TELESPECTRUM WORLDWIDE INC, 10-K, 1997-03-28

TELESPECTRUM WORLDWIDE INC
10-K, 1997-03-28
BUSINESS SERVICES, NEC

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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, 1996

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
TO

COMMISSION FILE NO. 0-21107

TELESPECTRUM WORLDWIDE INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 23-2845501
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)

443 SOUTH GULPH ROAD, KING OF PRUSSIA, PENNSYLVANIA 19406
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

610-878-7400
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE

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

NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
NONE NONE

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

COMMON STOCK, PAR VALUE $.01 PER SHARE
--------------------------------------
(TITLE OF CLASS)

Indicate by check mark whether the Registrant (1) has filed all reports 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. [ ]

As of February 28, 1997, the aggregate market value of the Common Stock held
by non-affiliates of the registrant was $164,870,936. Such aggregate market
value was computed by reference to the closing sale price of the Common Stock
as reported on the National Market segment of The Nasdaq Stock Market on such
date. For purposes of making this calculation only, the registrant has defined
affiliates as including all directors and beneficial owners of more than five
percent of the Common Stock of the Company.

As of February 28, 1997, there were 25,210,984 shares of the registrant's
Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Definitive Proxy Statement for the Registrant's 1997 Annual
Meeting of Stockholders to be filed within 120 days after the end of the fiscal
year covered by this annual report on Form 10-K--Part III.

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TABLE OF CONTENTS

PART I
<TABLE>
<S> <C> <C>
Item 1. Business............................................................................... 1
Item 2. Properties............................................................................. 7
Item 3. Legal Proceedings...................................................................... 8
Item 4. Submission of Matters to a Vote of Security Holders.................................... 8

PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters.............. 8
Item 6. Selected Financial Data................................................................ 8
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.. 13
Item 8. Financial Statements and Supplementary Data............................................ 30
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure... 30

PART III
Item 10. Directors and Executive Officers of the Registrant..................................... 30
Item 11. Executive Compensation................................................................. 31
Item 12. Security Ownership of Certain Beneficial Owners and Management......................... 31
Item 13. Certain Relationships and Related Transactions......................................... 31

PART IV
Item 14. Exhibits, Financial Statement Schedule and Report on Form 8-K.......................... 32
Index to Financial Statements and Schedule............................................. F-1
</TABLE>

This Report contains, in addition to historical information, forward-looking
statements that involve risks and uncertainties. These forward-looking
statements include statements regarding the Company's development, growth and
expansion plans and the sufficiency of the Company's liquidity and capital.
Such statements are based on management's current expectations and are subject
to a number of uncertainties and risks that could cause actual results to
differ materially from those described in the forward-looking statements.

Unless the context indicates otherwise, the terms "TeleSpectrum" and
"Company" refer to TeleSpectrum Worldwide Inc.
<PAGE>

TELESPECTRUM WORLDWIDE INC.

PART I

ITEM 1. BUSINESS.

TeleSpectrum Worldwide Inc. (the "Company," or "TeleSpectrum") was founded in
April 1996 to create a premier provider of teleservice products by providing a
single source for complete, integrated solutions to all of its customers'
teleservice needs at numerous points on the teleservice chain of services: from
pre-sale marketing, to business acquisition, to customer
activation/service/retention to consumer affairs, and ultimately to post-sales
marketing surveys.

On August 12, 1996, the Company completed its initial public offering, which
generated net cash proceeds to the Company of approximately $162 million.
Concurrently with the offering, the Company began material operations with the
acquisition of the assets and the assumption of liabilities of six companies
engaged in telemarketing, market research and direct mail and fulfillment
businesses (collectively, the "Initial Operating Businesses"). Unless otherwise
indicated, all references to the Company's business includes the activities of
these predecessor companies. The Company believes that its ability to bundle
teleservices enables it to satisfy clients by more efficiently managing their
teleservice marketing efforts at a lower cost while delivering a unified
consistent message. The Company's core teleservice capabilities are focused on
three teleservice platforms: dedicated call centers, high volume, semi-
dedicated call centers and call centers focusing on complex telesolutions.
Through dedicated call centers, the Company is able to operate as a seamless
extension of the Client's own teleservice capabilities. Through its high-
volume, semi-dedicated call centers, the Company offers clients cost-effective
and extensive teleservice capacity. Through its inbound teleservice centers,
the Company offers extensive consumer and business customer service. The
Company operates over 2,400 workstations in call centers located primarily in
the eastern United States. The Company also operates call centers in the
provinces of Ontario and Manitoba, Canada. Assuming an average per workstation
of 45 calls per hour, 16 hours per day, 6 days per week, the Company has the
capacity to handle over 500 million calls per year.

