Management’s Discussion and Analysis of Financial Condition and Results of Operations  (continued) Liquidity and Capital Resources We have financed our operations during these periods primarily through funds generated from operations. Memberships for core research, which constituted approximately 77% of our revenues for the year ended December 31, 2000, are annually renewable and are generally payable in advance. We generated  $70.0 million and $31.9 million in cash from operating activities during the years ended December 31, 2000 and 1999, respectively.  Included in cash from operations during the year ended December 31, 2000 is a deferred tax benefit of $13.6 million resulting primarily from stock option exercises during the year. These exercises generated a tax deduction of approximately $80.3 million for Forrester. Approximately $34.3 million of this tax deduction will eliminate current year taxable income and be carried back to obtain a refund of certain taxes paid in prior years. The remaining $46.0 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 the year ended December 31, 2000, we used $112.2 million of cash in investing activities, consisting of $14.9 million for the acquisition of FORIT GmbH, $18.0 million for purchases of property and equipment, and $79.3 million for net purchases of marketable securities and other non-marketable investments.  We regularly invest excess funds in short- and intermediate-term interest-bearing obligations of investment grade. During the year ended December 31, 2000, we generated $44.5 million from financing activities,  consisting of $22.7 million of net proceeds from our public offering of common stock in February 2000 and  $21.8 million in proceeds from exercises of employee stock options and proceeds from our employee stock purchase plan.  As of December 31, 2000, we had cash and cash equivalents of $15.8 million and $158.9 million in marketable securities. 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, to open additional offices in and outside of the United States, and to invest in our infrastructure over 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. In June 2000, we committed to invest $20.0 million in two private equity investment funds. We have adopted a cash bonus plan to pay bonuses, after the return of our 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. To date, we have contributed approximately $4.0 million to the funds. The timing and amount of future contributions are entirely within the discretion of the investment funds.  The timing of the recognition of 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. Forrester Research | Annual Report 2000 f-10 | 11