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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: Sylvan Learning Systems targets the K-12 market, doesn’t it?

Mr. Appert: Historically, the K-12 market has been Sylvan’s (Nasdaq:SLVN) primary business. Sylvan’s niche is tutoring services for kids, primarily in grades two through eight. That would be their power alley. Basically, Sylvan offers remediation services for kids who have fallen behind grade level in reading or math skills. Parents will pay a premium price to help their kids when they are having trouble in school, and that’s the niche market that Sylvan has done quite well in. The biggest part of Sylvan’s business today, though, which is something I think investors may not fully appreciate is the international postsecondary market. Sylvan has positioned itself to do overseas what Apollo (Nasdaq:APOL), DeVry (NYSE:DV), etc., have done successfully in the US, which is to serve the postsecondary market. Through a series of acquisitions, Sylvan has purchased five postsecondary institutions in, most recently, France, and before that, Spain, Switzerland, Chile and Mexico. They are, by a large measure, the largest player in the international postsecondary educational market, at least among the for-profit companies.

TWST: Are the programs that they offer similar to what companies such as Apollo offer in the US, mainly technology or other vocational programs?

Mr. Appert: They are clearly vocationally oriented. The focus is on the traditional 18- to 24-year-old college student. But these are institutions that are career preparatory. So these are not academic institutions that are built around a research function. These are academic institutions built around a teaching function, and their goal is to prepare students for their first job. That’s something that parents and students value substantially. The appeal of that international postsecondary market is the fact that, number one, there are so many markets to serve and so many kids to serve. Number two, the college participation rate, the percentage of high school graduates going on to college overseas tends to be substantially lower than it is in the US. In the US roughly 60% of high school grads pursue some form of postsecondary education. In Spain that number may be only 17% or 18%. In Mexico it may only be 5%. So the scale of the market opportunity is very large, and the growth rate is very large. That was evident in the 18% enrollment growth rate of new students that Sylvan reported in its just released fall quarter.

TWST: What’s the compelling reason to buy Sylvan Learning Systems today?

Mr. Appert: I think the reason it’s a compelling investment opportunity is the combination of the earnings growth leverage provided by the international postsecondary business, the continued steady growth in the core domestic tutoring business, interesting opportunities to leverage content through online distribution, and lastly, an appealing valuation. Basically, Sylvan has remade its business over the last several years by selling its computer-based testing business, selling a corporate training business, and selling part of their English language training business. They’ve used the proceeds to pay down all their debt, buy back 25% of the stock, and fund the purchase of these international universities I’ve mentioned. The net result is a company that can grow, I think, 20% plus on a consistent basis, but also a company that still has roughly $5 a share in cash and investments on its balance sheet. So if I look at the valuation net of the cash balances, the stock looks relatively inexpensive vis-à-vis the comparables.

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.