INDUSTRY OVERVIEW

The teleservices industry facilitates the direct communication of marketing
information to and from current and prospective customers by telephone.
Indirect marketing methods, such as radio, television and print advertising,
employ a "one-to-many" approach to convey marketing information that can
position products and services within a broad market context. Direct marketing
methods, such as telemarketing and direct mail, employ a "one-to-one" approach
to deliver a marketing message directly to a specific current or prospective
customer and to elicit immediate customer response. In addition to traditional
outbound and inbound telemarketing, teleservices include inbound telephone-
based customer service and support and related value-added services such as
market research, direct mail and fulfillment, training, consulting, call center
management and electronic order processing.

As businesses seek greater returns from their investments in marketing
activities, they are increasingly coupling traditional indirect marketing
methods such as advertising with direct marketing methods such as
telemarketing. Advances in computer and telecommunications technology are
helping telemarketers to more accurately identify and contact potential
customers, and are providing call center representatives ("CCRs") with more
complete on-line guidance and support.

Improvements in the scale and speed of computer and telecommunications
networking capabilities allow teleservices providers to implement larger and
more complex programs for their clients. As a result, clients in a variety of
industries have the opportunity to increase the breadth and depth of their
telemarketing efforts. Industry sources estimate that companies in the United
States spent approximately $88 billion on telemarketing activities in 1996 and
could grow to $100 billion in 1998.

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To date, businesses have relied overwhelmingly upon in-house call center
personnel to provide telemarketing and telephone-based customer support
services. However, the Company believes that businesses are increasingly
outsourcing their ancillary needs to third party providers as they focus more
closely upon their core businesses. This trend toward outsourcing may be
reinforced by the rising level of capital expenditures necessary to provide
telemarketing services that can take full advantage of recent advances in
computer and telecommunications technology. Providers of outsourced
teleservices can offer clients economies of scale in sharing the cost of new
technology among a larger base of users than might be possible with in-house
telemarketing, while at the same time better matching available capacity to
fluctuating client demand.

As the trend toward outsourcing continues, the Company believes that businesses
will increasingly seek to reduce the number of vendors they utilize, and may
prefer single-source providers of integrated solutions drawing upon a variety
of related services and capabilities. The Company believes that further
opportunities may emerge for an integrated teleservices provider that can
assemble and offer other value-added services, such as inbound customer
service, market research, direct mail and fulfillment and other direct
marketing services, which together can create complete solutions to clients'
direct marketing needs. These trends and opportunities could encourage
consolidation within the currently fragmented teleservices industry.

STRATEGY

The Company intends to employ the following strategies in attaining its goal of
becoming a premier national provider of teleservice solutions:

Offer a Single Source for Complete, Integrated Solutions

The Company offers its clients a single source for all of their outsourced
teleservices needs. To effect this strategy, the Company has assembled an array
of teleservices resources, including outbound and inbound calling, customer
service, market research, direct mail and fulfillment, training, consulting,
call center management and electronic order processing. In particular, the
Company utilizes its expertise and has expanded its capacity to provide
sophisticated and flexible inbound customer service solutions for its clients.
The Company believes that its ability to bundle numerous teleservice products
provide it with a competitive advantage. A one-source outsource allows
companies to more easily manage its teleservice providers, save money, build a
unified, consistent message while avoiding conflicts between different
teleservice providers.

Establish Long-Term Relationships with Major Clients

The Company has established and continues to seek associations with major
clients whose outsourcing needs foster long-term, significant relationships. As
clients continue to outsource an increasing portion of their direct sales and
customer service activities, the Company will endeavor to capitalize upon its
relationships and past performance to expand the range of services that it
provides to each of its clients.

