The year in review.

This past year was an exciting year for TEI and for me personally. Last August, TEI's Board of Directors adopted an overall theme for the year ("Be Effective, Stay Effective") and identified five general areas in which our effectiveness would be challenged and validated. The specific objectives we adopted relate to TEI's principal areas of activity--education, networking, and advocacy--but also included items focused on core membership services and effective management. With such an ambitious agenda, it is hardly surprising that we did not accomplish all that we set out to do. But a review of the accomplishments set forth below demonstrates that TEI continues to be a growth-oriented, high-achieving organization of dedicated volunteers and staff.

Be Current, Stay Current ... Through Quality Education Programs on Tax Developments and Tax Management Issues

For sixty years, TEI has rightly prided itself on the quality and cost effectiveness of its educational programs. Given the pace of change and the ever-expanding scope of the tax executive's role, it is more important than ever for TEI members to stay informed, and I am pleased to report that TEI stepped forward in a number of important ways.

During the past year, TEI held a full complement of conferences, seminars, courses, and telephone/web conferences. All in all, 2,957 individuals registered for our programs (the number participating is likely considerably more because only one individual need register for a telephone seminar in order for a whole department to "attend"). Our conferences continue to attract top-level keynote speakers, such as Secretary of the Treasury John Snow, Senate Finance Committee Chairman Charles Grassley, IRS Commissioner Mark Everson, IRS Chief Counsel Don Korb, and SEC Chief Accountant Donald Nicolaisen, with their remarks being broadcast by C-SPAN or other media outlets.

One aspect of our 2004 Annual Conference deserves mention. I was delighted that 20 former TEI presidents joined us in New Orleans to celebrate the 60th anniversary of our founding. From a group of 14 New York-based tax professionals in 1944 to more than 5,800 tax executives worldwide today, TEI has grown into a truly global organization. The past Institute presidents who attended last fall's conference (and all our former leaders) pursued and built upon the vision of Paul Smith and TEI's other founders; they kept the organization relevant, focused, and member-driven. That Morris Rinehart (our 1964-1965 president) attended the New Orleans meeting--and addressed the conference--was a special treat.

While the conferences are the hallmarks of TEI's educational curriculum, two other programs merit attention--our FAS 109 Seminar in November 2004 (which attracted 349 registrants) and our Senior Tax Executive Conference in May (which sold out and garnered excellent ratings). I was especially pleased that Brunswick Corporation's Chairman and CEO, George Buckley, participated in the STE program. His "CEO's View of Sarbanes-Oxley" was a highlight of the two-day conference.

TEI's committees and staff worked diligently to plan, promote, and execute these programs. If there is a downside to our educational programs, it is that attendance at some programs did not meet our expectations. We remain hopeful the decline is temporary and attributable to external forces (e.g., the uncertain economy and the continuing aftershocks of Sarbanes-Oxley), but are working to identify the causes and, where needed, improve the programs. Among other things, the Institute has expanded its policy of offering discounts to multiple registrants from the same company.

Finally, during the year the Institute completed its 2004-2005 Corporate Tax Department Survey. The survey--a 184-page printed commentary and representative tables, accompanied by a CD-ROM containing more than 12,000 tables--will enable tax executives to benchmark more effectively and efficiently. We had also committed to reviewing the efficacy of a salary survey, and while no decision has been made, significant informal work has been completed.

Be Connected, Stay Connected ... by Enhancing Member Communications and Strengthening Network of Tax Professionals

TEI's launch of a new website in August 2004 helped kickstart the new year. From real-time information on TEI's advocacy and educational activities to the reinvigorated discussion forums to the sites maintained by many of our local chapters to the communications functionality available to all members through the site, TEI's website team created an Internet presence that is both welcoming and informative. We are working to improve the site and thereby make it an indispensable stop on all tax executives' web surfing. If you have not done so already, please log on to www.tei.org and share your ideas for making the site even better.

In late 2004, TEI hired a Communications Specialist and realigned duties of other staff in order to enhance our customer service to members and other users of the site. Among other things, the Institute developed a chapter website administrators guide and held a webconference for chapter website administrators to help them create and enhance their own websites. We also devoted a session at the 2005 Leadership Seminar to the website.

Internet technology and e-mail have expanded the tax executive's network, narrowing the distance that exists among business colleagues and our fellow tax practitioners. This past year we undertook to use a somewhat dated form of technology--telephone conferencing--to enable TEI's Board of Directors to meet more frequently than our traditional three times a year (in conjunction with our conferences and our Annual Meeting of Members). Specifically, we amended the By-Laws to permit telephonic meetings of the Board, and then convened two meetings (in January and June) to "bridge the gap" between our face-to-face meetings. Based on the feedback received, these telephonic meetings will continue.

Be a Voice, Have a Voice ... Through Enhanced Advocacy

In discussing TEI's advocacy activities this past year, it is difficult to know where to begin. We have had an extraordinarily busy year. From our liaison meetings in Ottawa and Washington, to our European Chapter's involvement with the European Union and OECD, to our briefs in state tax cases, to our comments on the American Jobs Creation Act (both before and after its enactment), TEI has striven to give voice to the real-world concerns of the business community. Given our diversity, there may be occasions in which the Institute is unable to take a position, but time and time again, we have weighed in and have had a positive effect on the outcome.

Five projects deserve mention. First, TEI continues to be a leader in opposing the enactment of a provision requiring the Chief Executive Officer to sign either the corporate tax return or a declaration concerning the company's return preparation process. Even if this provision is ultimately enacted, we are confident that we have contributed to the narrowing and refinement of the proposal. (The same is true in respect of our continuing opposition to the codification of the economic substance doctrine, at both the federal and state levels.) Second, we have worked effectively with the IRS and Treasury Department in setting guidance priorities under the 2004 tax law. Third, we successfully advocated for an amendment to Circular 230, recognizing the unique character of in-house tax professionals and therefore exempting them from the more onerous provisions of the IRS regulations that govern "practice before the IRS." Had the Institute's efforts not been successful, all TEI members would be faced with expensive, time-consuming, and (I daresay) non-value-added compliance activities.

The fourth development involved a first--TEI's first-ever testimony before the Senate Foreign Relations Committee. The Institute's work in support of the Dutch and Barbados treaties--we were one of only two private sector witnesses at the hearing--contributed to the Senate's ultimate approval of the treaties.

The "state of play" on the fifth project--corporate e-filing--is more uncertain. TEI has been in the forefront on this issue, which involves significant tax administration and technology challenges. We reached out to the IRS from the very beginning, raising practical concerns about the IRS mandate and working with both the IRS and outside vendors to identify both problems and their solutions. We also continue to press the IRS to issue early guidance on what type of hardship waivers will be granted, and remain hopeful that meaningful relief will be forthcoming.

