This past year has been a period of high productivity and intense internal reflection for our company. Externally, we have used our industry-leading processes to recover nearly $2 billion in lost profits for our clients. Internally, we have conducted a thorough strategic examination of how we operate and where we are headed as a business. On both counts, the results are positive. The nearly $2 billion in profit recovery speaks for itself. The results of our internal review have affirmed the strength of our business model, prioritized opportunities for operational improvement and identified a multifaceted growth strategy to pursue.

The Strength of the Business Model

Our value proposition for clients remains very compelling. The transactional complexities of conducting virtually any type of commerce today inevitably leads to errors in overpayments and under-deductions from vendors. We bring transactional assurance to companies and recover valuable profits that would otherwise be lost. Our audits are performance-based and applicable to nearly every company of size, in nearly every industry, in nearly every significant market economy in the world. This model creates a strong recurring revenue base and a process platform that can be highly leveraged. As we have said many times, our business is a win-win proposition for our clients and shareholders.

Measurable Operational Improvement

Over the past 24 months, we have evolved our business model to capitalize on technological innovation, more standardized audit tools, and the centralization of best practices within the Company. The goal has been to produce revenue more efficiently, as well as to better manage our business in changing industry and cyclical economic conditions.

In 2004, we began to see the benefits of these initiatives as our cost of revenue percentage improved from the first to the second half of the year by eight percent. Even more encouraging, productivity levels more than doubled during 2004 for audit functions conducted at our centralized service centers. And, new tools and processes are yielding more effective audits — in one instance improving claims by as much as 40 percent — that lead to more profitable recoveries. In short, we are making our best even better.

Multifaceted Growth Opportunities

The potential created by these improved operating processes is even more exciting when considered against the backdrop of top-line growth opportunities that can potentially increase our client base and penetration. In the U.S., we are leveraging our core competencies of low-occurrence error identification and management of large data sets to enter new vertical markets — airlines, energy and healthcare alone represent in excess of $5 billion in revenue opportunity for our industry. In less mature international markets, the potential is even greater due to low penetration of these relatively new markets and the opportunity to improve recovery rates. We have aggressive business development initiatives underway that focus on expanding the scope of our audits in each of the over 40 countries where we have a presence. To appreciate the true and full global potential for the Company, you simply have to remember that the pursuit of profitability is a universal business goal.

New Directions, New Possibilities

We pioneered the recovery audit business and have continually led its evolution for more than 30 years by being open to new ideas and thinking in new directions. Our goal remains true to our historical mandate — to optimize value for our clients and our shareholders.

We thank both for their support and the opportunity to serve. We also extend our sincere appreciation to our 2,900 associates around the world who are working harder than ever before to ensure continuing profitable recoveries for clients and for our Company.

John M. Cook
Chairman and Chief Executive Officer

Statements made in this document which look forward in time involve risks and uncertainties and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These risk factors are detailed in our Securities and Exchange Commission filings, including the Company’s 10-K, included with this document. The Company disclaims any obligation or duty to update or modify these forward-looking statements.