Add New Clients in Targeted Industries

The Company is focused upon expanding its client base in those industries
currently utilizing teleservices, including telecommunications, insurance,
financial services, pharmaceuticals, health care, public utilities, high
technology and publishing. The Company believes that within these industries
there are many large corporations which may employ the services offered by the
Company for a substantial portion of their direct sales and customer service
needs. The Company seeks to provide services to new clients in its existing
targeted industries, and to add clients in new targeted industries where it
believes that it can utilize its capabilities and expertise. In particular, due
to increased competition for local and long-distance telephone customers
anticipated to result from recent deregulation, the Company has identified
additional teleservices opportunities and is targeting new clients in the
telecommunications industry.

Pursue Strategic Acquisitions

The Company has complemented its internal growth through selective
acquisitions, as discussed below, and may pursue acquisitions which either
compliment the Company's services along the teleservice value chain, or expand
the Company's ability to service clients in other geographic areas.

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SERVICES OVERVIEW

The Company offers its clients a range of services along the teleservice value
chain, from pre-sale marketing, to business acquisition, to customer
activation/service/retention, to consumer affairs, and to post-sales marketing
surveys. The Company believes that its ability to provide a wide range of
services and to bundle these services will be a distinguishing factor as
clients and potential clients consider outsourcing their teleservice needs.

Direct Marketing

The Company provides both business-to-consumer and business-to-business
outbound telemarketing services, which consist primarily of direct sales
activities initiated by the Company on behalf of clients. These activities are
directed towards client-generated, electronically transmitted lists of
customers selected to match the demographic profile of the targeted customer
for the offered product or service. The Company's computerized call management
systems utilize predictive dialers to automatically dial telephone numbers,
determine if a live connection is made and present connected calls to a CCR who
has been trained for the client's program. The client or the Company provides a
prepared script to assist the CCR in marketing the product or service to the
call recipient.

In November 1996, the Company acquired PR Response, a Canadian provider of
Direct Marketing. PR Response, which is now TeleSpectrum Canada, operates call
centers in Manitoba and Toronto. This acquisition expanded the geographic
distribution of the Company's call centers.

Inbound Customer Support

The Company provides inbound teleservices support for activities such as
customer service, catalog sales, response to customer inquiries and electronic
order processing. Inbound callers typically call toll-free numbers to request
product or service information, place orders for advertised products or obtain
assistance with a previous order or purchase. The Company uses automated call
distributors to direct callers to appropriate CCRs, who have access to on-line
support databases to address customers' needs.

Market Research

The Company's market research capabilities include problem conceptualization,
program design, data gathering by telephone, mail and focus groups, data
tabulation and results analysis. Interviewing personnel use advanced data
collection technology to obtain data from a statistically projectable sample of
survey contacts. The Company then tabulates and analyzes fielded data using
multi-variate statistical techniques, and produces detailed reports that can
answer clients' marketing questions and suggest further avenues of inquiry
where appropriate.

Direct Mail and Fulfillment

The Company's direct mail services include preparing, addressing, coordinating,
sorting and mailing materials to current and potential customers of the
Company's clients. The Company also provides fulfillment services, which
involve filling orders received through outbound telemarketing, direct mail
solicitation and inbound customer service calls, including automated inbound
call center services. In its direct mail operations, the Company obtains name
and address data from clients, processes the data to eliminate duplicates and
correct errors and addresses pre-printed materials, in some cases with
personalized greetings and messages. Mailings are then coordinated and collated
by automated folding and inserting equipment, sorted by zip code to obtain the
fullest available postal discounts for mass-mailings, and in most instances
mailed from the Company's in-house postal facility. In its fulfillment
operations, the Company maintains warehouse space for storage of client-
supplied products and literature, which are sorted and bar-coded for inventory
control.

Consulting

The Company provides a range of customer service consulting to various clients,
including numerous Fortune 500 companies, principally through Technical
Assistance Research Programs Inc., TARP Information Systems, Inc. and TARP
EUROPE Ltd. (collectively, "TARP"). The Company acquired TARP in October 1996.
With the acquisition of TARP, the Company can now provide innovative design
solutions for its clients' customer service departments, ranging from the
design of a customer service function, quality reviews and audits of customer

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service groups' performance, as well as market research survey capabilities
regarding the performance of the client's customer service capabilities.
Through TARP the Company also licenses its proprietary customer service
software which clients can use to benchmark and improve their customer service
performance.

In March 1997, the Company acquired the business and certain of the assets and
liabilities of the teleservices division of Voice FX Corporation, a provider of
integrated voice response telemarketing services for $5.3 million in cash. The
Voice FX acquisition is intended to further expand the Company's range of
services available to its clients by providing interactive voice response
solutions and capabilities.

