FORRESTER RESEARCH INC - 10-K Annual Report

Back to GetFilings.com

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------

FORM 10-K

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER: 000-21433

---------------------

FORRESTER RESEARCH, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 04-2797789
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

400 TECHNOLOGY SQUARE
CAMBRIDGE, MASSACHUSETTS 02139
(Address of principal executive offices) (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (617) 613-6000

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

TITLE OF EACH CLASS Common Stock, $.01 par value

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [X] No [ ]

The aggregate market value of the voting stock held by non-affiliates of
the registrant as of June 28, 2002 (based on the closing price as quoted by the
Nasdaq National Market as of such date) was approximately $159,090,307.

As of March 27, 2003, 22,486,834 shares of the registrant's common stock
were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the Company's Annual Meeting of
Stockholders for the year ended December 31, 2002 are incorporated by reference
into Part III hereof.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

This Annual Report on Form 10-K contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. Words such
as "expects," "anticipates," "intends," "plans," "estimates," or similar
expressions are intended to identify these forward-looking statements. These
statements are based on our current plans and expectations and involve risks and
uncertainties that could cause actual future activities and results of
operations to be materially different from those set forth in the forward-
looking statements. We undertake no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events, or otherwise.

PART I

ITEM 1. BUSINESS

GENERAL

Forrester Research, Inc. is a leading independent emerging-technology
research firm that conducts research and analysis on the impact of emerging
technologies on business, consumers, and society. We provide our clients with an
integrated perspective on emerging technology and business, which we call the
WholeView(TM). This approach provides our clients with the strategies, data, and
product evaluations they need to win customers, identify new markets, and scale
their operations to gain competitive operational advantages. Our products and
services are targeted to benefit the senior management, business strategists,
and marketing and technology professionals at $1 billion-plus companies who use
our prescriptive and executable research to understand and capitalize on
changing business models and emerging technologies.

We offer our clients annual memberships to our WholeView Research that
provide barrier-free access to our core research on a wide variety of business
issues and technology topics. These issues and topics include the impact that
the application of technologies may have on business models, operational
strategy, financial results, investment priorities, organizational
effectiveness, and staffing requirements. We also provide Strategic Services
that allow our clients to interact with analysts to explore in greater detail
the issues and topics covered by our research on a client-specific basis. In
addition, we host Forum and Summit Events, conferences devoted to critical
business and technology issues, which bring together our clients and major
technology and business leaders to discuss the impact of technology change on
business. Our WholeView Research platform, Strategic Services, and Forum and
Summit Events combine to provide our clients with comprehensive, integrated
access to our research, analysts, online tools, presentations, advice, and
speeches.

We were incorporated in Massachusetts on July 7, 1983 and reincorporated in
Delaware on February 21, 1996. Our Internet address is www.forrester.com and the
Internet address for the investor information section of our Web site is
www.forrester.com/ER/Investor. We make available free of charge, on or through
the investor information section of our Web site, annual reports on Form 10-K,
quarterly reports on Form 10-Q, and current reports on Form 8-K and amendments
to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 as soon as reasonably practicable after we
electronically file such material with, or furnish it to, the Securities and
Exchange Commission.

INDUSTRY BACKGROUND

Emerging technologies continue to play a central role in companies' efforts
to remain both competitive and cost-efficient in an increasingly complex
business arena. In 2002, a challenging business environment forced
$1 billion-plus companies to reassess strategies, budgets, staffing, and
business models. These complex decisions require participation from corporate
leaders, business managers, marketing executives, and technology professionals.
Together, these individuals must work to reduce and even eliminate the
traditional separations between marketing, business strategy, and technology to
reach new markets, gain competitive advantage, and develop high customer service
and loyalty levels. Developing comprehensive and coordinated business strategies
is difficult because as the economy and technology change, consumers and
businesses adopt new methods of buying and selling, and markets grow
increasingly dynamic.

2

Consequently, companies rely on external sources of expertise that provide
independent business advice spanning a variety of areas including technology,
business strategy, and consumer behavior. In addition, companies demand instant
access to the issues and challenges confronting them in this dynamic
environment. We believe that there is a need for objective research that is
thematic, prescriptive, executable, and that provides a comprehensive
perspective on the integrated use of technology in business.

FORRESTER'S SOLUTION

We believe that our business and emerging-technology expertise enables us
to offer our clients the best available research on changing business models and
technologies, technology investments, and customer trends. Our solution provides
our clients with:

THE WHOLEVIEW. We provide our clients with a comprehensive and integrated
perspective on emerging technologies and business, which we call the WholeView,
the primary component of which is WholeView Research. WholeView Research
provides our clients with comprehensive access to our core research offerings.
Our WholeView Research combines with our delivery mechanisms, specialized
services, and expertise to offer clients access to the analysts, data, and
research they need to:

- Assess potential new markets, competitors, products, and services.

- Anticipate technology-driven business model shifts.

- Understand how technology can improve business processes.

- Educate, inform, and align strategic decision-makers in their
organizations.

- Capitalize on emerging technologies.

PERSONAL VIEW. Clients access our WholeView Research through our client
Web interface that we call the Personal View. The Personal View is an
easy-to-use gateway to our research that helps clients organize and access
reports, data, and product evaluations and accelerates the deployment of our
ideas and analysis. We distill the abundance of information, developments, and
data into concise, connected, and easy-to-read formats to facilitate rapid
decision-making.

A UNIFIED SET OF SERVICES TO BUILD BUSINESS AND TECHNOLOGY
STRATEGIES. Clients may combine our WholeView Research with Strategic Services
and Forum and Summit Events to enhance their understanding and the value of the
core research offerings.

EXPERTISE ON EMERGING TECHNOLOGIES. We started our business in 1983 and
have a long history of, and extensive experience in, identifying
emerging-technology trends and providing research and executable advice on the
impact of technology on business. Our research analysts have many years of
industry experience, are frequent speakers at business and technology
conferences and symposiums, and are often quoted in the press and other
publications. They enjoy direct access to the leaders and decision-makers within
large enterprises and technology vendors. We provide our research analysts with
rigorous training to ensure that they have the skills to challenge conventional
viewpoints and provide prescriptive, executable insight and research to our
clients.

FORRESTER'S STRATEGY

We seek to maintain and enhance our position as a leading technology
research firm and to capitalize on demand for our research by:

IDENTIFYING AND DEFINING NEW BUSINESS MODELS, TECHNOLOGIES, AND
MARKETS. We seek to position ourselves ahead of other research firms by
delivering strategic research and analysis on the impact of technology on
business models and technology infrastructure. We believe that our research
methodology and our creative culture allow us to identify and analyze rapid
shifts in the use of technology before these changes appear on the horizons of
most users, vendors, and other research firms. Our early identification of these
shifts enables us to offer research and introduce new products and services that
help our clients capitalize on emerging business models and technologies.
3

LEVERAGING THE WHOLEVIEW. Our business model, technology platform, and
research methodologies allow us to sell existing products and to rapidly
introduce new products and services without incurring significant incremental
costs. We intend to continue to use our business model, technology platform, and
research methodologies to both increase sales of our existing research and
introduce innovative new products.

USING TARGETED, GLOBAL SALES CHANNELS. We sell our products and services
via our headquarters in Cambridge, Massachusetts, our research centers in
Amsterdam, Frankfurt, London, and San Francisco, and our sales offices in Sydney
and Tokyo. We continually seek to increase average sales volume per sales
representative, lengthen the average tenure of our sales representatives and
sales management, and shorten our sales cycle through marketing initiatives.

GROWING OUR CLIENT BASE WORLDWIDE AND INCREASING SALES TO EXISTING
CLIENTS. We believe that our products and services can be successfully marketed
and sold to new client companies worldwide and to new organizations within our
existing client companies. We believe that within our client base of 1,125
client companies as of December 31, 2002, there is opportunity to sell
additional products and services. In addition, we intend to expand our
international presence as the growing impact of technology on business
innovation creates demand for external sources of objective research. In
February 2003, we completed our acquisition of Giga Information Group, Inc., a
global technology advisory firm. We believe that this acquisition will further
extend our research coverage by allowing us to offer products directed
specifically at technology practitioners and may bring approximately 900 new
clients to Forrester.

DEVELOPING AND RETAINING OUTSTANDING RESEARCH PROFESSIONALS. The knowledge
and experience of our analysts are critical elements of our ability to provide
high-quality products and services. We employ outstanding research professionals
from varied backgrounds and a wide range of industries. We believe that our
culture, which emphasizes excellence, cooperation, and creativity and fosters a
dedication to quality research, helps us to develop and retain high-caliber
research professionals. We provide a competitive compensation structure and
recognition and rewards for excellent individual and team performance.

OPTIMIZING THE USE OF NEW TECHNOLOGY. Our technology platform allows us to
conduct, design, sell, and deliver our research via the Internet. Through this
platform we can:

- Create research tools that allow us to perform, and clients to use,
research on the Internet.

- Conduct direct marketing campaigns.

- Improve fulfillment of sales leads.

- Accelerate the production of our research.

We intend to continue to use emerging technologies to improve the reach and
quality of our research.

PRODUCTS AND SERVICES

We offer annually renewable memberships to WholeView Research that provide
our clients comprehensive access to our core research offerings of
Technographics(R), TechStrategy(TM), and TechRankings(TM). We also offer
Strategic Services and host Forum and Summit Events, which, when combined with
our WholeView Research, provide unified guidance on customer trends, business
strategy, and technology investments.

WHOLEVIEW RESEARCH

In January 2002, we introduced WholeView Research -- a unified offering
that provides clients with comprehensive access to our core research offerings
and is designed to inform our clients' strategic decision-making. WholeView
Research consists of a library of cross-linked documents that interconnects our
reports, data, product rankings, and research archives and allows clients to
move barrier-free across our research. Our core research offerings consist of
the following products:

- TECHNOGRAPHICS. Technographics provides primary data and quantitative
research that analyzes how technology is considered, bought, and used by
consumers and businesses. Consumer Technographics

4

delivers both primary data and quantitative research, based on surveys of
approximately 200,000 households in North America and Europe, which is
analyzed and categorized into relevant market segments to help
organizations capitalize on changing consumer behavior. Business
Technographics is an ongoing quantitative research program that provides
comprehensive, in-depth assessments of what motivates businesses to
choose certain technologies and vendors over others.

- TECHSTRATEGY. TechStrategy provides qualitative industry and technology
research that analyzes the impact of technology change and informs
strategic decision-making.

- TECHRANKINGS. TechRankings consist of customizable, interactive research
databases and Web tools that evaluate technologies on the basis of
laboratory testing and measurement of characteristics weighted by us.
TechRankings research synthesizes a rigorous combination of product
evaluation results, market analysis, and user interviews to provide
detailed, objective guidance to clients as they select and implement
emerging technologies.

The following table lists the specific research topic areas covered in our
core research offerings:

AUTOMOTIVE -- Marketing, Manufacturing, Distribution, Retail
CONSUMER PACKAGED GOODS -- Marketing, Merchandising, Distribution, RFD
Technology, Retail
CONTENT MANAGEMENT -- Web Content, Enterprise Content, Digital Assets,
Collaborative Content Management
CUSTOMER RELATIONSHIP MANAGEMENT -- Sales, Marketing & Service, Consumer
Marketing Platforms, Contact Center Infrastructure, Customer Service
ENTERPRISE APPLICATIONS -- ERP, Enterprise Services Automation, B2B
Sell-Side
FINANCIAL SERVICES -- Banking, Insurance, Investment, Credit
HEALTHCARE -- Health Plans, Pharmaceuticals, Healthcare Providers,
Electronic Data Capture
INFRASTRUCTURE -- Servers, Corporate Wireless, Storage, Business
Intelligence, Commerce Platforms
INTEGRATION & WEB SERVICES -- Middleware, EAI/B2B Integration Tools,
Process Integration, Business Process Management
IT SECURITY -- Technology Security Risk, IT Security Management, Business
Continuity Planning
IT SPENDING -- IT Budgeting, Technology Adoption & Purchase Plans, IT
Organizations & Decision-Making
MANUFACTURING & B2B -- Collaboration, Trade Forecasts, Energy, Chemicals
MARKETING -- Branding, Promotion, Cross-Media Marketing, Marketing
Measurement, Online Advertising, Loyalty Programs, Portal Deals
MEDIA & ENTERTAINMENT -- Publishing, Television, Music, Content
Syndication
PORTALS & SITE TECHNOLOGY -- Measurement Tools, Process Portals, Search
Engines, Self-Service, X Internet
PRODUCT LIFE-CYCLE MANAGEMENT -- Product Development, Process and Discrete
Marketing, Aftermarket, Demand Management
RETAIL -- Marketing, eCommerce, Merchandising, Store Operations,
Technology
SERVICES & OUTSOURCING -- ASPs, Hosting, Outsourcing, Systems Integrators
SUPPLY CHAIN -- Planning & Execution, Logistics, Product Design,
eProcurement Applications
TELECOM & NETWORKS -- Telecom & Mobile Services Carrier Strategy,
Enterprise Network Management, Equipment, Services
TRAVEL -- Marketing, Distribution, Airlines, Hotel & Business & Leisure
Travel
USER EXPERIENCE -- Interface Design, ROI of Design, Scenario Design,
Speech Recognition, Usability

Clients that purchase WholeView Research have access to a password
protected Web site that contains a comprehensive, cross-linked library of our
Technographics, TechStrategy, and TechRankings research, which

5

we call the Personal View. The Personal View helps clients organize and
customize their research and provides access to:

- Forrester reports that deliver a concise, forward-looking analysis of a
significant topic.

- Forrester briefs and Data Overviews that offer succinct, timely
examinations of current industry developments written as events demand.

- Customizable research databases and Web tools.

- Product evaluations, benchmarks, and surveys.

In addition, clients subscribing to WholeView Research have access to the
Client Resource Center, a call center staffed by members of our research staff
who are dedicated to providing additional information about our research,
methodologies, coverage areas, and sources. The Client Resource Center is
available on demand to help clients navigate our research, find relevant data
and forecasts, collect analysis from a variety of related reports, and integrate
our models into client initiatives.

