | ------ | ----- |  | -- | ------ | --- |  | --- | ----- | ------ | -
|                                            |         |                                                    
|                                            |         | Year ended December 31,                            
|                                            |         |                                                    
|                                            |         | 2003                                                |       | 2002   |       | 2001 |       | 2000   |       | 1999
|                                            |         |                                                     |       |        |       |      |       |        |       |     
|                                            |         |                                                    
|                                            |         | (In thousands, except per share data)              
|                                            |         | Income (loss) before provision for income
    taxes |       |        | 4,075 |      |       |        | 7,033 |      |       |        | 6,538 |  |    |        | 924 |  |     |       | (4,314 | )
|Provision for income taxes                  |         |                                                     | 1,528 |        |       |      | 2,602 |        |       |      | 1,882 |        |       |  | 66 |        |     |  | 133 |      
|                                            |         |                                                     |       |        |       |      |       |        |       |      |       |        |       |  |    |        |     |  |     |      
|                                            |         | Net income (loss)                                   |       | $      | 2,547 |      |       | $      | 4,431 |      |       | $      | 4,656 |  |    | $      | 858 |  |     | $     | (4,447 | )
|                                            |         |                                                     |       |        |       |      |       |        |       |      |       |        |       |  |    |        |     |  |     |      
|Net income (loss) per share:                |         |                                                     |       |        |       |      |       |        |       |      |       |        |       |  |    |        |     |  |     |      
|                                            | Basic   |                                                     | $     | 0.22   |       |      | $     | 0.37   |       |      | $     | 0.37   |       |  | $  | 0.07   |     |  | $   | (0.50 | )     
|                                            | Diluted |                                                     | $     | 0.21   |       |      | $     | 0.35   |       |      | $     | 0.34   |       |  | $  | 0.06   |     |  | $   | (0.50 | )     
|Weighted average common shares outstanding: |         |                                                     |       |        |       |      |       |        |       |      |       |        |       |  |    |        |     |  |     |      
|                                            | Basic   |                                                     |       | 11,489 |       |      |       | 11,859 |       |      |       | 12,424 |       |  |    | 11,509 |     |  |     | 8,822 |       
|                                            | Diluted |                                                     |       | 11,884 |       |      |       | 12,512 |       |      |       | 13,519 |       |  |    | 13,509 |     |  |     | 8,822 |       

|                                               |  |                                                 |        |      |  |      |        |      |  |      |        |  |  |   |        |  |  |   |        |  
|---------------------------------------------- |  | ----------------------------------------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ------ |  |  | - | ------ | -
|                                               |  |                                                
|                                               |  | December 31,                                   
|                                               |  |                                                
|                                               |  | 2003                                            |        | 2002 |  | 2001 |        | 2000 |  | 1999
|                                               |  |                                                 |        |      |  |      |        |      |  |     
|                                               |  |                                                
|                                               |  | (In thousands, except number of customers data)
|Balance Sheet Data:                            |  |                                                 |        |      |  |      |        |      |  |      |        |  |  |   |        |  |  |   |        |  
|Cash and cash equivalents                      |  | $                                               | 22,794 |      |  | $    | 23,096 |      |  | $    | 18,162 |  |  | $ | 17,338 |  |  | $ | 13,598 |  
|Working capital (deficit)                      |  |                                                 | 3,165  |      |  |      | 3,645  |      |  |      | 2,399  |  |  |   | 1,827  |  |  |   | (691   | )
|Total assets                                   |  |                                                 | 60,563 |      |  |      | 58,798 |      |  |      | 53,543 |  |  |   | 58,832 |  |  |   | 49,698 |  
|Total current and long-term debt               |  |                                                 | 2,574  |      |  |      |       |      |  |      |       |  |  |   | 33     |  |  |   | 234    |  
|Deferred revenues                              |  |                                                 | 29,520 |      |  |      | 30,257 |      |  |      | 27,144 |  |  |   | 29,229 |  |  |   | 24,222 |  
|Total stockholders equity                     |  |                                                 | 18,711 |      |  |      | 17,509 |      |  |      | 16,000 |  |  |   | 16,353 |  |  |   | 13,363 |  
|Other Data for Web-based Products:             |  |                                                 |        |      |  |      |        |      |  |      |        |  |  |   |        |  |  |   |        |  
|Annualized contract value(2)                   |  | $                                               | 52,723 |      |  | $    | 56,075 |      |  | $    | 56,077 |  |  | $ | 58,354 |  |  | $ | 38,743 |  
|Number of customers                            |  |                                                 | 750    |      |  |      | 812    |      |  |      | 817    |  |  |   | 869    |  |  |   | 583    |  
|Average annualized contract value per customer |  | $                                               | 70.3   |      |  | $    | 69.0   |      |  | $    | 68.7   |  |  | $ | 67.2   |  |  | $ | 66.5   |  



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Other income for each of the years ended
    December 31, 2000 and 1999 included $2.0 million of
    license fees related to a software license agreement.                                                                                                                                                                                                                                                                                                                                                                
|   
|(2) | Annualized contract value represents the invoiced
    fees for one month that are included in deferred revenues for
    all customer contracts for Web-based products in effect at the
    measurement date, multiplied by 12, without regard to the actual
    remaining duration of such contracts. For more information
    regarding annualized contract value, see Part II,
    Item 7  Managements Discussion and
    Analysis of Financial Condition and Results of
    Operations  Annualized Contract Value.






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

This section should be read in conjunction with
the Selected Financial Data and OneSources
Consolidated Financial Statements and the Notes thereto
appearing elsewhere in this Annual Report on Form 10-K.

The following discussion contains forward-looking
statements that involve risks and uncertainties. OneSource makes
such forward-looking statements under the provision of the
Safe Harbor section of the Private Securities
Litigation Reform Act of 1995. Any forward-looking statements
should be considered in light of the factors described below in
Item 7 under Certain Factors that May Affect Future
Results. Actual results may vary materially from those
projected, anticipated or indicated in any forward-looking
statements. In this Annual Report on Form 10-K, the words
anticipates, believes,
expects, intends, future,
could, and similar words or expressions (as well as
other words or expressions referencing future events, conditions
or circumstances) identify forward-looking statements.

16



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##### Table of Contents



Recent Significant Developments

On October 3, 2003, OneSource announced that
it had received an unsolicited letter from ValueAct Capital
Partners, L.P. and its affiliates (ValueAct Capital)
expressing an interest in acquiring OneSources business.
OneSources board of directors subsequently formed a
special committee of outside directors to evaluate
OneSources strategic options to maximize shareholder
value. The special committee engaged Morgan Stanley &
Co. and Portico Capital Securities LLC to assist it in this
review. On January 13, 2004, ValueAct Capital amended its
Schedule 13D indicating that it was not in a position to
refresh its level of interest until OneSource announced its
fourth quarter and year-end 2003 financial results.

On February 5, 2004, OneSource announced
that as part of the special committees evaluation of
strategic options, discussions were held with potential
acquirers, and the future operating plans and prospects of
OneSource were reviewed. A number of organizations expressed
interest in OneSource, but none of these discussions led to a
final offer to acquire OneSource. As a result, the special
committee concluded its active evaluation of strategic options.
In connection with the review of strategic options, both the
board of directors and Dan Schimmel, president and chief
executive officer and director of OneSource, determined that new
executive leadership would be in the best interest of OneSource
and its shareholders. As a result, OneSource accepted the
resignation of Mr. Schimmel, effective as of
February 5, 2004. OneSources current chairman Martin
Kahn was appointed executive chairman and chief executive
officer on an interim basis.

On February 9, 2004, OneSource announced
that it received a letter from ValueAct Capital indicating that
it was prepared to offer to acquire all of the outstanding
shares of OneSource not already owned by ValueAct Capital at a
cash price of $8.10 per share on the terms and conditions
contained in a merger agreement enclosed with the letter.

On February 18, 2004, OneSource announced
that it had entered into a merger agreement with affiliates of
ValueAct Capital. Under the agreement, each share of common
stock of OneSource outstanding at the time of the merger (other
than shares held by ValueAct Capital), will be converted into
the right to receive $8.40 per share in cash. ValueAct
Capital held an approximate 32% ownership interest in OneSource,
according to its filing on February 9, 2004 with the
Securities and Exchange Commission. The transaction is expected
to close in the second quarter of 2004. On February 17,
2004, OneSources Rights Agreement with American Stock
Transfer & Trust Company, dated as of October 7, 2003,
was amended to exempt the proposed transaction.

During the first quarter of 2004, OneSource
incurred approximately $0.5 million to $0.7 million in
expenses in connection with the execution of the merger
agreement with affiliates of ValueAct Capital. These expenses
include legal fees, accounting fees, and compensation for
members of the special committee. In addition, severance costs
for OneSources previous chief executive officer, which
were recorded in the first quarter of 2004, include cash
payments of approximately $0.5 million and non-cash
compensation expense of $56,000 related to the modification of
stock options.

Overview

OneSource provides primarily Web-based business
and financial information products to professionals who need
quick access to timely and reliable company, industry, and
market intelligence. OneSources primary products, the
OneSource Business Browser products, are password-protected,
subscription-based products that provide sales, marketing,
finance, and management professionals and consultants with
industry and company profiles, research reports, media accounts,
executive listings and biographies, and financial information on
over 1.7 million public and private companies. OneSource
customers access this information over the Internet using
standard Web browsers. As a Web-based solution, the Business
Browser product line does not require the purchase of additional
computer hardware by the customer. OneSource also distributes
its CorpTech high-technology company database as part of the
Business Browser product line, as part of a separate Web-based
product, as part of CD Roms, as printed directories, and
through third party distributors. In addition, OneSource
provides fee-based consulting services to customers who seek to
integrate content from OneSource products into their internal
software platforms and applications such as intranets, portals,
and customer relationship management systems. These fee-based
services include helping customers apply

17



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##### Table of Contents



OneSources proprietary classification
system which organizes and links customers internal data
with content from OneSource products, as well as assisting
customers in designing and building custom information
applications.


OneSource was formed as a division of Lotus
Development Corporation in 1987 and became an independent
company when it was purchased in a management buy-out in 1993.
Until December 1996, OneSources business was to provide
business information to the financial community using
CD Rom technology as the primary method of distribution.
The introduction of the Business Browser product line in
December 1996 marked a fundamental shift in the business as
OneSource began a transition away from its legacy CD Rom
business and toward Web-based products. The OneSource Business
Browser product line is designed to be a comprehensive and
easy-to-use business and financial information resource,
integrating over 2,500 sources of business information from more
than 30 business and financial information providers and
OneSources own CorpTech high-technology company database.
The OneSource product line also includes the AppLink software
development kit, which allows customers to access content from
Business Browser products through their own internal
applications and without the use of the Business Browser user
interface and pre-established screens and workflow.

Revenues from OneSource products generally
consist of monthly subscription fees from customer contracts.
Customer contracts span varying periods of time but are
generally for one year, are renewable for like periods, and are
payable in advance. Subscription fees generally are quoted to
clients on an annual basis but are earned as revenues ratably on
a monthly basis over the subscription period. Invoices are
recorded as accounts receivable until paid and as deferred
revenues until earned. Deferred revenues decreased 2% to
$29.5 million as of December 31, 2003 from
$30.3 million as of December 31, 2002 and increased 9%
from $27.1 million as of December 31, 2001.

Cost of revenues consists primarily of royalty
costs for information providers and, to a lesser extent,
employee salaries and benefits, facilities allocation and
related expenses, depreciation associated with computers for
data processing and on-line requirements, amortization of
capitalized internal use software development costs, and Web
hosting expenses. OneSource enters into contracts with
information providers, which are generally for a term of at
least one year and automatically renew if not canceled by either
party as of the end of any term. These contracts may be
terminated by either party during the term under certain
breach(es) and other circumstances. Under these agreements,
royalties are generally paid on a quarterly basis to information
providers. Royalties are generally calculated as a fixed fee, as
a flat percentage of the amount that OneSource invoices its
customers, or as a calculated fee based upon product revenue
growth of OneSource products compared to prior periods.
Royalties are initially recorded as deferred royalties and are
expensed over the term of the contract period as revenues are
earned.

Selling and marketing expense consists primarily
of employee salaries and benefits to OneSources sales
force, customer support organization, and marketing personnel;
sales commissions paid to OneSources sales force;
facilities allocation and related expenses; direct marketing
promotional materials; trade show exhibitions; and advertising.
Sales commissions are paid when customers are invoiced,
generally initially recorded as deferred commissions, and
expensed over the term of the subscription period as revenues
are earned. All other selling and marketing costs are expensed
as incurred.

Platform and product development expense consists
primarily of employee salaries and benefits, facilities
allocation and related expenses, as well as outside contractor
expenses, relating to the development of the
platform of core software supporting OneSource
products and the development of new products based upon that
platform. Platform and product development expense includes
expenses relating to the editorial staff that implements the
Global Business Taxonomy system to integrate disparate
information sources into the OneSource Business Browser products.

General and administrative expense consists
primarily of employee salaries and benefits, facilities
allocation and related expenses associated with OneSources
management, finance, purchasing, human resources, legal,
management information systems, and administrative groups.

18



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##### Table of Contents





| |                                                                      
| | ---------------------------------------------------------------------
| | Critical Accounting Policies, Significant
    Judgments and Estimates

OneSources discussion and analysis of its
financial condition and results of operations are based upon
OneSources consolidated financial statements, which have
been prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of
these financial statements requires OneSource to make estimates
and judgments that affect the reported amounts of assets,
liabilities, revenues, and expenses, and related disclosure of
contingent assets and liabilities. On an on-going basis,
OneSource evaluates its estimates based on historical experience
and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under
different assumptions or conditions.

OneSource believes the following accounting
policies are most critical to fully understanding and evaluating
its financial results, as well as the areas of more significant
judgments and estimates used in the preparation of its
consolidated financial statements:

Revenue Recognition.OneSource products are generally sold
on a subscription basis pursuant to customer contracts that span
varying periods of time, but are generally for a period of one
year. OneSource initially records accounts receivable and defers
the related revenue when persuasive evidence of an arrangement
exists, fees are fixed or determinable, and collection is
reasonably assured. Revenues are recognized ratably over the
related subscription period beginning when access to products is
granted to the customer in accordance with customer agreements.
OneSource believes that this policy significantly reduces
subjectivity in determining the timing of revenue recognition.

Software Development Costs.Platform and product development
costs, other than certain software development costs, are
charged to expense as incurred. OneSource follows Statement of
Position 98-1 (SOP 98-1), Accounting for
the Costs of Computer Software Developed or Obtained for
Internal Use, which requires research and development
costs associated with the application development stage to be
capitalized for internal use software. Capitalized software
development projects include software platforms used in
OneSource products and programs used for its proprietary
classification system. Management is required to use
professional judgment in determining whether development costs
meet the criteria in SOP 98-1 for immediate expense or
capitalization. OneSource capitalizes qualified internal and
external costs directly associated with developing or modifying
internal-use software, which begins with the application
development stage and ends when the software is ready for its
intended use. The application development stage typically
includes tasks such as coding and testing. Capitalized
internal-use software is amortized over its estimated useful
life, generally two to three years.

Deferred Royalties and Commissions.Deferred royalties and commissions
include royalty costs and sales commissions that are associated
with procuring information and securing a subscription to be
delivered over the subscription period, respectively. These
costs are deferred and amortized ratably over the associated
subscription period as a component of cost of revenues and
selling and marketing expense, respectively. Long-term deferred
royalties are attributable to certain limited contracts with
information providers that allow for the use of their
information generally for a predetermined period of time at no
additional cost to OneSource after termination of the contract
(Wind-down Period). OneSource currently intends to
renew all existing contracts which include a Wind-down Period,
and accordingly, royalty payments associated with a Wind-down
Period have been classified as long-term deferred royalties. If
a contract relating to the procurement of information used in
the OneSource products is terminated prematurely and/or
OneSource elects to no longer use such information, for any
reason, royalty expense recognition may be accelerated and
incurred sooner than originally anticipated.

Allowance For Doubtful Accounts.OneSource assesses collectibility of
accounts receivable based on a number of factors including, but
not limited to, past transactions history with the customer and
the credit worthiness of the customer. OneSource does not
request collateral from its customers. OneSource maintains
allowances for doubtful accounts for estimated losses resulting
from the inability of its customers to make required payments.
If the financial condition of OneSources customers were to
deteriorate, resulting in an impairment of their ability to make
payments, additional allowances might be required.

19



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##### Table of Contents



Goodwill and Acquired Intangible Assets.Goodwill and acquired intangible
assets, which consist of a trademark, subscriber list, and
database, were the results of an acquisition of a company by
OneSource in 1999. Acquired intangible assets are amortized
using the straight-line method over periods of approximately
five to seven years, based on the estimated useful life. In
accordance with Statements of Financial Accounting Standards
No. 142 (SFAS No. 142), Goodwill and
Other Intangible Assets, OneSource ceased amortizing
goodwill as of January 1, 2002 and reviews goodwill for
potential impairment in the third quarter of each fiscal year,
as well as on event-driven basis, using a fair value approach.
Since OneSource constitutes one reporting unit under SFAS
No. 142, its fair value, which equals its market
capitalization based on the closing price of its common stock as
quoted on the NASDAQ National Market, is compared to its net
assets, which includes the carrying value of goodwill. If
OneSources market capitalization exceeds its net assets,
it is determined that no impairment has occurred and no
adjustment is required. If impairment is indicated, a write-down
to the implied fair value of goodwill is recorded. The implied
fair value of goodwill is determined in the same manner as the
amount of goodwill recognized in a business combination.

Long-Lived Asset Impairment.OneSource periodically evaluates its
long-lived assets, excluding goodwill, for impairment under
Statement of Financial Accounting Standards No. 144
(SFAS No. 144), Accounting for the
Impairment or Disposal of Long-Lived Assets, whenever
events or changes in circumstances indicate, in
managements judgment, that the carrying amount of such
assets may not be recoverable. OneSources long-lived
assets subject to such a review include property and equipment,
capitalized software costs and acquired intangible assets. When
such events or changes in circumstances occur, OneSource
assesses the recoverability of the assets by determining whether
the amortization of the remaining balance over its estimated
remaining life can be recovered through projected undiscounted
future cash flows and measures the impairment loss, if any,
based on the related future estimated discounted cash flows.
Such events and changes in circumstances include, but are not
limited to, significant underperformance relative to expected
historical or projected future operating results and significant
negative industry or economic trends.

Income Taxes.OneSource records income taxes in accordance with Statement of
Financial Accounting Standards No. 109 (SFAS
No. 109), Accounting for Income Taxes,
which requires management judgment in determining
OneSources consolidated provision for income taxes,
deferred income tax balances, and any valuation allowance
associated with deferred tax assets. A deferred income tax asset
or liability is established when differences exist between the
financial statement carrying amount and the tax bases of assets
and liabilities. When it is more likely than not that all or
some portion of specific deferred tax assets will not be
recovered from future taxable income, a valuation allowance must
be established for the amount of deferred tax assets that are
determined not to be realizable. In accordance with SFAS
No. 109, OneSource evaluates all available evidence, both
positive and negative, bearing upon the realizability of its
deferred tax assets. Through the third quarter of 2003,
OneSource recorded a full valuation allowance against its
deferred tax assets. At December 31, 2003, the valuation
allowance was reduced to zero because OneSource determined that
it was more likely than not that its deferred tax assets would
be realized based on facts and circumstances which include, but
are not limited to, its recent history of profitability, current
economic conditions and forecasted profitability in the future.
This reduction of the valuation allowance which was related to
net operating losses carryforwards from stock option exercises
resulted in an increase of $0.8 million to additional
paid-in capital.

20



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##### Table of Contents





| |                      
| | ---------------------
| | Results of Operations

The following table sets forth, for the periods
indicated, the percentage of total revenues represented by each
line item in OneSources consolidated statements of income.
Historical trends in revenues or operating results may not be
indicative of future results.

|                                         |                                            |                          |     |      |    |      |     |    |    |  |     |    |    | 
|---------------------------------------- | ------------------------------------------ | ------------------------ | --- | ---- | -- | ---- | --- | -- | -- |  | --- | -- | -- | 
|                                         |                                            |                         
|                                         |                                            | Year ended December 31, 
|                                         |                                            |                         
|                                         |                                            | 2003                     |     | 2002 |    | 2001
|                                         |                                            |                          |     |      |    |     
|                                         |                                            |                         
|                                         |                                            | (Percentage of total    
|                                         |                                            | revenues)               
|Revenues                                 |                                            |                          | 100 | %    |    |      | 100 | %  |    |  | 100 | % 
|Cost of revenues                         |                                            |                          | 32  |      |    |      | 31  |    |    |  | 31  |   
|                                         |                                            |                          |     |      |    |      |     |    |    |  |     |   
|                                         | Gross profit                               |                          |     | 68   |    |      |     | 69 |    |  |     | 69 |   
|                                         |                                            |                          |     |      |    |      |     |    |    |  |     |   
|Operating expenses:                      |                                            |                          |     |      |    |      |     |    |    |  |     |   
|                                         | Selling and marketing                      |                          |     | 30   |    |      |     | 29 |    |  |     | 31 |   
|                                         | Platform and product development           |                          |     | 18   |    |      |     | 17 |    |  |     | 14 |   
|                                         | General and administrative                 |                          |     | 13   |    |      |     | 11 |    |  |     | 10 |   
|                                         | Amortization of acquired intangible assets |                          |     | 1    |    |      |     | 1  |    |  |     | 2  |   
|                                         | Restructuring                              |                          |     |     |    |      |     |   |    |  |     | 1  |   
|                                         | Amortization of goodwill                   |                          |     |     |    |      |     |   |    |  |     | 1  |   
|                                         |                                            |                          |     |      |    |      |     |    |    |  |     |   
|                                         |                                            | Total operating expenses |     |      | 62 |      |     |    | 58 |  |     |    | 59 | 
|                                         |                                            |                          |     |      |    |      |     |    |    |  |     |   
|Income from operations                   |                                            |                          | 6   |      |    |      | 11  |    |    |  | 10  |   
|Interest income, net                     |                                            |                          | 1   |      |    |      | 1   |    |    |  | 1   |   
|                                         |                                            |                          |     |      |    |      |     |    |    |  |     |   
|Income before provision for income taxes |                                            |                          | 7   |      |    |      | 12  |    |    |  | 11  |   
|Provision for income taxes               |                                            |                          | 3   |      |    |      | 4   |    |    |  | 3   |   
|                                         |                                            |                          |     |      |    |      |     |    |    |  |     |   
|Net income                               |                                            |                          | 4   | %    |    |      | 8   | %  |    |  | 8   | % 
|                                         |                                            |                          |     |      |    |      |     |    |    |  |     |   

Comparison of Results for the Years Ended
December 31, 2003 and 2002

Revenues.Revenues
decreased 1% to $57.3 million for the year ended
December 31, 2003 from $57.8 million for the year
ended December 31, 2002. Web-based product revenues
decreased 1% to $55.4 million for the year ended
December 31, 2003 from $55.7 million for the year
ended December 31, 2002. This decrease was primarily a
result of an overall decline in revenues by $1.7 million, which
was partially offset by the impact of a higher average currency
conversion rate relating to the conversion of British pounds to
United States dollars, which increased Web-based product
revenues by $1.4 million. At the same time, CD Rom product
and other revenues decreased 7% to $1.9 million for the
year ended December 31, 2003 from $2.0 million for the
year ended December 31, 2002, primarily as a result of
OneSources continued emphasis on development, sales, and
marketing of the Business Browser product line.

Cost of Revenues.As
a percentage of revenues, cost of revenues increased to 32% for
the year ended December 31, 2003 from 31% for the year
ended December 31, 2002. Total cost of revenues increased
1% to $18.2 million for the year ended December 31,
2003 from $18.1 million for the year ended December 31,
2002. This increase was principally due to increased royalty
expense by $0.7 million associated with the addition of
Global Business Browser  Asia Pacific Edition and
content on small and mid-market United States and Canadian
companies, increased amortization expense of capitalized
software development costs by $0.3 million due to the
amortization of recently released OneSource products, and
increased expense for the purchase and maintenance of external
software programs by $0.2 million. Partially offsetting
these increases were lower compensation-related expense in
product production by $0.4 million as a result of decreased
headcount, decreased depreciation expense associated with
computer equipment used for data processing and on-line
requirements by $0.5 million, decreased Web hosting expense by
$0.1 million as a result of equipment consolidation, and
decreased use of external contractors by $0.1 million.

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Selling and Marketing
Expense.As a percentage of revenues,
selling and marketing expense increased to 30% for the year
ended December 31, 2003 from 29% for the year ended
December 31, 2002. Selling and marketing expense increased
4% to $17.1 million for the year ended December 31,
2003 from $16.5 million for the year ended December 31,
2002. This increase was principally due to increased recruiting
and employee development costs by $0.3 million, increased
compensation-related expense by $0.3 million, increased
travel and entertainment expense by $0.1 million, increased
expense for the purchase and maintenance of external software
programs by $0.1 million, increased allocation of facility
costs as a result of increased headcount by $0.1 million,
and increased depreciation expense associated with computer
equipment by $0.1 million. Partially offsetting these increases
for the year ended December 31, 2003 were lower fees paid
to external consultants by $0.3 million and decreased
direct marketing expenses by $0.1 million. OneSource
expects that selling and marketing expense will decrease
slightly during fiscal year 2004 as compared to fiscal year 2003.

Platform and Product Development
Expense.As a percentage of revenues,
platform and product development expense increased to 18% for
the year ended December 31, 2003 from 17% for the year
ended December 31, 2002. Platform and product development
expense increased 5% to $10.6 million for the year ended
December 31, 2003 from $10.0 million for the year
ended December 31, 2002. This increase was principally due
to higher compensation-related expense by $2.1 million as a
result of increased headcount, higher expense with respect to
the use of external contractors for platform and product
development by $0.5 million, increased allocation of facility
costs as a result of increased headcount by $0.2 million,
and increased travel and entertainment expenses by
$0.1 million. Partially offsetting these increases by
$2.0 million was the increased capitalization of software
development costs primarily associated with development of
software platforms to be used in OneSource products and programs
used for its proprietary classification system. In addition,
recruiting and employee development costs decreased by
$0.2 million and depreciation expense decreased by
$0.1 million, which partially offset the increase in
platform and product development expense. For the year ended
December 31, 2004, OneSource plans to decrease its spending
in platform and product research and development slightly
compared to the prior year. OneSource also anticipates that
external and internal capitalized software development costs
will be in the range of approximately $3.0 million to
$3.5 million in 2004.

General and Administrative
Expense.As a percentage of revenues,
general and administrative expense increased to 13% for the year
ended December 31, 2003 from 11% for the year ended
December 31, 2002. General and administrative expense
increased 19% to $7.3 million for the year ended
December 31, 2003 from $6.2 million for the year ended
December 31, 2002. This increase was primarily due to
$0.9 million of costs incurred in connection with the work
of OneSources board of directors special committee,
which was formed to evaluate OneSources strategic options
related to the October 2003 unsolicited letter from ValueAct
Capital Partners, L.P. and its affiliates expressing its
interest in acquiring OneSources business. These costs
primarily included investment advisory fees of
$0.5 million, compensation of $0.2 million to members
of the special committee and legal fees of $0.2 million.
Compensation expense also increased by $0.6 million related
to increased headcount. These increases were partially offset by
a reduction in recruiting and employee development costs by
$0.1 million, decreased facility costs by
$0.2 million, and decreased fees paid to external
contractors by $0.1 million.