TEI's advocacy successes were noteworthy, and I am pleased to say that our Communications Committee and staff worked diligently to share information about our activities with both members and the public. Through the frequent updating of our website, monthly email messages to members, and outreach to tax publications and media outlets, the Institute better communicated both its positions on specific issues as well as the process by which it reached those positions. We also stepped up our efforts to encourage more members to become involved in our projects, and while we can always do more, I am pleased with the progress we have made.

Be Involved, Stay Involved ... By Identifying and Addressing Demographic Trends and Other Barriers to Membership Growth

TEI continued to grow during the year. Our European Chapter held its largest meeting ever in May, and I was honored to travel to Copenhagen and address the group. TEI also expanded to another continent during the year, chartering our first chapte in Asia and thereby expanding the global reach of the Institute's educational, networking, and advocacy benefits. Closer to my home in Chicago, the Institute has taken steps to organize a chapter in Omaha. My congratulations to everyone who contributed to the growth of our chapters.

We also took the opportunity this year to analyze various demographic trends and are in the process of developing an action plan for growth, which we shared with our chapters and regions at the 2005 Leadership Seminar.

Be Efficient, Stay Effective ... by Improving Operation and Management of TEI

Our final set of objectives focused internally--on how efficiently we manage ourselves. In many respects, this has been a year of transition and, to a certain extent, deferred maintenance for TEI. First, we expanded and realigned our staff to address the Institute's changing needs. We added two employees to enhance our use of the Internet and technology, and also welcomed new employees to our conference planning and membership staffs. Perhaps most important, we completed the transition of our legal staff, hiring Eli Dicker as Chief Tax Counsel and naming Mary Lou Fahey our General Counsel. (Eli and Mary Lou are joined on the legal staff by Tax Counsels Jeff Rasmussen and Greg Matson.)

More generally, TEI established a formal system of performance and accountability, which has instilled in both managers and staff a stronger sense of accountability and should yield dividends to the Institute on an ongoing basis. We have also begun the process of addressing the succession planning challenges faced by many small organizations. Finally, we worked to clarify the respective roles of our volunteer leadership, for example, developing a position description for Chapter Representatives to the Institute Board of Directors, thereby enabling them to better fulfill their fiduciary duties.

Financial Accomplishments

A review of the Institute's financial statements (consolidated with those of TEI Education Fund, our affiliated section 501(c)(3) organization) confirms that TEI had a very good year financially. The Institute exceeded budget by a substantial margin ($685,855), and realized net revenues of $727,327. TEI's revenues fall into five general categories: dues and initiation fees; continuing education fees; publication income; sponsorship fees; royalties; and investment income. Each plays an important role in ensuring the Institute's financial stability:

* After dipping in the aftermath of 9-11, Dues Revenue (including initiation fees) reached a five-year high this past year--$2,023,725.

* Revenues from Continuing Education remain a significant part of the Institute's revenue picture--with gross revenues of Institute-level programs totalling $1,293,663. Importantly, while we experienced a decline of $31,125 in gross receipts last year, prudent management of expenses allowed us to hold the decline in net CE revenue (per the financial statements) to only $1,216. Overall, net revenues from Continuing (before allocation of overhead) was $608,185.

* Interest and other investment income contributed $125,036 to the Institute's bottom line.

* Our overall good financial results are due in significant measure to the Sponsorship initiative, where the growth in revenue has been substantial. Because of the allocation of Sponsorship revenue to Publications and the allocation of Royalties to Sponsorship and Advertising, the figures for Sponsorship, Publications (primarily Advertising), and Royalties should be viewed in combination. Total revenue for these three sources in the last fiscal year was $2,609,050. As the numbers suggest, TEI's conference sponsorship program has been a success. At the Institute level, the program continues to grow and provide a source of revenue, obviating dues or registration fee increases. In all, the Institute had 39 conference sponsors at either the 2004 Annual or 2005 Midyear Conference (or both). In addition to being a source of revenue, the sponsorship program has permitted the Institute to reach out to additional firms in terms of providing speakers for our educational programs and articles for The Tax Executive; it has also played a role in making TEI members aware of products and service providers that otherwise might have escaped their notice. At the chapter level, too, sponsorship has worked well. In August, the Board adopted guidelines for the chapters to ensure the smooth operation of the overall sponsorship program.

Concluding Thoughts

While TEI accomplished a great deal during the year, the Institute must strive continually to meet its members' needs in order to remain the preeminent association of business tax executives. I wish Mike Boyle and his leadership team much success in their efforts to accomplish the goals the Board has set for the year, and I pledge them my ongoing support.

I owe a debt of gratitude to my colleagues and staff at Brunswick Corporation for their support. I also offer thanks to all the members of the Institute to helped make this past year such a fabulous experience for me. From the committee members who worked on submissions or made presentations, to Board members who called me with their views, to our Executive Director and other members of our wonderful Institute staff, and to everyone who offered a kind word or extended courtesies to my husband Paul my sisters Nancy and Pat, their families, and me--you have made this year both wonderful and memorable. Representing TEI before Congress, leading the Institute's delegation to liaison meetings with the IRS and Treasury Department, and their counterparts in Canada; and presiding over our conferences--all have been an honor I could not have anticipated when I joined the Institute. I thank all of you for making it possible.

Appendix: 2004-2005 Technical Activities

Listed below are the written submissions that Tax Executives Institute filed with government agencies and congressional committees during the period ended August 31, 2005. Also included are liaison meetings and other technical activities in which the Institute participated.

Liaison Meetings

* Liaison meeting with Multistate Tax Commission (11/11/05).

* Liaison meetings with Canada Revenue Agency (separate meetings held on Income and Excise/Commodity Tax Issues) (12/7/05).

* Liaison meetings with Canadian Department of Finance (separate meetings held on Income and Excise/Commodity Tax Issues) (12/8/05).

* Liaison meetings with IRS Commissioner and IRS Large and Mid-Size Business Division (2/8-9/05).

* Liaison meeting teleconference with representatives from the U.S. Department of Treasury Office of Tax Policy and IRS Chief Counsel (3/11/05).

* Regions V & VI Liaison Meeting with IRS Large and Mid-Size Business Division (5/26/05).

Canadian Income and Commodity Taxes

* Statement filed with the House of Commons Standing Committee on Finance concerning 2004 Pre-Budget Consultations (9/10/04).

* Letter on proposed changes to Regulation 1013 of the Ontario Retail Sales Tax Act modernizing the retail sales tax rules relating to exempt transfers of assets between related corporations, filed with the Ontario Ministry of Finance (9/23/04) (Toronto Chapter).

* Comments on Revised GST/HST Policy Statement P-208R: Permanent Establishment, filed with Canada Revenue Agency (10/26/04).

* Comments on draft Technical Bill in respect of the treatment of foreign affiliates, filed with Canadian Department of Finance (12/6/04).

* Letter on proposal to harmonize Ontario income tax collection with the Canadian federal tax system, filed with the Premier of Ontario (12/14/04) (Toronto Chapter).

* Comments on Revised GST/HST Policy Statement P-51R2: Carrying on Business in Canada, filed with Canada Revenue Agency (2/9/05).