Clients subscribing to WholeView Research also may purchase the following
services to supplement the core research offerings:

- UNLIMITED ANALYST ACCESS. Unlimited Analyst Access licenses enable
clients to contact any of our analysts for quick feedback on projects a
client may have underway, to discuss ideas and models in the research, or
to answer questions about unfolding industry events. Unlimited Analyst
Access sessions are 30-minute phone calls, scheduled upon client request.

- TECHNOGRAPHICS DATA & SERVICES. Our Technographics Data & Services
leverage our core research findings to provide the detail that data
marketers, product developers, and consumer experts need to gain an
in-depth understanding of how consumers and businesses think about and
use technology. We combine respondent data sets from our Technographics
surveys into three offerings: Consumer Technographics North America,
Consumer Technographics Europe, and Business Technographics North
America. In addition to these three offerings, clients have unlimited,
on-demand access to a Technographics data specialist to help them use the
research effectively to meet their specific business needs.

STRATEGIC SERVICES

Our Strategic Services provide a number of ways for clients to interact
directly with our research analysts and, depending on the service purchased,
customize the research performed. Our Strategic Services include:

- Custom Research

- Custom Consumer Research

- Consumer Technographics Omnibus Survey

- Advisory Services

- Structured Advisory Packages

- Multi-Client Advisory Packages

- Site Evaluation and Design Services

- Technology Strategy Development Program

We offer several unique programs within each of these categories.

6

CUSTOM RESEARCH

Our Custom Research offerings include:

- CUSTOM CONSUMER RESEARCH (FORMERLY TECHNOGRAPHICS CUSTOM DATA
PROJECTS). Any of the surveys conducted by our Consumer Technographics
North America team are available for custom analysis. Each year, hundreds
of relevant questions in surveys conducted by our Consumer Technographics
North America team are answered by more than 200,000 respondents. These
responses are the foundation for a customizable array of services
tailored to clients' data needs. These services may include Consumer
Technographics Custom Segmentation, Consumer Technographics Customized
Surveys, or Consumer Technographics North America Zip Code Analysis.
Either with the help of a Technographics data specialist or by
downloading the data sets directly from our Web site, clients have access
to the precise data they need to drive their primary market research.

- CONSUMER TECHNOGRAPHICS OMNIBUS SURVEY. The Consumer Technographics
Omnibus Survey provides our clients with the opportunity to ask 5,000 of
our Benchmark respondents proprietary questions. Forrester then appends
the responses to the full Technographics Benchmark Survey, which includes
topics ranging from mobile phone ownership to online financial and retail
behaviors. In effect, participating clients receive custom data at a much
lower cost than that of full-scale primary research.

ADVISORY SERVICES

Our Advisory Services offerings include:

STRUCTURED ADVISORY PACKAGES

Our Structured Advisory Packages include:

- SOFTWARE SELECTION ADVISORY PROGRAM. Our Software Selection Advisory
Program combines expert guidance from our analysts with TechRankings
research to help clients select the best technology product with the
lowest risk. The Software Selection Advisory Program enhances
TechRankings research and online tools with four 1-hour conference calls
led by a TechRankings analyst.

- VENDOR SALES ADVISORY PROGRAM. Our Vendor Sales Advisory Program is a
structured program that provides technology vendors and solution
providers deep product positioning and competitive intelligence, which
vendors and providers can use when selling and marketing their products
to prospects and existing customers. Sales and marketing forces receive
competitive product analyses and training presentations that provide
robust insight on how to sell against other products.

- RETAIL COMPETITIVE ASSESSMENT. Our Retail Competitive Assessment arms
clients with profiles of their competitors' online and offline customers,
including demographics, spending, and shopping attitudes. With this
information, we believe clients can sharpen their marketing messages,
optimize their merchandising assortments, improve their store formats,
and tailor their service propositions to increase revenues and grow
market share.

MULTI-CLIENT ADVISORY PACKAGES

Our Multi-Client Advisory Packages include:

- FORRESTER OVAL PROGRAM. Our Forrester Oval Program currently consists of
the CIO Group and provides member CIOs from $1 billion-plus companies
with exclusive industry-specific benchmark data, access to a senior
analyst for individual research-related questions, membership-directed
research, best practices, and peer-to-peer networking.

- ONLINE FINANCIAL SERVICES BENCHMARK. Our Online Financial Services
Benchmark is a quarterly report that provides standard metrics for banks
to assess their online success. Participants provide us with usage and
activation data on the following metrics: online banking, bill payment,
aggregation,

7

credit card services, and small business banking. Each participant
receives a benchmark of their data against their peer group and across
the entire industry.

SITE EVALUATION & DESIGN SERVICES

Our Site Evaluation & Design Services include:

- WEB SITE REVIEW. Our Web Site Review provides a targeted,
action-oriented assessment of a client's B2C or B2B Web site, extranet,
or intranet. Feedback is based on comprehensive examination of the site
by our analysts, as well as any additional information a client provides
about its Web strategies.

- WEB SITE REVIEW BOOT CAMP. The Web Site Review Boot Camp teaches clients
how to review their sites with the objectivity and expertise of a
Forrester analyst in a two-day intensive training session for Web design
and strategy.

- EFFECTIVE SITE DESIGN BOOT CAMP. The Effective Site Design Boot Camp is
a workshop that takes clients through the steps of a scenario-based
design process to help produce useful, user-friendly sites. This workshop
provides a framework for making successful design-related decisions and
reveals tactics for obtaining better results from designers for
marketing, IT, and eBusiness decision-makers who hire, manage, or approve
the work of online site designers and design firms.

TECHNOLOGY STRATEGY DEVELOPMENT PROGRAM ("TSDP")

Our Technology Strategy Development Program focuses on a client's distinct
business needs to help create and refine technology strategies that drive
business forward. Each program is custom-built under the direction of a
dedicated senior research analyst with several years of industry experience who
collaborates with the client to plan the optimum program format and deliverables
for that client. Example programs include developing a business plan to take a
technology to a new market and designing an IT organization to implement
Internet-centric technologies.

FORUM AND SUMMIT EVENTS

We host Forum and Summit Events in various locations throughout the year.
Forums and Summits bring together senior executives for one- or two-day
conferences to network with their peers and to hear leaders from the technology
industry and other business sectors discuss the impact of technology change on
business.

PRICING AND CONTRACT SIZE

During 2002, the prices for contracts that included only core research were
a function of the number of research recipients within the client organization.
The average contract for annual memberships for core research only at December
31, 2002 was approximately $43,900, a decrease of 11% from $49,400 at December
31, 2001. In 2002, the prices for contracts that included core research and
Strategic Services were also a function of the number of research recipients
within the client organization and the amount and type of Strategic Services.
The average contract for an annual membership for research which also included
Strategic Services at December 31, 2002 was approximately $80,500, a decrease of
10% from $89,500 at December 31, 2001.

We believe that the agreement value of contracts to purchase research and
Strategic Services provides a significant measure of our business volume. We
calculate agreement value as the total revenues recognizable from all research
and advisory service contracts in force at a given time without regard to how
much revenue has already been recognized. Agreement value decreased 33% to $78.1
million at December 31, 2002 from $116.2 million at December 31, 2001.

RESEARCH ANALYSTS AND METHODOLOGY

We employ a structured methodology in our research that enables us to
identify and analyze technology trends, markets, and audiences and ensures
consistent research quality and recommendations across all

8

coverage areas. Our research provides consistent research themes and
comprehensive coverage of business and technology issues across our coverage
areas.

Our Technographics research combines our qualitative research methodology
with traditional survey research methodologies such as correlations,
frequencies, cross-tabulations, and multivariant statistics to produce research
reports, quantitative survey data, and data briefs. We use third-party data
vendors for data collection and tabulation.

In our TechStrategy research, we use the following primary research inputs:

- Confidential interviews with early adopters and mainstream users of new
technologies.

- In-depth interviewing with technology vendors and suppliers of related
services.

- Ongoing briefings with vendors to review current positions and future
directions.

Our TechRankings research combines in-depth product test results and user
interviews with market and strategic analysis to score attributes of emerging
technologies. We then apply this research and strategic analysis to determine
the weighting of each attribute and create interactive scorecards, databases,
and reports.

All of our WholeView Research begins with discussion sessions with analysts
to generate ideas for research. Analysts test ideas throughout the research
report process at both informal and weekly research meetings. Our reports are
consistent in format, and we require our analysts to write research reports in a
structure that combines graphics with easy-to-read text to deliver concise,
decisive, and objective research to our clients. At the final stage of the
research process, senior analysts meet to test the conclusions of each research
report. An analyst who has not been involved in the creation of a particular
report reviews the report to ensure quality, clarity, and readability. All
research is reviewed and graded by senior research management.

SALES AND MARKETING

We sell our products and services through our headquarters in Cambridge,
Massachusetts, our research centers in Amsterdam, Frankfurt, London, and San
Francisco, and our sales offices in Sydney and Tokyo. In 2002, we closed our
sales offices in Austin and Chicago. We employed 105 sales representatives as of
December 31, 2002, a decrease of 43% from 184 as of December 31, 2001. Our
direct sales force consists of:

- Sales directors who focus on high-level client contact and service.

- Account managers who are responsible for maintaining and leveraging the
current client base by renewing and selling additional products and
services to existing clients.

- Account executives who develop new business in assigned territories.

- Telesales representatives who operate out of our headquarters in
Cambridge.

We also sell our research products directly online through our Web site and
use local independent sales representatives to market and sell our products and
services internationally in Australia, Brazil, Hong Kong, India, Korea, Latin
America, South Africa, Spain, Taiwan, Turkey, and the United Arab Emirates.

Our marketing efforts are designed to increase awareness of the Forrester
brand and further our reputation as a leader in emerging technology research. We
actively promote brand awareness via our Web site, Forum and Summit Events,
extensive worldwide press relations, and direct mail campaigns. We also employ
an integrated direct marketing strategy that uses Internet, mail, and telephone
channels for identifying and attracting high-quality sales leads. We encourage
our analysts to increase our visibility by having their research ideas
selectively distributed through various Internet, print, and television outlets.

As of December 31, 2002, our research was delivered to 1,125 client
companies. No single client company accounted for more than 2% of our revenues
for the year ended December 31, 2002.

9

COMPETITION

We believe that the principal competitive factors in our industry include
the following:

- Quality of research and analysis.

- The ability to offer products that meet the changing needs of
organizations for research and analysis.

- Independence from vendors and clients.

- Timely delivery of information.

- Customer service.

- The ability to leverage new technologies.

- Price.

We believe that we compete favorably with respect to each of these factors.
We feel that our early focus on emerging technologies is a significant
competitive advantage. Additionally, we believe that our WholeView approach and
easy-to-read research format distinguish us from our competitors.

We compete in the market for research about emerging technologies. Our
principal direct competitors include other independent providers of similar
services, such as Gartner Group, as well as Internet and digital media
measurement services. In addition, our indirect competitors include the internal
planning and marketing staffs of our current and prospective clients, as well as
other information providers such as electronic and print publishing companies,
survey-based general market research firms, and general business consulting
firms. Our indirect competitors could choose to compete directly against us in
the future. In addition, there are relatively few barriers to entry into our
market, and new competitors could readily seek to compete against us in one or
more market segments addressed by our research. Increased competition could
adversely affect our operating results through pricing pressure and loss of
market share. There can be no assurance that we will be able to continue to
compete successfully against existing or new competitors.

EMPLOYEES

As of December 31, 2002, we employed a total of 344 persons, including 124
research staff and 105 sales representatives.

Our culture emphasizes certain key values -- including client service,
quality, and creativity -- that we believe are critical to our future growth. We
promote these values through rigorous training and frequent recognition for
achievement. We encourage teamwork and promote individuals who foster these
values. Each new employee that we hire undergoes a week-long training process.
This training includes workshops and presentations by our executives, which
focus on our corporate goals and provide individuals with the skills necessary
to achieve our key values.

All members of our research staff participate in our incentive compensation
bonus plan. Their performance is measured against individual and team goals to
determine an eligible bonus that is funded by our overall performance against
key business objectives. Individual and team goals include on-time delivery of
high-quality research and advisory services support to clients. In addition,
analysts, research directors, and research management are eligible to receive
equity awards under our incentive stock option plan.

All of our direct sales representatives participate in our annual sales
incentive compensation plan. Under this plan, we pay commissions monthly to
sales personnel based upon attainment of net bookings against established
quotas. In addition, all account managers, account executives, regional
managers, and regional directors are eligible to participate in our incentive
stock option plan based on performance.

10

RISKS AND UNCERTAINTIES

We are subject to risks and uncertainties that could cause our actual
future activities and results of operations to be materially different from
those set forth in forward-looking statements made by us. These risks and
uncertainties include:

INTEGRATION OF GIGA. In February 2003, we acquired Giga Information Group,
Inc., a global technology advisory firm. We may be unable to achieve the
anticipated benefits from this acquisition. For example, we cannot be certain
that Giga's customers will continue to do business with us or that the Giga
employees who continue their employment with us will become well-integrated into
our operations and culture. In addition, the integration of Giga can be
disruptive to our operations and divert management time and attention. If we do
not integrate the Giga acquisition effectively, we may fail to achieve the
benefits we expected and our financial condition and results of operations may
be adversely affected.

FLUCTUATIONS IN OUR OPERATING RESULTS. Our revenues and earnings may
fluctuate from quarter to quarter based on a variety of factors, many of which
are beyond our control, and which may affect our stock price. The factors
include, but are not limited to:

- The timing and size of new and renewal memberships for our research from
clients.

- The timing of revenue-generating Forum and Summit Events sponsored by us.

- The utilization of our Strategic Services by our clients.

- The introduction and marketing of new products and services by us and our
competitors.

- The hiring and training of new analysts and sales personnel.

- Changes in demand for our research.

- General economic conditions.

As a result, our operating results in future quarters may be below the
expectations of securities analysts and investors, which could have an adverse
effect on the market price for our common stock. Factors such as announcements
of new products, services, offices, or strategic alliances by us or the
technologies services industry may have a significant impact on the market price
of our common stock. The market price for our common stock may also be affected
by movements in prices of stocks in general.