Amortization of Acquired Intangible
Assets.Amortization of acquired
intangible assets decreased to $0.3 million for the year
ended December 31, 2003 from $0.4 million for the year
ended December 31, 2002. This decrease was principally the
result of the cost of a non-compete agreement becoming fully
amortized as of September 30, 2002.

Interest Income,
Net.Interest income, net of interest
expense, was $0.4 million for each of the years ended
December 31, 2003 and 2002.

Provision for Income
Taxes.Provision for income taxes
decreased 41% to $1.5 million for the year ended
December 31, 2003 from $2.6 million for the year ended
December 31, 2002. This decrease was due to pre-tax income
of $4.1 million at an effective tax rate of 37.5% for the year
ended December 31, 2003 as compared to pre-tax income of
$7.0 million at an effective tax rate of 37% for the year
ended December 31, 2002. For both years ended
December 31, 2003 and 2002, OneSource calculated its
provision for income taxes

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for its domestic income using the federal
statutory tax rate of 34%, plus an estimated effective state tax
rate of 5%. For both years ended December 31, 2003 and
2002, OneSource calculated its provision for income taxes for
its foreign income using a 30% effective tax rate. Due to
differentials in domestic and foreign income for the years ended
December 31, 2003 and 2002, these calculations yielded
annualized worldwide effective tax rates of 37.5% for the full
year 2003 and 37% for the full year 2002. During the year ended
December 31, 2003, OneSource reduced the valuation
allowance against its deferred tax assets to zero. This
reduction of the valuation allowance which was related to net
operating losses carryforwards from stock option exercises
resulted in an increase of $0.8 million to additional
paid-in capital.


Comparison of Results for the Years Ended
December 31, 2002 and 2001

Revenues.Total
revenues decreased 2% to $57.8 million for the year ended
December 31, 2002 from $59.0 million for the year
ended December 31, 2001. Web-based product revenues
decreased 1% to $55.7 million for the year ended
December 31, 2002 from $56.3 million for the year
ended December 31, 2001. This decrease was primarily a
result of an overall decline in business by $1.2 million, which
was partially offset by the impact of a higher average currency
conversion rate relating to the conversion of British pounds to
United States dollars, which increased Web-based product
revenues by $0.6 million. At the same time, CD Rom product
and other revenues, which consist of licensing royalties and
mailing lists, decreased 24% to $2.0 million in 2002 from
$2.7 million in 2001. These decreases were primarily a result of
the effects of the economic slowdown and resulting impact on
OneSources customer base.

Cost of Revenues.Total cost of revenues decreased 2% to $18.1 million for
the year ended December 31, 2002 from $18.5 million
for the year ended December 31, 2001. The decrease in total
cost of revenues during 2002 was principally due to the
reduction of costs of $0.4 million associated with the
expansion of the OneSource CorpTech high-technology database
relative to 2001 and a decrease in communication costs of
$0.2 million. Partially offsetting these decreases were
higher costs for royalties of $0.1 million and amortization
of capitalized software of $0.1 million.

Selling and Marketing
Expense.Selling and marketing expense
decreased as a percentage of total revenues to 29% in 2002 from
31% in 2001. Selling and marketing expense decreased 11% to
$16.5 million for the year ended December 31, 2002 from
$18.4 million for the year ended December 31, 2001.
These decreases were principally due to decreased
compensation-related expense by $2.1 million, decreased
recruiting expense by $0.1 million, and decreased travel
and entertainment expenses by $0.3 million, which were
primarily the result of workforce reductions in 2001. These
decreases were partially offset by increases in direct marketing
expenses by $0.3 million and in fees paid to external
consultants by $0.6 million

Platform and Product Development
Expense.Platform and product
development expense increased as a percentage of total revenues
to 17% in 2002 from 14% in 2001. Platform and product
development expense increased 20% to $10.0 million for the
year ended December 31, 2002 from $8.4 million for the
year ended December 31, 2001. These increases were
primarily the result of higher compensation related expense by
$2.2 million due to increased staffing, increased use of
outside contractors for platform and product development by
$0.4 million, and increased recruiting expense by
$0.1 million. Partially offsetting these increases was the
capitalization of software development costs associated with the
expanded development of new platforms and products that
increased to $1.9 million for 2002 from $0.8 million
for 2001.

General and Administrative
Expense.General and administrative
expense increased as a percentage of total revenues to 11% in
2002 from 10% in 2001. General and administrative expense
increased 5% to $6.2 million for the year ended
December 31, 2002 from $5.9 million for the year ended
December 31, 2001. These increases were primarily due to
higher insurance premium rates for directors and officers
liability insurance and other commercial insurance by
$0.1 million, and higher general supplies, postage and
shipping costs by $0.1 million.

Restructuring.Restructuring expense was zero for the year ended December 31,
2002, down from $0.7 million for the year ended
December 31, 2001. Restructuring expense during the year
ended December 31, 2001 was the result of cost reduction
measures implemented in both July and November 2001 that
resulted in an 11% reduction in our overall workforce and the
consolidation of certain functions. Restructuring

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expense primarily consists of severance related
expenses associated with the reduction in OneSources
overall workforce.


Amortization of
Goodwill.Amortization of goodwill
decreased to zero for the year ended December 31, 2002 from
$1.0 million for the year ended December 31, 2001.
This decrease was the result of OneSources adoption of
SFAS No. 142, Goodwill and Other Intangible
Assets, and its requirement to cease the amortization of
goodwill as of January 1, 2002.

Amortization of Acquired Intangible
Assets.Amortization of acquired
intangible assets decreased to $0.4 million for the year
ended December 31, 2002 from $0.5 million for the year
ended December 31, 2001. This decrease was the result of
the cost of a non-compete agreement becoming fully amortized
during the year ended December 31, 2002.

Interest Income,
Net.Interest income, net of interest
expense, decreased to $0.4 million for the year ended
December 31, 2002 from $0.9 million for the year ended
December 31, 2001. The decrease was primarily the result of
lower rates on invested funds, which was offset partially by
higher average cash balances.

Provision for Income
Taxes.Provision for income taxes
increased to $2.6 million for the year ended December 31,
2002 from $1.9 million for the year ended December 31,
2001. This increase was due to pre-tax income of $7.0 million at
an effective tax rate of 37% for the year ended
December 31, 2002 as compared to pre-tax income of
$6.5 million at an effective tax rate of 29% for the year
ended December 31, 2001. The effective tax rate increase
was primarily due to the utilization of all remaining tax
benefits in 2001 from federal net operating loss carryforwards.
OneSource calculated its provision for income taxes for its
domestic income using the federal statutory tax rate of 34%,
plus an estimated effective state tax rate of 5% for the year
ended December 31, 2002 and 6% for the year ended
December 31, 2001. For both years ended December 31, 2002
and 2001, OneSource calculated its provision for income taxes
for its foreign income using a 30% effective tax rate.

Quarterly Results of Operations
(Unaudited)

The following tables set forth a summary of
OneSources unaudited quarterly operating results for each
of the eight quarters in the two-year period ended
December 31, 2003. This information has been derived from
unaudited interim consolidated financial statements that, in the
opinion of management, have been prepared on a basis consistent
with the Consolidated Financial Statements appearing elsewhere
in this Annual Report on Form 10-K and include all
adjustments, consisting of only normal recurring adjustments,
necessary for a fair statement of such information when read in
conjunction with OneSources Consolidated Financial

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Statements and the Notes thereto. Operating
results as shown below for any quarter are not necessarily
indicative of results for any future period.


|                                            |                                            |                                          |        |           |       |          |        |          |       |          |        |           |       |          |        |          |       |   |        |        |       |   |        |        |       |   |        |        |       |   |        |        |       | 
|------------------------------------------- | ------------------------------------------ | ---------------------------------------- | ------ | --------- | ----- | -------- | ------ | -------- | ----- | -------- | ------ | --------- | ----- | -------- | ------ | -------- | ----- | - | ------ | ------ | ----- | - | ------ | ------ | ----- | - | ------ | ------ | ----- | - | ------ | ------ | ----- | 
|                                            |                                            |                                         
|                                            |                                            | Quarter ended                           
|                                            |                                            |                                         
|                                            |                                            |                                          |        |          
|                                            |                                            | 2003                                     |        | 2002     
|                                            |                                            |                                          |        |          
|                                            |                                            | Dec. 31,                                 |        | Sept. 30, |       | June 30, |        | Mar. 31, |       | Dec. 31, |        | Sept. 30, |       | June 30, |        | Mar. 31,
|                                            |                                            |                                          |        |           |       |          |        |          |       |          |        |           |       |          |        |         
|                                            |                                            |                                         
|                                            |                                            | (In thousands, except per share data)   
|Statement of Income Data:                   |                                            |                                          |        |           |       |          |        |          |       |          |        |           |       |          |        |          |       |   |        |        |       |   |        |        |       |   |        |        |       |   |        |       
|Revenues                                    |                                            | $                                        | 14,499 |           |       | $        | 13,890 |          |       | $        | 14,399 |           |       | $        | 14,496 |          |       | $ | 14,596 |        |       | $ | 14,557 |        |       | $ | 14,373 |        |       | $ | 14,224 |       
|Cost of revenues                            |                                            |                                          | 4,437  |           |       |          | 4,442  |          |       |          | 4,640  |           |       |          | 4,709  |          |       |   | 4,696  |        |       |   | 4,501  |        |       |   | 4,454  |        |       |   | 4,413  |       
|                                            |                                            |                                          |        |           |       |          |        |          |       |          |        |           |       |          |        |          |       |   |        |        |       |   |        |        |       |   |        |        |       |   |        |       
|                                            | Gross profit                               |                                          |        | 10,062    |       |          |        | 9,448    |       |          |        | 9,759     |       |          |        | 9,787    |       |   |        | 9,900  |       |   |        | 10,056 |       |   |        | 9,919  |       |   |        | 9,811  |      
|                                            |                                            |                                          |        |           |       |          |        |          |       |          |        |           |       |          |        |          |       |   |        |        |       |   |        |        |       |   |        |        |       |   |        |       
|Operating expenses:                         |                                            |                                          |        |           |       |          |        |          |       |          |        |           |       |          |        |          |       |   |        |        |       |   |        |        |       |   |        |        |       |   |        |       
|                                            | Selling and marketing                      |                                          |        | 4,208     |       |          |        | 4,133    |       |          |        | 4,350     |       |          |        | 4,444    |       |   |        | 4,170  |       |   |        | 4,385  |       |   |        | 4,189  |       |   |        | 3,723  |      
|                                            | Platform and product development           |                                          |        | 2,570     |       |          |        | 2,683    |       |          |        | 2,630     |       |          |        | 2,691    |       |   |        | 2,367  |       |   |        | 2,279  |       |   |        | 2,741  |       |   |        | 2,653  |      
|                                            | General and administrative                 |                                          |        | 2,574     |       |          |        | 1,522    |       |          |        | 1,705     |       |          |        | 1,507    |       |   |        | 1,613  |       |   |        | 1,677  |       |   |        | 1,291  |       |   |        | 1,575  |      
|                                            | Amortization of acquired intangible assets |                                          |        | 82        |       |          |        | 82       |       |          |        | 82        |       |          |        | 81       |       |   |        | 82     |       |   |        | 115    |       |   |        | 115    |       |   |        | 115    |      
|                                            |                                            |                                          |        |           |       |          |        |          |       |          |        |           |       |          |        |          |       |   |        |        |       |   |        |        |       |   |        |        |       |   |        |       
|                                            |                                            | Total operating expenses                 |        |           | 9,434 |          |        |          | 8,420 |          |        |           | 8,767 |          |        |          | 8,723 |   |        |        | 8,232 |   |        |        | 8,456 |   |        |        | 8,336 |   |        |        | 8,066 | 
|                                            |                                            |                                          |        |           |       |          |        |          |       |          |        |           |       |          |        |          |       |   |        |        |       |   |        |        |       |   |        |        |       |   |        |       
|                                            |                                            | Income from operations                   |        |           | 628   |          |        |          | 1,028 |          |        |           | 992   |          |        |          | 1,064 |   |        |        | 1,668 |   |        |        | 1,600 |   |        |        | 1,583 |   |        |        | 1,745 | 
|Interest income, net                        |                                            |                                          | 62     |           |       |          | 75     |          |       |          | 117    |           |       |          | 109    |          |       |   | 138    |        |       |   | 95     |        |       |   | 102    |        |       |   | 102    |       
|                                            |                                            |                                          |        |           |       |          |        |          |       |          |        |           |       |          |        |          |       |   |        |        |       |   |        |        |       |   |        |        |       |   |        |       
|                                            |                                            | Income before provision for income taxes |        |           | 690   |          |        |          | 1,103 |          |        |           | 1,109 |          |        |          | 1,173 |   |        |        | 1,806 |   |        |        | 1,695 |   |        |        | 1,685 |   |        |        | 1,847 | 
|Provision for income taxes                  |                                            |                                          | 259    |           |       |          | 413    |          |       |          | 422    |           |       |          | 434    |          |       |   | 668    |        |       |   | 627    |        |       |   | 642    |        |       |   | 665    |       
|                                            |                                            |                                          |        |           |       |          |        |          |       |          |        |           |       |          |        |          |       |   |        |        |       |   |        |        |       |   |        |        |       |   |        |       
|                                            |                                            | Net income                               |        | $         | 431   |          |        | $        | 690   |          |        | $         | 687   |          |        | $        | 739   |   |        | $      | 1,138 |   |        | $      | 1,068 |   |        | $      | 1,043 |   |        | $      | 1,182 | 
|                                            |                                            |                                          |        |           |       |          |        |          |       |          |        |           |       |          |        |          |       |   |        |        |       |   |        |        |       |   |        |        |       |   |        |       
|Net income per share:                       |                                            |                                          |        |           |       |          |        |          |       |          |        |           |       |          |        |          |       |   |        |        |       |   |        |        |       |   |        |        |       |   |        |       
|                                            | Basic                                      |                                          | $      | 0.04      |       |          | $      | 0.06     |       |          | $      | 0.06      |       |          | $      | 0.06     |       |   | $      | 0.10   |       |   | $      | 0.09   |       |   | $      | 0.09   |       |   | $      | 0.10   |      
|                                            | Diluted                                    |                                          | $      | 0.04      |       |          | $      | 0.06     |       |          | $      | 0.06      |       |          | $      | 0.06     |       |   | $      | 0.09   |       |   | $      | 0.09   |       |   | $      | 0.08   |       |   | $      | 0.09   |      
|Weighted average common shares outstanding: |                                            |                                          |        |           |       |          |        |          |       |          |        |           |       |          |        |          |       |   |        |        |       |   |        |        |       |   |        |        |       |   |        |       
|                                            | Basic                                      |                                          |        | 11,413    |       |          |        | 11,311   |       |          |        | 11,558    |       |          |        | 11,680   |       |   |        | 11,658 |       |   |        | 11,797 |       |   |        | 11,957 |       |   |        | 12,029 |      
|                                            | Diluted                                    |                                          |        | 11,835    |       |          |        | 11,705   |       |          |        | 11,883    |       |          |        | 12,119   |       |   |        | 12,180 |       |   |        | 12,368 |       |   |        | 12,620 |       |   |        | 12,884 |      

Annualized Contract Value

One measure of the performance of
OneSources business is annualized contract
value. Annualized contract value is a measurement that
OneSource uses for normalized period-to-period comparisons to
indicate business volume and growth, both in terms of new
customers and upgrades and expansions at existing customers.
OneSources presentation and calculation of annualized
contract value may not be comparable to similarly titled
measures used by other companies. It is not an absolute
indicator, and OneSource cannot guarantee that any annualized
contract value will be ultimately realized as revenues.

OneSource uses annualized contract value as a
measure of its business because it shows the growth or decline
in OneSources customer base in a way that revenues cannot.
Since OneSources business is primarily subscription-based,
revenues are recognized not when a sale is made, but in ratable
portions over the term of the subscription (which is usually
twelve months). As a result, from a revenue viewpoint the
addition or loss of even a major customer contract may not have
a dramatic impact on a quarter-to-quarter basis. On the other
hand, by looking at the value of customer contracts in hand at
the end of each quarter, OneSource can more readily see trends
in its business. For example, the addition of a one-year
subscription contract with total payments of $1.0 million
may only increase revenues by approximately $250,000
($1.0 million divided by four) in the quarter in which the
sale is made, but would increase annualized contract value by
$1.0 million. Similarly, if the customer did not renew that
contract, revenues in the next quarter would only decrease by
$250,000, while annualized contract value would decrease by
$1.0 million.

In calculating annualized contract value,
OneSource factors only those contracts for which the customer
has actually been invoiced. Since amounts invoiced are included
in deferred revenues on OneSources balance sheets for all
customer contracts with terms extending beyond the month of
invoice, this demonstrates that annualized contract value is
based on actual customer contracts reflected in OneSources
historical financial statements. To compute annualized contract
value, one multiplies by twelve the amount of total invoiced fees

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for one month that are included in deferred
revenues. Annualized contract value is not intended to be an
absolute indicator of future revenues. OneSource only annualizes
existing, invoiced contracts, but does so without regard to the
remaining term of those contracts. Most of OneSources
contracts are for 12 months, but as of the date that
OneSource calculates annualized contract value, the remaining
term of nearly all of OneSources contracts will be less
than 12 months. If a customer fails to pay its invoiced
fees or terminates the contract or if OneSource is unable to
renew a contract, its revenues in subsequent periods may be less
than expected if based solely on annualized contract value.
Conversely, if OneSource adds additional customers or renews
existing contracts at higher rates, its revenues in future
periods may exceed expectations if based solely on annualized
contract value.


The calculation of annualized contract value for
OneSources Web-based products is illustrated below:

|                  |  |                |        |               |  |                |         |  |  |   |        | 
|----------------- |  | -------------- | ------ | ------------- |  | -------------- | ------- |  |  | - | ------ | 
|                  |  |                |        | One Month of  |  |               
|                  |  | Web-Based      |        | Invoiced Fees |  |               
|                  |  | Deferred       |        | in Deferred   |  | Annualized    
|Measurement Date  |  | Revenues       |        | Revenues      |  | Contract Value
|                  |  |                |        |               |  |               
|                  |  |               
|                  |  | (In thousands)
|December 31, 2002 |  | $              | 29,748 |               |  | $              | 4,672.9 |  |  | $ | 56,075 | 
|December 31, 2003 |  |                | 28,742 |               |  |                | 4,393.6 |  |  |   | 52,723 | 

The aggregate annualized contract value for
Web-based products was $52.7 million as of
December 31, 2003 and $56.1 million as of
December 31, 2002. Of this $52.7 million,
$47.6 million was attributable to those customers that were
under contract as of both December 31, 2002 and 2003. The
renewal rate for subscribers of the Business Browser product
line as of December 31, 2003 was 78% calculated on a dollar
basis, whereas the renewal rate for those subscribers that also
used the AppLink software development kit as of
December 31, 2003 was 81% calculated on a dollar basis.

The number of Web-based customers decreased to
750 at December 31, 2003 from 812 at December 31,
2002. On average, OneSources customers for Web-based
products as of December 31, 2003 had an annualized contract
value of $70,297 per customer, compared to an average annualized
contract value of $69,058 per customer as of December 31,
2002.

As of December 31, 2003, 45 organizations
licensed the AppLink software development kit. Such customers as
of December 31, 2003 generated, on average, approximately
$380,000 each in annualized contract value.

Liquidity and Capital Resources

Since acquiring the business from Lotus
Development Corporation in 1993, OneSource has funded operations
through a combination of seller financing, proceeds received
from the sale of Class P common stock and common stock in
connection with the purchase of the business from Lotus
Development Corporation, bank debt, proceeds received from the
sale of non-strategic lines of business, capitalized equipment
leases, cash flows from operations, our initial public offering
which closed in May 1999, and issuance of stock pursuant to
stock options and employee stock purchase plan.

Cash and cash equivalents totaled
$22.8 million at December 31, 2003, compared to
$23.1 million at December 31, 2002. The decrease was
primarily due to funds used by investing activities of
$5.1 million and financing activities of $0.9 million,
partially offset by funds provided by operating activities of
$4.6 million and the effect of exchange rate changes of
$1.0 million.

Net cash provided by operating activities was
$4.6 million for the year ended December 31, 2003,
compared to $12.7 million for the year ended
December 31, 2002. The net decrease of $8.0 million
period to period was the result of a net decrease in operating
assets and liabilities of $5.1 million, which was primarily
attributable to a decrease in deferred revenues of
$4.0 million, a decrease in the tax benefits of stock
options of $0.6 million, a decrease in deferred income
taxes by $0.2 million, a decrease in depreciation and
amortization of $0.1 million, a decrease in amortization of
acquired intangible assets by $0.1 million, and net income
of $2.5 million in 2003 compared to net income of
$4.4 million in 2002.

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Net cash used in investing activities was
$5.1 million for the year ended December 31, 2003,
compared to $3.7 million for the year ended
December 31, 2002. Net cash used in investing activities
was primarily due to purchases of property and equipment for
$3.2 million during the year ended December 31, 2003
and $1.9 million during the year ended December 31,
2002, as well as $2.5 million for capitalized software
development costs for the year ended December 31, 2003 and
$1.9 million for the year ended December 31, 2002.
Purchases of property and equipment for the years ended
December 31, 2003 and 2002 include $1.4 million and
zero, respectively, of capitalized software development costs.
The remaining purchases of property and equipment for the years
ended December 31, 2003 and 2002 of $1.8 million and
$1.9 million, respectively, primarily consisted of software
and computer equipment. For the year ended December 31,
2003, OneSource capitalized an aggregate of $3.9 million of
external and internal software development costs compared to
$1.9 million for the year ended December 31, 2002.
These capitalized software development costs were primarily
associated with development of software platforms to be used in
OneSource products and programs used for its proprietary
classification system. For the year ended December 31,
2003, software development projects primarily included a new
data repository on a single, unified database structure;
development of new platform functionality; additional
functionalities for the AppLink software development kit
including, but not limited to, development of an XML-based
version; and the Catalyst modules. These uses of cash were
offset in part by proceeds from the release of restricted time
deposits of $0.6 million during the year ended
December 31, 2003. The restricted time deposits were
required to secure irrevocable letters of credit with a bank in
connection with two facility leases. During the year ended
December 31, 2003, these letters of credit were secured by
a working capital line of credit.

Net cash used in financing activities was
$0.9 million for the year ended December 31, 2003,
compared to $4.5 million for the year ended
December 31, 2002. Net cash used in financing activities
primarily consisted of the repurchase of common stock of
$6.6 million during the year ended December 31, 2003
and $5.6 million during the year ended December 31,
2002, and repayments of long-term debt of $0.6 million
during the year ended December 31, 2003. Partially
offsetting these uses were proceeds from long-term debt of
$3.1 million during the year ended December 31, 2003
and proceeds from the exercise of stock options and the employee
stock purchase plan of $3.2 million during the year ended
December 31, 2003 and $1.1 million during the year
ended December 31, 2002. During the years ended
December 31, 2003 and 2002, OneSource issued
896,591 and 173,038 shares of OneSource common stock,
respectively, in connection with its stock option plans and the
employee stock purchase plan.

In April 2001, OneSources board of
directors announced a stock buyback program to repurchase up to
1,000,000 shares of OneSource common stock over the following
twelve months. In January 2002, OneSource completed the
repurchase of its common stock authorized under this program at
an average price of $8.48 per share.

In January 2002, OneSources board of
directors announced a second stock buyback program to repurchase
up to an additional $5.0 million of its common stock over
the following twelve months. In November 2002, OneSource
completed its second stock buyback program, having repurchased
749,931 shares of its common stock at an average price of $6.67
per share.

In October 2002, OneSources board of
directors announced a third stock buyback program to repurchase
up to an additional $5.0 million of its common stock over
the following twelve months. In August 2003, OneSource completed
its third stock buyback program, having repurchased 736,837
shares of its common stock at an average price of $6.79 per
share.

In July 2003, OneSources board of directors
announced a fourth stock buyback program to repurchase up to an
additional $7.0 million of its common stock over the
following twelve months. As of December 31, 2003, OneSource
had repurchased 234,882 shares of its common stock under this
fourth stock buyback program at an average price of $7.83 per
share, for a total cost of $1.8 million.

OneSource believes that its current cash and cash
equivalents and funds anticipated to be generated from
operations will be sufficient to satisfy working capital and
capital expenditure requirements for at least the following
twelve months. However, in order to protect itself in the event
of a strategic cash requirement, in December 2002, OneSource
entered into a Loan and Security Agreement with Silicon Valley
Bank permitting

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borrowings of up to $10.0 million, which is
comprised of a $5.0 million working capital line of credit
and a $5.0 million equipment line of credit. In June 2003,
OneSource reserved $0.6 million from the working capital
line of credit to secure two letters of credit related to leased
office space. The working capital line of credit initially
expired on December 20, 2003. On January 8, 2004,
OneSource entered into the First Loan Modification Agreement
that retroactively extended the working capital revolving line
of credit portion of the Loan and Security Agreement from
December 21, 2003 until March 18, 2004. OneSource did
not renew the working capital revolving line of credit which
expired on March 18, 2004. The maximum borrowing capacity
for the working capital line of credit was limited to 80% of
OneSources eligible domestic accounts receivable that are
less than 90 days outstanding. The Loan and Security
Agreement contains financial covenants requiring that once a
borrowing takes place, OneSource maintain an adjusted quick
ratio of 2.0:1 and report a net profit of at least $1.00 for
each fiscal quarter. The adjusted quick ratio is defined as
quick assets to current liabilities, minus deferred revenue. As
of December 31, 2002, OneSource was in compliance with
these financial covenants. However, at December 31, 2003,
OneSource did not comply with certain negative covenants of the
Loan and Security Agreement and the bank has waived such
noncompliance.


Contractual Obligations and
Commitments

The following table presents OneSources
contractual obligations and commercial commitments as of
December 31, 2003:

|                        |  |                |        |                        |  |             |       |            |  |            |       |  |  |   |   |  |  |   |   | 
|----------------------- |  | -------------- | ------ | ---------------------- |  | ----------- | ----- | ---------- |  | ---------- | ----- |  |  | - | - |  |  | - | - | 
|                        |  |                |        |                       
|                        |  |                |        | Payments due by period
|                        |  |                |        |                       
|                        |  |                |        | Less than              |  | One to      |       | Three to   |  | More than 
|Contractual Obligations |  | Total          |        | one year               |  | three years |       | five years |  | five years
|                        |  |                |        |                        |  |             |       |            |  |           
|                        |  |               
|                        |  | (In thousands)
|Long-term debt          |  | $              | 2,579  |                        |  | $           | 1,050 |            |  | $          | 1,529 |  |  | $ |  |  |  | $ |  | 
|Operating leases        |  |                | 1,324  |                        |  |             | 772   |            |  |            | 552   |  |  |   |  |  |  |   |  | 
|Royalty contracts       |  |                | 8,383  |                        |  |             | 7,294 |            |  |            | 1,089 |  |  |   |  |  |  |   |  | 
|Purchase obligations    |  |                | 526    |                        |  |             | 526   |            |  |            |      |  |  |   |  |  |  |   |  | 
|                        |  |                |        |                        |  |             |       |            |  |            |       |  |  |   |   |  |  |   |   | 
|Total                   |  | $              | 12,812 |                        |  | $           | 9,642 |            |  | $          | 3,170 |  |  | $ |  |  |  | $ |  | 
|                        |  |                |        |                        |  |             |       |            |  |            |       |  |  |   |   |  |  |   |   | 

Off-Balance Sheet Arrangements

OneSource does not engage in off-balance sheet
transactions.