* Comments on Revised GST Memorandum 17.16: GST/HST Treatment of Insurance Claims, filed with Canada Revenue Agency (3/29/05).

Federal Taxes

* Comments on American Jobs Creation Act of 2003, filed with the House Ways and Means Committee and the Senate Finance Committee (7/13/04).

** Discussion with representatives from the Treasury Department's Office of Tax Policy and IRS concerning provisions of the American Jobs Creation Act requiring immediate regulatory guidance (11/01/04).

* Letter on final Schedule M-3, filed with the U.S. Department of the Treasury and IRS Large and Mid-Size Business Division (7/21/04).

* Comments on Proposed Ethics and Independence Rules Concerning Independence, Tax Services, and Contingent Fees, filed with the Public Company Accounting Oversight Board (3/1/05).

* Comments on proposed regulations relating to flat rate supplemental wage withholding, filed with Internal Revenue Service and U.S. Department of Treasury (4/11/05).

* Highway Reauthorization and Excise Tax Simplification Act of 2005:

** Letter opposing the CEO declaration in respect of a company's tax return, filed with Members of the Senate Finance Committee (5/12/05).

** Letter opposing the CEO declaration, codification of the economic substance doctrine, whistleblower provision, denial of deduction for fines and penalties, disallowance of deduction for punitive damages, and amendment of deferred compensation rules, filed with the House and Senate conferees (6/7/05).

International Taxes

* Letter on the development of a per se list of low-margin and non-integral services that should qualify for a cost safe harbor under the section 482 services regulations, filed with U.S. Department of the Treasury (7/2/04).

* Letter on the protocol to the U.S.-Netherlands Tax Treaty, filed with the Senate Foreign Relations Committee (7/15/04).

** Testimony before the U.S. Senate Committee on Foreign Relations regarding the Dutch and Barbados treaty protocols (9/24/04).

* Letter on IAS 12, Deferred Tax Accounting for Inter-Company Profits in Inventory, filed with the International Accounting Standards Board (7/27/04).

* Letter on the March 2004 Consultation Paper on Simplifying VAT Obligations: The One-Stop System, filed with the European Commission (7/31/04).

* Letter on temporary and proposed regulations under section 861 relating to the allocation and apportionment of expenses (alternative method for determining tax book value of assets), filed with U.S. Department of the Treasury (Office of International Tax Counsel) and the IRS Office of Associate Chief Counsel (International) (9/17/04).

* Letter on the revised Discussion Draft on the Attribution of Profits to a Permanent Establishment--Part I (General Considerations), filed with OECD Centre for Tax Policy and Administration commenting (10/12/04).

* Testimony before the Internal Revenue Service on the Advanced Pricing Agreement Program (2/22/04).

* Letter on the proposed regionalization of the Customs function, filed with the U.S. Department of Homeland Security (5/12/05).

* Comments on proposed regulations under section 1503 of the Internal Revenue Code relating to dual consolidated losses, filed with the U.S. Department of Treasury and Internal Revenue Service (8/22/05).

IRS Administrative Affairs

* Letter on Tax Administration Priorities for 2005, filed with the IRS Oversight Board (11/23/04).

** Testimony before the IRS Oversight Board on streamlining tax administration (2/1/05).

* Mandatory E-Filing of Form 1120.

** Comments on proposed regulations relating to returns required to be filed on magnetic media, filed with the Department of the Treasury and Internal Revenue Service (3/4/05).

** Testimony at the IRS hearing on the proposed regulations (3/16/04).

** Meetings of TEI-IRS Forms and Attachments Task Group to discuss use of alternative means of electronic filing (4/7-8/05 & 7/12-13/05).

** Meeting with representatives of the Government Accountability Office (4/21/05).

* Circular 230, Governing Practice Before the Internal Revenue Service:

** Comments on proposed regulations amending Circular 230 and their application to in-house professionals, filed with the Department of the Treasury and Internal Revenue Service (5/3/05).

** Letter to Internal Revenue Service and U.S. Department of Treasury concerning the definition of "employer" in the final regulations (6/3/05).

State and Local Taxes

* General Motors Corp. v. Franchise Tax Board (Allocation of California Research Tax Credit)

** Amicus curiae letter in support of Petition for Review, filed with the Supreme Court of California (8/31/04).

** Brief amicus curiae on the merits in support of General Motors, filed with the Supreme Court of California (4/26/05).

* Charlotte Cuno, et al. v. DaimlerChrysler Corp, et al. (Constitutionality of State Tax Incentives)

** Brief amicus curiae in support of Petition for Rehearing, filed with the United States Court of Appeals for the Sixth Circuit (9/23/04).

** Brief amicus curiae in support of DaimlerChrysler's Petition for a Writ of Certiorari, filed with the Supreme Court of the United States (7/15/05).

* Comments on legislative proposals being considered for the 2005 session of Virginia's General Assembly, filed with the Virginia Department of Taxation (10/21/04) (Virginia Chapter).

Standards of Conduct

Since the Mission, Principle, and Purposes of TEI can be achieved only by the observance on the part of its members of the highest standards of professional conduct, the Board of Directors adopted the following:

Tax Executives Institute, Inc., recognizes the following as the standards of conduct for each member in administering tax affairs for which he or she is responsible:

* The member accepts taxes as the cost of civilization and accepts the laws imposing taxes as the mechanism for distributing that cost among businesses and individuals. The member will comply with those laws, whether or not agreeing with them.

* The member recognizes an obligation to minimize company tax liability, within the bounds of the law and to the extent consistent with policies or objectives of the company, having due regard for the interests of society in sound tax policy, and will advise and support action to obtain that objective, to the best of the member's ability.

* The member recognizes an obligation to make an affirmative contribution to the sound administration of tax laws, and to the adoption of sound tax legislation, by cooperation and consultation with the persons charged with those functions, having due regard for the interests of society, as well as the interest of the company and its employees.

* The member accepts each Government representative as a person devoted to fulfilling the obligation to collect revenue honorably in accordance with law. The member will deal with the representatives on that basis, and will take occasion with others to uphold this view of Government representatives. In case of any deviation of a representative from that standard, the member will present the pertinent facts to the authorities authorized to take action with respect to the deviation.

* The member will present the facts required in tax returns and all the facts pertinent to the resolution of questions at issue with representatives of the government imposing the tax.

* The member will employ assistants and outside representatives upon the basis of their technical competence, always having due regard for the highest standards of professional ethics.

* The member will at all times recognize a duty of professionalism and will not use TEI membership to solicit business or sell products to other members.