Additional Value-Added Services

The Company offers additional value-added services, such as strategic
marketing, planning and consulting service technology, database marketing and
management, and training and call center management, that complement its core
teleservices offerings. Planning and consulting services include product
development and program design. Call center management involves all aspects of
recruiting, staffing, managing operations, providing analysis and reports to
clients at their own on-site telemarketing facilities and providing call center
technology and systems integration for database development.

COMPETITION

The telemarketing industry is intensely competitive. Industry participants
compete on value, available capacity, range of service offerings, quality and
customer service. The Company competes with numerous independent telemarketing
firms, as well as the in-house telemarketing operations of many of its clients
or potential clients. The Company's competitors include APAC TeleServices Inc.,
MATRIXX Marketing Inc., SITEL Corporation and West Telemarketing Corporation,
among others. In addition, most businesses that are significant consumers of
teleservices utilize more than one telemarketing firm at a time and reallocate
work among various firms from time to time. A significant amount of such work
is contracted on an individual project basis, with the effect that the Company
and other firms seeking such business are required to compete with each other
frequently as individual projects are initiated. Further, the Company believes
that businesses with telemarketing operations will continue to outsource the
management of those operations and that this trend may attract new competitors,
including competitors that are substantially larger and better capitalized than
the Company, into the Company's market. The Company may not be able to compete
effectively against its current competitors, and the Company cannot assure that
additional competitors with greater resources than the Company will not enter
the industry and compete effectively against the Company or that the trend
toward outsourcing telemarketing activity will continue. To the extent that the
Company is unable to compete successfully against its existing and future
competitors, its business, operating results and financial condition could be
materially adversely affected.

SALES, MARKETING AND CLIENTS

The Company's marketing strategy centers around providing tailored solutions to
each client's teleservices needs. As of December 31, 1996, there were a total
of 27 sales personnel employed by the Company. Sales personnel are compensated
by salary, commissions and bonuses based on individual performance and overall
profitability.

Sales teams work directly with each client or potential client to develop an
effective solution to the client's teleservices needs. Often, the Company
initially develops a pilot program for a new client to demonstrate the
Company's abilities and the effectiveness of its teleservices offerings. The
Company's sales personnel often communicate results of teleservices programs
and assist clients in modifying programs for future use.

The Company generally operates under short-term contractual relationships with
its clients. Pricing often includes an initial fee, a base service charge and
separate charges for ancillary services. Service charges for telemarketing
services are based upon hourly rates for outbound calls, per minute rates for
inbound calls or a commission or performance payment on successful sales or
results. Charges for other services such as consulting, market research,
training, direct mail and fulfillment may be computed on a fee-for-service or
piecework basis. Historically, the Company has acquired new clients and
marketed their services by word of mouth, attending trade shows, advertising in
industry publications, responding to requests for proposals, pursuing client
referrals and cross-selling to existing clients. The Company targets those
companies with the greatest potential to generate

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recurring revenues because of their ongoing direct sales and customer service
needs, and also those which have large customer bases which can benefit from
targeted telemarketing programs. Many of the Company's current clients have
sizable in-house telemarketing operations, and the Company often competes
against those in-house operations for the client's business.

TARGETED INDUSTRIES

The Company targets its teleservices solutions toward clients in industries
including, but not limited to, the following:

Telecommunications

The Company provides telemarketing programs for major telecommunications
companies for long distance, cellular and cable products and services, as well
as regional telecommunications companies marketing advanced telephone features.
The Company offers its telecommunications industry clients a range of services,
including customer service, sales and survey campaigns.

Utilities

The Company works with large public and private utilities in providing customer
service, consumer affairs service, collection efforts, and survey campaigns.

Insurance

The Company works with large consumer insurance companies and their agents,
complementing its clients' own sales efforts by offering products such as life
and accidental death and dismemberment insurance. As of December 31, 1996, the
Company employed 507 agents collectively holding state insurance licenses from
42 states.

Financial Services

The Company provides banks and other financial services clients with a wide
range of services, which primarily consist of credit cardholder acquisitions
and also include active account generation, account balance transfer, account
retention and customer service.