Related Party Transactions

During the year ended December 31, 2003,
OneSource had no related party transactions. During the year
ended December 31, 2002 and 2001, OneSource had related
party transactions for subscriptions to OneSource products.
Related parties consisted of customers who held a greater than
10% ownership interest in OneSource. At December 31, 2002
and 2001, OneSource had trade accounts receivable of
$0.7 million and $0.5 million, respectively, due from
one related party. OneSource recognized revenues of
$0.7 million and $0.8 million in the years ended
December 31, 2002 and 2001, respectively, from two related
parties.

Recently Issued Accounting
Pronouncements

In November 2002, the Emerging Issues Task Force
(the EITF) reached a consensus on Issue 00-21,
Revenue Arrangements with Multiple Deliverables.
EITF Issue 00-21 addresses revenue recognition for revenue
arrangements with multiple deliverables. The deliverables in
these revenue arrangements should be divided into separate units
of accounting when the individual deliverables have value to the
customer on a stand-alone basis; there is objective and reliable
evidence of the fair value of the undelivered elements; and, if
the arrangement includes a general right to return the delivered
element, delivery or performance of the undelivered element is
considered probable. The relative fair value of each unit should
be determined and the total consideration of the arrangement
should be allocated among the individual units based on their
relative fair value. The guidance in this issue is effective for
revenue arrangements entered into after June 15, 2003.

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OneSource has determined that the adoption of
EITF Issue 00-21 did not have an impact on its results of
operations or financial position.


In April 2003, the Financial and Accounting
Standards Board (the FASB) issued Statement of
Financial Accounting Standards No. 149 (SFAS
No. 149), Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS
No. 149 amends and clarifies the accounting and reporting
for derivatives, amending the previously issued Statement of
Financial Accounting Standards No. 133 (SFAS
No. 133), Accounting for Derivative Instruments
and Hedging Activities. SFAS No. 149 clarifies under
what circumstances a contract with an initial net investment
meets the characteristics of a derivative, amends the definition
of an underlying contract, and clarifies when a derivative
contains a financing component in order to increase the
comparability of accounting practices under SFAS No. 133.
SFAS No. 149 is effective for contracts entered into or
modified after June 30, 2003. OneSource has determined that
the adoption of SFAS No. 149 did not have an impact on its
financial position and results of operations.

In May 2003, the FASB issued Statement of
Financial Accounting Standards No. 150 (SFAS
No. 150), Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and
Equity. SFAS No. 150 establishes standards for how an
issuer classifies and measures certain financial instruments
with characteristics of both liabilities and equity. SFAS
No. 150 applies specifically to a number of financial
instruments that companies have historically presented within
their financial statements, either as equity or between the
liabilities section and the equity section, rather than as
liabilities. SFAS 150 is generally effective for financial
instruments entered into or modified after May 31, 2003,
and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003. OneSource has
determined that the adoption of SFAS No. 150 did not have
an impact on its financial position and results of operations.

In December 2003, the Staff of the Securities and
Exchange Commission issued Staff Accounting Bulletin
No. 104 (SAB No. 104), Revenue
Recognition. SAB 104 was effective upon issuance and
supersedes Staff Accounting Bulletin No. 101 (SAB
No. 101), Revenue Recognition in Financial
Statements. SAB 104s primary purpose is to
rescind the accounting guidance in SAB 101 related to
multiple-element arrangements as this guidance has been
superseded as a result of the issuance of EITF Issue 00-21,
Accounting for Revenue Arrangements with Multiple
Deliverables. OneSource has determined that the adoption
of SAB No. 104 did not have an impact on its financial
position and results of operations.

Certain Factors that May Affect Future
Results

This Annual Report on Form 10-K contains
forward-looking statements that involve risks and uncertainties.
OneSources actual results may differ materially from those
anticipated in these forward-looking statements as a result of
certain factors, including without limitation, those set forth
in the following risk factors discussed below and elsewhere in
this Annual Report on Form 10-K. In addition to the other
information included or incorporated by reference in this Annual
Report on Form 10-K, the following risk factors should be
considered carefully in evaluating OneSource and its business:

THE TRANSACTION WITH AFFILIATES OF VALUEACT
CAPITAL MAY NOT BE COMPLETED. On February 18, 2004, we
announced that we had entered into a merger agreement with
affiliates of ValueAct Capital Partners, L.P. Under the
agreement, each share of our common stock outstanding at the
time of the merger (other than shares held by ValueAct Capital
and its affiliates), will be converted into the right to receive
$8.40 per share in cash. The transaction is expected to close in
the second quarter of 2004 but ValueAct Capital may refuse to
complete the transaction for a variety of reasons, including if
there is a material adverse change affecting us or if holders of
more than 5% of our outstanding capital stock exercise
dissenters rights. If the transaction is not completed for
any reason, we may be subject to a number of consequences that
may adversely affect our business, results of operations and
stock price, including the following:



| |   |                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------
| |  | We may be required to pay a termination fee of
    $3 million plus up to $1 million of expenses of
    ValueAct Capital and its affiliates;

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the price of our common stock may decline to the
    extent that the relevant current market price reflects a market
    assumption that the transaction will be completed;                                                                                                                                                                                                                                
|
| |  | some costs related to the transaction, such as
    legal, accounting, financial advisor and financial printing
    fees, must be paid even if the transaction is not completed;                                                                                                                                                                                                                            
|
| |  | activities relating to the transaction and
    related uncertainties may divert managements attention
    from day-to-day business and cause substantial disruptions among
    employees and relationships with customers and data providers;
    and                                                                                                                                                     
|
| |  | provisions in the merger agreement include
    certain operating restrictions and prevent us from engaging in
    activities, discussions and negotiations with third parties
    regarding transactions that would involve a transfer of control
    which may prevent us from being able to take advantage of
    alternative business opportunities or effectively respond to
    competitive pressures.

OUR SALES EFFORTS TO OUR TARGET MARKET MAY BE
LENGTHY, INVOLVE DELAYS, OR INVOLVE UNCERTAINTY, ALL OF WHICH
MAY ADVERSELY IMPACT OUR BUSINESS, OPERATING RESULTS, AND
FINANCIAL CONDITION. Selling our products and services to Global
5000 companies, our target market, involves sales cycles that we
believe are potentially longer and more uncertain than those
involving small-size organizations. Our customers generally
commit significant time and resources to evaluate our products
and services, and they often require us to expend substantial
time, effort, and money to educate them about our products and
services. In addition, these sales efforts often require final
approval from our customers senior level management,
potentially resulting in delays to the sales cycle. Any of these
factors may extend the sales cycle and increase the uncertainty
of whether a sale will actually be completed. Further,
uncertainty resulting from our announcement of the transaction
with ValueAct Capital and its affiliates may cause current and
potential customers to defer orders. The timing and uncertainty
of sales and the length of the sales cycle may cause our
operating results to vary significantly from quarter to quarter
and may adversely impact our business, operating results, and
financial condition.

AS WE COMPLEMENT THE EXISTING ONESOURCE PRODUCT
LINE WITH NEW PRODUCTS AND SERVICES, THIS MAY DIVERT MANAGEMENT
AND TECHNICAL ATTENTION AND FINANCIAL RESOURCES AND MAY NOT
PRODUCE THE DESIRED BUSINESS RESULTS. As we complement the
existing OneSource product line with new business information
products and services, our management team and technical
personnel may spend a significant amount of time and management
and financial resources in such development and implementation.

Despite the investment of management, technical,
and financial resources with respect to these efforts, the
potential new products and services may not produce the
revenues, earnings, or business results that we may anticipate
for the following reasons:



| |   |                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we may experience difficulty in developing and
    implementing products and services that integrate and operate
    effectively with our customers existing applications,
    business processes, and functions;
|
| |  | the products and services may not achieve market
    acceptance;                                                                                                                                                  
|
| |  | we may contract with certain third parties to
    provide content and/or supplement the products and services we
    provide, which may yield lower gross margins than our existing
    business;                 
|
| |  | we may experience delays in the development and
    implementation of these products and services; and                                                                                                            
|
| |  | the introduction of new products and services may
    require changes to accounting methods, policies, and procedures.                                                                                            

WE HAVE A CUMULATIVE DEFICIT AND EXPECT TO
CONTINUE TO HAVE A CUMULATIVE DEFICIT FOR THE FORESEEABLE
FUTURE, AND WE MAY NOT SUSTAIN OR INCREASE NET INCOME UNLESS WE
CONTINUE TO OFFSET OUR ROYALTY PAYMENTS AND OPERATING EXPENSES
WITH REVENUES FROM OUR WEB-BASED PRODUCTS AND SERVICES. We
incurred losses from operations of approximately
$1.6 million in 1996, $1.4 million in 1997, $5.0
million in 1998, $6.4 million in 1999, and
$2.0 million in 2000, and had income from operations of

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$5.7 million in 2001, $6.6 million in
2002, and $3.7 million in 2003. As of December 31,
2003, we had an accumulated deficit of $6.8 million. If we are
unable to offset our royalty payments and operating expenses
with revenues from our Web-based products and services, we may
not be able to sustain or increase net income.


WE RELY ON GENERATING SUBSCRIPTION REVENUES FROM
OUR WEB-BASED PRODUCT LINE, AND WE MAY NOT SUSTAIN OR INCREASE
NET INCOME UNLESS DEMAND FOR OUR WEB-BASED PRODUCTS REMAINS THE
SAME OR CONTINUES TO GROW. Subscription revenues from Web-based
product line accounted for 97% of total revenues in 2003, 96% of
total revenues in 2002, 95% of total revenues in 2001, 91% of
total revenues in 2000, 90% of total revenues in 1999, 53% of
total revenues in 1998, and 11% of total revenues in 1997. As a
result, our future financial condition may depend heavily on the
success or failure of our Web-based product line. These products
were introduced in December 1996, and it is difficult to predict
demand and market acceptance in the rapidly evolving Web-based
business information products and services market. If the demand
for our Web-based products does not remain the same or continue
to grow, whether due to, among other factors, increased
competition, lack of market acceptance, insufficient
enhancements, failure of Internet or Web use to grow in general,
or technological change, we may not be able to sustain or
increase net income.

SOME OF OUR STOCKHOLDERS MAY BE ABLE TO
SIGNIFICANTLY INFLUENCE THE OUTCOME OF MATTERS REQUIRING
STOCKHOLDER APPROVAL, WHICH MAY ACCELERATE, DELAY, FACILITATE,
OR MAKE MORE DIFFICULT A MERGER, TENDER OFFER, OR PROXY CONTEST,
AND MAY ADVERSELY AFFECT THE RIGHTS OF OUR STOCKHOLDERS. Our
current directors, officers, and greater than 10% stockholders
together beneficially own a significant portion of our
outstanding shares of common stock. While these stockholders do
not hold a majority of our outstanding common stock, they will
be able to exercise significant influence over matters requiring
shareholder approval, including the proposed transaction with
ValueAct Capital and its affiliates, which may accelerate,
delay, facilitate, or make more difficult a merger, tender
offer, or proxy contest, and may adversely affect the rights of
our stockholders.

OUR RESTATED CERTIFICATE OF INCORPORATION AND
AMENDED AND RESTATED BY-LAWS CONTAIN PROVISIONS THAT MAY HAVE
THE EFFECT OF DELAYING OR PREVENTING CERTAIN CORPORATE ACTIONS,
WHICH MAY ADVERSELY AFFECT THE RIGHTS OF OUR STOCKHOLDERS. Our
board of directors is authorized to issue up to 1,000,000 shares
of preferred stock and to determine the price, rights,
preferences, privileges, and restrictions, including voting
rights, of those shares without further approval by
stockholders. Preferred stock may be issued with voting,
liquidation, dividend, and other rights superior to those of
common stock, without stockholder approval. The rights of the
holders of common stock will be subject to, and may be adversely
affected by, the rights of the holders of any preferred stock
that may be issued in the future. The issuance of preferred
stock may make it more difficult for a third party to acquire,
or may discourage a third party from acquiring, a majority of
our outstanding common stock.

In October 2003, our board of directors adopted
the Rights Plan under which all holders of record of our common
stock as of October 6, 2003 were issued a right to purchase
a fraction of a share of a new series of preferred stock. The
Rights Plan is designed to enhance the ability of our board of
directors to provide for fair and equal treatment for all
shareholders and may deter some potential acquirers. In
connection with the proposed transaction with ValueAct Capital
and its affiliates, the Rights Plan was amended to exempt the
transaction.

In addition, certain provisions of the Delaware
General Corporation Law may have the effect of delaying or
preventing a change in control or management of OneSource. The
issuance of preferred stock, implementation of the Rights Plan,
and relevant provisions of Delaware General Corporation Law may
delay or make more difficult a merger, tender offer, or proxy
contest, and may adversely affect the rights of our stockholders
that may otherwise receive a premium over the fair market value
of our common stock.

IF WE LOSE KEY PERSONNEL AND ARE UNABLE TO
ATTRACT ADDITIONAL AND RETAIN EXISTING KEY PERSONNEL, IT MAY
CAUSE AN ADVERSE EFFECT ON OUR

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BUSINESS. We expect that our future success will
depend, in substantial part, on the continued services of our
senior management. None of our senior management has entered
into employment agreements with us, and we do not maintain
key-person life insurance on any of our employees. The loss of
the services of one or a group of our key personnel may have a
material, adverse effect on development of new products and
services, our ability to manage the business, and our financial
condition. On February 5, 2004, we announced that Dan
Schimmel, our president and chief executive officer, resigned,
and Martin Kahn, our current chairman, was appointed executive
chairman and chief executive officer on an interim basis. In
addition, we expect that our future success will depend on our
continuing ability to attract, retain, and motivate highly
qualified technical, customer support, sales, finance,
accounting, and managerial personnel. Competition for such key
personnel is intense, and we cannot assure that we will be able
to retain such personnel or that we will be able to attract,
assimilate, or retain other highly qualified personnel in the
future. Further, competition for highly qualified key personnel
may lead to increased recruitment and retention costs, thus
potentially hindering our financial condition. Moreover,
uncertainty resulting from our announcement of the proposed
transaction with ValueAct Capital and its affiliates may cause
our key personnel to seek other employment opportunities, and
our ability to attract and retain key personnel may be harmed,
which may adversely affect our business.


IF OUR INFORMATION PROVIDERS PROVIDE US WITH
INACCURATE OR UNRELIABLE DATA, FAIL TO TRANSMIT THEIR DATA FEEDS
IN A TIMELY MANNER, CEASE DOING BUSINESS WITH US, OR REQUIRE US
TO SIGNIFICANTLY INCREASE OUR ROYALTY OBLIGATIONS, FUTURE SALES
OF OUR WEB-BASED PRODUCTS AND SERVICES MAY BE JEOPARDIZED, AND
THIS MAY ADVERSELY AFFECT OUR BUSINESS, OPERATING RESULTS, AND
FINANCIAL CONDITION. We depend significantly on information
providers to supply accurate and reliable information and data
feeds to us on a timely basis. Our Web-based products and
services may experience interruptions (and potentially may be
compromised) due to any failure, delay, or cut-off in the
transmission or receipt of this information, or a requirement by
our information providers that royalty payments be significantly
increased. In addition, our products and services may be
negatively affected if our information providers provide us with
faulty or erroneous data that becomes integrated with our
products and services. Further, as a result of our announcement
of the proposed transaction with ValueAct Capital and its
affiliates, some of our information providers may seek to change
or terminate their relationships with us. We may then have to
seek alternative sources, and, in some cases, it is possible
that reasonable alternatives may not exist without resorting to
multiple sources, or may not be provided in a timely manner.
This may result in increased costs or reduced functionality of
our products and services and may adversely affect our business,
operating results, and financial condition.

IF OUR THIRD PARTY HOSTING FACILITY SUFFERS A
DISASTER, IT MAY BE COSTLY TO CORRECT, AND OUR BUSINESS MAY
SUFFER SIGNIFICANT LOSSES. OneSource makes its on-line products
available through one hosting facility, which is managed by
SAVVIS Communications Corporation (formerly Cable & Wireless
U.S.A., Inc.). This hosting facility was moved in fiscal
year 2003 from Medford, Massachusetts to Waltham, Massachusetts.
Our third party hosting facility may suffer a disaster relating
to the facility, its power supplies, or telecommunications
transports. Defects, errors, or a disaster at our third party
hosting facility also may result in significant downtime, and
our business may as a consequence suffer significantly from
potential adverse customer reaction, litigation, negative
publicity, loss of revenues, or harm to our reputation.

ANNUALIZED CONTRACT VALUE MAY NOT BE AN ACCURATE
INDICATOR OF OUR PERFORMANCE. We use annualized contract
value as a measurement for normalized period-to-period
comparisons to indicate business volume and growth. Our
presentation and calculation of annualized contract value may
not be comparable to similarly titled measures used by other
companies. It is not an absolute indicator, and we cannot
guarantee that any annualized contract value will be ultimately
realized as revenues.

COMPETITION IN OUR INDUSTRY IS INTENSE, AND MANY
OF OUR COMPETITORS HAVE GREATER RESOURCES THAN WE DO; THIS
COMPETITION MAY ADVERSELY AFFECT OUR FINANCIAL RESULTS. The
business information products and services industry is intensely
competitive and rapidly evolving. Several of our information
providers compete against each other

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and in some cases with us. We face direct or
indirect competition from numerous companies, including the
following:




| |   |                                                                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | large, well-established business and financial
    information providers, such as Dow Jones & Co., Pearson PLC,
    Reuters Group PLC, and McGraw-Hill Companies Inc.;                                                                                                                                    
|
| |  | aggregators of business and financial
    information, such as LexisNexis Group (a Reed Elsevier Plc
    subsidiary), The Dialog Corporation (a Thomson Corporation
    subsidiary), Factiva (a Dow Jones & Co. subsidiary), Alacra,
    Inc., Capital IQ, Inc., and Bureau Van Dijk Computer Services SA;
|
| |  | providers of company information, such as Thomson
    Financial, Inc. (a Thomson Corporation subsidiary), Hemscott
    Group Ltd. (a Finmedia Ltd. subsidiary), and Hoovers, Inc. (a
    subsidiary of The Dun & Bradstreet Corporation);                                                                 
|
| |  | providers of sales, marketing, and credit
    information, such as Dun & Bradstreet, Inc. (a subsidiary of
    The Dun & Bradstreet Corporation) and InfoUSA Inc.; and                                                                                                                                    
|
| |  | Web retrieval and Web portal
    companies and other free or low-cost mass market on-line
    services, such as Yahoo! Inc., AOL-Time Warner, Inc.,
    MarketWatch.com, Inc., Google, Inc., and TheStreet.com, Inc.                                                                                    

Based on reported operating results, industry
reports and other publicly available information, many of our
competitors have longer operating histories, greater name
recognition, larger customer bases, and greater financial,
technical, and marketing resources. As a result, they may be
able to respond more quickly to new or emerging technologies and
changes in user requirements, or to devote greater resources to
the research, development, promotion, and sale of their products
and services than we can. These competitors may be able to
undertake more extensive marketing campaigns, adopt more
aggressive pricing policies, and make more attractive offers to
potential employees, customers, and information providers. Our
competitors also may develop products and services that are
equal or superior to our products and services or that achieve
greater market acceptance than our products and services.
Ultimately, we may lose customers to competitors if we are not
able to satisfy increasingly sophisticated customer
requirements, enhance existing OneSource products and services,
and develop new products and services in a timely, economical
fashion. In addition, increased competition may result in price
reductions, reduced margins, or loss of market share, any of
which may adversely affect our business, operating results, and
financial condition.

OUR FAILURE TO INCREASE THE NUMBER OF OUR
SUBSCRIBERS OR RETAIN OUR CURRENT SUBSCRIBER BASE MAY ADVERSELY
AFFECT OUR OPERATING RESULTS AND FINANCIAL CONDITION. Our future
success remains highly dependent on attracting organizations
that are financially able to and willing to allocate funds to
subscribe to on-line business information products and services.
If the market for subscription-based on-line business
information products and services develops more slowly than we
may anticipate, or if our efforts to retain existing subscribers
or attract new subscribers are not successful or cost-effective,
our operating results and financial condition may be adversely
impacted.

IF A SIGNIFICANT NUMBER OF OUR CUSTOMERS
EXPERIENCE A DECLINE IN THEIR FINANCIAL CONDITION, THE
COLLECTABILITY OF OUR ACCOUNTS RECEIVABLE MAY SUFFER, AND MAY
ADVERSELY AFFECT OUR OPERATING RESULTS AND FINANCIAL CONDITION.
If a significant number of our customers experience a decline in
their financial condition, it may cause us to write-off the
amounts owed by these customers as bad debt expense, a reduction
of deferred revenues, and/or realize a revenue reduction, either
of which may adversely affect our operating results and
financial condition.

EXPANDING INTO INTERNATIONAL MARKETS WHERE WE
HAVE LIMITED PRIOR EXPERIENCE MAY ADVERSELY AFFECT OUR BUSINESS.
Our principal offices are located in the United States and in
the United Kingdom, but we look to expand our business
opportunities into new markets. Expanding into diverse
international markets exposes us to certain risks of conducting
business that include, but are not limited to, the following:
potential higher costs, unanticipated regulatory changes,
political instability, terrorism, difficulties in staffing and
managing operations, adverse tax consequences, currency and

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exchange rate fluctuations, and seasonal
reductions in business activity. In addition, the impact of
language and other cultural differences may result in product
and service offerings that may not satisfy the needs of our
customers and may not be profitable. Further, strategic
relationships may be necessary to facilitate expansion into
certain markets, and our business may be adversely affected if
we misallocate our resources and ultimately fail to gain new or
effective alliances in these areas. Moreover, possible
nationalization, expropriation, and limits and unique laws
pertaining to the collection and provision of certain types of
information on individuals (e.g., the Data Protection Act, the
European Commissions Directive on Data Protection, etc.)
may hinder operations in international markets, and may
adversely affect our business.


GENERAL ECONOMIC AND GEOPOLITICAL CONDITIONS MAY
NEGATIVELY AFFECT OUR OPERATING RESULTS AND FINANCIAL CONDITION.
An economic downturn and uncertain geopolitical environment may
cause organizations to delay or forego entirely investments in
value-added business information products and services such as
our Web-based products and services. We have experienced these
effects in the last quarter as a result of the recent economic
slowdown and geopolitical conditions. A prolonged recession and
difficult geopolitical situation may cause organizations that
comprise our target market to significantly reduce discretionary
spending with business information providers and create a
greater risk of business failure among existing subscribers.
These effects may adversely affect our operating results and
financial condition.

IF OUR SOFTWARE OR HARDWARE BECOMES DEFECTIVE, OR
IF OUR SOFTWARE, HARDWARE, OR WEB SITE BECOMES THE TARGET OF
INTENTIONAL DISRUPTIONS, DIRECTLY OR INDIRECTLY, OUR PRODUCTS
AND SERVICES MAY BE NEGATIVELY IMPACTED, AND OUR REPUTATION,
FUTURE SALES, OPERATING RESULTS, AND FINANCIAL CONDITION MAY BE
HARMED IF THESE EFFORTS ARE SUCCESSFUL. Complex software like
the software we develop and use and the hardware we use for our
products and services may contain or develop errors or defects,
especially when first implemented and as our product and service
offerings increase in scope and complexity, that may be
difficult and costly to correct. In addition, our software,
hardware, or Web site may become the target of intentional
disruptions, directly or indirectly, including software viruses
and malicious code specifically designed to impede the
performance of our products and services; such software viruses
and malicious code may avoid detection by our anti-virus
software in place. Similarly, experienced computer programmers
or hackers may attempt to penetrate our network security or the
security of our Web site and misappropriate proprietary
information or cause interruptions to the delivery of our
products and services. As a result, our activities may be
substantially disrupted; the introduction of new products,
services, and enhancements may be delayed; and our reputation,
future sales, operating results, and financial condition may be
adversely impacted if these efforts are successful.

POTENTIAL GROWTH IN OUR FUTURE OPERATIONS MAY
STRAIN OUR MANAGERIAL AND FINANCIAL RESOURCES AND OPERATING
SYSTEMS. FAILURE TO SUCCESSFULLY MANAGE GROWTH, OR UNEXPECTED
DIFFICULTIES DURING EXPANSION, MAY ADVERSELY AFFECT OUR
OPERATING RESULTS AND FINANCIAL CONDITION. We have experienced
growth in our operations and plan to pursue growth opportunities
related to the OneSource product line, related software
applications, and fee-based services, particularly in our target
market accounts. In order to support such potential growth, we
may need to: (i) implement and modify relevant financial,
operational, and management controls; reporting systems; and
procedures on a timely basis; (ii) expand, train, and
manage our employee base; and (iii) alter the coordination
among our staff responsible for product and platform
development, sales and marketing, and finance and
administration. If we are unable to accomplish any of these
objectives during a period of growth, our operating results and
financial condition may be adversely impacted.

WE MAY EXPERIENCE SIGNIFICANT FLUCTUATIONS IN OUR
QUARTERLY RESULTS, WHICH MAY MAKE IT DIFFICULT FOR INVESTORS TO
PERFORM RELIABLE PERIOD-TO-PERIOD COMPARISONS, AND CONTRIBUTE TO
VOLATILITY IN THE MARKET PRICE FOR OUR COMMON STOCK, THUS
POTENTIALLY REDUCING INVESTMENT IN OUR STOCK. Our quarterly
revenues, gross profits, and operating results may fluctuate in
the future. In addition, we believe that an important measure of
our business is the annualized contract value at the end of each
period, which

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also may fluctuate. Causes of such fluctuations
have included and may include, among other factors, as follows:




| |   |                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------
| |  | changes in demand for our products and services;                                                              
|
| |  | the size, value and timing of both new and
    renewal subscriptions with our corporate customers;            
|
| |  | any delays or deferrals in recognizing revenue in
    any transaction;                                        
|
| |  | the cost and renewal status of contracts with our
    content providers;                                      
|
| |  | competition (particularly price, product, and
    service competition);                                       
|
| |  | increases in selling and marketing expense, as
    well as other operating expenses;                          
|
| |  | technical difficulties or system downtime
    affecting our products or the Web generally;                    
|
| |  | overall performance of our products, services,
    and technology;                                            
|
| |  | our ability to develop, market, and introduce new
    and enhanced versions of our products on a timely basis;
|
| |  | economic conditions specific to the Web, as well
    as general economic and political conditions; and        
|
| |  | consolidation of our customers.                                                                               

Further, a substantial portion of our expenses,
including most product and platform development and selling and
marketing expenses, must be incurred in advance of revenue
generation. If we are unable to sustain or expand our sales and
marketing efforts and our projected revenues do not meet our
expectations, then we are likely to experience a shortfall in
our income from operations relative to our expectations.
Moreover, any potential claims, even if not meritorious, in a
lawsuit against us may result in the expenditure of significant
financial and managerial resources on our part, which may
contribute to a decrease in investment of our stock and may
adversely impact our operating results and financial condition
by potentially subjecting us to significant liabilities and
negative publicity and by diverting managements attention
and resources.