A DECLINE IN RENEWALS FOR OUR MEMBERSHIP-BASED RESEARCH SERVICES. Our
success depends in large part upon renewals of memberships for our research
products. Approximately 57%, 51%, and 74% of our client companies with
memberships expiring during the years ended December 31, 2002, 2001, and 2000,
respectively, renewed one or more memberships for our products and services. The
decline in renewal rates for our research products since 2000 is reflective of
the more difficult economic environment, and any future declines in renewal
rates could have an adverse effect on our revenues.

THE ABILITY TO ATTRACT AND RETAIN QUALIFIED PROFESSIONAL STAFF. Our future
success will depend in large measure upon the continued contributions of our
senior management team, research analysts, and experienced sales and marketing
personnel. Thus, our future operating results will be largely dependent upon our
ability to retain the services of these individuals and to attract additional
professionals from a limited pool of qualified candidates. We experience
competition in hiring and retaining professionals from developers of Internet
and emerging-technology products, other research firms, management consulting
firms, print and electronic publishing companies and financial services
companies, many of which have substantially greater ability, either through cash
or equity, to attract and compensate professionals. If we lose professionals or
are unable to attract new talent, we will not be able to maintain our position
in the market or grow our business.

LOSS OF KEY MANAGEMENT. Our future success will depend in large part upon
the continued services of a number of our key management employees. The loss of
any one of them, in particular George F. Colony, our founder, Chairman of the
Board, and Chief Executive Officer, could adversely affect our business.

11

FAILURE TO ANTICIPATE AND RESPOND TO MARKET TRENDS. Our success depends in
part upon our ability to anticipate rapidly changing technologies and market
trends and to adapt our research to meet the changing information needs of our
clients. The technology and commerce sectors that we analyze undergo frequent
and often dramatic changes. The environment of rapid and continuous change
presents significant challenges to our ability to provide our clients with
current and timely analysis, strategies and advice on issues of importance to
them. Meeting these challenges requires the commitment of substantial resources.
Any failure to continue to provide insightful and timely analysis of
developments, technologies, and trends in a manner that meets market needs could
have an adverse effect on our market position and results of operations.

ABILITY TO DEVELOP AND OFFER NEW PRODUCTS AND SERVICES. Our future success
will depend in part on our ability to offer new products and services. These new
products and services must successfully gain market acceptance by addressing
specific industry and business organization sectors, anticipating and
identifying changes in client requirements and changes in the technology
industry. The process of internally researching, developing, launching and
gaining client acceptance of a new product or service, or assimilating and
marketing an acquired product or service, is risky and costly. We may not be
able to introduce new, or assimilate acquired, products or services
successfully. Our failure to do so would adversely affect our ability to
maintain a competitive position in our market and continue to grow our business.

COMPETITION. We compete in the market for research products and services
with other independent providers of similar services. We may also face increased
competition from Internet-based research firms. Some of our competitors have
substantially greater financial, information-gathering, and marketing resources
than we do. In addition, our indirect competitors include the internal planning
and marketing staffs of our current and prospective clients, as well as other
information providers such as electronic and print publishing companies,
survey-based general market research firms and general business consulting
firms. Our indirect competitors may choose to compete directly against us in the
future. In addition, there are relatively few barriers to entry into our market
and new competitors could readily seek to compete against us in one or more
market segments addressed by our products and services. Increased competition
could adversely affect our operating results through pricing pressure and loss
of market share.

This list of uncertainties and risks is not exhaustive. Certain factors
that could affect our actual future activities and results and cause actual
results to differ materially from those contained in forward-looking statements
made by us include, but are not limited to, those discussed above as well as
those discussed in other reports filed by us with the Securities and Exchange
Commission.

12

EXECUTIVE OFFICERS

The following table sets forth information about our directors and
executive officers as of March 31, 2003.

George F. Colony, Forrester's founder, has served as Chairman and Chief
Executive Officer since its inception in July 1983.

Richard C. Belanger became Forrester's chief technology officer in May
1998. From 1996 to 1998, Mr. Belanger served as vice president of interactive
media and vice president of technology for Mainspring Communications, an
Internet strategy research consulting firm. He was vice president of technology
at Information Access Company, an on-line information provider, from 1995 to
1996, and vice president of information services at Information Access Center,
formerly Ziff-Davis Technical Information Company, from 1992 to 1995.

Tahar Bouhafs became managing director, Asia, MEA, Latin America in October
2001. Mr. Bouhafs was previously Forrester's director of international channels
from 1998 to 2001 and director of European sales from 1992 to 1998. Prior to
joining Forrester, Mr. Bouhafs was a faculty member in the computer science
departments at Fitchburg State College and Boston University from 1985 to 1992.

Neil Bradford became managing director, Forrester Global in October 2001.
From 1999 to 2001, Mr. Bradford was the managing director of Forrester Research
Ltd., a role he assumed after Forrester's acquisition in November 1999 of
Fletcher Research Limited, a UK-based research firm co-founded by Mr. Bradford
in 1997. Prior to co-founding Fletcher and joining Forrester, Mr. Bradford was a
consultant at McKinsey and Company, a management consulting firm, from 1995 to
1997.

Robert W. Davidson became managing director, Forrester Europe in June 2001.
Prior to joining Forrester, Mr. Davidson was vice president and corporate
controller from 2000 to 2001 and vice president, finance from 1998 to 2000 for
Baan Company N.V., a software solutions and services company. From 1996 to 1998,
Mr. Davidson served as chief operating officer, Europe of PSI/Vicorp, a software
solutions company.

Emily Nagle Green became managing director, Forrester North America in
January 2002. Ms. Green previously was managing director, Forrester Research
B.V. from 1998 to 2001 and director, people & technology strategies, from 1996
to 1998. Prior to joining Forrester, Ms. Green was vice president of marketing
and sales at Point of View, Inc., a video technology training firm, from 1994 to
1995, and vice president of strategic marketing for ADC Fibermux, a computer
networking hardware manufacturer, from 1991 to 1994.

13

Warren Hadley became Forrester's chief financial officer and treasurer in
February 2002. Mr. Hadley previously was our director of finance from 1999 to
2002 and served as our assistant treasurer from 2000 to 2001. Mr. Hadley was our
corporate controller from 1996 to 1999. Prior to joining Forrester, Mr. Hadley
served as an audit manager for MacDonald, Levine, Jenkins, an accounting firm,
from 1993 to 1995.

Brian E. Kardon became Forrester's vice president of strategy and marketing
in January 2003. Prior to joining Forrester, Mr. Kardon was a co-founder and
managing partner of Catalyst Consulting Collaborative, a strategic consulting
firm, from 2002 to 2003 and president of First Act, Inc., a children's music
development company, from 2000 to 2001. Mr. Kardon also served as the executive
vice president of marketing and business at HomePortfolio, an online marketplace
for home design, products, and services, from 1999 to 2000 and senior vice
president and chief marketing officer of Cahners Business Information, a
business publisher, from 1995 to 1999. From 1987 to 1995, Mr. Kardon served as
director of the marketing strategy practice at Braxton Associates, the strategy
consulting division of Deloitte & Touche.

Dan Mahoney became Forrester's vice president of Giga Research in March
2003 in conjunction with Forrester's acquisition of Giga Information Group, Inc.
Prior to that, he was senior vice president of research at Giga Information
Group, Inc. from 1997 to 2003. Prior to joining Giga, Mr. Mahoney was the
general manager of Intranet Partners, an Intranet consulting company, from 1996
to 1997; the general manager of Dataquest North America, a technology
information provider, in 1996; and director of systems development for Household
Credit Services, the credit card division of Household International, Inc. from
1993 to 1996.

Timothy J. Moynihan, Esq. became Forrester's general counsel in February
2002. Mr. Moynihan previously served as Forrester's corporate counsel from 1998
to 2002. Mr. Moynihan also has served as secretary of Forrester since 2001, as
assistant secretary from 2000 to 2001, and as a member of Forrester's legal
department since 1996.

Timothy M. Riley became Forrester's vice president, strategic growth in
August 1997. Prior to joining Forrester, Mr. Riley served as the vice president
of human resources at Renaissance Solutions, a strategy and knowledge management
consulting firm, from 1993 to 1997. Mr. Riley served as director of human
resources at Bolt Beranek and Newman, a technology research and development
company, from 1987 to 1993.

Henk W. Broeders became a director of Forrester in May 1998. Mr. Broeders
has been the Chairman of the Executive Board of Cap Gemini N.V., a management
consulting firm located in the Netherlands, since January 2001. Cap Gemini NV is
the Dutch subsidiary of the global CGEY organization. From 1992 to 1998, Mr.
Broeders was general manager of IQUIP Informatica B.V., a software company in
the Netherlands.

Robert M. Galford became a director of Forrester in November 1996. Mr.
Galford has been a managing partner of the Center for Executive Development, an
executive education provider in Boston, since April 2001. From 1999 to 2001 he
was the executive vice president and chief people officer at Digitas, Inc., a
technology and marketing services firm. From 1994 to 1999 he consulted to
professional services firms and taught in the Executive Programs at the Kellogg
School of Management at Northwestern University and Columbia University's
Graduate School of Business. Before joining Columbia's Executive Programs, he
taught at Boston University from 1993 to 1994. Prior to his work in executive
education, Mr. Galford was vice president of the MAC Group, and its successor
firm, Gemini Consulting, both of which are management consulting firms, from
1991 to 1994.

George R. Hornig became a director of Forrester in November 1996. Mr.
Hornig has been a managing director and chief operating officer of the Private
Equity Division at Credit Suisse First Boston, an investment banking firm, since
1999. He was an executive vice president of Deutsche Bank Americas Holding
Corporation, a diversified financial services holding company, and several of
its affiliated entities, from 1993 to 1998. He is also a director of Unity
Mutual Life Insurance Company, U.S. Timberlands Company, L.P., and Veridian
Corporation.

Michael H. Welles became a director of Forrester in November 1996. Mr.
Welles is chief operating officer and founder of S2 Security Corporation, an
IP-based facility security systems start-up. He previously served as vice
president and general manager of the platforms business with NMS Communications,
an OEM infrastructure supplier to the telecom industry, from 2000 to 2002. He
previously served as vice president of
14

news operations and engineering for Individual.com, NewsEdge Corporation, and
Individual, Inc., a group of news solutions companies, from 1997 to 2000, and
before that as a general manager at Lotus Development Corporation, a software
company, from 1991 to 1997.

ITEM 2. PROPERTIES

Our headquarters are located in approximately 146,000 square feet of office
space in Cambridge, Massachusetts. This facility accommodates research,
marketing, sales, technology, and operations personnel. The initial lease term
of this facility expires in September 2006. We have the option to extend this
lease for up to two additional terms of five years each.

We also have leased office space for our research centers in Amsterdam,
Frankfurt, London, and San Francisco, and for our sales office in Sydney and
Tokyo.

We believe that our existing facilities are adequate for our current needs
and that additional facilities are available for lease to meet future needs.

ITEM 3. LEGAL PROCEEDINGS

We are not currently a party to any material legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock is traded on the Nasdaq National Market under the symbol
"FORR." On March 28, 2003, the closing price of our common stock was $14.71.

As of March 24, 2003 there were approximately 55 stockholders of record of
our common stock.

The following table represents the ranges of high and low sale prices of
our common stock for the fiscal years ended December 31, 2001, and December 31,
2002:

We did not declare or pay any dividends during the fiscal years ended
December 31, 2001 and 2002. We anticipate that future earnings, if any, will be
retained for the development of our business, and we do not anticipate paying
any cash dividends on our common stock in the foreseeable future.

15

ITEM 6.SELECTED CONSOLIDATED FINANCIAL DATA

The selected financial data presented below is derived from our
consolidated financial statements and should be read in connection with those
statements.

16

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

We are a leading independent emerging-technology research firm that
conducts research and analysis on the impact of emerging technologies on
business, consumers, and society. We provide our clients with an integrated
perspective on technology and business, which we call the WholeView. This
approach provides companies with the strategies, data, and product evaluations
they need to win customers, identify new markets, and gain competitive
operational advantages. Our products and services primarily are targeted to
benefit the senior management, business strategists, and marketing and
technology professionals at $1 billion-plus companies who use our prescriptive,
executable research to understand and capitalize on business models and emerging
technologies.

We derive revenues from memberships to our core research and from our
Strategic Services and Forum and Summit events. We offer contracts for our
products and services that are typically renewable annually and payable in
advance. Research revenues are recognized ratably over the term of the contract.
Accordingly, a substantial portion of our billings is recorded as deferred
revenue. Billings attributable to advisory services are initially recorded as
deferred revenue and recognized as revenue when performed. Similarly, Forum and
Summit billings are initially recorded as deferred revenue and are recognized
upon completion of each event.

Our operating expenses consist of cost of services and fulfillment, selling
and marketing expenses, general and administrative expenses, and depreciation
and amortization. Cost of services and fulfillment represents the costs
associated with the production and delivery of our products and services, and it
includes the costs of salaries, bonuses, and related benefits for research
personnel and all associated editorial, travel, and support services. Selling
and marketing expenses include salaries, employee benefits, travel expenses,
promotional costs, sales commissions, and other costs incurred in marketing and
selling our products and services. General and administrative expenses include
the costs of the technology, operations, finance, and strategy groups and our
other administrative functions. Overhead costs are allocated over these
categories according to the number of employees in each group.

We believe that the "agreement value" of contracts to purchase research and
advisory services provides a significant measure of our business volume. We
calculate agreement value as the total revenues recognizable from all research
and advisory service contracts in force at a given time, without regard to how
much revenue has already been recognized. Agreement value decreased 33% to $78.1
million at December 31, 2002 from $116.2 million at December 31, 2001. Agreement
value decreased 38% to $116.2 million at December 31, 2001 from $187.8 million
at December 31, 2000. No single client accounted for more than 3% of agreement
value at December 31, 2002. Our historical experience is that a majority of
client companies renew expiring contracts each year. Approximately 57%, 51%, and
74% of our client companies with memberships expiring during the years ended
December 31, 2002, 2001, and 2000, respectively, renewed one or more memberships
for our products and services. These renewal rates are not necessarily
indicative of the rate of future retention of our revenue base. The declines in
agreement value and renewal rates are reflective of the more difficult economic
environment and will lead to a decrease in revenue for 2003.