Tax Executives Institute, Inc. and TEI Education Fund

Audited Consolidated Financial Statements

June 30, 2005 and 2004

Independent Auditor's Report on the Consolidated Financial Statements

To the Board of Directors Tax Executives Institute, Inc. and TEI Education Fund

We have audited the accompanying consolidated statements of financial position of Tax Executives Institute, Inc. and TEI Education Fund (the Organization) as of June 30, 2005 and 2004, and the related consolidated statements of activities and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Organization's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Tax Executives Institute, Inc. and TEI Education Fund as of June 30, 2005 and 2004, and the changes in their net assets and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Tate & Tryon

Washington, DC

July 19, 2005

Major findings of TEI's 2004-2005 Corporate Tax Department Survey include:

* Nearly 4 in 5 respondent companies had worldwide revenues of $5 billion or less with three-quarters coming from operations in the United States.

* 3 in 4 Senior Tax Executives (STEs) have the title of Director of Tax]Corporate Tax Director or Vice President; regardless of title, the STE most often reports to the Chief Financial Officer.

* Half of the tax departments have 5 or fewer employees. In addition they are responsible for an average of 31 legal entities and 7 in 10 are located at a single location.

* More than half of the tax departments have budgets of $750,000 or less, and one-third have budgets of $1 to $5 million annually.

* During the last 3 years, the typical tax department has increased by fewer than 1 full-time equivalent (FTE) while its budget has increased by 12%.

* 7 in 10 companies reported that they are subject to the provisions of the Sarbanes-Oxley Act and an additional 1 in 7 of those not subject to the law plan to follow it.

* The most commonly considered control areas for the purposes of Sarbanes-Oxley deal with the calculations of the U.S. tax provisions, deferred accounts, and rate reductions.

Judith P. Zelisko, Chicago Chapter 2004-2005 International President

TEI's Advocacy Scorecard

* Reestablishing a liaison meeting with the Multistate Tax Commission, plus continuing TEI's traditionally strong liaison relationships with government tax agencies in Ottawa and Washington.

* Establishing a relationship with the Financial Accounting Standards Board (as a prelude to filing comments on the exposure draft on Uncertain Tax Positions), and filing comments with the Public Company Accounting Oversight Board on tax services.

* Testifying before the Senate Foreign Relations Committee on two tax treaties and before the IRS on the advance pricing agreement program.

* Forestalling enactment (to date) of the CEO Certification and Economic Substance Requirement.

* Successfully urging the IRS and Treasury to recognize the unique status of in-house tax professionals in Circular 230, relating to practice before the IRS.

* Engaging the IRS "early and often" in respect of its corporate e filing initiative, thereby making the e-filing mandate more workable, by increasing the time in which to correct errors from 5 days to 20, permitting some international forms to be filed on paper, and allowing certain forms to be attached to the e-filed return in a PDF format.

* Remaining in the forefront of the Treasury and IRS's Schedule M-3 project.

* Involvement in the Cuno case on the constitutionality of state tax incentives

TEI Conference Sponsors

TEI expresses its appreciation to the following firms that were sponsors of either the 2004 Annual Conference or the 2005 Midyear Conference or both. Where a firm's sponsorship level changed during the year, the firm is listed under the higher sponsorship level.

Platinum

ADP Tax Credit * Baker & McKenzie * Deloitte & Touche LLP Ernst & Young LLP * KPMG LLP * Mayer, Brown, Rowe & Maw LLP McKee Nelson LLP * PricewaterhouseCoopers LLP * RIA Sutherland Asbill & Brennan LLP * Taxware, L.P. * Vertex, Inc.

Gold

CrossBorder Solutions * Ducharme McMillen & Associates, Inc. Fenwick & West LLP * Foley & Lardner LLP * Liquid Engines, Inc. Net Profit, Inc. (TALX) * Ryan & Company * Steptoe & Johnson LLP Wachovia Exchange Services, Inc.

Silver

Alston & Bird LLP * Baker & Hostetler LLP * Jones Day King & Spalding LLP * Miller & Chevalier Chartered Skadden, Arps, Slate, Meagher & Flora LLP * Thompson Hine LLP

Bronze

Caplin & Drysdale, Chartered * CBIZ Valuation Group, Inc. Duane Morris LLP * Grant Thornton LLP Jefferson Wells International Inc. Location Management Services, LLC Management Insights, Inc. McDermott Will & Emery LLP * Morrison & Foerster LLP Planitax, Inc. * Robert Brakel & Associates Ltd.

Senior Tax Executive Conference Sponsors

TEI expresses its appreciation to the following firms that sponsored TEI's 2005 Senior Tax Executive Conference:

Baker & McKenzie

Deloitte & Touche LLP

Ernst & Young LLP

KPMG LLP

Mayer, Brown, Rowe & Maw LLP

McDermott Will & Emery LLP

McKee Nelson LLP

Miller & Chevalier Chartered

Skadden, Arps, Slate, Meagher & Flom

Steptoe & Johnson LLP

TEI'S 2004-2005 EXECUTIVE COMMITTEE

Judith P. Zelisko

Brunswick Corporation

International President

Michael P. Boyle

Microsoft Corporation

TEI Senior Vice President

David L. Bernard

Kimberly-Clark Corporation

TEI Secretary

Robert J. McDonough

Polaroid Corporation

TEI Treasurer

Lynn B. Jordan

Susquehanna Pfaltzgraff Co.

Bruce Maggin

IBM Corporation

Lisa Norton

Amazon.com, Inc.

David M. Penney

General Motors of Canada Limited.

Carita R. Twinem

Briggs & Stratton Corporation

TEI'S 2004-2005

COMMITTEE CHAIRS

Vincent Alicandri

Hydro One Networks, Inc.

Chair, Awards Committee

Michael P. Boyle

Microsoft Corporation

Chair, Continuing Education Committee

David V. Daubaras

GE Canada

Chair, Canadian Income Tax Committee

J.A. (Drew) Glennie

Shell Canada Limited

Chair, Advisory Committee to the President

John J. Herson

Neenah Paper, Inc.

Chair, TEI International Tax Committee

Lisbeth W. Huddleston

United States Filter Corporation

Chair, Membership Committee

Gary P. Morrison

Cambrex Corporation

Chair, Advanced Technology Committee

Paul O'Connor

Millipore Corporation

Chair, TEI IRS Administrative Affairs Committee

Sherrie Ann Pollock

Royal Bank of Canada

Chair, Canadian Commodity Tax Committee

Raymond G. Rossi

Intel Corporation

Chair, Internal Affairs Committee, and

Chair, Nominating Committee

Monika M. Siegmund

Shell Canada Limited

Chair, Communications Committee

Neil D. Traubenberg

Storage Technology Corporation

Chair, TEI Federal Tax Committee

Roger D. Wheeler

General Motors Corporation

Chair, Corporate Tax Management Committee

Janet M. Wilson

Halliburton Corporation

Chair, State & Local Tax Committee

Notes to Consolidated Financial

Statements

NOTE A--ORGANIZATION AND SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES

Organization:

Tax Executives Institute, Inc. (TEI), incorporated in 1944 in New York, is a professional organization for corporate and business employees who are responsible for the tax affairs of their employers in an executive, managerial, or administrative capacity. TEI is exempt from the payment of income taxes on its exempt activities under Section 501(c)(6) of the Internal Revenue Code. However, TEI is subject to tax on its unrelated business activities such as advertising.