WE MAY BE SUBJECT TO POTENTIAL LITIGATION BY ANY
THIRD PARTY CONCERNING THE INFRINGEMENT OF ANY PROPRIETARY
RIGHT, AND SUCH LITIGATION MAY BE COSTLY AND TIME CONSUMING. IN
ADDITION, WE MAY HAVE TO INCUR LEGAL EXPENSES TO PROTECT OUR
INTELLECTUAL PROPERTY RIGHTS. There has been substantial
litigation in the information services industry involving
intellectual property rights. Although we believe that we have
not infringed, and are not infringing, the intellectual property
of others through our products and services, if such claims were
to be asserted, with or without merit, they may adversely affect
our business, operating results, and financial condition. In
addition, to the extent that we license from third parties
information that is included in our Web-based product line, our
potential exposure to copyright infringement actions may
increase because we must rely upon warranties and
representations by such information providers as to the origin
and ownership of content that we are subsequently licensing to
users of our Web-based products; such warranties and
representations may be inaccurate or inadequate. In addition,
although we generally include indemnification provisions in our
agreements with information providers, indemnification may not
be adequate compensation for breach of such warranties and
representations. In the event of a successful claim against us,
we may be required to pay significant monetary damages if we are
held to have willfully infringed a patent, copyright, trade
secret, or other proprietary right; discontinue use or sale of
the infringing products or information; expend significant
resources to develop non-infringing technology; and/or enter
into royalty and licensing agreements that may not be offered on
acceptable terms. If a successful claim is filed against us and
we fail to commercially develop or license a substitute
technology, our business may be adversely harmed.

In the future, litigation may be necessary to
defend, enforce, and/or protect our own intellectual property,
including our copyrights, patents, trademarks, and other
proprietary information. The protective steps we have taken and
continue to take may be inadequate to deter misappropriations of
our intellectual property rights,

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and we may be unable to detect the unauthorized
use of, or take appropriate steps to enforce, our intellectual
property rights.


Any litigation involving intellectual property
rights may be costly and time consuming, and divert
managements attention, either of which may adversely
affect our business, operating results, and financial condition.
Adverse determinations in this litigation may result in the loss
of our proprietary rights, subject us to significant
liabilities, require us to seek licenses from additional third
parties, cause our customers to prematurely cancel their
subscriptions to our products, and prevent us from selling our
products and services; any one of these results may materially
and adversely affect our business, operating results, and
financial condition. Additionally, our general liability
insurance may not cover any of these claims or may not be
adequate to protect us against all liability that may be
imposed. Further, effective protection of intellectual property
rights is limited or unavailable in certain foreign countries,
thus making the possibility of misappropriation of our
intellectual property more likely. Policing unauthorized use of
our products is difficult, expensive, and time consuming, and
the unique technology of the Internet may provide new methods
for illegal copying and distribution. Accordingly, we cannot be
certain that we may be able to protect our intellectual property
rights against unauthorized third party copying, distribution,
or use. This may subject us to litigation and adversely affect
our competitive position.

THE FUTURE SALES OF OUR COMMON STOCK MAY
NEGATIVELY AFFECT OUR COMMON STOCK PRICE, WHICH MAY CAUSE
DIFFICULTIES IN THE FUTURE TO SELL EQUITY IN THE FUTURE. If our
stockholders decide to sell substantial amounts of our common
stock, including shares that may be issued upon the exercise of
outstanding options in the public market, the market price of
our common stock may decrease. Such potential sales may make it
increasingly difficult for us to sell equity securities in the
future at a time and price that we deem reasonable and
appropriate.

IF WE ARE UNABLE TO MAINTAIN OUR REPUTATION AND
EXPAND OUR NAME RECOGNITION, WE MAY HAVE DIFFICULTY ATTRACTING
NEW BUSINESS AND RETAINING OUR CURRENT CUSTOMER BASE AND
EMPLOYEES, AND OUR BRAND NAME, REPUTATION, AND BUSINESS MAY
SUFFER. Establishing and maintaining a solid reputation and name
recognition are critical for attracting and retaining customers
as well as employees. The importance of reputation and name
recognition is increasing and will continue to increase due to
the growing number and quality of providers of Web-based
business and financial information products and services. If our
reputation is damaged or if potential customers and employees
are not familiar with our products and services, we may not be
able to attract new, or retain existing, customers and
employees. The promotion and enhancement of our name will depend
largely on our success in continuing to provide valuable
products and services and to successfully market our products
and services. If customers do not perceive our products and
services to be effective or high quality, our brand name,
reputation, and business may suffer.

IF WE ARE REQUIRED TO RECORD A SIGNIFICANT CHARGE
TO OPERATING EXPENSES DUE TO A REASSESSMENT OF OUR ACQUIRED
INTANGIBLE ASSETS OR CAPITALIZED SOFTWARE DEVELOPMENT COSTS,
THIS MAY ADVERSELY AFFECT OUR OPERATING RESULTS AND FINANCIAL
CONDITION. We are required under generally accepted accounting
principles to periodically review our acquired intangible
assets, which consist of goodwill, trademarks, a subscriber
list, and a database, and our capitalized software development
costs, which consist of software programs and platforms used in
our products and programs used for our proprietary
classification system. Goodwill is required to be tested for
impairment at least annually. Factors that may be considered a
change in circumstances indicating that the carrying value of
our acquired intangible assets or capitalized software
development costs may not be recoverable include significant
underperformance relative to expected historical or projected
operating results and significant negative industry or economic
trends. We assess the recoverability of our acquired intangible
assets and capitalized software development costs by determining
whether the amortization of the remaining balance over its
estimated remaining life can be recovered through projected
undiscounted future cash flows and measure the impairment loss,
if any, based on the related future estimated discounted cash
flows. If we determine that our acquired intangible assets or
our capitalized software development costs may not be
recoverable, we may be required to record a significant charge
to operating expenses in our consolidated statement of income
during the period in which any impairment is determined. This
may adversely affect our operating results and financial
condition.

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LAWS, RULES, AND REGULATIONS WITH RESPECT TO
CORPORATE GOVERNANCE, REPORTING, AND DISCLOSURE MAY HINDER OUR
ABILITY TO ATTRACT AND/ OR RETAIN CAPABLE BOARD MEMBERS, A CHIEF
EXECUTIVE OFFICER, AND A CHIEF FINANCIAL OFFICER, AND MAY RESULT
IN A REDUCTION IN THE NUMBER OF BOARD MEMBERS, WHICH MAY
ADVERSELY AFFECT OUR BUSINESS, OPERATING RESULTS, AND FINANCIAL
CONDITION AND OUR ABILITY TO MEET LISTING CRITERIA. In July
2002, President George W. Bush signed the Sarbanes-Oxley Act of
2002 into law, and several rules and regulations were announced
thereafter. Among other things, the Sarbanes-Oxley Act of 2002
imposes corporate governance, reporting, and disclosure
requirements; introduces stricter independence and financial
expertise standards for audit committees; and sets stiff
penalties for securities fraud. In addition, the United States
Securities and Exchange Commission and the Nasdaq National
Market are considering proposals on related corporate governance
topics. The Sarbanes-Oxley Act of 2002 and the related rules and
regulations will likely increase the scope, complexity and costs
of our corporate governance, reporting, and disclosure
practices, and may increase the risk of personal liability for
our board members, chief executive officer, and chief financial
officer. Consequently, it may become more difficult to attract
and/or retain such individuals, and may result in a decrease in
the number of board members, which may adversely affect our
business, operating results, and financial condition and our
ability to meet listing criteria.

IF THE INTERNET BECOMES SUBJECT TO INCREASED
LEGISLATION AND GOVERNMENT REGULATION, USE OF THE INTERNET AS A
MEDIUM TO RECEIVE SUBSCRIPTION-BASED INFORMATION PRODUCTS AND
SERVICES MAY DECLINE, AND WE MAY BE SUBJECT TO LITIGATION,
EITHER OF WHICH MAY HAVE AN ADVERSE EFFECT ON OUR BUSINESS,
OPERATING RESULTS, AND FINANCIAL CONDITION. The laws governing
the Internet continue to be unsettled, even in areas where there
has been legislative action. Legislation may dampen the growth
in the use of the Internet generally and decrease the acceptance
of the Internet as a medium to receive subscription-based
information products and services. In addition, due to the
global nature of the Internet, it is possible that, although our
corporate headquarters are located in the Commonwealth of
Massachusetts and pre-production and development relating to our
products and services occurs primarily in the Commonwealth of
Massachusetts, other states, the United States, or foreign
countries may attempt to regulate our products and services or
levy sales or other applicable taxes on our Web-based products
and services. We cannot guarantee that any violations of
federal, state, local, or other laws will not be alleged by
governmental entities; that we may not unintentionally violate
these laws; or that these laws will not be modified, or new laws
enacted, in the future. Any of these developments may have an
adverse effect on our business, operating results, and financial
condition.

IF REQUIREMENTS RELATED TO ACCOUNTING TREATMENT
FOR EMPLOYEE STOCK OPTIONS ARE MODIFIED, WE MAY BE FORCED TO
CHANGE OUR BUSINESS PRACTICES, WHICH MAY HINDER OUR ABILITY TO
RETAIN EXISTING EMPLOYEES AND ATTRACT HIGHLY QUALIFIED
CANDIDATES, WHICH MAY HAVE A NEGATIVE EFFECT ON OUR NET INCOME.
We currently account for the issuance of stock options under
Accounting Principles Board Opinion No. 25 (APB
Opinion No. 25), Accounting for Stock Issued to
Employees. If proposals currently under consideration by
accounting standards organizations and governmental authorities
are adopted, we may be required to treat the value of stock
options granted to employees as a compensation expense. As a
result, we may decide to reduce the number of stock options
granted to employees or to grant options to fewer employees.
This may affect our ability to retain existing employees and
attract highly qualified candidates, and increase the cash
compensation we may be required to pay these individuals. Such a
change may have a negative effect on our net income.

IT MAY BECOME INCREASINGLY EXPENSIVE TO OBTAIN
AND MAINTAIN LIABILITY INSURANCE AT CURRENT LEVELS. We contract
for insurance to cover a variety of potential risks and
liabilities. In the current market, insurance coverage is
becoming more limited, with larger deductibles, higher costs,
more exclusions, and fewer carriers. In light of these
circumstances, it may become more difficult to maintain
insurance coverage at historical levels or, if such coverage is
available, the cost to obtain or maintain it may increase
substantially. This may result in our being forced to bear an
increased portion of risks for which we have traditionally been
covered by insurance, which may negatively affect our results of
operations.

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IF FUTURE OR EXISTING PLATFORMS EMERGE IN THE
MARKETPLACE, THEY MAY REQUIRE US TO UNDERGO THE EXPENSE OF
DEVELOPING AND MAINTAINING COMPATIBLE PRODUCT LINES, AND SUCH
DEVELOPMENT AND MAINTENANCE MAY PLACE A SIGNIFICANT STRAIN ON
OUR RESOURCES AND PRODUCT RELEASE SCHEDULES, WHICH MAY HAVE AN
ADVERSE EFFECT ON OUR BUSINESS, OPERATING RESULTS, AND FINANCIAL
CONDITION. Although our Web-based products can be licensed for
use with a variety of customer relationship management
platforms, there may be future or existing platforms that emerge
in the marketplace that may not be architecturally compatible
with our Web-based product design. Moreover, future or existing
user interfaces that emerge in the business application
marketplace may or may not be architecturally compatible with
our Web-based product design. Developing and maintaining
consistent performance across all of these combinations may
place a significant strain on our resources and product release
schedules, which may adversely affect our business, operating
results, and financial condition. To maintain performance across
accepted platforms and operating environments, or to achieve
market acceptance of those that we support, or to adapt to
emerging new ones, our expenses may increase, and our sales and
revenues may be adversely impacted.

Any one or more of these factors may affect our
business, operating results, and financial condition, and this
makes the prediction of operating results on a quarterly basis
unreliable. As a result, we believe that period-to-period
comparisons of our historical operating results and annualized
contract values are not necessarily meaningful and should not be
relied upon as an indication for future performance. Also, due
to these and other factors, it is possible that our quarterly
operating results (including the annualized contract value) may
be below expectations. If this happens, the price of our common
stock would likely decrease.






|         |                                                              
|-------- | -------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosure
    About Market Risk

OneSource is exposed to various market risks,
including changes in foreign currency exchange rates and
interest rates. OneSources exposure to currency exchange
rate fluctuations has been and is expected to continue to be
modest due to the fact that the operations of its United Kingdom
subsidiary are primarily conducted in British pounds, rather
than multiple foreign currencies. Operating results are
translated into United States dollars and consolidated for
reporting purposes. Foreign currency transaction gains and
losses were not material in amount for the years ended
December 31, 2003, 2002, and 2001. OneSource does not
engage in hedging activities.

OneSource also owns money market funds that are
sensitive to market risks as part of its investment portfolio.
The investment portfolio is used to preserve OneSources
capital until it is required to fund operations, including
OneSources sales and marketing and product development
activities. None of these market-risk sensitive instruments are
held for trading purposes. The investment portfolio contains
instruments that are subject to the risk of a decline in
interest rates. OneSource does not enter into derivatives or any
other financial instruments for trading or speculative purposes.
As of December 31, 2003 and 2002, OneSource had
$22.8 million and $23.1 million in cash and cash
equivalents, respectively.

In December 2002, OneSource entered into a Loan
and Security Agreement with Silicon Valley Bank permitting
borrowings of up to $10.0 million, which is comprised of a
$5.0 million working capital line of credit and a
$5.0 million equipment line of credit. The working capital
line of credit initially expired on December 20, 2003. On
January 8, 2004, OneSource entered into the First Loan
Modification Agreement that retroactively extends the working
capital revolving line of credit portion of the Loan and
security Agreement from December 21, 2003 through
March 18, 2004. OneSource did not renew the working capital
revolving line of credit which expired on March 18, 2004.
Borrowings under the working capital line of credit incur
interest at the prime interest rate (4.00% as of
December 31, 2003) plus 0.25%, and borrowings under the
equipment line of credit incur interest at the prime interest
rate plus 0.50%. Because of its variable interest rate, the
carrying value of OneSources debt approximates its fair
value.






|        |                                                
|------- | -----------------------------------------------
|Item 8. | Financial Statements and Supplementary
    Data

OneSources Consolidated Financial
Statements, Financial Statement Schedule and the Reports of
Independent Auditors, are set as indexed in Item 15 on
page 40.

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|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements With
    Accountants on Accounting and Financial Disclosure

None.






|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

Evaluation of disclosure controls and
procedures.Based on their evaluation
of OneSources disclosure controls and procedures (as
defined in Rules 13a-14(c) and 15(d)-14(c) under the
Securities Exchange Act of 1934) as of December 31, 2003,
OneSources principal executive officer and principal
financial officer have concluded the following:
(i) OneSources disclosure controls and procedures are
effective to ensure that information required to be disclosed by
OneSource in reports that it files or submits under the
Securities Exchange Act of 1934 is recorded, processed,
summarized, and reported within time periods specified in
Securities and Exchange Commission rules and forms; and
(ii) OneSources disclosure controls and procedures
are effective to ensure that information required to be
disclosed by OneSource in reports that it files or submits under
the Securities Exchange Act of 1934 is accumulated and
communicated to OneSources management, including its
principal executive officer and principal financial officer, or
persons performing similar functions, as appropriate to allow
timely decisions regarding required disclosure.

Changes in internal control over financial
reporting.There were no significant
changes in OneSources internal control over financial
reporting or in other factors that have materially affected, or
are reasonably likely to materially affect, OneSources
internal control over financial reporting. There were no
significant deficiencies or material weaknesses, and therefore
there were no corrective actions taken.




PART III






|         |                                                       
|-------- | ------------------------------------------------------
|Item 10. | Directors and Executive Officers of the
    Registrant

The information required by this Item is
incorporated by reference to the sections entitled
Occupations of Directors and Executive Officers,
Section 16(a) Beneficial Ownership Reporting
Compliance, Executive Compensation  Audit
Committee Financial Expert and Certain Relationships
and Related Transactions  Other Related Transactions
of OneSources Proxy Statement for its 2004 Special Meeting
of Stockholders, which will be filed with the United States
Securities and Exchange Commission within 120 days after
December 31, 2003.






|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation

The information required by this Item is
incorporated by reference to the section entitled
Executive Compensation of OneSources Proxy
Statement for its 2004 Special Meeting of Stockholders, which
will be filed with the United States Securities and Exchange
Commission within 120 days after December 31, 2003.






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

The information required by this Item is
incorporated by reference to Part II, Item 5(D)
entitled Securities Authorized for Issuance Under Equity
Compensation Plans of this Form 10-K and the section
entitled Securities Ownership of Certain Beneficial Owners
and Management of OneSources Proxy Statement for its
2004 Special Meeting of Stockholders, which will be filed with
the United States Securities and Exchange Commission within
120 days after December 31, 2003.






|         |                                                   
|-------- | --------------------------------------------------
|Item 13. | Certain Relationships and Related
    Transactions

The information required by this Item is
incorporated by reference to the sections entitled  The
Merger Agreement and Certain Relationships and
Related Transactions of OneSources Proxy Statement
for its 2004 Special Meeting of Stockholders, which will be
filed with the United States Securities and Exchange Commission
within 120 days after December 31, 2003.

39



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|         |                                           
|-------- | ------------------------------------------
|Item 14. | Principal Accountant Fees and
    Services

The information required by this Item is
incorporated by reference to the section entitled
Relationship With Auditors of OneSources Proxy
Statement for its 2004 Special Meeting of Stockholders, which
will be filed with the United States Securities and Exchange
Commission within 120 days after December 31, 2003.




PART IV






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



| |     |                                            
| | --- | -------------------------------------------
| | (a) | Documents filed as part of this
    report:

The following Consolidated Financial Statements,
Financial Statement Schedules and the Reports of the Independent
Auditors are filed herein:

(1) Financial Statements:

Index to Consolidated Financial Statements:

|                                                                                                                        |  |      |             | 
|----------------------------------------------------------------------------------------------------------------------- |  | ---- | ----------- | 
|                                                                                                                        |  | Page
|                                                                                                                        |  |     
|Report of Independent Auditors                                                                                          |  |      | F-1         | 
|Consolidated Balance Sheets at December 31,
    2003 and 2002                                                           |  |      | F-2         | 
|Consolidated Statements of Income for the years
    ended December 31, 2003, 2002 and 2001                              |  |      | F-3         | 
|Consolidated Statements of Changes in
    Stockholders Equity for the years ended December 31,
    2003, 2002 and 2001 |  |      | F-4         | 
|Consolidated Statements of Cash Flows for the
    years ended December 31, 2003, 2002 and 2001                          |  |      | F-5         | 
|Notes to Consolidated Financial Statements                                                                              |  |      | F-6 to F-24 | 

(2) Financial Statement Schedules:

|                                                                   |  |  |     | 
|------------------------------------------------------------------ |  |  | --- | 
|Report of Independent Auditors on Financial
    Statement Schedule |  |  | S-1 | 
|Schedule II  Valuation and
    Qualifying Accounts                |  |  | S-2 | 

All other financial statement schedules are
omitted because they are not required, are inapplicable or the
information has been included elsewhere in the financial
statements or notes thereto.



| |     |                    
| | --- | -------------------
| | (b) | Reports on Form 8-K

A current report on Form 8-K dated
October 6, 2003 was filed by OneSource on October 7,
2003 with the United States Securities and Exchange Commission
that reported that OneSource announced (i) the formation by
the OneSource Board of Directors of a special committee of
independent directors to evaluate OneSources strategic
options and a recent unsolicited offer received by OneSource
from ValueAct Capital Partners, L.P. and its affiliates
(ValueAct Capital) expressing an interest in an
acquisition of OneSource, and (ii) the adoption of a
shareholder rights plan by the OneSource Board of Directors.

A current report on Form 8-K dated
October 5, 2003 was filed by OneSource on October 9,
2003 with the United States Securities and Exchange Commission
that reported that the OneSource Board of Directors declared a
dividend of one preferred share purchase right for each
outstanding share of common stock, par value $0.01, outstanding
on October 6, 2003 to the stockholders of record on that
date.

A current report on Form 8-K dated
October 16, 2003 was furnished by OneSource on
October 16, 2003 with the United States Securities and
Exchange Commission that reported that OneSource announced
financial results for the third quarter ended September 30,
2003.

A current report on Form 8-K dated
February 5, 2004 was filed by OneSource on February 5,
2004 with the United States Securities and Exchange Commission
that reported that (i) OneSource accepted the resignation
of Dan Schimmel as President and Chief Executive Officer and as
a Director; (ii) current

40



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##### Table of Contents



Chairman of the Board of Directors Martin Kahn
has been named executive chairman and appointed CEO on an
interim basis; (iii) the special committee announced that
it has completed its review of strategic options; and
(iv) OneSource announced financial results for the fourth
quarter ended December 31, 2003.


A current report on Form 8-K dated
February 9, 2004 was filed by OneSource on February 9,
2004 with the United States Securities and Exchange Commission
that reported that OneSource received a letter from ValueAct
Capital indicating ValueAct was prepared to offer to acquire all
of the outstanding shares of OneSource at a cash price of
$8.10 per share on the terms and conditions contained in a
merger agreement enclosed with the letter. OneSource also
announced that the special committee of the board of directors
of OneSource is reviewing the proposal in order to determine the
course of action which will serve the best interests of all
shareholders.

A current report on Form 8-K dated
February 18, 2004 was filed by OneSource on
February 18, 2004 with the United States Securities and
Exchange Commission that reported that OneSource announced that
it had entered into a merger agreement with affiliates of
ValueAct Capital.

A current report on Form 8-K dated
February 18, 2004 was filed by OneSource on
February 18, 2004 with the United States Securities and
Exchange Commission that reported that OneSource announced that
it had entered into an Agreement and Plan of Merger, dated as of
February 18, 2004, by and among OneSource, VAC-OS Holdings
LLC (Parent) and OS Merger Sub, Inc.
(Merger Sub). Parent and Merger Sub are affiliates
of ValueAct Capital and its affiliates.

OneSource hereby files as part of this Annual
Report on Form 10-K the exhibits listed below. Exhibits
that are incorporated herein by reference can be inspected and
copied at the public reference rooms maintained by the United
States Securities and Exchange Commission in
Washington, D.C.; New York, New York; and
Chicago, Illinois. Please call the United States Securities
and Exchange Commission at 1-800-SEC-0330 for further
information on the public reference rooms. United States
Securities and Exchange Commission filings are also available to
the public from commercial document retrieval services and at
the web site maintained by the SEC at HTTP:// WWW.SEC.GOV.

41



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##### Table of Contents



|        |    |             |  |                                                                                                                                                                                                                                                                                                               
|------- | -- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|No.     |    | Description
|        |    |            
|        | 2  | .01         |  | Agreement and Plan of Merger dated September 8,
    1999 by and between the Registrant and Corporate Technology
    Information Services, Inc. (filed as Exhibit 2.1 to
    Form 8-K dated September 8, 1999, No. 000-25849
    and incorporated herein by reference).                                        
|        | 2  | .02         |  | Escrow Agreement dated September 8, 1999 by
    and among the Registrant, Corporate Technology Information
    Services, Inc., Andrew Campbell and Citizens Bank of
    Massachusetts (filed as Exhibit 2.2 to Form 8-K dated
    September 8, 1999, No. 000-25849 and incorporated
    herein by reference). 
|        | 2  | .03         |  | Agreement and Plan of Merger, dated as of
    February 18, 2004, by and among the Registrant, VAC-OS
    Holdings LLC and OS Merger Sub, Inc. (filed as Exhibit 2.1
    to the Form 8-K on February 18, 2004, and incorporated
    herein by reference).                                                      
|        | 3  | .01         |  | Second Amended and Restated Certificate of
    Incorporation of the Registrant, as amended on May 24, 2001
    (filed as Exhibit 3.01 to the Annual Report on
    Form 10-K on March 27, 2002 and incorporated herein by
    reference).                                                                      
|        | 3  | .02         |  | Second Amended and Restated By-Laws of the
    Registrant (filed as Exhibit 3.04 to the Registration
    Statement on Form S-1, No. 333-73263 and incorporated
    herein by reference).                                                                                                                      
|        | 4  | .01         |  | Rights Agreement, dated as of October 7,
    2003, between the Registrant and American Stock Transfer &
    Trust Company (filed as Exhibit 4.1 to the Form 8-K on
    October 9, 2003, and incorporated herein by reference).                                                                                
|        | 4  | .02         |  | Amendment No. 1 to the Rights Agreement,
    dated as of February 17, 2004 (filed as Exhibit 4.1 to
    the Form 8-K on February 18, 2004, and incorporated
    herein by reference).                                                                                                                         
|        | 10 | .01*        |  | 1993 Stock Purchase and Option Plan (filed as
    Exhibit 10.01 to the Registration Statement on
    Form S-1, No. 333-73263 and incorporated herein by
    reference).                                                                                                                                       
|        | 10 | .02*        |  | 1999 Stock Option and Incentive Plan, as amended
    on May 22, 2002 (filed as Exhibit 10.1 to the Quarterly
    Report on Form 10-Q on August 14, 2002 and
    incorporated herein by reference).                                                                                                            
|        | 10 | .03*        |  | 1999 Employee Stock Purchase Plan, as amended on
    May 24, 2001 (filed as Exhibit 10.2 to the Quarterly Report
    on Form 10-Q on August 10, 2001 and incorporated
    herein by reference).                                                                                                               
|        | 10 | .04         |  | Registration Agreement dated September 8,
    1993 (filed as Exhibit 10.04 to the Registration Statement
    on Form S-1, No. 333-73263 and incorporated herein by
    reference).                                                                                                                            
|        | 10 | .05         |  | Lease dated January 20, 1999 by and between
    the Registrant and 300 Baker Avenue Associates, Limited
    Partnership (filed as Exhibit 10.12 to the Registration
    Statement on Form S-1, No. 333-73263 and incorporated
    herein by reference).                                                       
|        | 10 | .06         |  | Agreement and Plan of Merger dated February 26,
    1999 by and between the Registrant and OneSource Holding
    Corporation (filed as Exhibit 10.13 to the Registration
    Statement on Form S-1, No. 333-73263 and incorporated
    herein by reference).                                                  
|        | 10 | .08         |  | Form of Management Stock Purchase Agreement
    (filed as Exhibit 10.09 the Registration Statement on
    Form S-1, No. 333-73263 and incorporated herein by
    reference).                                                                                                                                  
|        | 10 | .09         |  | Stock Purchase Agreement dated August 3,
    1993, by and among Lotus Development Corporation, Datext, Inc.
    and Datext Holding Corporation (filed as Exhibit 10.10 to
    the Registration Statement on Form S-1, No. 333-73263
    and incorporated herein by reference).                                
|        | 10 | .10         |  | Form of Fee Termination Agreement (filed as
    Exhibit 10.16 to the Registration Statement on
    Form S-1, No. 333-73263 and incorporate herein by
    reference).                                                                                                                                          
|        | 10 | .11         |  | Stock Redemption Agreement dated April 21,
    1999 (filed as Exhibit 10.17 to the Registration Statement
    on Form S-1, No. 333-73263 and incorporated herein by
    reference).                                                                                                                           
|        | 10 | .12*        |  | 2001 Non-Employee Director Stock Option Plan
    dated May 24, 2001 (filed as Exhibit 10.3 to the Quarterly
    Report on Form 10-Q on August 10, 2001 and
    incorporated herein by reference).                                                                                                             
|        | 10 | .13         |  | Registration Rights Agreement dated
    November 1, 2002 by and among the Registrant, ValueAct
    Capital Partners, L.P., ValueAct Capital Partners II,
    L.P., and ValueAct International, Ltd. (filed as
    Exhibit 10.1 to the Form 8-K on November 6, 2002,
    and incorporated herein by reference).