REORGANIZATIONS

On July 24, 2002, we announced a reduction of our work force by
approximately 21 positions in response to conditions and demands of the market.
As a result, we recorded a reorganization charge of approximately $2.6 million
during 2002. Approximately 31% of the terminated employees had been members of
the sales force, while 41% had been in research and 28% had held administrative
roles. The charge consisted primarily of severance and related benefits costs,
office consolidation costs, such as contractual lease commitments for space that
was vacated, the write-off of related leasehold improvements, and other payments
for professional services incurred in connection with the reorganization.
Additional depreciable assets that were written off consisted primarily of
computer equipment, software and furniture and fixtures related to vacated
locations in connection with the reorganization.

17

Total costs related to the July 24, 2002 reorganization are as follows:

There have been no changes in estimates during the periods presented.

The accrued costs related to the July 24, 2002 reorganization are expected
to be paid in the following periods:

On January 10, 2002, we announced a reduction of our work force by
approximately 126 positions in response to conditions and demands of the market
and a slower economy. As a result, we recorded an initial reorganization charge
of approximately $9.3 million in the three months ended March 31, 2002.
Approximately 39% of the terminated employees had been members of the sales
force, 33% were in research and 28% had held administrative roles. The initial
charge consisted primarily of severance and related benefits costs, office
consolidation costs, such as contractual lease commitments for space that was
vacated, the write-off of related leasehold improvements, and other payments for
professional services incurred in connection with the reorganization. Additional
depreciable assets that were written off included computer equipment, software,
and furniture and fixtures related to terminated employees and vacated locations
in connection with the reorganization.

During the three months ended September 30, 2002, we revised our estimates
of the January 10, 2002 reorganization charge to provide for additional losses
for office consolidation costs and the write-off of related leasehold
improvements due to deteriorating real estate market conditions. As a result, we
recorded an additional reorganization charge of approximately $593,000. We also
concluded that approximately $74,000 of the initial reorganization charge
associated with severance was excess, and accordingly, reversed that amount
through reorganization costs in the statement of income during the three months
ended September 30, 2002.

Total costs related to the January 10, 2002 reorganization are as follows:

18

The accrued costs related to the January 10, 2002 reorganization are
expected to be paid in the following periods:

On July 12, 2001, we announced a sales force reorganization and general
work force reduction in response to conditions and demands of the market and a
slower economy. As a result, we reduced our work force by 111 positions, closed
sales offices in Atlanta, Los Angeles, Melbourne, New York, and Zurich, and
recorded a reorganization charge of approximately $3.1 million in the three
months ended September 30, 2001. Approximately 66% of the terminated employees
had been members of the sales force, while 12% had been in research and 22% had
held administrative roles. This charge consisted primarily of severance and
related benefits costs from the work force reduction. This charge also included
office consolidation costs, such as contractual lease commitments for space that
was vacated, the write-off of related leasehold improvements, and other payments
for professional services incurred in connection with the reorganization.
Additional depreciable assets that were written off included computer equipment,
software, and furniture and fixtures related to terminated employees and vacated
locations in connection with the reorganization.

During the three months ended March 31, 2002, management concluded that
approximately $163,000 of the reorganization charge was excess, and accordingly,
reversed that amount through reorganization costs in the statement of income
during that period.

The costs related to the July 12, 2001 reorganization are as follows:

RECENT DEVELOPMENTS

In February 2003, we acquired Giga Information Group, Inc. ("Giga") for an
aggregate purchase price of $60 million in cash pursuant to a tender offer and
second step merger at a price of $4.75 per share of Giga common stock in cash.
The purchase price was paid out of our cash on hand.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management's discussion and analysis of financial condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance with generally accepted accounting principles in the
United States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. On an ongoing basis, we evaluate our estimates, including those
related to our revenue recognition, allowance for doubtful accounts,
non-marketable investments, and goodwill

19

and other intangible assets and income taxes. Management bases its estimates on
historical experience and various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

We have identified the following policies as critical to our business
operations and the understanding of our results of operations. This listing is
not a comprehensive list of all of our accounting policies. In many cases, the
accounting treatment of a particular transaction is specifically dictated by
generally accepted accounting principles, with no need for management's judgment
in their application. There are also areas in which management's judgment in
selecting any available alternative would not produce a materially different
result. For a discussion of our other accounting policies, see Note 1 in the
Notes to Consolidated Financial Statements in Item 15 of this Annual Report on
Form 10-K, beginning on page F-7.

- REVENUE RECOGNITION. We generally invoice our core research, advisory,
and other services when orders are received. The contract amount is
recorded as accounts receivable and deferred revenue when the client is
invoiced. Core research is generally recognized as revenue ratably over
the term of the agreement. Advisory services are recognized as revenue
during the period in which the services are performed. Revenue from
events is recognized upon completion of the event. Furthermore, our
revenue recognition determines the timing of commission expenses that are
deferred and expensed to operations as the related revenue is recognized.
We evaluate the recoverability of deferred commissions at each balance
sheet date. As of December 31, 2002, deferred revenues and deferred
commissions totaled $42.1 million and $3.5 million, respectively.

- ALLOWANCE FOR DOUBTFUL ACCOUNTS. We maintain an allowance for doubtful
accounts for estimated losses resulting from the inability of our
customers to make contractually obligated payments that totaled
approximately $827,000 as of December 31, 2002. Management specifically
analyzes accounts receivable and historical bad debts, customer
concentrations, current economic trends, and changes in our customer
payment terms when evaluating the adequacy of the allowance for doubtful
accounts. If the financial condition of our customers were to
deteriorate, resulting in an impairment of their ability to make
payments, additional allowances may be required.

- NON-MARKETABLE INVESTMENTS. We hold minority interests in companies and
equity investment funds that totaled approximately $10.0 million as of
December 31, 2002. Our investments are in companies that are not publicly
traded, and, therefore, no established market for these securities
exists. We have a policy in place to review the fair value of our
investments on a regular basis to evaluate the carrying value of the
investments in these companies. We record an impairment charge when we
believe that an investment has experienced a decline in value that is
other than temporary. We recorded impairment charges that totaled
approximately $3.2 million in 2001 and $4.1 in 2002. Future adverse
changes in market conditions or poor operating results of underlying
investments could result in losses or an inability to recover the
carrying value of the investments that may not be reflected in an
investment's current carrying value, thereby possibly requiring an
impairment charge in the future.

- GOODWILL. We have goodwill related to our European operations that
totaled approximately $14.0 million as of December 31, 2002. SFAS No. 142
requires that goodwill and intangible assets with indefinite lives no
longer be amortized but instead be measured for impairment at least
annually or whenever events indicate that there may be an impairment. In
order to determine if an impairment exists, we obtain an independent
appraisal which determines if the carrying amount of the reporting unit
with goodwill exceeds the fair value. The estimates of the reporting
unit's fair value are based on market conditions and operational
performance. We have selected November 30th as the date of performing the
annual goodwill impairment test. As of December 31, 2002, we believe that
the carrying value of our goodwill and other intangible assets is not
impaired. Future events could cause us to conclude that impairment
indicators exist and that goodwill or other intangible assets associated
with our acquired business are impaired. Any resulting impairment loss
could have a material adverse

20

impact on our financial condition and results of operations for the period in
which the loss is recognized.

- INCOME TAXES. We have deferred tax assets related to temporary
differences between the financial statement and tax base of assets and
liabilities as well as operating loss carryforwards that totaled
approximately $21.6 million as of December 31, 2002. In assessing the
realizability of deferred tax assets, management considers whether it is
more likely than not that some portion or all of the deferred tax assets
will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods
in which those temporary differences become deductible and the
carryforwards expire. Although realization is not assured, based upon the
level of historical taxable income of Forrester and projections for
Forrester's future taxable income over the periods during which the
deferred tax assets are deductible and the carryforwards expire,
management believes it is more likely than not that Forrester will
realize the benefits of these deductible differences. The amount of the
deferred tax asset considered realizable, however, could be reduced in
the near term if estimates of future taxable income during the
carry-forward period are reduced.

RESULTS OF OPERATIONS

The following table sets forth selected financial data as a percentage of
total revenues for the periods indicated:

YEARS ENDED DECEMBER 31, 2002 AND DECEMBER 31, 2001

REVENUES. Total revenues decreased 39% to $96.9 million in 2002, from
$159.1 million in 2001. Revenues from core research decreased 46% to $67.4
million in 2002, from $123.7 million in 2001. Decreases in total revenues and
revenues from core research were primarily attributable to decreases in client
companies to 1,125 at December 31, 2002 from 1,541 at December 31, 2001, as well
as lower average contract values due to a more difficult economic environment.
These same factors also resulted in a decrease in revenues from core research as
a percentage of total revenues. No single client company accounted for more than
2% of revenues in 2002.

Advisory services and other revenues decreased 17% to $29.6 million in
2002, from $35.4 million in 2001. This decrease was primarily attributable to
the smaller number of events we held in 2002, which was six Forums and eight
Summits, compared to nine Forums and six Summits held during the year ended
December 31, 2001. The more difficult economic environment also resulted in a
decrease in sales of advisory services. In addition, the reduction of our
research organization responsible for performing advisory services to

21

124 at December 31, 2002 from 196 at December 31, 2001 contributed to the
decrease in advisory services performed.

Revenues attributable to customers outside the United States decreased 41%
to $27.6 million in 2002, from $46.8 million in 2001 but remained constant as a
percentage of total revenues in 2002 compared with 2001 at 29%. The decrease in
international revenues in dollars is primarily attributable to a decline in
revenue from core research related to decreases in the number of client
companies and lower average contract values. We invoice our international
clients in US dollars, except for those in the United Kingdom, whom are billed
in British pounds sterling, and those in continental Europe, whom are billed in
the euro. The effect of changes in currency exchange rates have historically not
had a significant impact on our results of operations.

COST OF SERVICES AND FULFILLMENT. Cost of services and fulfillment
increased as a percentage of total revenues to 35% in 2002, from 31% in 2001.
These expenses decreased 31% to $34.0 million in 2002, from $49.1 million in
2001. The increase in expense as a percentage of revenues was primarily
attributable to cost of services and fulfillment expenses, particularly
compensation-related costs, rent and survey costs associated with our product
offerings, decreasing at a slower rate than revenues. The decreases in these
expenses in absolute dollars is primarily due to compensation-related costs and
travel and entertainment expense savings associated with the reduction in
staffing in our research organization to 124 at December 31, 2002 from 196 at
December 31, 2001. The decrease in expenses is also due to a reduction in events
expense as we hosted fewer events and had a higher mix of lower costing Summits
in 2002 compared to 2001.

SELLING AND MARKETING. Selling and marketing expenses decreased as a
percentage of total revenues to 32% in 2002 from 37% in 2001. These expenses
decreased 47% to $30.7 million in 2002, from $58.3 million in 2001. The
decreases in expenses in absolute dollars and as a percentage of revenues were
principally due to lower compensation-related costs and travel and entertainment
expense savings as a result of the reduction in the number of direct sales
personnel to 105 at December 31, 2002 from 184 at December 31, 2001.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
as a percentage of total revenues to 13% in 2002, from 11% in 2001. These
expenses decreased 25% to $12.7 million in 2002, from $16.9 million in 2001. The
increase in expense as a percentage of revenues was primarily attributable to
general and administrative expenses, particularly compensation-related costs and
rent, decreasing at a slower rate than revenues. The decrease in expenses in
absolute dollars were principally due to the reduction in the staffing level of
our general and administrative group to 66 at December 31, 2002 from 108 at
December 31, 2001.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
decreased 24% to $8.4 million in 2002, from $11.1 million in 2001. The decrease
in these expenses was principally due to low capital expenditures as well as the
write-off of depreciable assets in connection with the workforce reorganizations
in January 2002 and July 2002. The adoption of SFAS No. 142 also resulted in a
reduction in annual amortization of $716,000 due to goodwill no longer being
amortized.

OTHER INCOME, NET. Other income decreased to $1.4 million in 2002, from
$6.4 million in 2001. Other income in 2002 consisted of $6.1 million of interest
income from marketable securities, offset by aggregate write-downs of
approximately $4.1 million on certain non-marketable investments and $593,000 of
other miscellaneous non-operating expenses. Other income in 2001 consisted of
$9.1 million of interest income from marketable securities and a gain of
approximately $1.7 million realized on the sale of our Internet AdWatch(TM)
product, offset by aggregate write-downs of approximately $3.2 million on
certain non-marketable investments and $1.1 million of other miscellaneous
non-operating expenses. The decrease in interest income was principally due to a
decline in market interest rates.

INCOME TAX PROVISION. During 2002, we recorded a tax benefit of $311,000
reflecting an effective tax rate of (111.9%). During 2001, we recorded a tax
provision of $8.9 million, reflecting, an effective tax rate of 33.0%. The
decrease in our effective tax rate resulted primarily from a decrease in
operating income coupled with our investments in tax-exempt marketable
securities and our recording of a valuation allowance of $1.5 million associated
with our operations in Germany.

22

YEARS ENDED DECEMBER 31, 2001 AND DECEMBER 31, 2000

REVENUES. Total revenues increased 1% to $159.1 million in 2001, from
$157.1 million in 2000. Revenues from core research increased 3% to $123.7
million in 2001, from $120.5 million in 2000. Increases in total revenues and
revenues from core research were primarily attributable to sales of additional
core research products to existing clients. No single client company accounted
for more than 2% of revenues in 2001.

Advisory services and other revenues decreased 3% to $35.4 million in 2001,
from $36.7 million in 2000. This decrease was primarily attributable to the
decrease in demand for advisory services in the second half of the year.

Revenues attributable to customers outside the United States increased 14%
to $46.8 million in 2001, from $41.1 million in 2000. Revenues attributable to
customers outside the United States increased as a percentage of total revenues
to 29% in 2001 from 26% in 2000. The increase in international revenues is
primarily attributable to the expansion of our international operations,
specifically our European headquarters in Amsterdam, Netherlands; our Research
Centers in London, England and Frankfurt, Germany; and our sales office in
Tokyo, Japan. We invoice our international clients in US dollars, except for
those billed by our UK Research Centre, which invoices clients in British pounds
sterling. The effect of changes in currency exchange rates historically have not
had a significant impact on our results of operations.