TEI Education Fund (the Fund) was formed in 1987 to sponsor or co-sponsor continuing education programs and otherwise to further TEI's educational objectives. The Fund is exempt from the payment of income taxes on its exempt activities under Section 501(c)(3) of the Internal Revenue Code and has been classified by the Internal Revenue Service as other than a private foundation under Section 509(a)(1).

Principles of consolidation:

The consolidated financial statements include the accounts of TEI and its affiliate, the Fund (collectively referred to as the Organization). Significant inter-company accounts and transactions have been eliminated in consolidation.

Basis of accounting:

The Organization prepares its financial statements on the accrual basis of accounting. Revenue is recognized when earned and expense when the obligation is incurred.

Use of estimates:

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from estimates.

Cash and cash equivalents:

For financial statement purposes, cash and cash equivalents consists of demand deposits and money market accounts.

Accounts receivable:

Accounts receivable consists primarily of amounts owed from customers for advertising. Accounts receivable are presented at the gross amount due to the Organization. The Organization's management periodically reviews the status of all accounts receivable balances for collectibility. Each receivable balance is assessed based on management's knowledge of the customer, the Organization's relationship with the customer, and the age of the receivable balance. As a result of these reviews, allowances are recorded for customer balances deemed to be uncollectible. As of June 30, 2005, the allowance for doubtful accounts receivable totaled $5,351.

Fixed assets:

Acquisitions of fixed assets greater than $1,000 are recorded at cost and depreciated or amortized using the straight-line basis over the following useful lives: furniture and office equipment--3 to 10 years; leasehold improvements--over the lesser of the remaining life of the office lease or the estimated useful life of the improvements.

Deferred revenue:

Revenue received in advance of the period in which it is earned is deferred to subsequent years.

Net assets--unrestricted:

Unrestricted net assets include those net assets whose use is not restricted by donors, even though their use may be limited in other respects, such as by board designation.

Undesignated: Undesignated net assets are used for the general operations of Organization. TEI has established a reserve policy, the goal of which is to maintain minimum reserves equivalent to at least 50 percent of annual operating expenses. This goal has been met and there are no current plans to increase the reserve except as a result of normal operations.

Designated: Designated net assets include funds that have been designated for use in special project activities. At its June 2004 meeting, the Executive Committee approved a resolution to designate $100,000 for use in the Corporate Tax Department Survey and for the 60th Anniversary Celebration which took place during the year ended June 30, 2005. At its June 2005 meeting, the Executive Committee approved the budget for the year ending June 30, 2006 which included an additional designation for special projects in the amount of $25,000.

Functional allocation of expenses:

The costs of providing various program and supporting service activities have been summarized on a functional basis in the statement of activities. Accordingly, certain costs have been allocated among the program and supporting services benefited.

NOTE B--CONCENTRATION OF CREDIT RISK

Financial instruments that subject the Organization to a concentration of credit risk consist of demand deposits placed with financial institutions that, at times, may exceed the Federal Deposit Insurance Corporation limits. The Organization has not experienced any losses in such accounts. Other financial instruments that potentially subject the Organization to concentration of credit risk consist principally of investments. The Organization places its investments with creditworthy financial institutions. By policy, these investments are kept within limits designed to prevent risks caused by concentration.

NOTE C--INVESTMENTS

Short-term:

Short-term investments in marketable (non-equity) securities are recorded at cost, which approximates market value, and consist of the following at June 30,:

Treasury Notes--Short-term                                        2005
Purchased July 31, 2003, matures July 31, 2005, 1.500%         200,000
Purchased September 30, 2003,
  matures September 30, 2005, 1.625%                           200,000
Purchased October 31, 2003,
  matures October 31, 2005, 1.625%                             200,000
Purchased December l, 2003,
  matures November 30, 2005, 1.875%                            200,000
Purchased January 8, 2004,
  matures December 31, 2005, 1.875%                            200,000
Purchased February 2, 2004,
  matures January 31, 2006, 1.875%                             200,000
Purchased March 1, 2004,
  matures February 28, 2006, 1.625%                            400,000
Purchased March 31, 2004,
  matures March 31, 2006, 1.500%                               200,000
Purchased April 30, 2004, matures April 30, 2006, 2.250%       400,000
Purchased June 1, 2004, matures May 31, 2006, 2.500%           200,000
Purchased July 1, 2004, matures June 30, 2006, 2.750%          200,000
Certificates of Deposit
Bank of America, purchased December 1, 2003,
  matures November 28, 2005, 1.850%                            200,000
SunTrust, purchased March 26, 2005,
  matures September 26, 2005, 2.470% *                         102,737
Money Market
Bank of America Securities LLC, 2.784% at June 30, 2005      1,125,319
                                                            $4,028,056

* TEIF Investment

Treasury Notes--Short-term                                        2004
Purchased July 31, 2002, matures July 31, 2004, 2.250%         200,000
Purchased December 2, 2002,
  matures November 30, 2004, 2.000%                            200,000
Purchased January 31, 2003,
  matures January 31, 2005, 1.625%                             200,000
Purchased February 28, 2003,
  matures February 28, 2005, 1.500%                            200,000
Purchased May 7, 2003, matures April 30, 2005, 1.625%          200,000
Purchased July 3, 2003, matures June 30, 2005, 1.125%          200,000

Certificates of Deposit
Bank of America, purchased February 28, 2002,
  matures March 2, 2005, 3.590%                                100,000
Bank of America, purchased May 13, 2002,
  matures May 13, 2005, 3.690%                                 100,000
SunTrust, purchased September 21, 2003,
  matures September 23, 2004, 1.090% *                         100,982

Money Market
Bank of America Securities, LLC, 0.812% at June 30, 2004     1,807,913
                                                            53,308,895

* TEIF Investment

Long-term:
Long-term investments in marketable (non-equity)
securities are recorded at cost, which approximates
market value, and consist of the following at June 30,:

Two-Year Treasury Notes (percentage = coupon rate)                2005
Purchased August 2, 2004, matures July 31, 2006, 2.75%         200,000
Purchased August 31, 2004,
  matures August 31, 2006, 2.375%                              200,000
Purchased October 1, 2004,
  matures September 30, 2006, 2.500%                           200,000
Purchased November 30, 2004,
  matures November 30, 2006, 2.875%                            200,000
Purchased December 31, 2004,
  matures December 31, 2006, 3.000%                            200,000
Purchased January 31, 2005,
  matures January 31, 2007, 3.125%                             200,000
Purchased March 7, 2005,
  matures February 28, 2007, 3.375%                            200,000
Purchased April 1, 2005,
  matures March 31, 2007, 3.750%                               400,000
Purchased May 2, 2005, matures April 30, 2007, 3.625%          400,000
Purchased June 1, 2005, matures May 31, 2007, 3.500%           200,000
Purchased June 30, 2005, matures June 30, 2007, 3.625%         400,000
Other Investments
Mutual of America (deferred compensation)                       40,667
                                                            $2,840,667