42



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##### Table of Contents



|        |    |             |  |                                                                                                                                                                                                                                                                     
|------- | -- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|No.     |    | Description
|        |    |            
|        | 10 | .14         |  | Loan and Security Agreement, dated as of
    December 20, 2002, between Silicon Valley Bank and
    OneSource Information Services, Inc. (filed as
    Exhibit 10.14 to the Annual Report on Form 10-K on
    March 27, 2003, and incorporated herein by reference).
|        | 10 | .15         |  | First Loan Modification Agreement, dated as of
    January 8, 2004, between Silicon Valley Bank and OneSource
    Information Services, Inc.                                                                                                                        
|        | 10 | .16         |  | Form of Change of Control Agreement by and
    between OneSource Information Services, Inc. and each of the
    following individuals: Yvonne Cekel, David DeSimone, Philip
    Garlick, Roy Landon, Mary McCabe, Daniel Schimmel, and William
    Schumacher.      
|        | 14 | .01         |  | OneSource Information Services, Inc. Code of
    Business Conduct and Ethics                                                                                                                                                                                        
|        | 21 | .01         |  | Subsidiaries of the Registrant (filed as
    Exhibit 21.01 to the Annual Report on Form 10-K on
    March 28, 2001 and incorporated herein by reference).                                                                                                           
|        | 23 | .02         |  | Consent of PricewaterhouseCoopers LLP                                                                                                                                                                                                                               
|        | 24 | .01         |  | Power of Attorney (included in signature page)                                                                                                                                                                                                                      
|        | 31 | .01         |  | Rule 13a-14(a)/15d-14(a) Certification                                                                                                                                                                                                                              
|        | 31 | .02         |  | Rule 13a-14(a)/15d-14(a) Certification                                                                                                                                                                                                                              
|        | 32 | .01         |  | Certification pursuant to 18 U.S.C. section 1350,
    as adopted pursuant to section 906 of the Sarbanes-Oxley Act of
    2002                                                                                                                                      
|        | 32 | .02         |  | Certification pursuant to 18 U.S.C. section 1350,
    as adopted pursuant to section 906 of the Sarbanes-Oxley Act of
    2002                                                                                                                                      



---



|  |                                                                                                                                                  
|- | -------------------------------------------------------------------------------------------------------------------------------------------------
|* | Indicates a management contract or compensatory
    plan, contract, or arrangement required to be filed as an
    exhibit pursuant to Item 14(c).

43



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##### Table of Contents






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.



| |                                                   
| | --------------------------------------------------
| | ONESOURCE INFORMATION SERVICES, INC.              
|
| | By: /s/ MARTIN KAHN                               
| |                                                   
| | MARTIN KAHN                                       
| | Chairman of the Board of Directors and Interim CEO
|
| | Date: March 29, 2004                              

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



| |                                                  
| | -------------------------------------------------
| | By: /s/ ROY D. LANDON                            
| |                                                  
| | ROY D. LANDON                                    
| | Senior Vice President and Chief Financial Officer
|
| | Date: March 29, 2004                             
|
| | By: /s/ HENRY ANCONA                             
| |                                                  
| | HENRY ANCONA                                     
| | Director                                         
|
| | Date: March 29, 2004                             
|
| | By: /s/ CARL P. FISHER                           
| |                                                  
| | CARL P. FISHER                                   
| | Director                                         
|
| | Date: March 29, 2004                             
|
| | By: /s/ PETER H. KAMIN                           
| |                                                  
| | PETER H. KAMIN                                   
| | Director                                         
|
| | Date: March 29, 2004                             
|
| | By: /s/ ROBERT J. MASSIE                         
| |                                                  
| | ROBERT J. MASSIE                                 
| | Director                                         
|
| | Date: March 29, 2004                             

44



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##### Table of Contents



POWER OF ATTORNEY AND SIGNATURES

The undersigned officers and directors of
OneSource Information Services, Inc. hereby severally constitute
and appoint Martin Kahn and Roy D. Landon, and each of them
singly, with full power of substitution, our true and lawful
attorneys-in-fact and agents, until June 15, 2004, to sign
for us and in our names in the capacities indicated below, any
amendments to this Annual Report on Form 10-K, and
generally to do all things in our names and on our behalf in
such capacities to enable OneSource Information Services, Inc.
to comply with the Securities Exchange Act of 1934, as amended,
and any rules, regulations and requirements of the Securities
and Exchange Commission, in connection with this Annual Report
on Form 10-K.

|                                      |  |                                                                                                              |  |                |  | 
|------------------------------------- |  | ------------------------------------------------------------------------------------------------------------ |  | -------------- |  | 
|                                      |  |                                                                                                              |  |               
|Signature                             |  | Title(s)                                                                                                     |  | Date          
|                                      |  |                                                                                                              |  |               
|                                     
|/s/ MARTIN KAHN Martin Kahn           |  | Chairman of the Board of Directors and Interim
    Chief Executive Officer
    (principal executive officer) |  | March 29, 2004
|                                     
|/s/ ROY D. LANDON Roy D. Landon       |  | Senior Vice President and
    Chief Financial Officer
    (principal financial officer)                      |  | March 29, 2004
|                                     
|/s/ CARL P. FISHER Carl P. Fisher     |  | Director                                                                                                     |  | March 29, 2004
|                                     
|/s/ HENRY ANCONAHenry Ancona          |  | Director                                                                                                     |  | March 29, 2004
|                                     
|/s/ ROBERT J. MASSIE Robert J. Massie |  | Director                                                                                                     |  | March 29, 2004
|                                     
|/s/ PETER H. KAMIN Peter H. Kamin     |  | Director                                                                                                     |  | March 29, 2004

45



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##### Table of Contents



REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of

OneSource Information Services, Inc.:


In our opinion, the accompanying consolidated
balance sheets and the related consolidated statements of
income, of changes in stockholders equity and of cash
flows present fairly, in all material respects, the financial
position of OneSource Information Services, Inc. and its
subsidiaries at December 31, 2003 and 2002, and the results
of their operations and their cash flows for each of the three
years in the period ended December 31, 2003 in conformity
with accounting principles generally accepted in the United
States of America. These financial statements are the
responsibility of the Companys management; our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally
accepted in the United States of America, which require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

As discussed in Note 2 to these consolidated
financial statements, the Company changed its method of
accounting for the amortization of goodwill in accordance with
guidance provided by Statements of Financial Accounting
Standards No. 142, Goodwill and Other Intangible
Assets, in 2002.

/s/ PRICEWATERHOUSECOOPERS LLP

Boston, Massachusetts

January 28, 2004, except for Note 15,


as to which the date is March 1, 2004


F-1



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##### Table of Contents



ONESOURCE INFORMATION
SERVICES, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

|                                                        |                                                                                                                                  |                                                                                                                                                                                                                |                                            |         |        |        |       |         |        |        | 
|------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ------ | ------ | ----- | ------- | ------ | ------ | 
|                                                        |                                                                                                                                  |                                                                                                                                                                                                               
|                                                        |                                                                                                                                  | December 31,                                                                                                                                                                                                  
|                                                        |                                                                                                                                  |                                                                                                                                                                                                               
|                                                        |                                                                                                                                  | 2003                                                                                                                                                                                                           |                                            | 2002   
|                                                        |                                                                                                                                  |                                                                                                                                                                                                                |                                            |        
|ASSETS                                                 
|Current assets:                                         |                                                                                                                                  |                                                                                                                                                                                                                |                                            |         |        |        |       |        
|                                                        | Cash and cash equivalents                                                                                                        |                                                                                                                                                                                                                | $                                          | 22,794  |        |        | $     | 23,096  |       
|                                                        | Accounts receivable, net of allowance for
    doubtful accounts of $289 and $299 at December 31, 2003 and
    2002, respectively |                                                                                                                                                                                                                |                                            | 16,705  |        |        |       | 16,499  |       
|                                                        | Deferred royalties                                                                                                               |                                                                                                                                                                                                                |                                            | 1,729   |        |        |       | 2,873   |       
|                                                        | Deferred commissions                                                                                                             |                                                                                                                                                                                                                |                                            | 1,362   |        |        |       | 1,644   |       
|                                                        | Prepaid expenses and other current assets                                                                                        |                                                                                                                                                                                                                |                                            | 899     |        |        |       | 822     |       
|                                                        |                                                                                                                                  |                                                                                                                                                                                                                |                                            |         |        |        |       |        
|                                                        |                                                                                                                                  | Total current assets                                                                                                                                                                                           |                                            |         | 43,489 |        |       |         | 44,934 |       
|Property and equipment, net                             |                                                                                                                                  |                                                                                                                                                                                                                | 4,612                                      |         |        |        | 3,629 |        
|Goodwill                                                |                                                                                                                                  |                                                                                                                                                                                                                | 4,445                                      |         |        |        | 4,445 |        
|Acquired intangible assets, net                         |                                                                                                                                  |                                                                                                                                                                                                                | 890                                        |         |        |        | 1,217 |        
|Restricted time deposit                                 |                                                                                                                                  |                                                                                                                                                                                                                |                                           |         |        |        | 603   |        
|Long-term deferred royalties                            |                                                                                                                                  |                                                                                                                                                                                                                | 1,517                                      |         |        |        | 1,540 |        
|Capitalized software development costs, net             |                                                                                                                                  |                                                                                                                                                                                                                | 3,923                                      |         |        |        | 2,250 |        
|Deferred income taxes                                   |                                                                                                                                  |                                                                                                                                                                                                                | 1,480                                      |         |        |        |      |        
|Other assets                                            |                                                                                                                                  |                                                                                                                                                                                                                | 207                                        |         |        |        | 180   |        
|                                                        |                                                                                                                                  |                                                                                                                                                                                                                |                                            |         |        |        |       |        
|                                                        |                                                                                                                                  |                                                                                                                                                                                                                | Total assets                               |         | $      | 60,563 |       |         | $      | 58,798 | 
|                                                        |                                                                                                                                  |                                                                                                                                                                                                                |                                            |         |        |        |       |        
|LIABILITIES AND STOCKHOLDERS
    EQUITY               
|Current liabilities:                                    |                                                                                                                                  |                                                                                                                                                                                                                |                                            |         |        |        |       |        
|                                                        | Current portion of long-term debt                                                                                                |                                                                                                                                                                                                                | $                                          | 1,046   |        |        | $     |        |       
|                                                        | Accounts payable                                                                                                                 |                                                                                                                                                                                                                |                                            | 1,851   |        |        |       | 2,222   |       
|                                                        | Accrued compensation and benefits                                                                                                |                                                                                                                                                                                                                |                                            | 2,692   |        |        |       | 2,534   |       
|                                                        | Accrued royalties                                                                                                                |                                                                                                                                                                                                                |                                            | 2,641   |        |        |       | 3,419   |       
|                                                        | Accrued expenses                                                                                                                 |                                                                                                                                                                                                                |                                            | 1,882   |        |        |       | 2,612   |       
|                                                        | Deferred revenues                                                                                                                |                                                                                                                                                                                                                |                                            | 29,520  |        |        |       | 30,257  |       
|                                                        | Deferred income taxes                                                                                                            |                                                                                                                                                                                                                |                                            | 692     |        |        |       | 245     |       
|                                                        |                                                                                                                                  |                                                                                                                                                                                                                |                                            |         |        |        |       |        
|                                                        |                                                                                                                                  | Total current liabilities                                                                                                                                                                                      |                                            |         | 40,324 |        |       |         | 41,289 |       
|                                                        | Long-term debt                                                                                                                   |                                                                                                                                                                                                                |                                            | 1,528   |        |        |       |        |       
|                                                        |                                                                                                                                  |                                                                                                                                                                                                                |                                            |         |        |        |       |        
|                                                        |                                                                                                                                  |                                                                                                                                                                                                                | Total liabilities                          |         |        | 41,852 |       |         |        | 41,289 | 
|                                                        |                                                                                                                                  |                                                                                                                                                                                                                |                                            |         |        |        |       |        
|Commitments, contingencies and guarantees
    (Note 13) |                                                                                                                                  |                                                                                                                                                                                                                |                                           |         |        |        |      |        
|Stockholders equity:                                   |                                                                                                                                  |                                                                                                                                                                                                                |                                            |         |        |        |       |        
|                                                        | Preferred stock, $0.01 par value:                                                                                                |                                                                                                                                                                                                                |                                            |         |        |        |       |         |       
|                                                        |                                                                                                                                  | 1,000,000 shares authorized; no shares
    issued and outstanding                                                                                                                                              |                                            |         |       |        |       |         |       |       
|                                                        | Common stock, $0.01 par value:                                                                                                   |                                                                                                                                                                                                                |                                            |         |        |        |       |         |       
|                                                        |                                                                                                                                  | 35,000,000 shares authorized;
    13,287,453 shares issued and 11,635,432 shares
    outstanding at December 31, 2003; 13,287,453 shares
    issued and 11,681,741 shares outstanding at
    December 31, 2002 |                                            |         | 133    |        |       |         | 133    |       
|                                                        | Additional paid-in capital                                                                                                       |                                                                                                                                                                                                                |                                            | 36,720  |        |        |       | 35,128  |       
|                                                        | Accumulated deficit                                                                                                              |                                                                                                                                                                                                                |                                            | (6,801  | )      |        |       | (5,856  | )     
|                                                        | Accumulated other comprehensive income                                                                                           |                                                                                                                                                                                                                |                                            | 941     |        |        |       | 437     |       
|                                                        | Treasury stock, at cost                                                                                                          |                                                                                                                                                                                                                |                                            | (12,282 | )      |        |       | (12,333 | )     
|                                                        |                                                                                                                                  |                                                                                                                                                                                                                |                                            |         |        |        |       |        
|                                                        |                                                                                                                                  |                                                                                                                                                                                                                | Total stockholders equity                 |         |        | 18,711 |       |         |        | 17,509 | 
|                                                        |                                                                                                                                  |                                                                                                                                                                                                                |                                            |         |        |        |       |        
|                                                        |                                                                                                                                  |                                                                                                                                                                                                                | Total liabilities and stockholders equity |         | $      | 60,563 |       |         | $      | 58,798 | 
|                                                        |                                                                                                                                  |                                                                                                                                                                                                                |                                            |         |        |        |       |        

The accompanying notes are an integral part of
these consolidated financial statements.

F-2



---



##### Table of Contents



ONESOURCE INFORMATION
SERVICES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share
data)


|                                            |                                            |                                          |        |        |        |      |        |        |        |   |        |        |        | 
|------------------------------------------- | ------------------------------------------ | ---------------------------------------- | ------ | ------ | ------ | ---- | ------ | ------ | ------ | - | ------ | ------ | ------ | 
|                                            |                                            |                                         
|                                            |                                            | Year Ended December 31,                 
|                                            |                                            |                                         
|                                            |                                            | 2003                                     |        | 2002   |        | 2001
|                                            |                                            |                                          |        |        |        |     
|Revenues                                    |                                            | $                                        | 57,284 |        |        | $    | 57,750 |        |        | $ | 59,017 |       
|Cost of revenues                            |                                            |                                          | 18,228 |        |        |      | 18,064 |        |        |   | 18,496 |       
|                                            |                                            |                                          |        |        |        |      |        |        |        |   |        |       
|                                            | Gross profit                               |                                          |        | 39,056 |        |      |        | 39,686 |        |   |        | 40,521 |       
|                                            |                                            |                                          |        |        |        |      |        |        |        |   |        |       
|Operating expenses:                         |                                            |                                          |        |        |        |      |        |        |        |   |        |       
|                                            | Selling and marketing                      |                                          |        | 17,135 |        |      |        | 16,467 |        |   |        | 18,447 |       
|                                            | Platform and product development           |                                          |        | 10,574 |        |      |        | 10,040 |        |   |        | 8,360  |       
|                                            | General and administrative                 |                                          |        | 7,308  |        |      |        | 6,156  |        |   |        | 5,889  |       
|                                            | Amortization of acquired intangible assets |                                          |        | 327    |        |      |        | 427    |        |   |        | 460    |       
|                                            | Restructuring                              |                                          |        |       |        |      |        |       |        |   |        | 660    |       
|                                            | Amortization of goodwill                   |                                          |        |       |        |      |        |       |        |   |        | 1,020  |       
|                                            |                                            |                                          |        |        |        |      |        |        |        |   |        |       
|                                            |                                            | Total operating expenses                 |        |        | 35,344 |      |        |        | 33,090 |   |        |        | 34,836 | 
|                                            |                                            |                                          |        |        |        |      |        |        |        |   |        |       
|                                            |                                            | Income from operations                   |        |        | 3,712  |      |        |        | 6,596  |   |        |        | 5,685  | 
|Interest income                             |                                            |                                          | 446    |        |        |      | 490    |        |        |   | 903    |       
|Interest expense                            |                                            |                                          | (83    | )      |        |      | (53    | )      |        |   | (50    | )     
|                                            |                                            |                                          |        |        |        |      |        |        |        |   |        |       
|                                            |                                            | Income before provision for income taxes |        |        | 4,075  |      |        |        | 7,033  |   |        |        | 6,538  | 
|Provision for income taxes                  |                                            |                                          | 1,528  |        |        |      | 2,602  |        |        |   | 1,882  |       
|                                            |                                            |                                          |        |        |        |      |        |        |        |   |        |       
|                                            |                                            | Net income                               |        | $      | 2,547  |      |        | $      | 4,431  |   |        | $      | 4,656  | 
|                                            |                                            |                                          |        |        |        |      |        |        |        |   |        |       
|Net income per share:                       |                                            |                                          |        |        |        |      |        |        |        |   |        |       
|                                            | Basic                                      |                                          | $      | 0.22   |        |      | $      | 0.37   |        |   | $      | 0.37   |       
|                                            | Diluted                                    |                                          | $      | 0.21   |        |      | $      | 0.35   |        |   | $      | 0.34   |       
|Weighted average common shares outstanding: |                                            |                                          |        |        |        |      |        |        |        |   |        |       
|                                            | Basic                                      |                                          |        | 11,489 |        |      |        | 11,859 |        |   |        | 12,424 |       
|                                            | Diluted                                    |                                          |        | 11,884 |        |      |        | 12,512 |        |   |        | 13,519 |       

The accompanying notes are an integral part of
these consolidated financial statements.

F-3



---



##### Table of Contents



ONESOURCE INFORMATION
SERVICES, INC.


CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS EQUITY

(In thousands, except share data)


|                                                                              |                      |              |            |            |  |          |     |              |  |               |        |                |  |               |      |               |  |        |         |        |  |   |     |  |  |  |           |   |  |   |         |   |  |   |        |   |  |   |       |       | 
|----------------------------------------------------------------------------- | -------------------- | ------------ | ---------- | ---------- |  | -------- | --- | ------------ |  | ------------- | ------ | -------------- |  | ------------- | ---- | ------------- |  | ------ | ------- | ------ |  | - | --- |  |  |  | --------- | - |  | - | ------- | - |  | - | ------ | - |  | - | ----- | ----- | 
|                                                                              |                      |              |            |            |  |          |     |              |  | Accumulated   |        |                |  |               |      |              
|                                                                              |                      | Common Stock |            | Additional |  |          |     |              |  | Other         |        | Treasury Stock |  | Total         |      |              
|                                                                              |                      |              |            | Paid-in    |  | Unearned |     | Accumulated  |  | Comprehensive |        |                |  | Stockholders |      | Comprehensive
|                                                                              |                      | Shares       |            | Amount     |  | Capital  |     | Compensation |  | Deficit       |        | Income         |  | Shares        |      | Amount        |  | Equity |         | Income
|                                                                              |                      |              |            |            |  |          |     |              |  |               |        |                |  |               |      |               |  |        |         |       
|Balance, December 31, 2000                                                    |                      |              | 12,158,467 |            |  | $        | 122 |              |  | $             | 30,309 |                |  | $             | (174 | )             |  | $      | (14,033 | )      |  | $ | 129 |  |  |  |          |   |  | $ |        |   |  | $ | 16,353 |   |  |   |       |      
|Comprehensive income:                                                         |                      |              |            |            |  |          |     |              |  |               |        |                |  |               |      |               |  |        |         |        |  |   |     |  |  |  |           |   |  |   |         |   |  |   |        |   |  |   |       |      
|Net income                                                                    |                      |              |            |            |  |          |     |              |  |               |        |                |  |               |      |               |  |        | 4,656   |        |  |   |     |  |  |  |           |   |  |   |         |   |  |   | 4,656  |   |  | $ | 4,656 |      
|Foreign currency translation adjustment                                       |                      |              |            |            |  |          |     |              |  |               |        |                |  |               |      |               |  |        |         |        |  |   | 138 |  |  |  |           |   |  |   |         |   |  |   | 138    |   |  |   | 138   |      
|                                                                              |                      |              |            |            |  |          |     |              |  |               |        |                |  |               |      |               |  |        |         |        |  |   |     |  |  |  |           |   |  |   |         |   |  |   |        |   |  |   |       |      
|                                                                              | Comprehensive income |              |            |            |  |          |     |              |  |               |        |                |  |               |      |               |  |        |         |        |  |   |     |  |  |  |           |   |  |   |         |   |  |   |        |   |  |   | $     | 4,794 | 
|                                                                              |                      |              |            |            |  |          |     |              |  |               |        |                |  |               |      |               |  |        |         |        |  |   |     |  |  |  |           |   |  |   |         |   |  |   |        |   |  |   |       |      
|Amortization of unearned compensation relating to
    grants of stock options |                      |              |            |            |  |          |     |              |  |               |        |                |  |               | 97   |               |  |        |         |        |  |   |     |  |  |  |           |   |  |   |         |   |  |   | 97     |   |  |   |       |      
|Issuance of common stock pursuant to exercise of
    options                  |                      |              | 812,030    |            |  |          | 8   |              |  |               | 1,601  |                |  |               |      |               |  |        |         |        |  |   |     |  |  |  |           |   |  |   |         |   |  |   | 1,609  |   |  |   |       |      
|Issuance of common stock pursuant to the employee
    stock purchase plan     |                      |              | 50,967     |            |  |          |    |              |  |               | 379    |                |  |               |      |               |  |        |         |        |  |   |     |  |  |  |           |   |  |   |         |   |  |   | 379    |   |  |   |       |      
|Repurchase of common stock                                                    |                      |              |            |            |  |          |     |              |  |               |        |                |  |               |      |               |  |        |         |        |  |   |     |  |  |  | 960,600   |   |  |   | (8,097  | ) |  |   | (8,097 | ) |  |   |       |      
|Tax benefits of stock options                                                 |                      |              |            |            |  |          |     |              |  |               | 865    |                |  |               |      |               |  |        |         |        |  |   |     |  |  |  |           |   |  |   |         |   |  |   | 865    |   |  |   |       |      
|                                                                              |                      |              |            |            |  |          |     |              |  |               |        |                |  |               |      |               |  |        |         |        |  |   |     |  |  |  |           |   |  |   |         |   |  |   |        |   |  |   |       |      
|Balance, December 31, 2001                                                    |                      |              | 13,021,464 |            |  |          | 130 |              |  |               | 33,154 |                |  |               | (77  | )             |  |        | (9,377  | )      |  |   | 267 |  |  |  | 960,600   |   |  |   | (8,097  | ) |  |   | 16,000 |   |  |   |       |      
|Comprehensive income:                                                         |                      |              |            |            |  |          |     |              |  |               |        |                |  |               |      |               |  |        |         |        |  |   |     |  |  |  |           |   |  |   |         |   |  |   |        |   |  |   |       |      
|Net income                                                                    |                      |              |            |            |  |          |     |              |  |               |        |                |  |               |      |               |  |        | 4,431   |        |  |   |     |  |  |  |           |   |  |   |         |   |  |   | 4,431  |   |  | $ | 4,431 |      
|Foreign currency translation adjustment                                       |                      |              |            |            |  |          |     |              |  |               |        |                |  |               |      |               |  |        |         |        |  |   | 170 |  |  |  |           |   |  |   |         |   |  |   | 170    |   |  |   | 170   |      
|                                                                              |                      |              |            |            |  |          |     |              |  |               |        |                |  |               |      |               |  |        |         |        |  |   |     |  |  |  |           |   |  |   |         |   |  |   |        |   |  |   |       |      
|                                                                              | Comprehensive income |              |            |            |  |          |     |              |  |               |        |                |  |               |      |               |  |        |         |        |  |   |     |  |  |  |           |   |  |   |         |   |  |   |        |   |  |   | $     | 4,601 | 
|                                                                              |                      |              |            |            |  |          |     |              |  |               |        |                |  |               |      |               |  |        |         |        |  |   |     |  |  |  |           |   |  |   |         |   |  |   |        |   |  |   |       |      
|Amortization of unearned compensation relating to
    grants of stock options |                      |              |            |            |  |          |     |              |  |               |        |                |  |               | 77   |               |  |        |         |        |  |   |     |  |  |  |           |   |  |   |         |   |  |   | 77     |   |  |   |       |      
|Issuance of common stock pursuant to exercise of
    options                  |                      |              | 238,327    |            |  |          | 3   |              |  |               | 471    |                |  |               |      |               |  |        | (858    | )      |  |   |     |  |  |  | (150,199  | ) |  |   | 1,157   |   |  |   | 773    |   |  |   |       |      
|Issuance of common stock pursuant to the employee
    stock purchase plan     |                      |              | 27,662     |            |  |          |    |              |  |               | 175    |                |  |               |      |               |  |        | (52     | )      |  |   |     |  |  |  | (22,839   | ) |  |   | 179     |   |  |   | 302    |   |  |   |       |      
|Repurchase of common stock                                                    |                      |              |            |            |  |          |     |              |  |               |        |                |  |               |      |               |  |        |         |        |  |   |     |  |  |  | 818,150   |   |  |   | (5,572  | ) |  |   | (5,572 | ) |  |   |       |      
|Tax benefits of stock options                                                 |                      |              |            |            |  |          |     |              |  |               | 1,328  |                |  |               |      |               |  |        |         |        |  |   |     |  |  |  |           |   |  |   |         |   |  |   | 1,328  |   |  |   |       |      
|                                                                              |                      |              |            |            |  |          |     |              |  |               |        |                |  |               |      |               |  |        |         |        |  |   |     |  |  |  |           |   |  |   |         |   |  |   |        |   |  |   |       |      
|Balance, December 31, 2002                                                    |                      |              | 13,287,453 |            |  |          | 133 |              |  |               | 35,128 |                |  |               |     |               |  |        | (5,856  | )      |  |   | 437 |  |  |  | 1,605,712 |   |  |   | (12,333 | ) |  |   | 17,509 |   |  |   |       |      
|Comprehensive income:                                                         |                      |              |            |            |  |          |     |              |  |               |        |                |  |               |      |               |  |        |         |        |  |   |     |  |  |  |           |   |  |   |         |   |  |   |        |   |  |   |       |      
|Net income                                                                    |                      |              |            |            |  |          |     |              |  |               |        |                |  |               |      |               |  |        | 2,547   |        |  |   |     |  |  |  |           |   |  |   |         |   |  |   | 2,547  |   |  | $ | 2,547 |      
|Foreign currency translation adjustment                                       |                      |              |            |            |  |          |     |              |  |               |        |                |  |               |      |               |  |        |         |        |  |   | 504 |  |  |  |           |   |  |   |         |   |  |   | 504    |   |  |   | 504   |      
|                                                                              |                      |              |            |            |  |          |     |              |  |               |        |                |  |               |      |               |  |        |         |        |  |   |     |  |  |  |           |   |  |   |         |   |  |   |        |   |  |   |       |      
|                                                                              | Comprehensive income |              |            |            |  |          |     |              |  |               |        |                |  |               |      |               |  |        |         |        |  |   |     |  |  |  |           |   |  |   |         |   |  |   |        |   |  |   | $     | 3,051 | 
|                                                                              |                      |              |            |            |  |          |     |              |  |               |        |                |  |               |      |               |  |        |         |        |  |   |     |  |  |  |           |   |  |   |         |   |  |   |        |   |  |   |       |      
|Issuance of common stock pursuant to exercise of
    options                  |                      |              |            |            |  |          |     |              |  |               | 14     |                |  |               |      |               |  |        | (3,410  | )      |  |   |     |  |  |  | (859,725  | ) |  |   | 6,421   |   |  |   | 3,025  |   |  |   |       |      
|Stock-based employee compensation expense                                     |                      |              |            |            |  |          |     |              |  |               | 51     |                |  |               |      |               |  |        |         |        |  |   |     |  |  |  |           |   |  |   |         |   |  |   | 51     |   |  |   |       |      
|Issuance of common stock pursuant to the employee
    stock purchase plan     |                      |              |            |            |  |          |     |              |  |               |        |                |  |               |      |               |  |        | (82     | )      |  |   |     |  |  |  | (36,866   | ) |  |   | 277     |   |  |   | 195    |   |  |   |       |      
|Repurchase of common stock                                                    |                      |              |            |            |  |          |     |              |  |               |        |                |  |               |      |               |  |        |         |        |  |   |     |  |  |  | 942,900   |   |  |   | (6,647  | ) |  |   | (6,647 | ) |  |   |       |      
|Tax benefits of stock options                                                 |                      |              |            |            |  |          |     |              |  |               | 1,527  |                |  |               |      |               |  |        |         |        |  |   |     |  |  |  |           |   |  |   |         |   |  |   | 1,527  |   |  |   |       |      
|                                                                              |                      |              |            |            |  |          |     |              |  |               |        |                |  |               |      |               |  |        |         |        |  |   |     |  |  |  |           |   |  |   |         |   |  |   |        |   |  |   |       |      
|Balance, December 31, 2003                                                    |                      |              | 13,287,453 |            |  | $        | 133 |              |  | $             | 36,720 |                |  | $             |     |               |  | $      | (6,801  | )      |  | $ | 941 |  |  |  | 1,652,021 |   |  | $ | (12,282 | ) |  | $ | 18,711 |   |  |   |       |      
|                                                                              |                      |              |            |            |  |          |     |              |  |               |        |                |  |               |      |               |  |        |         |        |  |   |     |  |  |  |           |   |  |   |         |   |  |   |        |   |  |   |       |      