COST OF SERVICES AND FULFILLMENT. Cost of services and fulfillment
increased as a percentage of total revenues to 31% in 2001, from 29% in 2000.
These expenses increased 8% to $49.1 million in 2001, from $45.5 million in
2000. The increases in these expenses in absolute dollars and as a percentage of
revenues were principally due to additional survey costs associated with our
product offerings, and the opening of our Research Center in San Francisco,
California.

SELLING AND MARKETING. Selling and marketing expenses remained constant as
a percentage of total revenues at 37% in 2001 and 2000. These expenses increased
1% to $58.3 million in 2001, from $58.0 million in 2000. The increase in
expenses in absolute dollars was principally due to expansion of our
international sales offices in Europe and the Asia-Pacific region, offset by
cost savings as a result of the July 2001 reorganization.

GENERAL AND ADMINISTRATIVE. General and administrative expenses decreased
as a percentage of total revenues to 10% in 2001, from 12% in 2000. These
expenses decreased 10% to $16.9 million in 2001, from $18.6 million in 2000. The
decrease in expenses in absolute dollars and as a percentage of revenues were
principally due to decreased staffing in our technology, operations, finance,
and strategy groups and related compensation, travel, and recruiting expenses.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
increased 40% to $11.1 million in 2001, from $7.9 million in 2000. The increase
in these expenses in absolute dollars was principally due to previous purchases
of computer equipment, software, and leasehold improvements to support business
growth in past years. Further, amortization of goodwill related to our October
2000 acquisition of Forit, GmbH in Frankfurt, Germany, increased to
approximately $1.0 million in 2001, from approximately $260,000 in 2000.

OTHER INCOME, NET. Other income decreased to $6.4 million in 2001, from
$6.9 million in 2000. Other income in 2001 consisted of $9.1 million of interest
income from marketable securities and a gain of approximately $1.7 million
realized on the sale of our Internet AdWatch(TM) product to Evaliant Media
Resources, LLC in exchange for membership interests in Evaliant offset by
aggregate write-downs of approximately $3.3 million on certain non-marketable
investments and $1.1 million of other miscellaneous non-operating expenses.
Other income in 2000 consisted primarily of $8.0 million of interest income from
marketable securities offset by a non-marketable investment write-down of
approximately $1.0 million, and approximately $175,000 of other miscellaneous
non-operating expenses. We achieved the additional interest income in spite of
generally lower yields due to higher cash and marketable securities balances
resulting from positive cash flows from operations of $28.7 million and $16.4
million from proceeds of stock option exercises and our employee stock purchase
plan during 2001.

23

INCOME TAX PROVISION. During 2001, we recorded a tax provision of $8.9
million, reflecting, an effective tax rate of 33.0%. During 2000, we recorded a
tax provision of $12.4 million reflecting, an effective tax rate of 36.5%. The
decrease in our effective tax rate resulted primarily from an increase in our
investments in tax-exempt marketable securities.

RESULTS OF QUARTERLY OPERATIONS

The following tables set forth a summary of our unaudited quarterly
operating results for each of our eight most recently ended fiscal quarters. We
have derived this information from our unaudited interim consolidated financial
statements, which, in the opinion of our management, have been prepared on a
basis consistent with our financial statements contained elsewhere in this
annual report and include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation in accordance with generally
accepted accounting principles in the United States when read in conjunction
with our consolidated financial statements and related notes included elsewhere
in this annual report. Historically, our total revenues, operating profit, and
net income in the fourth quarter have reflected the significant positive
contribution of revenues attributable to advisory services performed and Forum
events held in the fourth quarter. As a result, we have historically experienced
a decline in total revenues, operating profit, and net income from the quarter
ended December 31 to the quarter ended March 31. Our quarterly operating results
are not necessarily indicative of future results of operations.

LIQUIDITY AND CAPITAL RESOURCES

We have financed our operations during 2001 and 2002 primarily through
funds generated from operations. In addition, we received $22.7 million of net
proceeds from our public offering of common stock in February 2000, as well as
proceeds from exercises of employee stock options and our employee stock
purchase plan of $16.4 million in 2001 and $11.3 million in 2002. Memberships
for core research, which constituted approximately 70% of our revenues for the
year ended December 31, 2002, are annually renewable and are generally payable
in advance. We generated cash from operating activities of $5.6 million in 2002
and $28.7 million in 2001. This decline in cash from operations is primarily the
result of the decrease in agreement value from $116.2 million at December 31,
2001 to $78.1 million at December 31, 2002 which is reflected in lower accounts
receivable and deferred revenue balances as of December 31, 2002 and a decrease
in net income from $18.1 million in 2001 to $589,000 in 2002. Such declines in
key business metrics reflect the more difficult economic environment.

Included in cash from operations are deferred tax benefits of $2.6 million
in 2002 and $8.6 million in 2001, which resulted primarily from stock option
exercises. These exercises have generated a cumulative tax deduction of
approximately $118.4 million for us. The remaining $42.8 million of this tax
deduction will be carried forward to offset future taxable income. The offset of
these deferred tax benefits have been recorded as an increase to additional
paid-in capital within stockholders' equity.

During 2002, we used $1.0 million of cash in investing activities,
consisting primarily of $1.0 million for purchases of property and equipment and
$4.8 million for purchases of non-marketable investments offset by $4.8 million
of proceeds from net sales of marketable securities. We regularly invest excess
funds in short- and intermediate-term interest-bearing obligations of investment
grade.

During 2002, we used $10.8 million of cash in financing activities
consisting of $20.1 million for repurchases of our common stock and $2.0 million
for the investment in a structured stock repurchase program offset by $11.3
million in proceeds from exercises of employee stock options and proceeds from
our employee stock purchase plan.

In February 2003, we acquired Giga for an aggregate purchase price of $60
million in cash pursuant to a tender offer and second step merger at a price of
$4.75 per share of Giga common stock in cash. The purchase price was paid out of
our cash on hand.

25

In October 2001, we announced a program authorizing the repurchase of up to
$50 million of our common stock. The shares repurchased will be used, among
other things, in connection with our employee stock option and purchase plans
and for potential acquisitions. As of December 31, 2002, we had repurchased
1,203,707 shares of common stock at an aggregate cost of $20.1 million.

As of December 31, 2002, we had cash and cash equivalents of $11.5 million
and marketable securities of $183.1 million. We do not have a line of credit and
do not anticipate the need for one in the foreseeable future. We plan to
continue to introduce new products and services and to invest in our
infrastructure during the next 12 months. We believe that our current cash
balance, marketable securities, and cash flows from operations will satisfy
working capital, financing activities, and capital expenditure requirements for
at least the next two years including cash requirements related to the purchase
of Giga and our stock repurchase program.

During the three months ended September 30, 2002, we entered into a
structured stock repurchase agreement giving us the right to acquire shares of
our common stock in exchange for an up-front net payment of $2.0 million. Upon
expiration of the agreement in November 2002, we received 143,542 shares of our
common stock. During the three months ended December 31, 2002, we entered into a
similar agreement in exchange for an up-front net payment of $2.0 million.
Pursuant to the agreement, if our stock price is above $14.84 on the expiration
date, we will have the investment of $2.0 million returned with a premium. If
our stock price is below $14.84 on the expiration date, we will receive 144,291
shares of our common stock. The $2.0 million up-front net payment is recorded in
stockholders' equity as a reduction of additional paid-in capital in the
accompanying consolidated balance as of December 31, 2002. Upon expiration of
the agreement in February 2003, we received 144,291 shares of our common stock.

In June 2000, we committed to invest $20.0 million in two private equity
investment funds over a period of up to five years. We have adopted a cash bonus
plan to pay bonuses, after the return of invested capital, measured by the
proceeds of a portion of the share of net profits from these investments, if
any, to certain key employees, subject to the terms and conditions of the plan.
The payment of such bonuses would result in compensation expense with respect to
the amounts so paid. As of December 31, 2002, we had contributed approximately
$12.2 million to the funds. In February 2003, we contributed an additional $1.1
million to the funds.

As of December 31, 2002, we had recorded total write-downs to the private
equity investment funds of $3.3 million as a result of the permanent impairment
of certain investments within the funds. The timing of the recognition of future
gains or losses from the investment funds is beyond our control. As a result, it
is not possible to predict when we will recognize such gains or losses, if we
will award cash bonuses based on the net profit from such investments, or when
we will incur compensation expense in connection with the payment of such
bonuses. If the investment funds realize large gains or losses on their
investments, we could experience significant variations in our quarterly results
unrelated to our business operations. These variations could be due to
significant gains or losses or to significant compensation expenses. While gains
may offset compensation expenses in a particular quarter, there can be no
assurance that related gains and compensation expenses will occur in the same
quarter.

As of December 31, 2002, we had contractual obligations as follows (in
thousands) gross of estimated restructuring provisions*:

- ---------------

* The above table does not include the remaining $7.8 million of capital
commitments to the private equity investment funds described above due to the
uncertainty in timing of capital calls made by such funds to pay this
remaining capital commitment. The above table also does not include future
minimum rentals to be received under subleases of $5.4 million.

We do not maintain any off-balance sheet financing arrangements.

26

We hold minority interests in companies and equity investment funds having
operations or technology in areas within our strategic focus. During 2001 and
2002, we recognized revenues of approximately $102,000 and $234,000
respectively, related to a core research with advisory services contract
purchased by one of the private equity investment firms. The remaining revenues
will be recognized in accordance with our revenue recognition policy through the
termination date of the contract in March 2003. The prices for these
transactions were determined as a function of our list price. We purchased data
from companies in which we held a minority interest that totaled approximately
$699,000 in 2000, $1,404,000 in 2001, and $1,113,000 in 2002. We believe that
the services received were on arm's-length terms and at fair market value.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 2002, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. This statement supersedes Emerging
Issues Task Force (EITF) No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity. Under SFAS No. 146, a
liability for a cost associated with a disposal or exit activity is recognized
at fair value when the liability is incurred rather than at the date of an
entity's commitment to an exit plan as required under EITF 94-3. The provisions
of SFAS No. 146 are effective for exit or disposal activities that are initiated
after December 31, 2002, with early adoption permitted. We will apply the
provisions of this standard to all restructuring activities initiated after
January 1, 2003.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation -- Transition and Disclosure -- an amendment of FASB Statement No.
123. This statement amends FASB Statement No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 amends the disclosure requirements of
SFAS No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. We will
continue to account for stock-based compensation in accordance with APB No. 25.
As such, we do not expect the adoption of this standard to have a material
impact on our consolidated financial position or results of operations. We
adopted the disclosure only provision of SFAS No. 148 as of December 31, 2002.

In November 2002, the EITF issued EITF No. 00-21, Revenue Arrangements with
Multiple Deliverables. Under EITF 00-21, revenues for contracts which contain
multiple deliverables are allocated among the separate units based on their
relative fair values. The provisions of EITF 00-21 are effective for contracts
entered into in fiscal periods beginning after June 15, 2003. We are currently
evaluating the impact, if any, of EITF 00-21 on our consolidated financial
position and results of operations.

In January 2003, the FASB issued Interpretation No. 46, Consolidation for
Variable Interest Entities, an Interpretation of ARB No. 51 which requires all
variable interest entities (VIEs) to be consolidated by the primary beneficiary.
The primary beneficiary is the entity that holds the majority of the beneficial
interest in the VIE. In addition, the interpretation expands the disclosure
requirements for both variable interest entities that are consolidated as well
as VIEs from which the entity is the holder of a significant amount of
beneficial interests, but not the majority. FIN 46 is effective for all VIEs
created or acquired after January 31, 2003. For VIEs created or acquired prior
to February 1, 2003, the provisions of FIN 46 must be applied for the first
interim or annual period beginning after June 15, 2003. The adoption of this
interpretation is not expected to be material to our consolidated financial
position or results of operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discussion about our market risk disclosures involves
forward-looking statements. Actual results could differ materially from those
projected in the forward-looking statements. We are exposed to market risk
related to changes in interest rates and foreign currency exchange rates. We do
not use derivative financial instruments.

27

INTEREST RATE SENSITIVITY. We maintain an investment portfolio consisting
mainly of federal and state government obligations and corporate obligations,
with a weighted-average maturity of less than one year. These available-for-sale
securities are subject to interest rate risk and will fall in value if market
interest rates increase. We have the ability to hold our fixed income
investments until maturity (except for any future acquisitions or mergers).
Therefore, we would not expect our operating results or cash flows to be
affected to any significant degree by a sudden change in market interest rates
on our securities portfolio. The following table provides information about our
investment portfolio. For investment securities, the table presents principal
cash flows and related weighted-average interest rates by expected maturity
dates.

Principal amounts by expected maturity in US dollars (dollars in
thousands):

FOREIGN CURRENCY EXCHANGE. On a global level, we face exposure to
movements in foreign currency exchange rates. This exposure may change over time
as business practices evolve and could have a material adverse impact on our
financial results. Historically, our primary exposure had been related to non-US
dollar denominated operating expenses in Canada, and Asia where we sell
primarily in US dollars. The introduction of the euro as a common currency for
members of the European Monetary Union took place in our fiscal year 1999. To
date, neither the introduction of the euro nor the effect of changes in currency
exchange rates has had a significant impact on our financial position or results
of operations. Accordingly, we have not entered into any hedging agreements.
However, we are prepared to hedge against fluctuations that the euro, or other
foreign currencies, will have on foreign exchange exposure if this exposure
becomes material. As of December 31, 2002, the total assets related to non-US
dollar denominated currencies was approximately $9.5 million.

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements listed in the following Index to Financial
Statements are filed as a part of this 2002 Annual Report on Form 10-K under
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

28

FORRESTER RESEARCH, INC.

INDEX TO FINANCIAL STATEMENTS

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

On April 1, 2002, our Audit Committee recommended, and our Board of
Directors decided, to no longer engage Arthur Andersen LLP ("Andersen") as our
independent public accountants and to engage Deloitte & Touche LLP to serve as
our independent public auditors for the fiscal year 2002.

