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Six analysts and top management from twelve sector firms examine the education sector in this special 85-page Education Industry issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info465.htm.

TWST: Jeffrey, what are the postsecondary enrollment trends that you’re watching most closely, and which programs are most in demand?

Mr. Silber: In terms of the first question, Jerry talked about total enrollment growth trends, and I think he did a good job there. One of the aspects of those numbers that we look at is retention. Unfortunately, a lot of the companies don’t specify retention rates separately. But that’s actually built into total enrollment. If you see new enrollment slowing down, but total enrollment is still increasing, obviously you’re keeping your students a little longer, so your retention rates should be increasing. The longer you hold onto a student, the more you can amortize the costs of acquiring that student, and therefore the more money you make from each student. I would argue that retention should increase in a slower economy. One reason many of these schools were losing students in the late 1990s is that students were leaving these programs before they graduated due to the lure of the hot job market. And obviously, we’re not in a hot job market right now, so these students may actually stay a little longer. And that’s one of the reasons we actually might see these companies post stronger than expected earnings. With this economic slowdown — the major risk of investing in postsecondary stocks is related to financial aid — one of the aspects that you have to look at is the student loan default rate. You would think that in this environment probably more students would be defaulting on their student loans. However, the measurements by the Department of Education are released on a two-year lag, so you’re not going to see this impact on the numbers for another couple of years. But it is still something that investors should be aware of. You also asked about which programs are in greatest demand. I might have a different perspective on this since I also follow staffing companies. Right now the companies that are hiring the most are in the healthcare market, where we haven’t seen too much of a slowdown since demand for healthcare services typically does not correlate with changes in economic cycles. It’s the same thing with some of the scientific or pharmaceutical areas. Therefore, postsecondary programs catering to those spaces, such as some of the allied health programs cited by Jerry, should still be seeing robust demand. Another general area that is still going to remain hot, no matter what the economy does, are business skills such as accounting and management skills. Obviously, in a slower economy, having better business skills becomes even more important. So for the companies that focus on business degrees, I think there will be a lot of demand there as well.

TWST: Jeffrey, what are the strategies that you prefer to see, and which strategies do you believe resonate best with investors?

Mr. Silber: I would echo what Jerry said. I think he actually did a great job of articulating the different strategies. But there are a couple of areas that I would focus on beyond that. One is the working adult focus, and this is another area where Apollo (Nasdaq:APOL) is obviously the clear leader. Another area that we see on the horizon is the international postsecondary market. Right now the only public company that’s really made significant inroads there is Sylvan Learning Systems (Nasdaq:SLVN). Jerry mentioned that Sylvan is talking about potentially spinning off their online higher ed division. There actually may be a transaction before that, and that would be the potential spinout of their International Universities business. It’s an area that they started in early 1999 via acquisition, and right now it represents the largest piece of the company’s business. The dynamics of the international postsecondary market are similar to those of the US market in terms of the recognized value of a postsecondary education to a career, but you don’t necessarily have the regulatory risk from a financial aid perspective that you do in the United States. So there are a lot of attractive features to the international postsecondary market that I think investors, once they hear the Sylvan story, will begin to appreciate.

1) Education Industry - In an in-depth (11,600 words) Analyst Roundtable, Peter L. Martin, Senior Vice President at Jefferies & Company, Inc., Gerald R. Odening, Managing Director at J.P. Morgan H&Q and Jeffrey M. Silber, Senior Vice President at Gerard Klauer Mattison & Company, Inc. examine the outlook for the sector including enrollments in higher education, regulatory issues and share specific stock recommendations.

2) Educational Publishing & Service Companies - In an in-depth (4,700 words) Analyst Interview, Peter Appert, Managing Director at Deutsche Banc Alex. Brown, Inc., examines the outlook for the sector and shares specific stock recommendations.

3) Outlook for Education Stocks - In an in-depth (4,000 words) Analyst Interview, Greg W. Cappelli, Managing Director at Credit Suisse First Boston, examines the outlook for the sector and shares specific stock recommendations.

4) Knowledge Technologies - In an in-depth (4,700 words) Analyst Interview, George Sutton, Managing Director at RBC Capital Markets, examines the outlook for the sector and shares specific stock recommendations.

5) The TWST confidential Off-The-Record survey of management performance at eighteen sector firms asked market insiders about the ability of management teams to create shareholder value.

6) CEO interviews (average 2,500 words). Top management of twelve sector firms examine the outlook for their firm and the sector.