The accompanying notes are an integral part of
these consolidated financial statements.

F-4



---



##### Table of Contents



ONESOURCE INFORMATION
SERVICES, INC.

CONSOLIDATED STATEMENTS OF CASH
FLOWS

(In thousands)


|                                                                 |                                                                                       |                                              |                                   |        |        |        |        |        |        |       |        |        |        |        |  
|---------------------------------------------------------------- | ------------------------------------------------------------------------------------- | -------------------------------------------- | --------------------------------- | ------ | ------ | ------ | ------ | ------ | ------ | ----- | ------ | ------ | ------ | ------ | -
|                                                                 |                                                                                       |                                             
|                                                                 |                                                                                       | Year Ended December 31,                     
|                                                                 |                                                                                       |                                             
|                                                                 |                                                                                       | 2003                                         |                                   | 2002   |        | 2001  
|                                                                 |                                                                                       |                                              |                                   |        |        |       
|Cash flows relating to operating activities:                     |                                                                                       |                                              |                                   |        |        |        |        |        |        |       |        |       
|                                                                 | Net income                                                                            |                                              | $                                 | 2,547  |        |        | $      | 4,431  |        |       | $      | 4,656  |       
|                                                                 | Adjustments to reconcile net income to net cash
    provided by operating activities: |                                              |                                   |        |        |        |        |        |        |       |        |        |       
|                                                                 |                                                                                       | Depreciation and amortization                |                                   |        | 3,061  |        |        |        | 3,152  |       |        |        | 3,067  |       
|                                                                 |                                                                                       | Amortization of goodwill                     |                                   |        |       |        |        |        |       |       |        |        | 1,020  |       
|                                                                 |                                                                                       | Amortization of acquired intangible assets   |                                   |        | 327    |        |        |        | 427    |       |        |        | 460    |       
|                                                                 |                                                                                       | Stock-based employee compensation expense    |                                   |        | 51     |        |        |        | 77     |       |        |        | 97     |       
|                                                                 |                                                                                       | Tax benefits of stock options                |                                   |        | 739    |        |        |        | 1,328  |       |        |        | 865    |       
|                                                                 |                                                                                       | Deferred income taxes                        |                                   |        | (245   | )      |        |        |       |       |        |        |       |       
|                                                                 |                                                                                       | Loss on disposal of fixed assets             |                                   |        | 14     |        |        |        | 7      |       |        |        | 23     |       
|                                                                 |                                                                                       | Changes in operating assets and liabilities: |                                   |        |        |        |        |        |        |       |        |        |        |       
|                                                                 |                                                                                       |                                              | Accounts receivable               |        |        | 355    |        |        |        | 864   |        |        |        | 2,413  |  
|                                                                 |                                                                                       |                                              | Deferred royalties                |        |        | 1,144  |        |        |        | 260   |        |        |        | 2,036  |  
|                                                                 |                                                                                       |                                              | Deferred commissions              |        |        | 282    |        |        |        | (302  | )      |        |        | 771    |  
|                                                                 |                                                                                       |                                              | Prepaid expenses and other assets |        |        | (81    | )      |        |        | (518  | )      |        |        | (65    | )
|                                                                 |                                                                                       |                                              | Long-term deferred royalties      |        |        | 23     |        |        |        | (514  | )      |        |        | (1,026 | )
|                                                                 |                                                                                       |                                              | Accounts payable                  |        |        | (491   | )      |        |        | 460   |        |        |        | (95    | )
|                                                                 |                                                                                       |                                              | Accrued compensation and benefits |        |        | 84     |        |        |        | 391   |        |        |        | (1,269 | )
|                                                                 |                                                                                       |                                              | Accrued royalties                 |        |        | (778   | )      |        |        | (420  | )      |        |        | (1,655 | )
|                                                                 |                                                                                       |                                              | Accrued expenses                  |        |        | (737   | )      |        |        | 734   |        |        |        | 22     |  
|                                                                 |                                                                                       |                                              | Deferred revenues                 |        |        | (1,659 | )      |        |        | 2,302 |        |        |        | (1,890 | )
|                                                                 |                                                                                       |                                              |                                   |        |        |        |        |        |        |       |        |       
|                                                                 |                                                                                       | Net cash provided by operating activities    |                                   |        | 4,636  |        |        |        | 12,679 |       |        |        | 9,430  |       
|                                                                 |                                                                                       |                                              |                                   |        |        |        |        |        |        |       |        |       
|Cash flows relating to investing activities:                     |                                                                                       |                                              |                                   |        |        |        |        |        |        |       |        |       
|                                                                 | Decrease in restricted time deposits                                                  |                                              |                                   | 603    |        |        |        |       |        |       |        |       |       
|                                                                 | Purchases of property and equipment                                                   |                                              |                                   | (3,246 | )      |        |        | (1,872 | )      |       |        | (1,843 | )     
|                                                                 | Capitalization of software development costs                                          |                                              |                                   | (2,480 | )      |        |        | (1,872 | )      |       |        | (759   | )     
|                                                                 |                                                                                       |                                              |                                   |        |        |        |        |        |        |       |        |       
|                                                                 |                                                                                       | Net cash used by investing activities        |                                   |        | (5,123 | )      |        |        | (3,744 | )     |        |        | (2,602 | )     
|                                                                 |                                                                                       |                                              |                                   |        |        |        |        |        |        |       |        |       
|Cash flows relating to financing activities:                     |                                                                                       |                                              |                                   |        |        |        |        |        |        |       |        |       
|                                                                 | Issuance of stock pursuant to stock options and
    employee stock purchase plan      |                                              |                                   | 3,220  |        |        |        | 1,075  |        |       |        | 1,988  |       
|                                                                 | Repurchase of common stock for treasury                                               |                                              |                                   | (6,647 | )      |        |        | (5,572 | )      |       |        | (8,097 | )     
|                                                                 | Proceeds from issuance of long-term debt                                              |                                              |                                   | 3,140  |        |        |        |       |        |       |        |       |       
|                                                                 | Repayments of long-term debt                                                          |                                              |                                   | (566   | )      |        |        |       |        |       |        |       |       
|                                                                 | Repayment of capital lease obligations                                                |                                              |                                   |       |        |        |        |       |        |       |        | (33    | )     
|                                                                 |                                                                                       |                                              |                                   |        |        |        |        |        |        |       |        |       
|                                                                 |                                                                                       | Net cash used by financing activities        |                                   |        | (853   | )      |        |        | (4,497 | )     |        |        | (6,142 | )     
|                                                                 |                                                                                       |                                              |                                   |        |        |        |        |        |        |       |        |       
|Effect of exchange rate changes on cash and cash
    equivalents |                                                                                       |                                              | 1,038                             |        |        |        | 496    |        |        |       | 138    |       
|                                                                 |                                                                                       |                                              |                                   |        |        |        |        |        |        |       |        |       
|Increase (decrease) in cash and cash equivalents                 |                                                                                       |                                              | (302                              | )      |        |        | 4,934  |        |        |       | 824    |       
|Cash and cash equivalents, beginning of year                     |                                                                                       |                                              | 23,096                            |        |        |        | 18,162 |        |        |       | 17,338 |       
|                                                                 |                                                                                       |                                              |                                   |        |        |        |        |        |        |       |        |       
|Cash and cash equivalents, end of year                           |                                                                                       | $                                            | 22,794                            |        |        | $      | 23,096 |        |        | $     | 18,162 |       
|                                                                 |                                                                                       |                                              |                                   |        |        |        |        |        |        |       |        |       
|Supplemental disclosure of cash flow information:                |                                                                                       |                                              |                                   |        |        |        |        |        |        |       |        |       
|                                                                 | Cash paid for interest                                                                |                                              | $                                 | 64     |        |        | $      | 32     |        |       | $      | 1      |       
|                                                                 | Cash paid for income taxes                                                            |                                              | $                                 | 1,664  |        |        | $      | 411    |        |       | $      | 333    |       

The accompanying notes are an integral part of
these consolidated financial statements.

F-5



---



##### Table of Contents



ONESOURCE INFORMATION
SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

1.     Nature of
Business

OneSource Information Services, Inc.
(OneSource) provides Web-based business and
financial information products to professionals in corporations
and other enterprises and also distributes information on
private technology companies. OneSource primarily sells its
products through a direct sales force located throughout the
United States and United Kingdom. OneSource manages its business
as a single segment.

2.     Summary of
Significant Accounting Policies



| |                            
| | ---------------------------
| | Principles of Consolidation

The consolidated financial statements include the
accounts of OneSource and its wholly-owned subsidiaries:
Corporate Technology Information Services, Inc. and
OneSource Information Services Limited. All significant
intercompany transactions and balances have been eliminated.



| |                    
| | -------------------
| | Revenue Recognition

OneSources products are primarily sold on a
subscription basis pursuant to customer contracts that span
varying periods of time but are generally for a period of one
year. OneSource initially records receivables and defers the
related revenues when persuasive evidence of an arrangement
exists, fees are fixed or determinable, and collection is
reasonably assured. Revenues are recognized ratably over the
related subscription period beginning when access to products is
granted to the customer in accordance with customer agreements.



| |                                       
| | --------------------------------------
| | Deferred Royalties and
    Commissions

Deferred royalties and commissions include
royalty costs and sales commissions that are associated with
procuring information and securing a subscription to be
delivered over the subscription period, respectively. These
costs are deferred and amortized ratably over the associated
subscription period as a component of cost of revenues and
selling and marketing expense, respectively. Long-term deferred
royalties are attributable to certain limited contracts with
information providers that allow for the use of their
information for a predetermined period of time at no additional
cost to OneSource after termination of the contract
(Wind-down Period). OneSource currently intends to
renew all existing contracts that include a Wind-down Period,
and accordingly, royalty payments associated with a Wind-down
Period have been classified as long-term deferred royalties. If
a contract relating to the procurement of information used in
the OneSource products is terminated prematurely and/or
OneSource elects to no longer use such information, for any
reason, royalty expense recognition may be accelerated and
incurred sooner than originally anticipated. At
December 31, 2003 and 2002, deferred costs consisted of
$1.4 million and $1.6 million, respectively, related
to sales commissions and $3.2 million and
$4.4 million, respectively, related to royalties.



| |                          
| | -------------------------
| | Cash and Cash Equivalents

Cash equivalents consist of highly liquid
investment securities with original maturities of three months
or less at the date of purchase and are stated at cost, which
approximates fair market value. At December 31, 2003 and
2002, cash equivalents totaled $21.7 million and
$21.3 million, respectively, and consisted primarily of
money market funds.



| |                                    
| | -----------------------------------
| | Allowance For Doubtful
    Accounts

OneSource assesses collectibility of accounts
receivable based on a number of factors including, but not
limited to, past transactions history with the customer and the
credit worthiness of the customer. OneSource maintains
allowances for doubtful accounts for estimated losses resulting
from the inability of its customers to make required payments.
If the financial condition of OneSources customers were to
deteriorate, resulting in an impairment of their ability to make
payments, additional allowances might be required.

F-6



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##### Table of Contents



ONESOURCE INFORMATION
SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                       
| | ----------------------
| | Property and Equipment

Property and equipment are recorded at cost and
depreciated over their estimated useful lives, generally three
to five years, using the straight-line method. Repair and
maintenance costs are expensed as incurred. As an asset is
retired or sold, the related cost and accumulated depreciation
are removed from the accounts and any resulting gain or loss is
recognized.



| |                  
| | -----------------
| | Advertising Costs

OneSource recognizes advertising expense as
incurred. Advertising expense was approximately $48,000, $78,000
and $58,000 for the years ended December 31, 2003, 2002 and
2001, respectively.



| |                                            
| | -------------------------------------------
| | Goodwill and Acquired Intangible
    Assets

Goodwill and acquired intangible assets, which
consist primarily of a trademark, subscriber list and a
database, were the result of an acquisition of a company by
OneSource in 1999. Acquired intangible assets are amortized
using the straight-line method over periods of approximately
five years to seven years, based on their estimated useful
lives. In accordance with Statement of Financial Accounting
Standard No. 142 (SFAS No. 142),
Goodwill and Other Intangible Assets, OneSource
ceased amortizing goodwill as of January 1, 2002 and
reviews goodwill for potential impairment in the third quarter
of each fiscal year, as well as on an event-driven basis, using
a fair value approach. Since OneSource constitutes one reporting
unit under SFAS No. 142, its fair value, which equals
its market capitalization based on the closing price of its
common stock as quoted on the NASDAQ National Market, is
compared to its net assets, which includes the carrying value of
goodwill. If market capitalization exceeds net assets, it is
determined that no impairment has occurred and no adjustment is
required. If impairment is indicated, a write-down to the
implied fair value of goodwill is recorded. The implied fair
value of goodwill is determined in the same manner as the amount
of goodwill recognized in a business combination.



| |                            
| | ---------------------------
| | Long-Lived Asset Impairment

OneSource periodically evaluates its long-lived
assets, excluding goodwill, for impairment under Statement of
Financial Accounting Standards No. 144
(SFAS No. 144), Accounting for the
Impairment or Disposal of Long-Lived Assets, whenever
events or changes in circumstances indicate, in
managements judgment, that the carrying amount of such
assets may not be recoverable. OneSources long-lived
assets subject to such a review include property and equipment,
capitalized software development costs and acquired intangible
assets. When such events or changes in circumstances occur,
OneSource assesses the recoverability of the assets by
determining whether the amortization of the remaining balance
over its estimated remaining life can be recovered through
projected undiscounted future cash flows and measures the
impairment loss, if any, based on the related future estimated
discounted cash flows. Such events and changes in circumstances
include, but are not limited to, significant underperformance
relative to expected historical or projected future operating
results and significant negative industry or economic trends.



| |                                                                    
| | -------------------------------------------------------------------
| | Platform and Product Development and
    Software Development Costs

Platform and product development costs, other
than certain software development costs, are charged to expense
as incurred. OneSource follows Statement of Position 98-1
(SOP 98-1), Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use,
which requires research and development costs associated with
the application development stage to be capitalized for internal
use software. Capitalized software development projects
primarily include software platforms used in OneSource products
and programs used for its proprietary classification system. At
December 31, 2003 and 2002, external and internal
capitalized software development costs, net of accumulated
amortization, were $3.9 million and $2.3 million,
respectively, as reported under the caption Capitalized
software development costs, net on the consolidated

F-7



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##### Table of Contents



ONESOURCE INFORMATION
SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

balance sheets. In addition, property and
equipment as reported on the consolidated balance sheets
included $1.5 million and $0.1 million of external and
internal capitalized software development costs, net of
accumulated amortization as of December 31, 2003 and 2002,
respectively. Capitalized software is amortized over its
estimated useful life, generally two to three years, using the
straight-line method. For the years ended December 31,
2003, 2002 and 2001, amortization of capitalized software
development costs amounted to $0.8 million,
$0.5 million and $0.5 million, respectively.



| |                      
| | ---------------------
| | Financial Instruments

The carrying amounts reflected in the
consolidated balance sheet for cash and cash equivalents,
restricted time deposits, and accounts receivable approximate
their fair value due to the short-term maturities of these
instruments. Because of its variable interest rate, the carrying
value of OneSources long-term debt approximates its fair
value. OneSource does not engage in off-balance sheet
transactions.



| |                             
| | ----------------------------
| | Concentration of Credit Risk

Financial instruments that potentially subject
OneSource to concentrations of credit risk consist primarily of
cash, cash equivalents, and accounts receivable. In accordance
with OneSources cash investment policy, the majority of
its investments are made in investment grade securities and are
managed by financial institutions with strong credit ratings. At
December 31, 2003 and periodically throughout the year,
OneSource has maintained cash and cash equivalents in various
operating accounts in excess of federally insured limits.
OneSource limits the amount of credit exposure with any one
financial institution by evaluating the creditworthiness of the
financial institutions with which it invests.

Concentration of credit risk with respect to
accounts receivable is limited due to the large number of
companies comprising OneSources client base. Ongoing
credit evaluations of customers financial condition are
performed and collateral is generally not required. OneSource
maintains reserves for potential credit losses and such losses,
in the aggregate, have not exceeded managements
expectations. Management believes the risk with respect to
accounts receivables is mitigated by the fact that
OneSources customer base is geographically widespread and
is highly diversified. As of December 31, 2003 and 2002,
OneSources single largest outstanding accounts receivable
balance represented 6% and 4%, respectively, of its total
outstanding accounts receivable. No single customer accounted
for 3% or more of annual revenues for the years ended
December 31, 2003, 2002 or 2001.

Accounting
for Stock-Based Compensation

Compensation expense has been recognized for
OneSources stock option plans in accordance with
Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees. Had
compensation cost been determined based on the fair value of the
options at the grant date consistent with the provisions of
Statement of Financial Accounting Standards No. 123
(SFAS No. 123), Accounting for
Stock-Based

F-8



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##### Table of Contents



ONESOURCE INFORMATION
SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Compensation, OneSources net income
and net income per share on a pro forma basis would have been as
shown below. For the years ended December 31, 2002 and
2001, stock-based compensation expense determined under the fair
value method has been adjusted to properly reflect related tax
effects.

|                              |                                                                                                                                             |                         |   |        |   |      |   |        |   |  |   |        |  
|----------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------- | - | ------ | - | ---- | - | ------ | - |  | - | ------ | -
|                              |                                                                                                                                             |                        
|                              |                                                                                                                                             | Year Ended December 31,
|                              |                                                                                                                                             |                        
|                              |                                                                                                                                             | 2003                    |   | 2002   |   | 2001
|                              |                                                                                                                                             |                         |   |        |   |     
|                              |                                                                                                                                             |                        
|                              |                                                                                                                                             | (In thousands, except  
|                              |                                                                                                                                             | per share data)        
|Net income:                   |                                                                                                                                             |                         |   |        |   |      |   |        |   |  |   |       
|                              | As reported                                                                                                                                 |                         | $ | 2,547  |   |      | $ | 4,431  |   |  | $ | 4,656  |  
|                              | Add: Stock-based employee compensation expense
    included in reported net income, net of related tax effects                              |                         |   | 51     |   |      |   | 77     |   |  |   | 97     |  
|                              | Less: Stock-based employee compensation expense
    determined under fair value based method for all awards, net of
    related tax effects |                         |   | (2,421 | ) |      |   | (2,343 | ) |  |   | (1,657 | )
|                              |                                                                                                                                             |                         |   |        |   |      |   |        |   |  |   |       
|                              | Pro forma net income                                                                                                                        |                         | $ | 177    |   |      | $ | 2,165  |   |  | $ | 3,096  |  
|                              |                                                                                                                                             |                         |   |        |   |      |   |        |   |  |   |       
|Basic net income per share:   |                                                                                                                                             |                         |   |        |   |      |   |        |   |  |   |       
|                              | As reported                                                                                                                                 |                         | $ | 0.22   |   |      | $ | 0.37   |   |  | $ | 0.37   |  
|                              | Pro forma                                                                                                                                   |                         | $ | 0.02   |   |      | $ | 0.18   |   |  | $ | 0.25   |  
|Diluted net income per share: |                                                                                                                                             |                         |   |        |   |      |   |        |   |  |   |       
|                              | As reported                                                                                                                                 |                         | $ | 0.21   |   |      | $ | 0.35   |   |  | $ | 0.34   |  
|                              | Pro forma                                                                                                                                   |                         | $ | 0.01   |   |      | $ | 0.17   |   |  | $ | 0.23   |  

The fair value of each option grant was estimated
on the date of grant using the Black-Scholes option pricing
model with the following weighted-average assumptions:

|             |                                                |                         |   |       |   |      |   |       |   |  |   |       |  
|------------ | ---------------------------------------------- | ----------------------- | - | ----- | - | ---- | - | ----- | - |  | - | ----- | -
|             |                                                |                        
|             |                                                | Year Ended December 31,
|             |                                                |                        
|             |                                                | 2003                    |   | 2002  |   | 2001
|             |                                                |                         |   |       |   |     
|Assumptions: |                                                |                         |   |       |   |      |   |       |   |  |   |      
|             | Expected option term (years)                   |                         |   | 5.0   |   |      |   | 5.0   |   |  |   | 5.0   |  
|             | Risk-free interest rate                        |                         |   | 2.89  | % |      |   | 4.34  | % |  |   | 4.86  | %
|             | Expected volatility                            |                         |   | 56.00 | % |      |   | 56.00 | % |  |   | 59.00 | %
|             | Dividend yield                                 |                         |   |      | % |      |   |      | % |  |   |      | %
|Fair value:  |                                                |                         |   |       |   |      |   |       |   |  |   |      
|             | Weighted-average fair value of options granted |                         | $ | 3.83  |   |      | $ | 3.75  |   |  | $ | 4.36  |  

The fair value of shares issued under the 1999
Employee Stock Purchase Plan was estimated on the date of issue
using the Black-Scholes option pricing model with the following
weighted-average assumptions:

|             |                         |                                                                          |  |       |      |      |  |       |      |  |  |       |      | 
|------------ | ----------------------- | ------------------------------------------------------------------------ |  | ----- | ---- | ---- |  | ----- | ---- |  |  | ----- | ---- | 
|             |                         |                                                                         
|             |                         | Year Ended December 31,                                                 
|             |                         |                                                                         
|             |                         | 2003                                                                     |  | 2002  |      | 2001
|             |                         |                                                                          |  |       |      |     
|Assumptions: |                         |                                                                          |  |       |      |      |  |       |      |  |  |      
|             | Expected term (years)   |                                                                          |  | 0.49  |      |      |  | 0.49  |      |  |  | 0.54  |     
|             | Risk-free interest rate |                                                                          |  | 1.42  | %    |      |  | 2.50  | %    |  |  | 5.05  | %   
|             | Expected volatility     |                                                                          |  | 56.00 | %    |      |  | 56.00 | %    |  |  | 59.00 | %   
|             | Dividend yield          |                                                                          |  |      | %    |      |  |      | %    |  |  |      | %   
|Fair value:  |                         |                                                                          |  |       |      |      |  |       |      |  |  |      
|             |                         | Weighted-average fair value of shares issued
    under the Purchase Plan |  | $     | 1.78 |      |  | $     | 2.34 |  |  | $     | 2.90 | 

F-9



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##### Table of Contents



ONESOURCE INFORMATION
SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                   
| | ------------------
| | Earnings Per Share

Earnings per share is computed in accordance with
Statement of Financial Accounting Standards No. 128
(SFAS No. 128), Earnings Per
Share. SFAS No. 128 requires the presentation of
two amounts: basic earnings per share and diluted earnings per
share. Basic earnings per share is computed by dividing net
income by the weighted average number of shares of common stock
outstanding during the year. Diluted earnings per share is
computed by dividing net income by the sum of the weighted
average number of shares of common stock outstanding during the
year plus, when dilutive, the weighted average number of shares
of potential common stock from the assumed exercise of stock
options using the treasury stock method.



| |                             
| | ----------------------------
| | Foreign Currency Translation

Assets and liabilities of OneSources United
Kingdom operations, where the local currency is the functional
currency, are translated into US dollars at the exchange rate in
effect as of the balance sheet date, while revenues and expenses
are translated at average exchange rates during the period. The
resulting translation adjustment is reflected in
stockholders equity as a component of accumulated other
comprehensive income. Foreign currency transaction gains and
losses, which were not material in amount for any period
reported, are reflected in the consolidated statements of income.



| |                 
| | ----------------
| | Use of Estimates

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



| |                                              
| | ---------------------------------------------
| | Recently Issued Accounting
    Pronouncements

In November 2002, the Emerging Issues Task Force
(the EITF) reached a consensus on Issue 00-21,
Revenue Arrangements with Multiple Deliverables.
EITF Issue 00-21 addresses revenue recognition for revenue
arrangements with multiple deliverables. The deliverables in
these revenue arrangements should be divided into separate units
of accounting when the individual deliverables have value to the
customer on a stand-alone basis; there is objective and reliable
evidence of the fair value of the undelivered elements; and, if
the arrangement includes a general right to return the delivered
element, delivery or performance of the undelivered element is
considered probable. The relative fair value of each unit should
be determined and the total consideration of the arrangement
should be allocated among the individual units based on their
relative fair value. The guidance in this issue is effective for
revenue arrangements entered into after June 15, 2003.
OneSource has determined that the adoption of EITF
Issue 00-21 did not have an impact on its results of
operations or financial position.