Purchased July 31, 2003, matures July 31, 2005, 1.500%         200,000
Purchased September 30, 2003,
  matures September 30, 2005, 1.625%                           200,000
Purchased October 31, 2003,
  matures October 31, 2005, 1.625%                             200,000
Purchased December 1, 2003,
  matures November 30, 2005, 1.875%                            200,000
Purchased January 8, 2004,
  matures December 31, 2005, 1.875%                            200,000
Purchased February 2, 2004,
  matures January 31, 2006, 1.875%                             200,000
Purchased March 1, 2004,
  matures February 28, 2006, 1.625%                            400,000
Purchased March 31, 2004,
  matures March 31, 2006, 1.500%                               200,000
Purchased April 30, 2004, matures April 30, 2006, 2.250%       400,000
Purchased June 1, 2004, matures May 31, 2006, 2.500%           200,000

Certificate of Deposit
Bank of America, purchased December 1, 2003,
  matures November 28, 2005, 1.850%                            200,000

Other Investments
Mutual of America (deferred compensation)                       34,784
                                                            $2,634,784

NOTE D--RETIREMENT PLANS

Deferred Compensation Plan:

TEI has a deferred compensation plan under Section 457(b) of the Internal Revenue Code, which covers a key employee. No contributions were made to the deferred compensation plan in the years ended June 30, 2005 and 2004, and management has determined that no future contributions will be made because of the establishment of the 401(k) Plan (see description below). However, participant balances will continue to accumulate earnings and losses. Deferred compensation liabilities amounted to $40,667 and $34,784 at June 30, 2005 and 2004, respectively.

Money Purchase Plan:

TEI has a defined contribution money-purchase pension plan, which covers all eligible employees who meet age and length-of-service requirements. Under the plan, TEI's annual contribution amounts to eight percent of each participant's compensation. Participants are fully vested after six years. TEI's contribution to the plan for the years ended June 30, 2005 and 2004, was $106,651 and $107,519, respectively.

401(k) Plan:

TEI has a defined contribution salary deferral and savings incentive plan, which covers all eligible employees who meet age and length of service requirements. Under the plan, TEI contributes an amount equal to fifty percent of the first two percent of compensation, and twenty-five percent of the next four percent of compensation up to the maximum contribution allowed by Internal Revenue Service limits. Participants are fully vested after five years. TEI's contribution to the plan for the years ended June 30, 2005 and 2004, was $21,826 and $24,559, respectively.

NOTE E--MANAGEMENT FEES

TEI pays the Fund management fees pursuant to a written agreement under which TEI agreed to administer the continuing education courses sponsored by the Fund. Under the agreement, TEI paid the Fund a percentage of its net income from the sponsored courses totaling $11,552 and $16,792 for the years ended June 30, 2005 and 2004, respectively.

NOTE F--CHAPTERS AND REGIONS

tei has several chapters and regions primarily located throughout the united states of america. as stipulated in the chapter regulations, the activities of the chapters and regions are subject to policies adopted by and the general oversight of tei's board, this oversight, however, does not constitute control in accordance with the aicpa's statement of position number 94-3, reporting of related entities by not-for-profit organizations, thus, the chapters and regions are not included in these financial statements. aggregate chapter and region cash balances approximate $1,000,000 annually.

NOTE G--COMMITMENT & CONTINGENCY

Office lease:

TEI leases office space under a non-cancelable operating lease that expires in June 2007. Under the terms of the lease, TEI received a rent abatement relating to the first five months of the first lease year and the first month of each of the seventh through the tenth lease years. The abatement has been accrued and is being amortized over the life of the lease. Rent expense was approximately $241,800 and $199,000 for the years ended June 30, 2005 and 2004, respectively. During the year ended June 30, 2005, TEI signed an amendment to its office lease which increased the square footage available for occupancy.

Future minimum lease payments under the office lease as of June 30, 2005, are as follows:

Year Ending June 30,      Amount

2006                      267,000
2007                      247,100

                        $ 514,100

Employment agreement:

TEI has an employment agreement with its Executive Director, which expires June 2009. Under the terms of the agreement, should the Institute terminate the agreement for any reason other than good cause, it would be obligated to pay the Executive Director's salary and benefits for the remaining period of the agreement.

2005-2006 Officers

PRESIDENT

Michael P. Boyle (E)

Microsoft Corporation

SENIOR VICE PRESIDENT

David L. Bernard (E)

Kimberly-Clark Corporation

SECRETARY

Robert J. McDonough (E)

Polaroid Corporation

TREASURER

Vincent Alicandri (E)

Hydro One Networks Inc.

VICE PRESIDENT--REGION I

Monika M. Siegmund

Shell Canada Limited

VICE PRESIDENT--REGION II

Anthony D. Bernice

Gold Toe Investment Corp.

VICE PRESIDENT--REGION III

Timothy F. Wigon

BOSE Corporation

VICE PRESIDENT--REGION IV

Fred W. Brenner, Jr.

Steelcase, Inc.

VICE PRESIDENT--REGION V

Mickey J. Bladel

Bandag, Incorporated

VICE PRESIDENT--REGION VI

David L. Bullington

Wal-Mart Stores, Inc.

VICE PRESIDENT--REGION VII

Susan A. Bauer

Arby's Restaurant Group

VICE PRESIDENT--REGION VIII

Lynn C. Anderson

Edison Mission Energy

VICE PRESIDENT--REGION IX

Anthony J. Maggiore

Richemont International SA

ADDITONAL EXECUTIVE COMMITTEE MEMBERS

Lynn B. Jordan (E)

Susquehanna Pfaltzgraff Co.

Lisa Norton (E)

Amazon.com, Inc.

Paul O'Connor (E)

Millipore Corp

Neil D. Traubenberg (E)

Sun Microsystems, Inc.

Carita R. Twinem (E)

Briggs & Stratton Corporation

(E) Executive Committee Member. The Executive Committee consists of the Institute's four senior officers and five other members of the Board of Directors appointed by the President.

2005-2006 Committee Chairs

ADVISORY COMMITTEE TO THE PRESIDENT

Raymond G. Rossi

Intel Corporation

AWARDS

Bruce R. Maggin

IBM Corporation

CANADIAN COMMODITY TAX

Natalie St-Pierre

BCE Inc.

CANADA INCOME TAX

David V. Daubaras

General Electric Canada

COMMUNICATIONS

Mitchell S. Trager

Georgia-Pacific Corporation

CONTINUING EDUCATION

David L. Bernard

Kimberly-Clark Corporation

CORPORATE TAX MANAGEMENT

Roger D. Wheeler

General Motors Corp.

FEDERAL TAX

Susan A. Bauer

Arby's Restaurant Group

FEDERAL TAX: EMPLOYEE BENEFITS AND PAYROLL TAXES SUBCOMMITTEE

Michael J. Nesbitt

Paychex, Inc.