Andersen's reports on our consolidated financial statements for each of the
years ended December 31, 2001 and December 31, 2000 did not contain an adverse
opinion or disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope, or accounting principles. During the years ended
December 31, 2001 and December 31, 2000 and through April 1, 2002, there were no
disagreements with Andersen on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure which, if not
resolved to Andersen's satisfaction, would have caused it to make reference to
the subject matter in connection with its report on our consolidated financial
statements for such years. There were no reportable events as defined in Item
304(a)(1)(v) of Regulation S-K.

We provided Andersen with a copy of the foregoing disclosures. A letter
from Andersen dated April 5, 2002 and addressed to the Securities and Exchange
Commission (the "SEC") is included as Exhibit 16 to this 2002 Annual Report on
Form 10-K and states that Andersen agrees with such disclosure.

During the years ended December 31, 2001 and December 31, 2000 and through
April 1, 2002, we did not consult Deloitte & Touche with respect to the
application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
our consolidated financial statements, or any other matter that was either the
subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K)
or a reportable event (as described in Item 304(a)(1)(v) of Regulation S-K).

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Certain information regarding Executive Officers of the registrant is
included in Item 1 in Part I of this 2002 Annual Report on Form 10-K under the
section captioned "Executive Officers". The information set forth under the
sections captioned "Election of Directors" and "Compliance with Section 16(a) of
the Securities Exchange Act of 1934" in our Proxy Statement for our Annual
Meeting of Stockholders for the year ended December 31, 2002 (the "2002 Proxy
Statement"), is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information set forth under the caption "Executive Compensation" of the
2002 Proxy Statement, except for the Report of the Compensation Committee is
incorporated herein by reference.

29

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The information relating to security ownership of certain beneficial owners
of our common stock and security ownership of our management may be found under
the section captioned "Security Ownership of Certain Beneficial Owners and
Management" in the 2002 Proxy Statement, and is incorporated herein by
reference. The information relating to the compensation plans under which our
equity securities are authorized for issuance may be found under the section
captioned "Securities Authorized for Issuance under Equity Compensation Plans"
in the 2002 Proxy Statement and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item may be found under the section
captioned "Certain Relationships and Related Transactions" in the 2002 Proxy
Statement, and is incorporated herein by reference.

ITEM 14. CONTROLS AND PROCEDURES

DISCLOSURE CONTROLS AND PROCEDURES. Within 90 days before filing this
report, we evaluated the effectiveness of the design and operation of our
disclosure controls and procedures. Our disclosure controls and procedures are
the controls and other procedures that we designed to ensure that we record,
process, summarize and report in a timely manner the information we must
disclose in reports that we file with or submit to the SEC. George F. Colony,
our Chairman of the Board and Chief Executive Officer, and Warren Hadley, our
Treasurer and Chief Financial Officer, reviewed and participated in this
evaluation. Based on this evaluation, Messrs. Colony and Hadley concluded that,
as of the date of their evaluation, our disclosure controls were effective.

INTERNAL CONTROLS. Since the date of the evaluation described above, there
have not been any significant changes in our internal controls or in other
factors that could significantly affect those controls.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K

(a) 1. Financial Statements. The financial statements filed as part of
this report are listed at Page F-1 and indexed on Page 29.

2. Financial Statements Schedules. None.

3. Exhibits. A complete listing of exhibits required is given in the
Exhibit Index that precedes the exhibits filed with this report on page E-1
hereof.

(b) Report on Form 8-K.

Forrester filed a Current Report on Form 8-K on April 5, 2002
disclosing under Item 4 its dismissal of Arthur Andersen LLP as its
independent public accountant and its appointment of Deloitte & Touche LLP
to serve as its independent public auditor for the fiscal year 2002.

(c) See Item 15(a)(3) of this report.

(d) See Item 15(a)(2) of this report.

30

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

FORRESTER RESEARCH, INC.

By: /s/ GEORGE F. COLONY
------------------------------------
George F. Colony
Chairman of the Board and Chief
Executive Officer

Date: March 31, 2003

Pursuant to the requirement of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant in
the capacities and on the dates indicated.

31

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER

I, George F. Colony, certify that:

1. I have reviewed this annual report on Form 10-K of Forrester Research,
Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;

b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

c) Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

/s/ GEORGE F. COLONY
--------------------------------------
George F. Colony
Chairman of the Board and Chief
Executive Officer
(Principal executive officer)

Date: March 31, 2003

32

CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER

I, Warren Hadley, certify that:

1. I have reviewed this annual report on Form 10-K of Forrester Research,
Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;

b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

c) Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

/s/ WARREN HADLEY
--------------------------------------
Warren Hadley
Chief Financial Officer and Treasurer
(Principal financial and accounting
officer)

Date: March 31, 2003

33

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Forrester Research, Inc.:

We have audited the accompanying consolidated balance sheet of Forrester
Research, Inc. and subsidiaries (the "Company") as of December 31, 2002, and the
related consolidated statements of income, stockholders' equity, and cash flows
for the year then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on the
2002 financial statements based on our audit. The financial statements as of
December 31, 2001 and for each of the years in the two-year period then ended,
before the inclusion of the disclosures discussed in Note 4 to the financial
statements, were audited by other auditors who have ceased operations. Those
auditors expressed an unqualified opinion on those financial statements in their
report dated January 29, 2002.

We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the 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 audit provides a
reasonable basis for our opinion.

In our opinion, the 2002 consolidated financial statements present fairly,
in all material respects, the financial position of the Company as of December
31, 2002, and the results of its operations and its cash flows for the year then
ended, in conformity with accounting principles generally accepted in the United
States of America.

As discussed in Note 4 to the consolidated financial statements, on January
1, 2002 the Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets."

As discussed above, the consolidated financial statements of the Company,
as of December 31, 2001, and for the two years in the period then ended, were
audited by other auditors who have ceased operations. As described in Note 4,
those financial statements have been revised to include the transitional
disclosures required by SFAS No. 142. Our audit procedures with respect to the
disclosures in Note 4 with respect to 2001 and 2000 included (i) comparing the
previously reported net income to the previously issued financial statements and
the adjustments to reported net income representing amortization expense
(including any related tax effects) recognized in those periods related to
goodwill to the Company's underlying analysis obtained from management, and (ii)
testing the mathematical accuracy of the reconciliation of adjusted net income
to reported net income, and the related earnings-per-share amounts. In our
opinion, the disclosures for 2001 and 2000 in Note 4 are appropriate. However,
we were not engaged to audit, review, or apply any procedures to the 2001 and
2000 financial statements of the Company other than with respect to such
disclosures and, accordingly, we do not express an opinion or any other form of
assurance on the 2001 and 2000 financial statements taken as a whole.

/s/ DELOITTE & TOUCHE LLP

Boston, Massachusetts
January 28, 2003
(February 24, 2003 with respect to Note 17)

F-1

THIS IS A COPY OF A REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN LLP. THIS REPORT
HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP NOR HAS ARTHUR ANDERSEN LLP
PROVIDED A CONSENT TO THE INCLUSION OF ITS REPORT IN THESE FINANCIAL STATEMENTS.
THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2000 AND FOR THE YEAR ENDED DECEMBER
31, 1999 ARE NOT PRESENTED HEREIN.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders of
Forrester Research, Inc.:

We have audited the accompanying consolidated balance sheets of Forrester
Research, Inc. (a Delaware corporation) and subsidiaries as of December 31,
2000, and 2001, and the related consolidated statements of income, stockholders'
equity, and comprehensive income and cash flows for each of the three years in
the period ended December 31, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the 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 financial statements referred to above present fairly,
in all material respects, the financial position of Forrester Research, Inc. and
subsidiaries as of December 31, 2000, and 2001, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States.

/s/ ARTHUR ANDERSEN LLP

Boston, Massachusetts
January 29, 2002

F-2

FORRESTER RESEARCH, INC.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The accompanying notes are an integral part of these consolidated financial
statements.
F-3

FORRESTER RESEARCH, INC.

CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The accompanying notes are an integral part of these consolidated financial
statements.
F-4

FORRESTER RESEARCH, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)

The accompanying notes are an integral part of these consolidated financial
statements.
F-5

FORRESTER RESEARCH, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

The accompanying notes are an integral part of these consolidated financial
statements.
F-6

FORRESTER RESEARCH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002

(1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

BUSINESS

Forrester Research, Inc. ("Forrester") is a leading independent
emerging-technology research firm that conducts research and analysis on the
impact of emerging technologies on business, consumers, and society.

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
Forrester and its wholly owned subsidiaries. All intercompany balances have been
eliminated in consolidation.

FOREIGN CURRENCY

The functional currencies of Forrester's wholly owned subsidiaries are
their respective local currencies. The financial statements of the subsidiaries
are translated to United States dollars using period-end exchange rates for
assets and liabilities and average exchange rates during the corresponding
period for revenues and expenses. Translation gains and losses as a result of
this translation are accumulated as a component of accumulated other
comprehensive (loss) income. Net gains and losses resulting from foreign
exchange transactions are included in other income in the consolidated
statements of income and were not significant during the periods presented.

NET INCOME PER COMMON SHARE

Basic net income per common share is computed by dividing net income by the
basic weighted average number of common shares outstanding during the period.
Diluted net income per common share is computed by dividing net income by the
diluted weighted average number of common and common equivalent shares
outstanding during the period. The weighted average number of common equivalent
shares outstanding has been determined in accordance with the treasury-stock
method. Common stock equivalents consist of common stock issuable upon the
exercise of outstanding stock options.

Basic and diluted weighted average common shares are as follows (in
thousands):

As of December 31, 2000, 2001 and 2002, approximately 442,000, 3,483,000
and 3,428,000 options, respectively, were outstanding but not included in the
diluted weighted average common share calculation as the effect would have been
anti-dilutive.

REVENUE RECOGNITION

Forrester generally invoices its core research, advisory, and other
services when an order is received. The contract amount is recorded as accounts
receivable and deferred revenue when the client is invoiced. Core research is
recognized as revenue ratably over the term of the agreement. Advisory services
are recognized during the period in which the services are performed. Revenue
from events is recognized upon completion of the event.

F-7

FORRESTER RESEARCH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

DEFERRED COMMISSIONS

Commissions incurred in acquiring new or renewal contracts are deferred and
expensed to operations as the related revenue is recognized. Forrester evaluates
the recoverability of deferred commissions at each balance sheet date.

STOCK-BASED COMPENSATION

Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for
Stock-Based Compensation, requires the measurement of the fair value of stock
options or warrants to be included in the statement of income or disclosed in
the notes to financial statements. Forrester has determined that it will
continue to account for stock-based compensation for employees under Accounting
Principles Board (APB) Opinion No. 25 and elect the disclosure-only alternative
under SFAS No. 123. There is no compensation expense related to option grants
reflected in the accompanying consolidated financial statements.

If compensation cost for Forrester's stock option plans had been determined
consistent with SFAS No. 123, net income for the years ended December 31, 2000,
2001 and 2002 would have been approximately as follows (in thousands, except per
share data):

The assumptions underlying this computation can be seen in Note 11.

DEPRECIATION AND AMORTIZATION

Forrester provides for depreciation and amortization, computed using the
straight-line method, over estimated useful lives of assets as follows:

INTANGIBLE ASSETS AND IMPAIRMENT OF LONG-LIVED ASSETS SUBJECT TO AMORTIZATION

Forrester continually evaluates whether events or circumstances have
occurred that indicate that the estimated remaining useful life of long-lived
assets and certain identifiable intangible assets may warrant revision or that
the carrying value of these assets may be impaired. To compute whether assets
have been impaired, the estimated undiscounted future cash flows for the
estimated remaining useful life of the assets are compared to the carrying
value. To the extent that the future cash flows are less than the carrying
value, the assets are written down to the estimated fair value of the asset.

F-8

FORRESTER RESEARCH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ACCUMULATED OTHER COMPREHENSIVE INCOME

The components of accumulated other comprehensive income as of December 31,
2001 and 2002 are as follows (in thousands):

PRODUCT DEVELOPMENT

All costs associated with the development of new products and services are
expensed as incurred.

CONCENTRATIONS OF CREDIT RISK

Forrester has no significant off-balance sheet concentration of credit risk
such as foreign exchange contracts, option contracts, or other foreign hedging
arrangements. Financial instruments that potentially subject Forrester to
concentrations of credit risk are principally cash equivalents, marketable
securities, and accounts receivable. Forrester places its investments in highly
rated securities. No single customer accounted for greater than 10% of revenues
or accounts receivable in any of the periods presented.

CASH, CASH EQUIVALENTS, AND MARKETABLE INVESTMENTS

Forrester considers all short-term, highly liquid investments with
maturities of 90 days or less from the original date of purchase to be cash
equivalents. Forrester accounts for investments in marketable securities in
accordance with SFAS No. 115, Accounting for Certain Investments in Debt and
Equity Securities. Under SFAS No. 115, securities purchased to be held for
indefinite periods of time and not intended at the time of purchase to be held
until maturity are classified as available-for-sale securities.

FINANCIAL INSTRUMENTS

Forrester's financial instruments consist of cash equivalents, marketable
securities, accounts receivable and accounts payable. The estimated fair value
of these financial instruments approximates their carrying value. The fair
market value of marketable securities is based on market quotes. Forrester's
cash equivalents and marketable securities are generally investment-grade
corporate bonds and obligations of the federal government or municipal issuers.

Forrester does not use derivative financial instruments.

MANAGEMENT ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. On an ongoing basis, management evaluates its
estimates. Actual results could differ from these estimates.

RECLASSIFICATIONS

Certain amounts in the prior year's financial statements have been
reclassified to conform with the current year's presentation.