In April 2003, the Financial and Accounting
Standards Board (the FASB) issued Statement of
Financial Accounting Standards No. 149
(SFAS No. 149), Amendment of
Statement 133 on Derivative Instruments and Hedging
Activities. SFAS No. 149 amends and clarifies
the accounting and reporting for derivatives, amending the
previously issued SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities.
SFAS No. 149 clarifies under what circumstances a
contract with an initial net investment meets the
characteristics of a derivative, amends the definition of an
underlying contract, and clarifies when a derivative contains a
financing component in order to increase the comparability of
accounting practices under SFAS No. 133.
SFAS No. 149 is effective for contracts entered into
or modified after June 30, 2003. OneSource has determined
that the adoption of SFAS No. 149 did not have an
impact on its financial position and results of operations.

F-10



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##### Table of Contents



ONESOURCE INFORMATION
SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

In May 2003, the FASB issued Statement of
Financial Accounting Standards No. 150
(SFAS No. 150), Accounting for
Certain Financial Instruments with Characteristics of both
Liabilities and Equity. SFAS No. 150 establishes
standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities
and equity. SFAS No. 150 applies specifically to a
number of financial instruments that companies have historically
presented within their financial statements, either as equity or
between the liabilities section and the equity section, rather
than as liabilities. SFAS 150 is generally effective for
financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning
of the first interim period beginning after June 15, 2003.
OneSource has determined that the adoption of
SFAS No. 150 did not have an impact on its financial
position and results of operations.

In December 2003, the Staff of the Securities and
Exchange Commission issued Staff Accounting Bulletin
No. 104 (SAB No. 104), Revenue
Recognition. SAB 104 was effective upon issuance and
supersedes Staff Accounting Bulletin No. 101 (SAB
No. 101), Revenue Recognition in Financial
Statements. SAB 104s primary purpose is to
rescind the accounting guidance in SAB 101 related to
multiple-element arrangements as this guidance has been
superseded as a result of the issuance of EITF Issue 00-21,
Accounting for Revenue Arrangements with Multiple
Deliverables. OneSource has determined that the adoption
of SAB No. 104 did not have an impact on its financial
position and results of operations.



| |                 
| | ----------------
| | Reclassification

Certain reclassifications have been made to prior
year balances in order to conform to the current year
presentation. Such reclassifications had no impact on net income
or net stockholders equity.



|   |                                            
|-- | -------------------------------------------
|3. | Goodwill and Acquired Intangible
    Assets

As of January 1, 2002, OneSource adopted
SFAS No. 142, Goodwill and Other Intangible
Assets. Under SFAS No. 142, goodwill and certain
other intangible assets with indefinite lives are no longer
amortized, but instead are reviewed for impairment annually, or
more frequently if impairment indicators arise.

In connection with the adoption of
SFAS No. 142, OneSource was required to perform a
transitional impairment assessment of goodwill within six months
of adoption of this standard. SFAS No. 142 requires
that OneSource identify its reporting units and determine the
carrying value of each of those reporting units by assigning
assets and liabilities, including existing goodwill and
intangible assets, to those reporting units. OneSource has
concluded that it currently has one reporting unit, and has
assigned the entire balance of goodwill to this reporting unit
for purposes of performing the transitional impairment test and
annual impairment test. The fair value of this reporting unit
was determined using OneSources market capitalization
based on the closing price of its common stock as quoted on the
NASDAQ National Market. OneSource completed its transitional
impairment assessment of goodwill during the first quarter of
2002, and determined that goodwill was not impaired. OneSource
performs its annual goodwill impairment test during the third
quarter of each fiscal year as well as on an event-driven basis
to determine whether goodwill is impaired. If OneSources
market capitalization exceeds its net assets, it is determined
that no impairment has occurred and no adjustment is required.
If impairment is indicated, a write-down to the implied fair
value of goodwill is recorded. OneSource performed its annual
goodwill impairment test during the third quarter of 2003 and
determined that goodwill was not impaired because
OneSources fair value exceeded the net assets of the
reporting unit, including goodwill.

F-11



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##### Table of Contents



ONESOURCE INFORMATION
SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

A reconciliation of reported net income and net
income per share for the year ended December 31, 2001
adjusted to excluded goodwill amortization is as follows:

|                                                                           |  |                                       |       |      |  |      |       |                  |  |         |       |  |  |   |      |  |  |   |      | 
|-------------------------------------------------------------------------- |  | ------------------------------------- | ----- | ---- |  | ---- | ----- | ---------------- |  | ------- | ----- |  |  | - | ---- |  |  | - | ---- | 
|                                                                           |  |                                      
|                                                                           |  | Year Ended December 31,              
|                                                                           |  |                                      
|                                                                           |  | 2003                                  |       | 2002 |  |      |       |                 
|                                                                           |  |                                       |       |      |  |      |       |                 
|                                                                           |  |                                       |       |      |  |     
|                                                                           |  |                                       |       |      |  | 2001
|                                                                           |  |                                       |       |      |  |     
|                                                                           |  |                                       |       |      |  |      |       |                 
|                                                                           |  |                                       |       |      |  |      |       | Per Share Amount
|                                                                           |  |                                       |       |      |  |      |       |                 
|                                                                           |  |                                       |       |      |  |      |       | Basic            |  | Diluted
|                                                                           |  |                                       |       |      |  |      |       |                  |  |        
|                                                                           |  |                                      
|                                                                           |  | (In thousands, except per share data)
|Net income, as reported                                                    |  | $                                     | 2,547 |      |  | $    | 4,431 |                  |  | $       | 4,656 |  |  | $ | 0.37 |  |  | $ | 0.34 | 
|Add back: amortization expense of goodwill, net
    of related tax effects |  |                                       |      |      |  |      |      |                  |  |         | 1,020 |  |  |   | 0.09 |  |  |   | 0.08 | 
|                                                                           |  |                                       |       |      |  |      |       |                  |  |         |       |  |  |   |      |  |  |   |      | 
|Adjusted net income                                                        |  | $                                     | 2,547 |      |  | $    | 4,431 |                  |  | $       | 5,676 |  |  | $ | 0.46 |  |  | $ | 0.42 | 
|                                                                           |  |                                       |       |      |  |      |       |                  |  |         |       |  |  |   |      |  |  |   |      | 

There was no change in the carrying value of
goodwill during the year ended December 31, 2003. During
the year ended December 31, 2002, the carrying value of
goodwill was reduced by $0.5 million as a result of the
utilization of an acquired net operating loss carryforward.

Acquired intangible assets consist of the
following:

|                      |  |                   |       |                   |  |          |        |          |  |              |     |          |  |   |       |  |  |   |        |   |  |   |       | 
|--------------------- |  | ----------------- | ----- | ----------------- |  | -------- | ------ | -------- |  | ------------ | --- | -------- |  | - | ----- |  |  | - | ------ | - |  | - | ----- | 
|                      |  |                   |       |                  
|                      |  | December 31, 2003 |       | December 31, 2002
|                      |  |                   |       |                  
|                      |  | Gross             |       |                   |  | Net      |        | Gross    |  |              |     | Net     
|                      |  | Carrying          |       | Accumulated       |  | Carrying |        | Carrying |  | Accumulated  |     | Carrying
|                      |  | Amount            |       | Amortization      |  | Amount   |        | Amount   |  | Amortization |     | Amount  
|                      |  |                   |       |                   |  |          |        |          |  |              |     |         
|                      |  |                  
|                      |  | (In thousands)   
|Non-compete agreement |  | $                 |      |                   |  | $        |       |          |  | $            |    |          |  | $ | 400   |  |  | $ | (400   | ) |  | $ |      | 
|Subscriber list       |  |                   | 1,150 |                   |  |          | (675   | )        |  |              | 475 |          |  |   | 1,150 |  |  |   | (516   | ) |  |   | 634   | 
|Database              |  |                   | 986   |                   |  |          | (598   | )        |  |              | 388 |          |  |   | 986   |  |  |   | (458   | ) |  |   | 528   | 
|Trademark             |  |                   | 145   |                   |  |          | (118   | )        |  |              | 27  |          |  |   | 145   |  |  |   | (90    | ) |  |   | 55    | 
|                      |  |                   |       |                   |  |          |        |          |  |              |     |          |  |   |       |  |  |   |        |   |  |   |       | 
|                      |  | $                 | 2,281 |                   |  | $        | (1,391 | )        |  | $            | 890 |          |  | $ | 2,681 |  |  | $ | (1,464 | ) |  | $ | 1,217 | 
|                      |  |                   |       |                   |  |          |        |          |  |              |     |          |  |   |       |  |  |   |        |   |  |   |       | 

For the years ended December 31, 2003, 2002
and 2001, amortization expense of acquired intangible assets was
$0.3 million, $0.4 million, and $0.5 million,
respectively. The following table summarizes estimated future
amortization expense related to acquired intangible assets
recorded at December 31, 2003 for the periods indicated:

|             |  |                |     | 
|------------ |  | -------------- | --- | 
|             |  | Estimated     
|Year Ending  |  | Amortization  
|December 31, |  | Expense       
|             |  |               
|             |  | (In thousands)
|2004         |  | $              | 327 | 
|2005         |  |                | 299 | 
|2006         |  |                | 264 | 
|             |  |                |     | 
|             |  | $              | 890 | 
|             |  |                |     | 

F-12



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##### Table of Contents



ONESOURCE INFORMATION
SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

4.   Property and
Equipment

Property and equipment consists of the following:

|                                                |  |                |        |      |  |   |        |  
|----------------------------------------------- |  | -------------- | ------ | ---- |  | - | ------ | -
|                                                |  |               
|                                                |  | December 31,  
|                                                |  |               
|                                                |  | 2003           |        | 2002
|                                                |  |                |        |     
|                                                |  |               
|                                                |  | (In thousands)
|Office and computer equipment                   |  | $              | 13,583 |      |  | $ | 10,825 |  
|Furniture and fixtures                          |  |                | 553    |      |  |   | 532    |  
|                                                |  |                |        |      |  |   |        |  
|                                                |  |                | 14,136 |      |  |   | 11,357 |  
|Less: accumulated depreciation and amortization |  |                | (9,524 | )    |  |   | (7,728 | )
|                                                |  |                |        |      |  |   |        |  
|                                                |  | $              | 4,612  |      |  | $ | 3,629  |  
|                                                |  |                |        |      |  |   |        |  

During 2003 and 2002, OneSource retired
$0.5 million and $0.2 million, respectively, of fully
depreciated property and equipment. Total depreciation expense
for the years ended December 31, 2003, 2002 and 2001 was
$2.3 million, $2.6 million, and $2.6 million,
respectively.

5.   Long-Term Debt

In December 2002, OneSource entered into a Loan
and Security Agreement with Silicon Valley Bank permitting
borrowings of up to $10.0 million. The loan and security
agreement represents a working capital revolving line of credit
and an equipment line of credit for up to $5.0 million each
and was effective for one year from the date of signing.
OneSource has granted the bank a security interest in
substantially all the assets of the company as collateral.

Borrowings under the working capital line of
credit are at the prime interest rate (4.00% as of
December 31, 2003), plus 0.25%, and borrowings under the
equipment line of credit incur interest at the prime rate plus
0.50%. The equipment line of credit had two draw-down periods,
one that expired on March 31, 2003 and a second that
expired on September 30, 2003. Principal payments under the
equipment line of credit consist of 36 equal monthly
installments, commencing at the end of each draw-down period.
The working capital line of credit expired on December 20,
2003. On January 8, 2004, OneSource entered into the First
Loan Modification Agreement that retroactively extends the
working capital revolving line of credit portion of the Loan and
Security Agreement from December 21, 2003 until
March 18, 2004. OneSource did not renew the working capital
revolving line of credit which expired on March 18, 2004.
The maximum borrowing capacity for the working capital line of
credit was limited to 80% of OneSources eligible domestic
accounts receivable that are less than 90 days outstanding.
The Loan and Security Agreement contains financial covenants
requiring that once a borrowing takes place, OneSource maintain
an adjusted quick ratio of 2.0:1 and report a net profit of at
least $1.00 for each fiscal quarter. The adjusted quick ratio is
defined as quick assets to current liabilities, minus deferred
revenue. As of December 31, 2002, OneSource was in
compliance with these financial covenants. However, at
December 31, 2003, OneSource did not comply with certain
negative covenants of the Loan and Security Agreement and the
bank has waived such noncompliance as of March 1, 2004.

In March 2003, OneSource borrowed
$1.5 million under the equipment line of credit. Monthly
repayments of 36 equal installments began on April 1, 2003.
In June 2003, OneSource reserved $0.6 million from the
working capital line of credit to secure two letters of credit
related to leased office space. In September 2003, OneSource
borrowed $1.3 million under the equipment line of credit.
Monthly repayments of 36 equal installments began on
October 1, 2003.

In June 2003, OneSource borrowed
$0.3 million and issued a promissory note to fund
maintenance costs associated with computer networking equipment.
The note is payable in twelve equal quarterly installments of

F-13



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##### Table of Contents



ONESOURCE INFORMATION
SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

approximately $25,000 at an effective interest
rate of 1.7%, beginning May 2003. The promissory note does not
require any collateral and does not contain any financial
covenants.

The following table summarizes future maturities
under the equipment line of credit and the promissory note as of
December 31, 2003:

|                                   |  |                |       |            |  |            |     |  |  |   |       | 
|---------------------------------- |  | -------------- | ----- | ---------- |  | ---------- | --- |  |  | - | ----- | 
|                                   |  | Equipment      |       | Promissory |  |           
|Year ending December 31,           |  | Line of Credit |       | Note       |  | Total Debt
|                                   |  |                |       |            |  |           
|                                   |  |               
|                                   |  | (In thousands)
|2004                               |  | $              | 948   |            |  | $          | 102 |  |  | $ | 1,050 | 
|2005                               |  |                | 948   |            |  |            | 102 |  |  |   | 1,050 | 
|2006                               |  |                | 454   |            |  |            | 25  |  |  |   | 479   | 
|                                   |  |                |       |            |  |            |     |  |  |   |       | 
|Minimum future payments            |  |                | 2,350 |            |  |            | 229 |  |  |   | 2,579 | 
|Less amounts representing interest |  |                |      |            |  |            | 5   |  |  |   | 5     | 
|                                   |  |                |       |            |  |            |     |  |  |   |       | 
|Total debt                         |  |                | 2,350 |            |  |            | 224 |  |  |   | 2,574 | 
|Current portion of long-term debt  |  |                | 948   |            |  |            | 98  |  |  |   | 1,046 | 
|                                   |  |                |       |            |  |            |     |  |  |   |       | 
|Long-term debt                     |  | $              | 1,402 |            |  | $          | 126 |  |  | $ | 1,528 | 
|                                   |  |                |       |            |  |            |     |  |  |   |       | 



|   |                     
|-- | --------------------
|6. | Net Income Per Share

Below is a summary of the shares used in
computing basic and diluted net income per share for the years
indicated.

|                                                                              |                                                |                         |        |      |  |      |        |     |  |  |        |       | 
|----------------------------------------------------------------------------- | ---------------------------------------------- | ----------------------- | ------ | ---- |  | ---- | ------ | --- |  |  | ------ | ----- | 
|                                                                              |                                                |                        
|                                                                              |                                                | Year Ended December 31,
|                                                                              |                                                |                        
|                                                                              |                                                | 2003                    |        | 2002 |  | 2001
|                                                                              |                                                |                         |        |      |  |     
|                                                                              |                                                |                        
|                                                                              |                                                | (In thousands)         
|Weighted-average shares outstanding used for
    basic net income per share   |                                                |                         | 11,489 |      |  |      | 11,859 |     |  |  | 12,424 |      
|                                                                              | Incremental shares from dilutive stock options |                         |        | 395  |  |      |        | 653 |  |  |        | 1,095 | 
|                                                                              |                                                |                         |        |      |  |      |        |     |  |  |        |      
|Weighted-average shares outstanding used for
    diluted net income per share |                                                |                         | 11,884 |      |  |      | 12,512 |     |  |  | 13,519 |      
|                                                                              |                                                |                         |        |      |  |      |        |     |  |  |        |      

For the years ended December 31, 2003, 2002,
and 2001, stock options to purchase 1,511,477, 2,317,512 and
1,026,931 shares of common stock, respectively, were
outstanding, but were not included in the computation of diluted
net income per share because the exercise prices of the options
were greater than the average market price of common stock
during the year; as a result, their inclusion would have been
antidilutive.



|   |                     
|-- | --------------------
|7. | Stockholders Equity



| |                  
| | -----------------
| | Authorized Shares

The authorized capital stock of OneSource
consists of 35,000,000 shares of common stock,
$0.01 par value, and 1,000,000 shares of undesignated
preferred stock, $0.01 par value.



| |              
| | -------------
| | Voting Rights

All holders of common stock are entitled to one
vote per share on all matters to be voted upon by
OneSources shareholders.

F-14



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##### Table of Contents



ONESOURCE INFORMATION
SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                        
| | -----------------------
| | Shareholder Rights Plan

In October 2003, the board of directors of
OneSource adopted a shareholder rights plan (the Rights
Plan) under which all holders of record of OneSource
common stock as of October 6, 2003 were issued a right to
purchase a fraction of a share of a new series of preferred
stock. The Rights Plan is designed to enhance the ability of
OneSources board of directors to provide for fair and
equal treatment for all shareholders.

Each right entitles the holder to purchase from
OneSource one-thousandth of a share of a new series of
participating preferred stock at an initial purchase price of
$32.50. The rights will become exercisable and will detach from
the common stock a specified period of time after any person has
become the beneficial owner of 15% or more of OneSource common
stock or commenced a tender or exchange offer which, if
consummated, would result in any person becoming the beneficial
owner of 15% or more of the common stock.

If any person becomes the beneficial owner of 15%
or more of OneSource common stock, each right will entitle the
holder, other than the acquiring person, to purchase for a
number of shares of capital stock of OneSource having a value of
twice the purchase price.

If, following an acquisition of 15% or more of
OneSource common stock, OneSource is involved in certain mergers
or other business combinations or sells or transfers more than
50% of its assets or earning power, each right will entitle the
holder to purchase for the purchase price common stock of the
other party to such transaction having a value of twice the
purchase price.

At any time after a person has acquired 15% or
more (but before any person has acquired more than 50%) of
OneSource common stock, OneSource may exchange all or part of
the rights for shares of common stock at an exchange ratio of
one share of common stock per right.

The Rights Plan grandfathers ValueAct
Capital, L.P. and its affiliates (ValueAct Capital)
as long as they do not acquire beneficial ownership of more than
35% of OneSource common stock. On February 17, 2004, the
Rights Plan was amended to exempt the proposed transaction with
ValueAct Capital.

OneSource may redeem the rights at a price of
$0.001 per right at any time prior to the time that any
person becomes the beneficial owner of 15% or more of its common
stock. The rights will expire on October 6, 2013, unless
earlier exchanged.



| |               
| | --------------
| | Treasury Stock

In April 2001, OneSources board of
directors announced a stock buyback program to repurchase up to
1,000,000 shares of OneSource common stock over the
following twelve months. In January 2002, OneSource completed
the repurchase of its common stock authorized under this program
at an average price of $8.48 per share.

In January 2002, OneSources board of
directors announced a second stock buyback program to repurchase
up to an additional $5.0 million of its common stock over
the following twelve months. In November 2002, OneSource
completed its second stock buyback program, having repurchased
749,931 shares of its common stock at an average price of
$6.67 per share.

In October 2002, OneSources board of
directors announced a third stock buyback program to repurchase
up to an additional $5.0 million of its common stock over
the following twelve months. In August 2003, OneSource completed
its third stock buyback program, having repurchased
736,837 shares of its common stock at an average price of
$6.79 per share.

In July 2003, OneSources board of directors
announced a fourth stock buyback program to repurchase up to an
additional $7.0 million of its common stock over the
following twelve months. As of December 31,

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##### Table of Contents



ONESOURCE INFORMATION
SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

2003, OneSource had repurchased
234,882 shares of its common stock under this fourth stock
buyback program at an average price of $7.83 per share for
a total cost of $1.8 million.

In August 2002, OneSource began to re-issue its
treasury stock, using the average cost method, for stock option
exercises associated with OneSources various stock option
plans and for common stock sold under the 1999 Employee Stock
Purchase Plan. As of December 31, 2003, OneSouce had
re-issued 1,069,629 shares of its treasury stock having an
average cost of $7.51 per share.

Gains resulting from the re-issuance of treasury
stock at per share prices that are above the average cost are
recorded as an increase to additional paid-in capital. Losses
resulting from the re-issuance of treasury stock at per share
prices that are below the average cost are first recorded as a
reduction of additional paid-in capital for previously recorded
gains, then as an increase to accumulated deficit. As a result
of the re-issuance of treasury stock, OneSource recorded an
increase of $3.5 million and $0.9 million to
accumulated deficit during the years ended December 31,
2003 and 2002, respectively.



|   |            
|-- | -----------
|8. | Stock Plans

The 1993 Stock Purchase and Option Plan (the
1993 Plan) provides for the grant of incentive stock
options and non-qualified stock options for the purchase of up
to an aggregate of 4,273,500 shares of OneSources
common stock by employees, directors, consultants, and advisors
of OneSource. The board of directors determines the term of each
option, option price, number of shares for which each option is
granted, whether restrictions will be imposed on the shares
subject to options, and the vesting schedule of each option. The
exercise price for incentive stock options granted may not be
less than the fair value per share of the underlying common
stock on the date granted as determined by the board of
directors (not less than 110% of the fair value for options
granted to holders of more than 10% of the voting stock of
OneSource). Additionally, the term of the options cannot exceed
ten years (five years for options granted to holders of more
than 10% of the voting stock of OneSource). The options
generally vest over a four-year period. No shares of common
stock remain available for grant under the 1993 Plan.

In February 1999, the board of directors of
OneSource approved the 1999 Stock Option and Incentive Plan (the
1999 Plan) to be effective upon OneSources
initial public offering. The 1999 Plan provides for the grant of
stock-based awards to employees, officers and directors of, and
consultants or advisors to, OneSource. The 1999 Plan is
administered by the board of directors of OneSource and the
compensation committee. Subject to the provisions of the 1999
Plan, each of the board of directors and the compensation
committee has the authority to select the persons to whom awards
are granted and to determine the terms of each award, including
the number of shares of common stock subject to the award. All
stock options granted pursuant to the 1999 Plan are granted at
fair market value and generally vest over a four year period at
a rate of 25% per year starting on the first anniversary of
the vesting start date. A total of 3,300,000 shares of
common stock are authorized for issuance upon the exercise of
options or other awards granted under the 1999 Plan. As of
December 31, 2003, there were 854,006 shares of common
stock available for grant under the 1999 Plan.

In February 1999, the board of directors of
OneSource approved the 1999 Employee Stock Purchase Plan (the
Purchase Plan), to be effective upon
OneSources initial public offering. The Purchase Plan is
administered by the board of directors of OneSource or a
committee which the Board may designate. The Purchase Plan is
intended to provide an incentive to, and to encourage stock
ownership by, all eligible employees of OneSource and its
participating subsidiaries so that these employees may share in
the growth of OneSource by acquiring or increasing their
proprietary interest in OneSource. Under the Purchase Plan,
payroll deductions are used to purchase OneSources common
stock for eligible participating employees. An employee electing
to participate in the Purchase Plan must authorize an amount (a
whole percentage not less than 1% nor more than 10% of the
employees cash compensation, including base pay or salary
and any overtime, bonuses or commissions) to be deducted by
OneSource from the employees pay and applied toward

F-16



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##### Table of Contents



ONESOURCE INFORMATION
SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

the purchase of common stock under the Purchase
Plan. The Purchase Plan provides for the issuance of a maximum
of 300,000 shares of common stock. As of December 31,
2003, there were 129,016 shares of common stock available
for grant under the Purchase Plan.

In March 2001, the board of directors of
OneSource approved the 2001 Non-employee Director Stock Option
Plan (the Director Plan). The Director Plan was
ratified by the stockholders in May 2001. The purpose of the
Director Plan is to promote the interests of OneSource by
providing an inducement to obtain and retain the services of
qualified persons who are not employees or officers of OneSource
(Non-Employee Directors) to serve as members of its
board of directors. The Director Plan is administered by the
compensation committee of the board of directors of OneSource.
Options may be granted to Non-Employee Directors and will
generally vest annually at the rate of 25% per year from
the date of grant and become immediately exercisable in full
upon a change in control of OneSource. The exercise price per
share for all options granted under the Director Plan will be
equal to the fair market value per share of the common stock on
the date of grant. The Director Plan provides for the issuance
of a maximum of 300,000 shares of common stock. As of
December 31, 2003, there were 97,500 shares of common
stock available for grant under the Director Plan.



| |                
| | ---------------
| | Reserved Shares

At December 31, 2003, OneSource had reserved
3,608,999 shares of common stock for issuance under the
1993 Plan, the 1999 Plan, the Purchase Plan and the Director
Plan.