FEDERAL TAX: FINANCIAL PRODUCTS SUBCOMMITTEE

Philip G. Cohen

Unilever United States, Inc.

FINANCIAL ACCOUNTING TASK FORCE

Neil D. Traubenberg

Sun Microsystems, Inc.

INTERNAL AFFAIRS

Judith P. Zelisko

Brunswick Corporation

IRS ADMINISTRATIVE AFFAIRS

Kelly A. Nall

Electronic Data Systems Corp.

INTERNATIONAL TAX

John J. Herson

Neenah Paper, Inc.

INTERNATIONAL TAX: ASIA TAXES SUBCOMMITTEE

David K. Sutherland

Morgan Stanley & Co., Incorporated

INTERNATIONAL TAX: EUROPEAN TAXES SUBCOMMITTEE

Daniel Goff

Hewlett-Packard International Sarl

MEMBERSHIP

Wayne Monfries

Mars, Incorporated

MEMBERSHIP: RECRUITMENT & RETENTION SUBCOMMITTEE

David M. Penney

General Motors of Canada Limited

NOMINATING

Judith P. Zelisko

Brunswick Corporation

STATE & LOCAL TAX

Janet M. Wilson

Halliburton Company

TASK FORCE ON STRUCTURE AND GOVERNANCE

David M. Penney

General Motors of Canada Limited

Judith P. Zelisko

TEI 2004-2008 International President

Tax Executives Institute, Inc. and TEI Education
Fund Consolidated Statements of Financial Position

                                          For the years ended June 30,

                                                      2005

                                               TEI            TEIF

Assets

Current assets
  Cash and cash equivalents--Note B          $ 220,667        $ 15,675
  Short-term investments--Note C             3,925,319         102,737
  Accounts receivable, net of allowance         53,602              --
  Prepaid expenses                              58,581              --
  Due (to) from affiliate                       (6,779)          6,779

    Total current assets                     4,251,390         125,191

Long-term investments--Notes B & C           2,840,667              --

Fixed assets, at cost
  Furniture and office equipment               716,494           7,359
  Leasehold improvements                         4,987              --
                                               721,481           7,359

  Less accumulated depreciation
    and amortization                          (399,551)         (5,227)
                                               321,930           2,132

  Security deposit                              14,305              --

    Total assets                           $ 7,428,292       $ 127,323

Liabilities and Net Assets

Current liabilities
  Accounts payable                            $ 61,831           $ 953
  Accrued liabilities                           57,149              --
  Deferred revenue
    Member dues                              1,055,099              --
    Subscriptions                                9,775              --
    Advertising                                 27,000              --
    Sponsorships                               735,250              --
    Seminars, schools, and conferences         170,425              --
    Royalty                                    200,000              --

    Total current liabilities                2,316,529             953

  Deferrred compensation--Note D                40,667              --
  Deferred rent--Note G                         26,969              --

    Total liabilities                        2,384,165             953

Net assets--unrestricted
  Undesignated                               5,019,127         126,370
  Designated                                    25,000              --

    Total net assets                         5,044,127         126,370

Commitments and contingencies--Note G               --              --

    Total liabilities and net assets       $ 7,428,292       $ 127,323

Revenue
  Continuing Education                     $ 2,023,725              --
  Membership dues                            1,205,187              --
  Sponsorships                               1,183,063              --
  Royalty                                      452,600              --
  Publications                                 411,263              --
  Initiation fees                              110,600              --
  Interest                                     110,493           1,771
  Other                                         10,312           2,460
  Management fees--Note E                      (11,552)         11,552
                                             5,495,691          15,783

Expenses
  Program Services
    Continuing education                     1,768,068          12,321
    Committee and liaison                      588,590              --
    Publications                               433,874              --
    Membership services and development        212,492              --
    Dues transferred to chapters               167,115              --
                                             3,170,139          12,321

  Supporting Services
    General and administrative               1,518,231           1,303
                                             4,688,370          13,624

Change in net assets
    before special project                     807,321           2,159
  Special Project                              (80,000)             --

Change in net assets                           727,321           2,159
  Net assets, beginning of year              4,316,806         124,211

Net assets, end of year                    $ 5,044,127       $ 126,370

Cash Flows From Operating Activities
  Change in net assets                       $ 727,321         $ 2,159

  Adjustments to reconcile change in
  net assets to net cash provided by
  operating activities:
    Allowance                                    5,531              --
    Depreciation and amortization              118,516             328
    Changes in assets and liabilities:
    Accounts receivable                         12,897              --
    Prepaid expenses                            13,551              --
    Due (to) from affiliate                      1,067          (1,067)
    Accounts payable                          (170,335)            953
    Accrued liabilities                           (925)             --
    Deferred revenue                          (140,545)             --
    Deferred compensation                        5,883              --
    Deferred rent                               (4,048)             --

      Total adjustments                       (158,408)            214

      Net cash provided by
        operating activities                   568,913           2,373

Cash Flows From Investing Activities
  Purchases of fixed assets                   (164,231)         (2,460)
  Purchases of investments                  (3,923,289)       (102,737)
  Maturity of investments                    3,000,000         100,982

Net cash used in investing activities       (1,087,520)         (4,215)

Net (decrease) increase
  in cash and cash equivalents                (518,607)         (1,842)
  Cash and cash equivalents,
    beginning of year                          739,274          17,517

Cash and cash equivalents, end of year         220,667          15,675

Supplemental Disclosures
    of Cash Flow Information
  Income taxes paid                              1,837              --

                                          For the years ended June 30,

                                              2005            2004

                                              Total            TEI

Assets

Current assets
  Cash and cash equivalents--Note B          $ 236,342       $ 739,274
  Short-term investments--Note C             4,028,056       3,207,913
  Accounts receivable, net of allowance         53,602          72,030
  Prepaid expenses                              58,581          72,132
  Due (to) from affiliate                           --          (5,712)

    Total current assets                     4,376,581       4,085,637

Long-term investments--Notes B & C           2,840,667       2,634,784

Fixed assets, at cost
  Furniture and office equipment               723,853         815,407
  Leasehold improvements                         4,987           2,487
                                               728,840         817,894

  Less accumulated depreciation
    and amortization                          (404,778)       (541,679)
                                               324,062         276,215

  Security deposit                              14,305          14,305

    Total assets                           $ 7,555,615     $ 7,010,941

Liabilities and Net Assets

Current liabilities
  Accounts payable                            $ 62,784       $ 232,166
  Accrued liabilities                           57,149          58,074
  Deferred revenue
    Member dues                              1,055,099       1,019,411
    Subscriptions                                9,775          10,883
    Advertising                                 27,000          17,650
    Sponsorships                               735,250         881,000
    Seminars, schools, and conferences         170,425         209,150
    Royalty                                    200,000         200,000