F-9

FORRESTER RESEARCH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

RECENTLY ISSUED ACCOUNTING STANDARDS

In June 2002, the Financial Accounting Standards Board (FASB) issued SFAS
No. 146, Accounting for Costs Associated with Exit or Disposal Activities. This
statement supersedes Emerging Issues Task Force ("EITF") No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity. Under SFAS No. 146, a liability for a cost associated with a disposal
or exit activity is recognized at fair value when the liability is incurred
rather than at the date of an entity's commitment to an exit plan as required
under EITF 94-3. The provisions of SFAS No. 146 are effective for exit or
disposal activities that are initiated after December 31, 2002. Forrester will
apply the provisions of this standard to all restructuring activities initiated
after January 1, 2003.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation -- Transition and Disclosure -- an amendment of FASB Statement No.
123. This statement amends FASB Statement No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 amends the disclosure requirements of
SFAS No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. Forrester
will continue to account for stock-based compensation in accordance with APB No.
25. As such, Forrester does not expect the adoption of this standard to have a
material impact on its consolidated financial position or results of operations.
Forrester adopted the disclosure-only provision of SFAS No. 148 as of December
31, 2002.

In November 2002, the EITF issued EITF No. 00-21, Revenue Arrangements with
Multiple Deliverables. Under EITF 00-21, revenues for contracts which contain
multiple deliverables are allocated among the separate units based on their
relative fair values. The provisions of EITF 00-21 are effective for contracts
entered into in fiscal periods beginning after June 15, 2003. Forrester is
currently evaluating the impact, if any, of EITF 00-21 on Forrester's
consolidated financial position and results of operations.

In January 2003, the FASB issued Interpretation No. 46, Consolidation for
Variable Interest Entities, an Interpretation of ARB No. 51 which requires all
variable interest entities (VIEs) to be consolidated by the primary beneficiary.
The primary beneficiary is the entity that holds the majority of the beneficial
interest in the VIE. In addition, the interpretation expands the disclosure
requirements for both variable interest entities that are consolidated as well
as VIEs from which the entity is the holder of a significant amount of
beneficial interests, but not the majority. FIN 46 is effective for all VIEs
created or acquired after January 31, 2003. For VIEs created or acquired prior
to February 1, 2003, the provisions of FIN 46 must be applied for the first
interim or annual period beginning after June 15, 2003. The adoption of this
interpretation is not expected to be material to our consolidated financial
position or results of operations.

(2) REORGANIZATIONS

On July 24, 2002, Forrester announced a reduction of its work force by
approximately 21 positions in response to conditions and demands of the market.
As a result, Forrester recorded a reorganization charge of approximately $2.6
million during the year ended December 31, 2002. Approximately 31% of the
terminated employees were members of the sales force, while 41% and 28% held
research and administrative roles, respectively. The charge consisted primarily
of severance and related benefits costs, office consolidation costs, such as
contractual lease commitments for space that was vacated, the write-off of
related leasehold improvements, and other payments for professional services
incurred in connection with the reorganization. Additional depreciable assets
that were written off consisted primarily of computer equipment, software and
furniture and fixtures related to vacated locations in connection with the
reorganization.

F-10

FORRESTER RESEARCH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Total costs related to the July 24, 2002 reorganization are as follows:

There have been no changes in estimates during the periods presented.

The accrued costs related to the July 24, 2002 reorganization are expected
to be paid in the following periods:

On January 10, 2002, Forrester announced a reduction of its work force by
approximately 126 positions in response to conditions and demands of the market
and a slower economy. As a result, Forrester recorded an initial reorganization
charge of approximately $9.3 million in the three months ended March 31, 2002.
Approximately 39% of the terminated employees were members of the sales force,
while 33% and 28% held research and administrative roles, respectively. The
initial charge consisted primarily of severance and related benefits costs,
office consolidation costs, such as contractual lease commitments for space that
was vacated, the write-off of related leasehold improvements, and other payments
for professional services incurred in connection with the reorganization.
Additional depreciable assets that were written off included computer equipment,
software, and furniture and fixtures related to terminated employees and vacated
locations in connection with the reorganization.

During the three months ended September 30, 2002, Forrester revised the
estimates of the January 10, 2002 reorganization charge to provide for
additional losses for office consolidation costs and the write-off of related
leasehold improvements due to deteriorating real estate market conditions. As a
result, Forrester recorded an additional reorganization charge during the three
months ended September 30, 2002 of approximately $593,000. Forrester also
concluded that approximately $74,000 of the initial reorganization charge
associated with severance was excess, and accordingly, reversed that amount
through reorganization costs in the statement of income during the three months
ended September 30, 2002.

F-11

FORRESTER RESEARCH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Total costs related to the January 10, 2002 reorganization are as follows:

The accrued costs related to the January 10, 2002 reorganization are
expected to be paid in the following periods:

On July 12, 2001, Forrester announced a sales force reorganization and
general work force reduction in response to conditions and demands of the market
and a slower economy. As a result, Forrester reduced its work force by 111
positions, closed sales offices in Atlanta, Los Angeles, Melbourne, New York,
and Zurich, and recorded a reorganization charge of approximately $3.1 million
in the three months ended September 30, 2001. Approximately 66% of the
terminated employees had been members of the sales force, while 12% and 22% had
held research and administrative roles, respectively. This charge consisted
primarily of severance and related benefits costs from the work force reduction.
This charge also included office consolidation costs, such as contractual lease
commitments for space that was vacated, the write-off of related leasehold
improvements, and other payments for professional services incurred in
connection with the reorganization. Additional depreciable assets that were
written off included computer equipment, software, and furniture and fixtures
related to terminated employees and vacated locations in connection with the
reorganization.

During the three months ended March 31, 2002, management concluded that
approximately $163,000 of the reorganization charge was excess, and accordingly,
reversed that amount through reorganization costs in the statement of income
during that period.

The costs related to the July 12, 2001 reorganization are as follows:

F-12

FORRESTER RESEARCH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(3) ACQUISITIONS

On October 15, 2000, Forrester acquired 100% of the outstanding shares of
Forit, GmbH ("Forit") for $15.0 million in cash and the assumption of
approximately $1.0 million in liabilities. Forit is a provider of technology
research to companies primarily located in Germany, Switzerland, and Austria.
The acquisition was accounted for under the purchase method, and accordingly,
Forit's results of operations have been included within the consolidated results
of Forrester since the date of acquisition. Forit's historical financial
position and results of operations prior to the date of acquisition were not
material to Forrester's financial position and results of operations.

The purchase price was allocated to the assets acquired and the liabilities
assumed based upon estimated fair values at the date of acquisition. The excess
of purchase price over the fair values of the net assets acquired was
approximately $15.6 million and was recorded as goodwill and other intangible
assets, which was being amortized on a straight-line basis as follows (in
thousands) prior to the adoption of SFAS No. 142, Goodwill and Other Intangible
Assets.

(4) GOODWILL AND OTHER INTANGIBLE ASSETS

In June 2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS
No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 requires all
business combinations initiated after June 30, 2001 to be accounted for using
the purchase method. SFAS No. 141 also specifies criteria that acquired
intangible assets must meet to be recognized and reported apart from goodwill.
As a result of the adoption of SFAS No. 141 on January 1, 2002, Forrester
reclassified approximately $82,000 of assembled workforce-related intangible
assets into goodwill. The adoption of SFAS No. 141 did not have a material
effect on Forrester's consolidated financial position or results of operations.

SFAS No. 142 requires that goodwill and intangible assets with indefinite
lives no longer be amortized but instead be measured for impairment at least
annually or whenever events indicate that there may be an impairment. Forrester
adopted SFAS No. 142 effective January 1, 2002. In connection with the SFAS No.
142 transitional goodwill impairment evaluation, Forrester was required to
perform an assessment of whether there was an indication that goodwill in any
reporting unit was impaired as of the date of adoption. Through an independently
obtained appraisal, it was determined that the carrying amount of the reporting
unit with goodwill did not exceed the fair value, and as a result no
transitional impairment loss existed. Forrester has selected November 30th as
its date of performing the annual goodwill impairment test. Forrester obtained
an independent appraisal as of November 30, 2002 and determined that no
impairment of its goodwill had occurred.

F-13

FORRESTER RESEARCH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Had the provisions of SFAS No. 142 been applied for the year ended December
31, 2000 and 2001, Forrester's net income and net income per share would have
been as follows:

A summary of Forrester's intangible assets as of December 31, 2002 and 2001
is as follows:

F-14

FORRESTER RESEARCH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Amortization expense related to identifiable intangible assets that will
continue to be amortized in the future was approximately $328,000 during the
year ended December 31, 2002. Estimated amortization expense related to
identifiable intangible assets that will continue to be amortized is as follows:

(5) CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES

The Company's available-for-sale securities at December 31, 2001 and 2002
consisted of investments in federal obligations, state and municipal obligations
and corporate obligations, which were recorded at fair market value, with any
unrealized gains and losses reported as a separate component of accumulated
other comprehensive loss. There were no held-to-maturity or trading securities
at December 31, 2001 and 2002.

The aggregate market value, amortized cost, unrealized gains and unrealized
losses on available-for-sale marketable securities are as follows (in
thousands):

F-15

FORRESTER RESEARCH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes the maturity periods of marketable
securities as of December 31, 2002:

Gross realized losses on sales of marketable securities for the years ended
December 31, 2000, 2001 and 2002, which were calculated based on specific
identification, were approximately $34,000, $70,000 and $287,000, respectively.

(6) PROPERTY AND EQUIPMENT

At December 31, 2001 and 2002, property and equipment consisted of the
following (in thousands):

(7) NON-MARKETABLE INVESTMENTS

In June 2000, Forrester committed to invest $20.0 million in two private
equity investment funds over a period of up to five years. During the year ended
December 31, 2001 and 2002, Forrester contributed approximately $3.3 million and
$5.0 million, respectively, to these limited liability investment funds,
resulting in total cumulative contributions of approximately $12.3 million. One
of these investments is being accounted for using the cost method and,
accordingly, is valued at cost unless an other than temporary impairment in its
value occurs or the investment is liquidated. The other investment is being
accounted for using the equity method. The carrying value of the investment
funds as of December 31, 2002 was approximately $7.8 million. During the years
ended December 31, 2001 and 2002, Forrester recorded impairments to these
investments of approximately $901,000 and $2,383,000 which are included in the
consolidated statements of income. During the year ended December 31, 2000, 2001
and 2002, fund management charges of approximately $161,000, $619,000 and
$484,000, respectively, were included in other income (expense) in the
consolidated statements of income. Fund management charges are recorded as a
reduction of the investments' carrying value. Forrester has adopted a cash bonus
plan to pay bonuses to its employees, after the return of invested capital,
measured by the proceeds of a portion of its share of net profits from these
investments, if any, to certain key employees, subject to the terms and
conditions of the plan. The payment of such bonuses would result in compensation
expense with respect to the amounts so paid.

During the years ended December 31, 2000, December 31, 2001 and December
31, 2002, Forrester recognized revenues of approximately $71,000, $102,000 and
$234,000, respectively, related to a core research and advisory services
contract purchased by one of the private equity investment firms.

F-16

FORRESTER RESEARCH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In September 2001, Forrester sold its Internet AdWatch(TM) product to
Evaliant Media Resources LLC ("Evaliant"), a privately held international
provider of online advertising data, in exchange for membership interest in
Evaliant representing approximately a 8.3% ownership interest. Revenues related
to the Internet AdWatch product were not material to Forrester's total revenues
in any of the periods presented. This investment was being accounted for using
the cost method and, accordingly, was being valued at cost unless an impairment
in its value that is other than temporary occurs or the investment is
liquidated. This transaction resulted in a net gain to Forrester of
approximately $1.7 million during the quarter ended September 30, 2001, which
was classified as other income in the consolidated statement of income. In March
2002, Forrester determined that its investment had been impaired. As a result,
Forrester recorded a write-down of approximately $1,464,000, which was included
in the consolidated statement of income during the year ended December 31, 2002,
reducing the carrying value to approximately $250,000. Substantially all of
Evaliant's assets were sold in June 2002 resulting in no gain or loss on the
transaction.

In March 2000, Forrester invested $1.0 million in the common stock of
Doculabs, Inc. ("Doculabs"), an independent technology research firm. In March
2001, Forrester invested an additional $2.0 million, resulting in approximately
a 10.4% ownership interest in Doculabs. This investment is being accounted for
using the cost method and, accordingly, is being valued at cost unless an
impairment in its value that is other than temporary occurs or the investment is
liquidated. In December 2001, Forrester determined that its investment had been
impaired. As a result, Forrester recorded a write-down of $1,474,000 to
impairments of non-marketable investments in the consolidated statement of
income during the year ended December 31, 2002. As of December 31, 2002,
Forrester determined that no further impairment had occurred.

During the years ended December 31, 2000, 2001 and 2002, Forrester expensed
approximately $300,000, $1,030,000 and $931,000, respectively, to the cost of
services and fulfillment related to services purchased from Doculabs.

In July 2000, Forrester invested $1.6 million to purchase preferred shares
of comScore Networks, Inc. ("comScore"), a provider of infrastructure services
which utilizes proprietary technology to accumulate comprehensive information on
consumer buying behavior, resulting in approximately a 1.2% ownership interest.
This investment is being accounted for using the cost method and, accordingly,
is valued at cost unless a permanent impairment in its value occurs or the
investment is liquidated. In September 2001, Forrester determined that its
investment in comScore had been permanently impaired due to an additional round
of financing at a significantly lower valuation. As a result, Forrester recorded
a write-down of $836,000 to impairments of non-marketable investments in the
consolidated statement of income. In June 2002, Forrester determined that its
investment in comScore had been permanently impaired due to an additional round
of financing at a significantly lower valuation. As a result, Forrester recorded
a further write-down of $271,000 to impairments of non-marketable investments in
the consolidated statement of income during the year ended December 31, 2002. As
of December 31, 2002, Forrester determined that no further permanent impairment
had occurred.

During the year ended December 31, 2001, Forrester expensed approximately
$60,000 to the cost of services and fulfillment related to services purchased
from comScore.

In May 1999, Forrester invested $1.0 million in a holding company that is
the majority shareholder of Greenfield Online, Inc. ("Greenfield"), an
Internet-based marketing research firm. As a result of this investment,
Forrester effectively owned approximately a 3.4% ownership interest in
Greenfield. In March 2000 and June 2000, Forrester entered into additional Note
and Warrant Agreements with Greenfield. Pursuant to these agreements, Forrester
loaned Greenfield an aggregate of $216,000 bearing interest at 10% per annum.
Forrester also received warrants to purchase additional equity in Greenfield. In
August 2000, and concurrent with an additional round of financing in which
Forrester did not participate, the notes, related accrued interest, and warrants
were all converted into common stock such that Forrester's effective ownership
interest in Greenfield was approximately 3.1%.
F-17

FORRESTER RESEARCH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In December 2000, Forrester determined that its ownership interest in
Greenfield had been impaired due to its decision not to participate in an
additional round of financing at a significantly lower valuation. As a result,
Forrester recorded a write-down of approximately $1.0 million during the fiscal
quarter ended December 31, 2000, which was included in other income in the
consolidated statement of income. As of December 31, 2002, Forrester determined
that no further impairment had occurred.