Transactions under the 1993 Plan, the 1999 Plan
and the Director Plan during the years ended December 31,
2001, 2002 and 2003 are summarized as follows:

|                                |           |           |           |                |   |   |      |      | 
|------------------------------- | --------- | --------- | --------- | -------------- | - | - | ---- | ---- | 
|                                |           |           |           | Weighted-     
|                                |           | Number of |           | average       
|                                |           | shares    |           | exercise price
|                                |           |           |           |               
|Outstanding  December 31, 2000 |           |           | 2,884,473 |                |   | $ | 4.53 |     
|                                | Granted   |           |           | 1,143,844      |   |   |      | 7.91 | 
|                                | Exercised |           |           | (812,030       | ) |   |      | 1.98 | 
|                                | Forfeited |           |           | (227,417       | ) |   |      | 7.60 | 
|                                |           |           |           |                |   |   |      |     
|Outstanding  December 31, 2001 |           |           | 2,988,870 |                |   |   | 6.25 |     
|                                | Granted   |           |           | 1,123,900      |   |   |      | 6.78 | 
|                                | Exercised |           |           | (388,526       | ) |   |      | 1.99 | 
|                                | Forfeited |           |           | (409,551       | ) |   |      | 8.14 | 
|                                |           |           |           |                |   |   |      |     
|Outstanding  December 31, 2002 |           |           | 3,314,693 |                |   |   | 6.69 |     
|                                | Granted   |           |           | 409,350        |   |   |      | 7.57 | 
|                                | Exercised |           |           | (859,725       | ) |   |      | 3.52 | 
|                                | Forfeited |           |           | (335,841       | ) |   |      | 7.77 | 
|                                |           |           |           |                |   |   |      |     
|Outstanding  December 31, 2003 |           |           | 2,528,477 |                |   |   | 7.82 |     
|                                |           |           |           |                |   |   |      |     

F-17



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##### Table of Contents



ONESOURCE INFORMATION
SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following table summarizes information about
stock options outstanding and exercisable at December 31,
2003:

|                        |  |             |           |             |  |               |       |           |  |           |     |  |  |  |           |  |  |   |       | 
|----------------------- |  | ----------- | --------- | ----------- |  | ------------- | ----- | --------- |  | --------- | --- |  |  |  | --------- |  |  | - | ----- | 
|                        |  |             |           |            
|                        |  | Outstanding |           | Exercisable
|                        |  |             |           |            
|                        |  |             |           | Weighted-   |  |              
|                        |  |             |           | Weighted-   |  | average       |       |           |  | Weighted-
|                        |  |             |           | average     |  | remaining     |       |           |  | average  
|                        |  | Number of   |           | exercise    |  | contractual   |       | Number of |  | exercise 
|Range of exercise price |  | shares      |           | price       |  | life in years |       | shares    |  | price    
|                        |  |             |           |             |  |               |       |           |  |          
|$0.12                   |  |             | 612       |             |  | $             | 0.12  |           |  |           | 1.9 |  |  |  | 612       |  |  | $ | 0.12  | 
|$1.36                   |  |             | 17,361    |             |  |               | 1.36  |           |  |           | 3.6 |  |  |  | 17,361    |  |  |   | 1.36  | 
|$2.18                   |  |             | 9,160     |             |  |               | 2.18  |           |  |           | 4.3 |  |  |  | 9,160     |  |  |   | 2.18  | 
|$5.15 to $7.13          |  |             | 989,867   |             |  |               | 6.75  |           |  |           | 8.4 |  |  |  | 287,361   |  |  |   | 6.81  | 
|$7.90 to $10.50         |  |             | 1,491,138 |             |  |               | 8.58  |           |  |           | 7.2 |  |  |  | 792,677   |  |  |   | 8.84  | 
|$12.00 to $12.13        |  |             | 20,339    |             |  |               | 12.04 |           |  |           | 5.6 |  |  |  | 20,339    |  |  |   | 12.04 | 
|                        |  |             |           |             |  |               |       |           |  |           |     |  |  |  |           |  |  |   |       | 
|                        |  |             | 2,528,477 |             |  |               | 7.82  |           |  |           | 7.6 |  |  |  | 1,127,510 |  |  |   | 8.21  | 
|                        |  |             |           |             |  |               |       |           |  |           |     |  |  |  |           |  |  |   |       | 

As of December 31, 2002 and 2001, 1,430,310
and 1,332,479 options were exercisable, respectively, under the
1993 Plan, the 1999 Plan, and the Director Plan.



| |                     
| | --------------------
| | Compensation Expense

During 1999, options to purchase
40,700 shares of common stock were granted with an exercise
price of $2.19 per share and options to purchase
30,525 shares of common stock were granted with an exercise
price of $5.90 per share; these exercise prices were below
the estimated fair market value of the common stock at the date
of grant. Unearned compensation of $438,000, less $92,000
subsequently forfeited by a terminated employee, was recorded in
accordance with APB Opinion No. 25 and was amortized over
the related vesting period of four years. Related compensation
expense of $77,000 and $97,000 was recorded during the years
ended December 31, 2002 and 2001, respectively.

During 2003, the vesting period of options to
purchase 32,500 shares of common stock was modified in
connection with an employee termination. As a result of this
modification, OneSource recorded stock-based compensation
expense of $51,000 during the year in accordance with the
Financial Accounting Standards Board Interpretation No. 44,
Accounting for Certain Transactions Involving Stock
Compensation.

Options issued during 2003, 2002 and 2001 were
granted with exercise prices equal to the fair market value of
the common stock at the grant date.



|   |              
|-- | -------------
|9. | Restructuring

In July and November 2001, OneSource initiated
cost reduction programs that included an 11% reduction in its
overall workforce and the consolidation of certain functions.
OneSource recorded restructuring charges of $0.7 million in
2001 associated with the workforce reduction and consolidation.
All amounts were paid during 2002.

F-18



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##### Table of Contents



ONESOURCE INFORMATION
SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |             
|--- | ------------
|10. | Income Taxes

Components of the income before income taxes and
of the current and deferred provision for income taxes are as
follows:

|                                     |          |                         |       |       |   |      |       |       |  |   |       |       | 
|------------------------------------ | -------- | ----------------------- | ----- | ----- | - | ---- | ----- | ----- |  | - | ----- | ----- | 
|                                     |          |                        
|                                     |          | Year Ended December 31,
|                                     |          |                        
|                                     |          | 2003                    |       | 2002  |   | 2001
|                                     |          |                         |       |       |   |     
|                                     |          |                        
|                                     |          | (In thousands)         
|Income before income taxes:          |          |                         |       |       |   |      |       |       |  |   |       |      
|                                     | Domestic |                         | $     | 1,775 |   |      | $     | 4,544 |  |   | $     | 4,682 | 
|                                     | Foreign  |                         |       | 2,300 |   |      |       | 2,489 |  |   |       | 1,856 | 
|                                     |          |                         |       |       |   |      |       |       |  |   |       |      
|                                     |          | $                       | 4,075 |       |   | $    | 7,033 |       |  | $ | 6,538 |      
|                                     |          |                         |       |       |   |      |       |       |  |   |       |      
|Current provision for income taxes:  |          |                         |       |       |   |      |       |       |  |   |       |      
|                                     | Federal  |                         | $     | 450   |   |      | $     | 846   |  |   | $     | 401   | 
|                                     | State    |                         |       | 147   |   |      |       | 365   |  |   |       | 427   | 
|                                     | Foreign  |                         |       | 962   |   |      |       | 774   |  |   |       | 130   | 
|                                     |          |                         |       |       |   |      |       |       |  |   |       |      
|                                     |          |                         | 1,559 |       |   |      | 1,985 |       |  |   | 958   |      
|                                     |          |                         |       |       |   |      |       |       |  |   |       |      
|Deferred provision for income taxes: |          |                         |       |       |   |      |       |       |  |   |       |      
|                                     | Federal  |                         |       | 200   |   |      |       | 512   |  |   |       | 563   | 
|                                     | State    |                         |       | 41    |   |      |       | 105   |  |   |       | 116   | 
|                                     | Foreign  |                         |       | (272  | ) |      |       |       |  |   |       | 245   | 
|                                     |          |                         |       |       |   |      |       |       |  |   |       |      
|                                     |          |                         | (31   | )     |   |      | 617   |       |  |   | 924   |      
|                                     |          |                         |       |       |   |      |       |       |  |   |       |      
|Total provision for income taxes     |          | $                       | 1,528 |       |   | $    | 2,602 |       |  | $ | 1,882 |      
|                                     |          |                         |       |       |   |      |       |       |  |   |       |      

Provision has not been made for the United States
or additional foreign taxes on undistributed earnings of foreign
subsidiaries as those earnings have been permanently reinvested.

Income taxes computed using the federal statutory
income tax rate differ from OneSources effective tax rate
primarily due to the following:

|                                                        |  |                         |       |      |  |      |       |   |  |   |        |  
|------------------------------------------------------- |  | ----------------------- | ----- | ---- |  | ---- | ----- | - |  | - | ------ | -
|                                                        |  |                        
|                                                        |  | Year Ended December 31,
|                                                        |  |                        
|                                                        |  | 2003                    |       | 2002 |  | 2001
|                                                        |  |                         |       |      |  |     
|                                                        |  |                        
|                                                        |  | (In thousands)         
|Income tax expense at US federal statutory tax
    rate |  | $                       | 1,385 |      |  | $    | 2,391 |   |  | $ | 2,223  |  
|State income taxes, net of federal tax effect           |  |                         | 138   |      |  |      | 346   |   |  |   | 398    |  
|Permanent items                                         |  |                         | 47    |      |  |      | 55    |   |  |   | 362    |  
|Other                                                   |  |                         | (42   | )    |  |      | (190  | ) |  |   | 127    |  
|Change in deferred tax asset valuation allowance        |  |                         |      |      |  |      |      |   |  |   | (1,228 | )
|                                                        |  |                         |       |      |  |      |       |   |  |   |        |  
|Provision for income taxes                              |  | $                       | 1,528 |      |  | $    | 2,602 |   |  | $ | 1,882  |  
|                                                        |  |                         |       |      |  |      |       |   |  |   |        |  

F-19



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ONESOURCE INFORMATION
SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Components of OneSources deferred tax
assets and liabilities are as follows:

|                                      |                                        |                                |     |       |       |   |      |        |       | 
|------------------------------------- | -------------------------------------- | ------------------------------ | --- | ----- | ----- | - | ---- | ------ | ----- | 
|                                      |                                        |                               
|                                      |                                        | December 31,                  
|                                      |                                        |                               
|                                      |                                        | 2003                           |     | 2002 
|                                      |                                        |                                |     |      
|                                      |                                        |                               
|                                      |                                        | (In thousands)                
|Deferred tax assets:                  |                                        |                                |     |       |       |   |      |       
|                                      | Net operating loss carryforwards       |                                | $   | 2,094 |       |   | $    | 2,727  |      
|                                      | Depreciation                           |                                |     | 540   |       |   |      | 54     |      
|                                      | Accrued expenses                       |                                |     | 370   |       |   |      | 347    |      
|                                      | Other                                  |                                |     | 316   |       |   |      | 317    |      
|                                      |                                        |                                |     |       |       |   |      |       
|                                      |                                        | Gross deferred tax assets      |     |       | 3,320 |   |      |        | 3,445 | 
|                                      | Less: valuation allowance              |                                |     |      |       |   |      | (1,635 | )    
|                                      |                                        |                                |     |       |       |   |      |       
|                                      |                                        | Total deferred tax assets      |     |       | 3,320 |   |      |        | 1,810 | 
|                                      |                                        |                                |     |       |       |   |      |       
|Deferred tax liabilities:             |                                        |                                |     |       |       |   |      |       
|                                      | Prepaid expenses                       |                                |     | 558   |       |   |      | 674    |      
|                                      | Capitalized software development costs |                                |     | 1,609 |       |   |      | 882    |      
|                                      | Tax operating leases                   |                                |     |      |       |   |      |       |      
|                                      | Other intangible assets                |                                |     | 365   |       |   |      | 499    |      
|                                      |                                        |                                |     |       |       |   |      |       
|                                      |                                        | Total deferred tax liabilities |     |       | 2,532 |   |      |        | 2,055 | 
|                                      |                                        |                                |     |       |       |   |      |       
|Net deferred tax assets (liabilities) |                                        | $                              | 788 |       |       | $ | (245 | )     
|                                      |                                        |                                |     |       |       |   |      |       

During the fourth quarter of 2003, OneSource
assessed the realizability of its deferred tax assets by
evaluating all available evidence, both positive and negative,
bearing upon the realizability of its deferred tax assets. Based
on these facts and circumstances which include, but are not
limited to OneSources recent history of profitability,
current economic conditions and forecasted profitability in the
future, management concluded that it was more likely than not
that the deferred tax asset would be realized and reduced the
valuation allowance to zero. This reduction of the valuation
allowance which was related to net operating losses
carryforwards from stock option exercises resulted in an
increase of $0.8 million to additional paid-in capital.

During the year ended December 31, 2002,
OneSource determined that it was more likely than not that its
deferred tax assets would not be realized and so therefore
provided a valuation allowance of $1.6 million, which was
equal to the full amount of its deferred tax assets.

As of December 31, 2003, OneSource had
combined federal and state net operating loss carryforwards of
approximately $5.1 million. The federal net operating loss
carryforwards begin to expire in 2020 and the state net
operating loss carryforwards begin to expire in 2005. Under the
provisions of the Internal Revenue Code, if certain substantial
changes in OneSources ownership should occur, the amount
of net operating loss carryforwards which could be utilized
annually to offset future taxable income and income tax
liability may be limited. The amount of any annual limitation is
determined based upon OneSources value prior to an
ownership change.



|    |                       
|--- | ----------------------
|11. | Employee Benefit Plans

On the first day of the month following the date
of hire, OneSource employees in the United States are eligible
to participate in a tax deferred savings plan (the Savings
Plan) under Section 401(k) of the Internal Revenue
Code. OneSource matches 50% (25% for the years 2000 and prior)
of the first 6% of compensation contributed by the employee, and
the employee becomes fully vested in OneSources matching
contribution

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##### Table of Contents



ONESOURCE INFORMATION
SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

after three years of service. OneSources
contributions to the Savings Plan totaled $0.3 million,
$0.4 million and $0.3 million for the years ended
December 31, 2003, 2002 and 2001, respectively.

OneSource has a defined contribution savings plan
for its employees in the United Kingdom, under which eligible
employees may contribute from 2% to 5% of their compensation.
Depending upon the employees contribution, OneSource
provides a matching contribution from 6% to 11% of their
compensation. For each of the years ended December 31,
2003, 2002 and 2001, OneSource contributed $0.2 million.



|    |                           
|--- | --------------------------
|12. | Related Party Transactions

During the year ended December 31, 2003,
OneSource had no related party transactions. During the year
ended December 31, 2002 and 2001, OneSource had related
party transactions for subscriptions to OneSource products.
Related parties consisted of customers who held a greater than
10% ownership interest in OneSource. At December 31, 2002
and 2001, OneSource had trade accounts receivable of
$0.7 million and $0.5 million, respectively, due from
one related party. OneSource recognized revenues of
$0.7 million and $0.8 million in the years ended
December 31, 2002 and 2001, respectively, from two related
parties.



|    |                                              
|--- | ---------------------------------------------
|13. | Commitments, Contingencies and
    Guarantees



| |       
| | ------
| | Leases

OneSource leases facilities and certain equipment
under various noncancellable operating lease agreements. Total
rent expense under such leases was $1.5 million for each of
the years ended December 31, 2003, 2002 and 2001. Future
minimum lease commitments under all noncancellable operating
leases at December 31, 2003 are as follows:

|                             |  |                |       | 
|---------------------------- |  | -------------- | ----- | 
|                             |  | Operating     
|Year ending December 31,     |  | Leases        
|                             |  |               
|                             |  | (In thousands)
|2004                         |  | $              | 772   | 
|2005                         |  |                | 262   | 
|2006                         |  |                | 171   | 
|2007                         |  |                | 119   | 
|                             |  |                |       | 
|Total minimum lease payments |  | $              | 1,324 | 
|                             |  |                |       | 



| |          
| | ---------
| | Royalties

OneSource enters into royalty contracts with
content providers, which are generally for a term of at least
one year and renew for the same period if not cancelled or
terminated with advance notice. Under these arrangements,
royalties are generally paid on a quarterly basis to content
providers. Royalty expense for the years ended December 31,
2003, 2002 and 2001 was $12.6 million, $11.9 million
and $11.8 million, respectively. Future minimum royalty
payment obligations at December 31, 2003 are as follows:

|                               |  |                |       | 
|------------------------------ |  | -------------- | ----- | 
|                               |  | Royalty       
|Year ending December 31,       |  | Minimums      
|                               |  |               
|                               |  | (In thousands)
|2004                           |  | $              | 7,294 | 
|2005                           |  |                | 1,089 | 
|                               |  |                |       | 
|Total minimum royalty payments |  | $              | 8,383 | 
|                               |  |                |       | 

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ONESOURCE INFORMATION
SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                         
| | ------------------------
| | Restricted Time Deposits

In connection with two facility leases, OneSource
is required to maintain, on behalf of the landlord, irrevocable
letters of credit with a bank in the total amount of $603,000
over the term of the leases. Beginning in June 2003, these
letters of credit were secured by OneSources working
capital line of credit. Prior to this date, these letters of
credit were guaranteed by restricted certificates of deposit in
equal amounts as security for the letters of credit, over the
term of the leases.



| |                                        
| | ---------------------------------------
| | Guarantor Agreements and
    Provisions

The following is a summary of agreements and
provisions that OneSource has determined are within the scope of
Financial Accounting Standards Board Interpretation No. 45
(FIN 45), Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others:

OneSources agreements with customers, third
party information and technology providers, and vendors include
standard indemnification provisions. Under these indemnification
provisions, OneSource generally agrees to defend, indemnify, and
hold harmless the indemnified party with respect to any third
party claim that the OneSource product, excluding any data or
technology provided by the indemnified party, infringes upon a
United States or United Kingdom patent, copyright, trade secret,
or other proprietary right. The terms of these indemnification
provisions are generally perpetual after execution of the
agreement. The maximum potential amount of future payments
OneSource may be required to make under these indemnification
provisions is unlimited. OneSource has never incurred costs to
defend lawsuits or settle actions related to these
indemnification provisions. As a result, OneSource believes that
the estimated fair market value of these indemnification
provisions is minimal. Accordingly, OneSource has not recorded
any liabilities recorded in its financial statements related to
these indemnification provisions as of December 31, 2003.

OneSources agreements with customers also
include standard warranty provisions. OneSource warrants that it
has the right to license the OneSource product line to
customers, but does not warrant the accuracy, adequacy,
completeness, or timeliness of the OneSource products or content
from the OneSource products. However, OneSource has never
incurred expense under its product warranties. As a result,
OneSource believes that the estimated fair market value of this
warranty provision is minimal. Accordingly, OneSource has not
recorded any liabilities in its financial statements related to
these warranty provisions as of December 31, 2003.

OneSource has provisions in its articles of
incorporation whereby it indemnifies its officers and directors
for certain events or occurrences while the officer or director
is, or was serving, at OneSources request in such
capacity. The maximum potential amount of future payments
OneSource could be required to make under these indemnification
provisions is unlimited; however, OneSource has a Directors and
Officers insurance policy that limits its exposure and should
enable it to recover a portion of any future amounts paid. As a
result of its insurance policy coverage, OneSource estimates
that the exposure resulting from these indemnification
provisions is minimal. Accordingly, OneSource has not recorded
any liabilities in its financial statements for these provisions
as of December 31, 2003.

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ONESOURCE INFORMATION
SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                       
|--- | ----------------------
|14. | Geographic Information

Revenues were distributed geographically as
follows:

|               |  |                         |        |      |  |      |        |  |  |   |        | 
|-------------- |  | ----------------------- | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|               |  |                        
|               |  | Year Ended December 31,
|               |  |                        
|               |  | 2003                    |        | 2002 |  | 2001
|               |  |                         |        |      |  |     
|               |  |                        
|               |  | (In thousands)         
|United States  |  | $                       | 40,961 |      |  | $    | 42,034 |  |  | $ | 44,086 | 
|United Kingdom |  |                         | 16,323 |      |  |      | 15,716 |  |  |   | 14,931 | 
|               |  |                         |        |      |  |      |        |  |  |   |        | 
|               |  | $                       | 57,284 |      |  | $    | 57,750 |  |  | $ | 59,017 | 
|               |  |                         |        |      |  |      |        |  |  |   |        | 

Substantially all of OneSources
identifiable long-lived assets are located in the United States.



|    |                  
|--- | -----------------
|15. | Subsequent Events

On October 3, 2003, OneSource announced that
it had received an unsolicited letter from ValueAct Capital
Partners, L.P. and its affiliates (ValueAct Capital)
expressing an interest in acquiring OneSources business.
OneSources board of directors subsequently formed a
special committee of outside directors to evaluate
OneSources strategic options to maximize shareholder
value. The special committee engaged Morgan Stanley &
Co. and Portico Capital Securities LLC to assist it in this
review. On January 13, 2004, ValueAct Capital amended its
Schedule 13D indicating that it was not in a position to
refresh its level of interest until OneSource announced its
fourth quarter and year-end 2003 financial results.

On February 5, 2004, OneSource announced
that the special committee concluded its active evaluation of
strategic options. In connection with the review of strategic
options, both the board of directors and Dan Schimmel, president
and chief executive officer and director of OneSource,
determined that new executive leadership would be in the best
interest of OneSource and its shareholders. As a result,
OneSource accepted the resignation of Dan Schimmel effective as
of February 5, 2004. OneSources current chairman
Martin Kahn was appointed executive chairman and chief executive
officer on an interim basis.

On February 9, 2004, OneSource announced
that it received a letter from ValueAct Capital indicating that
it was prepared to offer to acquire all of the outstanding
shares of OneSource not already owned by ValueAct Capital at a
cash price of $8.10 per share on the terms and conditions
contained in a merger agreement enclosed with the letter.

On February 18, 2004, OneSource announced
that it had entered into a merger agreement with affiliates of
ValueAct Capital. Under the agreement, each share of common
stock of OneSource outstanding at the time of the merger (other
than shares held by ValueAct Capital), will be converted into
the right to receive $8.40 per share in cash. ValueAct
Capital held an approximate 32% ownership interest in OneSource,
according to its filing on February 9, 2004 with the
Securities and Exchange Commission. The transaction is expected
to close in the second quarter of 2004. On February 17,
2004, OneSources Rights Agreement with American Stock
Transfer & Trust Company, dated as of October 7,
2003, was amended to exempt the proposed transaction. As
required under the merger agreement, the board of directors of
OneSource terminated OneSources 1999 Employee Stock
Purchase Plan effective as of February 29, 2004.

OneSource and its directors were named as
defendants in two purported class action lawsuits filed in the
Delaware Court of Chancery in February 2004, entitled
Hoffacker v. OneSource Information Services, Inc.,
et al., Filing ID No. 3140593, and Pennsylvania
Avenue Funds v. Kamin, et al., Filing ID
No. 3141683, respectively. The complaints allege, among
other things, that the defendants breached their fiduciary
duties in entering into the proposed transaction with affiliates
of ValueAct Capital. The complaints seek unspecified damages and
injunctive relief. OneSource and its directors believe the
claims to be without merit and intend to defend against them
vigorously.

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##### Table of Contents



ONESOURCE INFORMATION
SERVICES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

During the first quarter of 2004, OneSource
incurred approximately $0.5 million to $0.7 million in
expenses in connection with the execution of the merger
agreement with affiliates of ValueAct Capital. These expenses
include legal fees, accounting fees, and compensation for
members of the special committee. In addition, severance costs
for OneSources previous chief executive officer, which
were recorded in the first quarter of 2004, include cash
payments of approximately $0.5 million and non-cash
compensation expense of $56,000 related to the modification of
stock options.

At December 31, 2003, OneSource did not
comply with certain negative covenants of the Loan and Security
Agreement, as described in Note 5 to these consolidated
financial statements, and the bank has waived such noncompliance
as of March 1, 2004.

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##### Table of Contents



REPORT OF INDEPENDENT AUDITORS ON

FINANCIAL STATEMENT SCHEDULE


To the Board of Directors of

OneSource Information Services, Inc.:


Our audits of the consolidated financial
statements referred to in our report dated January 28,
2004, except for Note 15, as to which the date is
March 1, 2004, listed in the index appearing under
Item 15(a)(1) on page 40 also included an audit of the
financial statement schedule listed in Item 15(a)(2) on
page 40 of this Annual Report on Form 10-K. In our
opinion, the financial statement schedule presents fairly, in
all material respects, the information set forth therein when
read in conjunction with the related consolidated financial
statements.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

January 28, 2004, except for Note 15, as to
which the date is March 1, 2004.


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ONESOURCE INFORMATION
SERVICES, INC.

SCHEDULE II. VALUATION AND QUALIFYING
ACCOUNTS

(In thousands)


|                             |                                                           |                                        |  |            |       |            |  |            |      |   |  |   |       |      |  |   |       | 
|---------------------------- | --------------------------------------------------------- | -------------------------------------- |  | ---------- | ----- | ---------- |  | ---------- | ---- | - |  | - | ----- | ---- |  | - | ----- | 
|                             |                                                           | Balance at                             |  |            |       |            |  | Balance at
|                             |                                                           | Beginning of                           |  | Charged to |       |            |  | End of    
|Description                  |                                                           | Period                                 |  | Operations |       | Deductions |  | Period    
|                             |                                                           |                                        |  |            |       |            |  |           
|Year ended December 31, 2001 |                                                           |                                        |  |            |       |            |  |            |      |   |  |   |       |      |  |  
|                             | Reserves and allowances deducted from asset
    accounts: |                                        |  |            |       |            |  |            |      |   |  |   |       |      |  |   |      
|                             |                                                           | Allowance for doubtful accounts        |  | $          | 672   |            |  | $          | 238  |   |  | $ | 140   | (1)  |  | $ | 770   | 
|                             |                                                           | Deferred tax asset valuation allowance |  | $          | 5,023 |            |  | $          |     |   |  | $ | 1,493 |      |  | $ | 3,530 | 
|Year ended December 31, 2002 |                                                           |                                        |  |            |       |            |  |            |      |   |  |   |       |      |  |  
|                             | Reserves and allowances deducted from asset
    accounts: |                                        |  |            |       |            |  |            |      |   |  |   |       |      |  |   |      
|                             |                                                           | Allowance for doubtful accounts        |  | $          | 770   |            |  | $          | (379 | ) |  | $ | 92    | (1)  |  | $ | 299   | 
|                             |                                                           | Deferred tax asset valuation allowance |  | $          | 3,530 |            |  | $          |     |   |  | $ | 1,895 |      |  | $ | 1,635 | 
|Year ended December 31, 2003 |                                                           |                                        |  |            |       |            |  |            |      |   |  |   |       |      |  |  
|                             | Reserves and allowances deducted from asset
    accounts: |                                        |  |            |       |            |  |            |      |   |  |   |       |      |  |   |      
|                             |                                                           | Allowance for doubtful accounts        |  | $          | 299   |            |  | $          | (59  | ) |  | $ | (49   | )(1) |  | $ | 289   | 
|                             |                                                           | Deferred tax asset valuation allowance |  | $          | 1,635 |            |  | $          |     |   |  | $ | 1,635 |      |  | $ |      | 



---



|    |                                                  
|--- | -------------------------------------------------
|(1) | Doubtful accounts written off, net of recoveries.

S-2