Pharmaceuticals and Health care

The Company provides pharmaceuticals clients with product support, customer
service and fulfillment services. In addition, the Company performs market
research and analysis for clients in the health care industry.

Consumer Products

The Company provides its consumer products clients with customer service, order
entry and new customer acquisition services and can support inbound calls 24
hours per day and 365 days per year.

High Technology

The Company provides product support and customer service inbound teleservices
for clients in the computer hardware and software industry. In addition, the
Company provides business-to-business teleservices such as lead generation,
customer qualification and account management, as well as call center
management, for high technology clients.

Publishing

The Company provides publishers with a wide range of services, including reader
surveys, circulation requalification as well as other teleservices.

PERSONNEL AND TRAINING

As of December 31, 1996, the Company employed approximately 4,980 individuals
on a full-time basis and 1,015 individuals on a part-time basis. TeleServices
Representatives account for approximately 5,125 employees of the total force
level of 5,995. The Company's ability to hire, train and manage qualified
employees is critical to its ability to provide high quality services to its
clients. The Company's service centers are located in areas that give the
Company access to a capable labor supply. The Company provides training upon
hire, as well as advanced and follow-up training. This training includes
instruction in proper direct marketing and customer service techniques, as well
as instruction in the specific characteristics of the industries which the
Company serves. In addition, the

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Company has approximately 500 insurance CCRs as of December 31, 1996, each of
whom is licensed to sell insurance in one or more states, and all of whom
collectively are licensed to sell insurance in 42 states.

INFORMATION TECHNOLOGIES

The Company continues to develop an integrated state-of-the art management
information system to provide both it and its clients with real-time
information collection, analysis and reporting. The Company utilizes all
available technologies including traditional mediums (disks, diskettes,
magnetic tapes) as well as evolving mediums (secured web serves, wide area
networks, and the internet.)

QUALITY ASSURANCE

The Company has consistently emphasized quality service and extensive employee
training. The Company's quality assurance program includes the selection and
training of qualified CCRs, the training and professional development of call
center management personnel, the monitoring of calls and sales verification and
editing. Both the Company and its clients are able to perform real time on-site
and remote call monitoring to maintain quality and efficiency. Sales
confirmations may be recorded (with the customer's consent), and callers may
also be monitored by management personnel to verify the accuracy and
authenticity of transactions. Additionally, the Company is able to provide its
clients with current updates on the progress of an ongoing telemarketing
effort. Access to this data allows the Company and its clients to identify
previously unrecognized potential campaign opportunities and to immediately
modify or enhance a telemarketing effort.

GOVERNMENT REGULATION

Telemarketing sales practices are regulated at both the federal and state
level. The Federal Telephone Consumer Protection Act of 1991 (the "TCPA"),
enforced by the Federal Communications Commission, imposes restrictions on
unsolicited automated telephone calls to residential telephone subscribers.
Under the TCPA it is unlawful to initiate telephone solicitations to
residential telephone subscribers before 8:00 a.m. or after 9:00 p.m., local
time at the subscriber's location, or to use automated telephone dialing
systems or artificial or prerecorded voices to call certain subscribers.
Additionally, the TCPA requires teleservice firms to develop a written policy
implementing a "do not call" list, including the training of its telemarketing
personnel to comply with these restrictions. Currently, the Company trains its
service representatives to comply with the regulations of the TCPA and programs
its call management system to prevent initiating telephone calls during
restricted hours or to individuals maintained on the Company's "do not call"
list.

The Federal Trade Commission (the "FTC") regulates both general sales
practices, and telemarketing specifically. Under the Federal Trade Commission
Act (the "FTC Act"), the FTC has broad authority to prohibit a variety of
advertising or marketing practices that may constitute "unfair or deceptive
acts and practices."

The FTC also administers the Federal Telemarketing and Consumer Fraud and Abuse
Prevention Act of 1994 (the "TCFAPA"). Under the TCFAPA, the FTC has issued
regulations prohibiting a variety of deceptive, unfair or abusive practices in
telemarketing sales. Generally, these rules prohibit misrepresentations of the
cost, quantity, terms, restrictions, performance or characteristics of products
or services offered by telephone solicitation or of refund, cancellation or
exchange policies. The regulations also regulate the use of prize promotions in
telemarketing to prevent deception and require that a telemarketer identify
promptly and clearly the seller on whose behalf the telemarketer is calling,
the purpose of the call, the nature of the goods or services offered and, if
applicable, that no purchase or payment is necessary to win a prize. The
regulations also require that telemarketers maintain records on various aspects
of their business. The Company believes that it is in compliance with the TCPA
and the regulations promulgated pursuant to the TCFAPA.