During the years ended December 31, 2000, 2001 and 2002, Forrester expensed
approximately $399,000, $314,000 and $183,000, respectively, to the cost of
services and fulfillment related to services purchased from Greenfield.

In the aggregate, Forrester included impairment losses of $3,217,000 and
$4,118,000 in the consolidated statements of income related to non-marketable
investments and $619,000 and $484,000 (included in other income, net) related to
fund management charges during the years ended December 31, 2001 and 2002,
respectively. The aggregate carrying value of non-marketable investments
included in other assets in the accompanying consolidated balance sheets as of
December 31, 2001 and December 31, 2002 were $9,845,000 and $10,018,000,
respectively.

(8) INCOME TAXES

Forrester accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes. SFAS No. 109 requires the recognition of deferred
tax assets and liabilities for the expected future tax consequences of temporary
differences between the financial statement and tax base of assets and
liabilities as well as operating loss carryforwards. Forrester measures deferred
taxes based on enacted tax rates assumed to be in effect when these differences
reverse.

Income before income tax provision for the years ended December 31, 2000,
2001 and 2002 consists of the following (in thousands):

F-18

FORRESTER RESEARCH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The components of the income tax provision (benefit) for the years ended
December 31, 2000, 2001 and 2002 are as follows (in thousands):

A reconciliation of the federal statutory rate to Forrester's effective tax
rate for the years ended December 31, 2000, 2001 and 2002 is as follows:

The components of deferred income taxes as of December 31, 2001 and 2002
are as follows(in thousands):

Forrester has aggregate net operating loss carryforwards for federal tax
purposes of approximately $42.8 million related to exercises of employee stock
options. These net operating losses were recorded as a benefit to additional
paid-in capital within stockholders' equity and will expire between the years
2015 and
F-19

FORRESTER RESEARCH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2022. The use of these net operating loss carryforwards may be limited pursuant
to Internal Revenue Code Section 382 as a result of future ownership changes.

During the year ended December 31, 2002, Forrester recorded a valuation
allowance of $1.5 million primarily related to net operating loss carryforwards
in Germany. Forrester has not provided a valuation allowance for the remaining
net deferred tax assets, primarily its federal net operating loss carryforwards,
as management believes Forrester will have sufficient time to realize these
assets during the twenty-year carryforward period.

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible and the carryforwards
expire. Although realization is not assured, based upon the level of historical
taxable income of Forrester and projections for Forrester's future taxable
income over the periods during which the deferred tax assets are deductible and
the carryforwards expire, management believes it is more likely than not that
Forrester will realize the benefits of these deductible differences. The amount
of the deferred tax asset considered realizable, however, could be reduced in
the near term if estimates of future taxable income during the carry-forward
period are reduced.

(9) COMMITMENTS

Forrester leases its office space and certain office equipment under
operating leases. At December 31, 2002, approximate future minimum rentals are
as follows (in thousands):

2003........................................................ $ 8,842
2004........................................................ 9,054
2005........................................................ 9,054
2006........................................................ 7,475
2007........................................................ 3,007
Thereafter.................................................. 4,691
-------
Total minimum lease payments.............................. $42,123
=======

Future minimum rentals have not been reduced by minimum sublease rentals to
be received of $5,395 due in the future under subleases. These rentals are due
as follows: $1,713 in 2003, $1,676 in 2004, $1,332 in 2005 and $674 in 2006.

Aggregate rent expenses, net of sublease income, were approximately $6,428,
$9,388 and $8,323 for the years ended December 31, 2000, December 31, 2001, and
December 31, 2002, respectively.

(10) STOCKHOLDERS' EQUITY

PREFERRED STOCK

Forrester has authorized 500,000 shares of $.01 par value preferred stock.
The Board of Directors has full authority to issue this stock and to fix the
voting powers, preferences, rights, qualifications, limitations, or restrictions
thereof, including dividend rights, conversion rights, redemption privileges and
liquidation preferences and the number of shares constituting any series or
designation of such series.

TREASURY STOCK

In October 2001, Forrester announced a program authorizing the repurchase
of up to $50 million of our common stock. The shares repurchased will be used,
among other things, in connection with our employee

F-20

FORRESTER RESEARCH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

stock option and purchase plans and for potential acquisitions. As of December
31, 2002, Forrester had repurchased 1,203,707 shares of common stock at an
aggregate cost of $20.1 million.

During the three months ended September 30, 2002, Forrester entered into a
structured stock repurchase agreement giving it the right to acquire shares of
Forrester common stock in exchange for an up-front net payment of $2.0 million.
Upon expiration of the agreement in November 2002, Forrester received 143,542
shares of Forrester common stock. During the three months ended December 31,
2002, Forrester entered into a similar agreement in exchange for an up-front net
payment of $2.0 million. Pursuant to the agreement, if Forrester's stock price
is above $14.84 on the expiration date, Forrester will have the investment of
$2.0 million returned with a premium. If Forrester's stock price is below $14.84
on the expiration date, Forrester will receive 144,291 shares of Forrester
common stock. The $2.0 million up-front net payment is recorded in stockholders'
equity as a reduction of additional paid-in capital in the accompanying
consolidated balance as of December 31, 2002.

(11) STOCK OPTION PLANS

In February 1996, Forrester adopted the Forrester Research, Inc. 1996
Equity Incentive Plan, which has been subsequently amended (the "Plan"). The
Plan provides for the issuance of incentive stock options ("ISOs") and
non-qualified stock options ("NSOs") to purchase up to 13,500,000 shares of
common stock. Under the terms of the Plan, ISOs may not be granted at less than
fair market value on the date of grant (and in no event less than par value).
ISO grants to holders of 10% of the combined voting power of all classes of
Forrester stock must be granted at an exercise price not less than 110% of the
fair market value at the date of grant. Options generally vest ratably over
three to four years and expire after 10 years. Options granted under the Plan
immediately vest upon certain events, as described in the Plan.

In September 1996, Forrester adopted the 1996 Stock Option Plan for
Non-Employee Directors (the "Directors' Plan"), which provides for the issuance
of options to purchase up to 300,000 shares of common stock. The Directors' Plan
was amended in 2002 to increase the number of shares of common stock available
for issuance under the Directors' Plan by 300,000 shares. The Directors' Plan is
administered by the Compensation Committee of the Board of Directors (the
"Compensation Committee"). Under the Directors' Plan, each non-employee director
shall be awarded options to purchase 6,000 shares of common stock, at an
exercise price equal to the fair market value of the common stock upon his or
her election as a director. These options vest in three equal annual
installments commencing on the date of grant. In addition, each non-employee
director will also receive an option to purchase 12,500 shares of common stock,
at an exercise price equal to the fair market value of the common stock, each
year immediately following Forrester's annual stockholders' meeting. These
options vest in four equal installments on the first, second, third, and fourth
anniversaries of the date of grant. The Compensation Committee also has the
authority under the Directors' Plan to grant options to non-employee directors
in such amounts and on such terms as set forth in the Directors' Plan as it
shall determine at the time of grant.

F-21

FORRESTER RESEARCH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Stock option activity under the Plan and under the Directors' Plan from
December 31, 1999, to December 31, 2002, was as follows (in thousands, except
per share data):

The following table summarizes information about stock options outstanding
and exercisable at December 31, 2002 (in thousands, except per share data):

F-22

FORRESTER RESEARCH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

As of December 31, 2002, options available for future grant under the Plan
and the Directors' Plan were approximately 4,011,000.

As described in Note 1, Forrester uses APB No. 25 to account for equity
grants and awards to employees. Accordingly, there is no compensation expense
related to option grants reflected in the accompanying consolidated financial
statements. Forrester has adopted the disclosure-only provisions of SFAS No.
123, as amended by SFAS No. 148, and has presented such disclosure in Note 1.
The "fair value" of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model. The key assumptions used to apply this
pricing model and the related weighted average fair values are as follows:

In January 1998, Forrester's founder and principal shareholder granted
certain key employees options to purchase 2,000,000 shares of his common stock.
The options have an exercise price of $9.57 and vest as follows:
one-thirty-sixth of the total number of options granted monthly through January
28, 1999; and one-third of the total number of options granted on and after each
of January 28, 2000, and January 28, 2001. As of December 31, 2002,
approximately 95,000 options remained outstanding, all of which were
exercisable.

(12) EMPLOYEE PENSION PLANS

Forrester sponsors several defined contribution plans for eligible
employees. Generally, the defined contribution plans have funding provisions
which, in certain situations, require contributions based upon formulas relating
to employee wages or the level of elective participant contributions, as well as
allow for additional discretionary contributions. Further, certain plans contain
vesting provisions. Forrester's pension contributions totaled approximately
$813,000, $1,276,000 and $762,000 for the years ended December 31, 2000, 2001
and 2002, respectively.

(13) EMPLOYEE STOCK PURCHASE PLAN

In September 1996, Forrester adopted the 1996 Employee Stock Purchase Plan
(the "Stock Purchase Plan"), which provides for the issuance of up to 400,000
shares of common stock. The Stock Purchase Plan was amended in 2002 to increase
the number of shares of common stock available for purchase under the Stock
Purchase Plan by 500,000 shares. The Stock Purchase Plan is administered by the
Compensation Committee. With certain limited exceptions, all employees of
Forrester who have completed six months or more of continuous service in the
employ of Forrester and whose customary employment is more than 20 hours per
week, including officers and directors who are employees, are eligible to
participate in the Stock Purchase Plan. Purchase periods under the Stock
Purchase Plan are generally six months in length and commence on each successive
January 1 and July 1. During each purchase period under the Stock Purchase Plan,
the maximum number of shares of common stock that may be purchased by an
employee is limited to the number of shares equal to $12,500 divided by the fair
market value of a share of common stock on the first day of the purchase period.
An employee may elect to have up to a maximum of 10% deducted from his or her
regular salary for the purpose of purchasing shares under the Stock Purchase
Plan. The price at which the employee's shares are purchased is the lower of: a)
85% of the closing price of the common stock on the day

F-23

FORRESTER RESEARCH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

that the purchase period commences, or b) 85% of the closing price of the common
stock on the day that the purchase period terminates. Shares purchased by
employees under the Stock Purchase Plan are as follows:

(14) OPERATING SEGMENT AND ENTERPRISE WIDE REPORTING

Operating segments are defined as components of an enterprise about which
separate discrete financial information is evaluated regularly by the chief
operating decision-maker, or decision-making group, as defined under SFAS No.
131, in deciding how to allocate resources and assess performance. Forrester's
chief decision-making group is the Executive Team, consisting of the Chief
Executive Officer and other executive officers. To date, Forrester has viewed
its operations and managed its business as principally one segment, research
services. As a result, the financial information disclosed herein materially
represents all of the financial information related to Forrester's principal
operating segment. Long-lived tangible assets by location as of December 31,
2001, and 2002 are as follows (in thousands):

Net revenues by geographic destination and as a percentage of total
revenues for the years ended December 31, 2000, December 31, 2001, and December
31, 2002 are as follows (dollars in thousands):

F-24

FORRESTER RESEARCH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(15) CERTAIN BALANCE SHEET ACCOUNTS

ACCRUED EXPENSES:

Accrued expenses as of December 31, 2001 and 2002 consist of the following
(in thousands):

ALLOWANCE FOR DOUBTFUL ACCOUNTS:

A roll-forward of the allowance for doubtful accounts as of and for the
years ended December 31, 2000, 2001 and 2002 is as follows (in thousands):

(16) SUMMARY SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following is a summary of selected quarterly financial data for the
years ended December 31, 2001 and 2002 (in thousands, except per share data):

F-25

FORRESTER RESEARCH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(17) SUBSEQUENT EVENT

On January 20, 2003, Forrester entered into an Agreement and Plan of Merger
with Giga Information Group, Inc. ("Giga") to acquire Giga, a global technology
advisory firm. Pursuant to the agreement, Forrester commenced a tender offer for
all of the outstanding shares of common stock of Giga at a price of $4.75 per
share in cash. The tender offer expired at 12:00 midnight, New York City time on
February 24, 2003. 10,336,913 shares of Giga common stock were tendered in the
offer, representing approximately 93% of the outstanding common stock of Giga as
of February 24, 2003. Forrester will acquire the remaining shares of outstanding
common stock in a second-step merger in which all remaining Giga stockholders
who did not tender their shares in the tender offer (and who do not exercise
statutory appraisal rights) will receive the same $4.75 per share in cash paid
in the tender offer.

F-26

EXHIBIT INDEX

- ---------------

+ Denotes management contract or compensation arrangements.

(1) Filed as an Exhibit to Forrester's Current Report on Form 8-K filed on
November 30, 1999 (File No. 000-21433) and incorporated by reference herein.

(2) Filed herewith.

(3) Filed as an Exhibit to Forrester's Registration Statement on Form S-1 filed
on September 26, 1996 (File No. 333-12761) and incorporated by reference
herein.

(4) Filed as an Exhibit to Forrester's Annual Report on Form 10-K for the year
ended December 31, 1997 (File No. 000-21433) and incorporated by reference
herein.

(5) Filed as an Exhibit to Forrester's Annual Report on Form 10-K for the year
ended December 31, 1999 (File No. 000-21433) and incorporated by reference
herein.

(6) Filed as an Exhibit to Forrester's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 2002 (File No. 000-21433) and incorporated
herein by reference.

(7) Filed as an Exhibit to Forrester's Current Report on Form 8-K filed on
January 22, 2003 (File No. 000-21433) and incorporated herein by reference.

(8) Filed as an Exhibit to Forrester's Current Report on Form 8-K filed on April
5, 2002 (File No. 000-21433) and incorporated herein by reference.

E-1