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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: Why do investors need to own the education stocks, particularly the niche businesses that have the investment appeal that you look for?

Mr. Appert: The obvious and most compelling reason to own the stocks is that the performance has been strong and is expected to remain so, based on positive fundamental trends. Year to date, the stocks are up around 10%. In contrast, the S&P 500 is down about 16%. Another reason is that education is an important industry that represents a large component of GDP. Most investors are underexposed to the sector relative to its economic importance. The final reason is the growth opportunity in this industry. Strong revenue and earnings growth from a number of industry players creates a very favorable fundamental backdrop, particularly in the context of a weak economy.

TWST: You talked about SmartForce (Nasdaq:SMTF) in some detail earlier, but would you reiterate why investors should buy it today?

Mr. Appert: The appeal of SmartForce is, number one, the growth leverage in the context of an eventual recovery in the economy, which will translate into an acceleration in corporate training budgets; two, more importantly, the fact that the share shift from instructor-led to computer-based training is continuing, even in this tough economic environment, which has been beneficial to SmartForce and the other e-learning companies; number three, the strength of SmartForce’s market position in terms of its market share and its relative size versus the competitors, which is translating into superior profit performance; and number four, finally, the potential for significant upside driven by the expectation that we’re going to see dramatic improvement in earnings per share numbers over the next couple of years because of the factors I’ve already mentioned. I believe that SmartForce could earn $1 a share in 2003. I believe that the earnings per share growth rate could be close to 50% for the next couple of years. So if I put a 30 multiple on $1 in earnings power, which I think is a reasonable target given the growth rate I mentioned, that could get this stock to $30 over the next 12 months.

TWST: One last question — what are the two or three most frequently asked questions that you get from investors?

Mr. Appert: Typically, the questions tend to be quite company-specific and in response to whatever is happening in the market at the time. Currently, there’s a lot of interest and concern about the impact of the macro-environment on the education industry, specifically, for example, what do higher levels of state and local government deficits mean for educational funding, or how does the impact of a weaker economy on corporate training budgets translate into revenue growth opportunities for the various companies in this market? That seems to be a significant investor focus at the moment. A year ago, or a year and a half ago there was a great deal of attention being paid to the issue of who the next start-ups would be, where will the next venture-based companies come up, and how will that change the competitive dynamic in the industry? Of course, we hear less on that issue currently.

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.