    Total current liabilities                2,317,482       2,628,334

  Deferrred compensation--Note D                40,667          34,784
  Deferred rent--Note G                         26,969          31,017

    Total liabilities                        2,385,118       2,694,135

Net assets--unrestricted
  Undesignated                               5,145,497       4,236,806
  Designated                                    25,000          80,000

    Total net assets                         5,170,497       4,316,806

Commitments and contingencies--Note G               --              --

    Total liabilities and net assets       $ 7,555,615     $ 7,010,941

Revenue
  Continuing Education                     $ 2,023,725     $ 2,054,880
  Membership dues                            1,205,187         984,000
  Sponsorships                               1,183,063       1,112,206
  Royalty                                      452,600         477,600
  Publications                                 411,263         254,290
  Initiation fees                              110,600          92,000
  Interest                                     112,264          78,725
  Other                                         12,772          19,765
  Management fees--Note E                           --         (16,792)
                                             5,511,474       5,056,674

Expenses
  Program Services
    Continuing education                     1,780,389       1,797,977
    Committee and liaison                      588,590         681,868
    Publications                               433,874         388,324
    Membership services and development        212,492         247,925
    Dues transferred to chapters               167,115         170,610
                                             3,182,460       3,286,704

  Supporting Services
    General and administrative               1,519,534       1,180,471
                                             4,701,994       4,467,175

Change in net assets
    before special project                     809,480         589,499
  Special Project                              (80,000)        (20,000)

Change in net assets                           729,480         569,499
  Net assets, beginning of year              4,441,017       3,747,307

Net assets, end of year                    $ 5,170,497     $ 4,316,806

Cash Flows From Operating Activities
  Change in net assets                       $ 729,480       S 569,499

  Adjustments to reconcile change in
  net assets to net cash provided by
  operating activities:
    Allowance                                    5,531              --
    Depreciation and amortization              118,844         120,075
    Changes in assets and liabilities:
    Accounts receivable                         12,897         (18,017)
    Prepaid expenses                            13,551          50,450
    Due (to) from affiliate                         --          (1,215)
    Accounts payable                          (169,382)        (16,078)
    Accrued liabilities                           (925)         23,282
    Deferred revenue                          (140,545)        800,662
    Deferred compensation                        5,883             (22)
    Deferred rent                               (4,048)         (5,722)

      Total adjustments                       (158,194)        953,415

      Net cash provided by
        operating activities                   571,286       1,522,914

Cash Flows From Investing Activities
  Purchases of fixed assets                   (166,691)       (254,530)
  Purchases of investments                  (4,026,026)     (4,262,611)
  Maturity of investments                    3,100,982       2,850,000

Net cash used in investing activities       (1,091,735)     (1,667,141)

Net (decrease) increase
  in cash and cash equivalents                (520,449)       (144,227)
  Cash and cash equivalents,
    beginning of year                          756,791         883,501

Cash and cash equivalents, end of year         236,342         739,274

Supplemental Disclosures
    of Cash Flow Information
  Income taxes paid                              1,837              --

                                          For the years ended June 30,

                                              2004

                                              TEIF            Total

Assets

Current assets
  Cash and cash equivalents--Note B           $ 17,517       $ 756,791
  Short-term investments--Note C               100,982       3,308,895
  Accounts receivable, net of allowance             --          72,030
  Prepaid expenses                                  --          72,132
  Due (to) from affiliate                        5,712              --

    Total current assets                       124,211       4,209,848

Long-term investments--Notes B & C                  --       2,634,784

Fixed assets, at cost
  Furniture and office equipment                 4,899         820,306
  Leasehold improvements                            --           2,487
                                                 4,899         822,793

  Less accumulated depreciation
    and amortization                            (4,899)       (546,578)
                                                    --         276,215

  Security deposit                                  --          14,305

    Total assets                             $ 124,211     $ 7,135,152

Liabilities and Net Assets

Current liabilities
  Accounts payable                                  --       $ 232,166
  Accrued liabilities                               --          58,074
  Deferred revenue
    Member dues                                     --       1,019,411
    Subscriptions                                   --          10,883
    Advertising                                     --          17,650
    Sponsorships                                    --         881,000
    Seminars, schools, and conferences              --         209,150
    Royalty                                         --         200,000

    Total current liabilities                       --       2,628,334

  Deferrred compensation--Note D                    --          34,784
  Deferred rent--Note G                             --          31,017

    Total liabilities                               --       2,694,135

Net assets--unrestricted
  Undesignated                                 124,211       4,361,017
  Designated                                        --          80,000

    Total net assets                           124,211       4,441,017

Commitments and contingencies--Note G               --              --

    Total liabilities and net assets         $ 124,211     $ 7,135,152

Revenue
  Continuing Education                              --     $ 2,054,880
  Membership dues                                   --         984,000
  Sponsorships                                      --       1,112,206
  Royalty                                           --         477,600
  Publications                                      --         254,290
  Initiation fees                                   --          92,000
  Interest                                         996          79,721
  Other                                             --          19,765
  Management fees--Note E                       16,792              --
                                                17,788       5,074,462

Expenses
  Program Services
    Continuing education                         8,066       1,806,043
    Committee and liaison                           --         681,868
    Publications                                    --         388,324
    Membership services and development             --         247,925
    Dues transferred to chapters                    --         170,610
                                                 8,066       3,294,770

  Supporting Services
    General and administrative                     552       1,181,023
                                                 8,618       4,475,793

Change in net assets
    before special project                       9,170         598,669
  Special Project                                   --         (20,000)

Change in net assets                             9,170         578,669
  Net assets, beginning of year                115,041       3,862,348

Net assets, end of year                      $ 124,211     $ 4,441,017

Cash Flows From Operating Activities
  Change in net assets                         S 9,170       $ 578,669

  Adjustments to reconcile change in
  net assets to net cash provided by
  operating activities:
    Allowance                                       --              --
    Depreciation and amortization                              120,075
    Changes in assets and liabilities:
    Accounts receivable                             --
    (18,017)
    Prepaid expenses                                --          50,450
    Due (to) from affiliate                      1,215              --
    Accounts payable                                --         (16,078)
    Accrued liabilities                             --          23,282
    Deferred revenue                                --         800,662
    Deferred compensation                           --             (22)
    Deferred rent                                   --          (5,722)

      Total adjustments                          1,215         954,630

      Net cash provided by
        operating activities                    10,385       1,533,299

Cash Flows From Investing Activities
  Purchases of fixed assets                         --        (254,530)
  Purchases of investments                    (100,982)     (4,363,593)
  Maturity of investments                      100,000       2,950,000

Net cash used in investing activities             (982)     (1,668,123)

Net (decrease) increase
  in cash and cash equivalents                   9,403        (134,824)
  Cash and cash equivalents,
    beginning of year                            8,114         891,615

Cash and cash equivalents, end of year          17,517         756,791

Supplemental Disclosures
    of Cash Flow Information
  Income taxes paid                                 --              --