Violation of the rules and regulations applicable to telemarketing practices
may result in injunctions against certain operations, in monetary penalties or
disgorgement of profits; moreover, such violations may give rise to private
actions for damages.

From time to time, bills are introduced in Congress which, if enacted, would
regulate the use of credit information. There can be no assurance that any such
legislation, if enacted, will not have an adverse effect on the telemarketing
industry generally or the Company's operations specifically.

Most states have enacted statutes similar to the FTC Act prohibiting unfair or
deceptive acts and practices. A number of states have enacted legislation and
other states are considering enacting legislation to regulate

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telemarketing. For example, telephone sales in certain states are not final
until a written contract is delivered to and signed by the buyer, and such a
contract often may be canceled within three business days. At least one state
also prohibits telemarketers from requiring credit card payment, and several
other states require certain telemarketers to obtain licenses, post bonds or
submit sales scripts to the state's attorney general.

The industries served by the Company are also subject to government regulation.
Company employees who complete the sale of insurance products are required to
be licensed by various state insurance commissions and to participate in
regular continuing education programs, which currently are provided by the
Company.

ITEM 2. PROPERTIES

The Company's corporate headquarters are located in 21,000 square feet of
rentable office space in King of Prussia, Pennsylvania, which it subleases from
CRW Financial, Inc., whose lease is with HFS Inc., of which a director and
officer of the Company is the general partner. In addition, as of December 31,
1996, the Company maintained the following material facilities:

<TABLE>
<CAPTION>
LOCATION DATE OPENED WORKSTATIONS
-------- -------------- ------------
<S> <C> <C>
DIRECT MARKETING TELESALES CENTERS
Philadelphia, PA February 1989 64
Salisbury, NC February 1991 104
Winston-Salem, NC December 1992 90
Fayetteville, NC January 1994 113
Toronto, Ontario April 1994 168
Asheville, NC September 1994 90
Andover, MA November 1994 48
Huntington, WV I March 1995 112
Westborough, MA June 1995 40
Huntington, WV II August 1995 108
Winnipeg, Manitoba November 1995 52
Burlington, MA December 1995 40
Phoenix, AZ I December 1995 56
Cambridge, MA January 1996 90
Wilmington, DE January 1996 60
Beckley, WV March 1996 108
Wheeling, WV April 1996 200
Charleston, WV October 1996 240
Phoenix, AZ II October 1996 48
Phoenix, AZ III November 1996 40
Stubenville, OH December 1996 120
-----
1,991
CUSTOMER CARE CENTERS
Annapolis, MD June 1989 115
San Francisco, CA June 1989 N/A
Arlington, VA June 1992 N/A
Annapolis, MD September 1992 N/A
London, U.K. July 1993 N/A
King of Prussia, PA July 1996 32
Linthicum, MD July 1996 72
Baltimore, MD August 1996 150
-----
369
MARKET RESEARCH AND DIRECT MAIL AND FULFILLMENT
CENTERS
Philadelphia, PA* February 1976 N/A
King of Prussia, PA May 1987 N/A
Upper Darby, PA July 1994 130
-----
130
-----
2,490
=====
</TABLE>

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* Company owned facility.

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Since December 31, 1996, the Company has added two additional call centers, one
in King of Prussia, and a second in Winnipeg. These additional call centers
added 360 outbound telesales workstations to the Company's capacity.

ITEM 3. LEGAL PROCEEDINGS

From time to time, the Company may be involved in litigation incidental to its
business. In the opinion of management, no litigation to which the Company is
currently involved in, individually or in the aggregate, is expected to have a
material adverse effect on the business, results of operation, or financial
condition of the Company.

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

The Company did not submit any matters to a vote of security holders during the
fourth quarter of fiscal year 1996.

PART II

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

The Company's Common Stock trades on the National Market segment of the Nasdaq
Stock Market under the symbol "TLSP." Shares of the Company's Common Stock were
first traded publicly on August 8, 1996 in connection with the Company's
initial public offering at a price to the public of $15.00 per share. The
following table sets forth, for the periods indicated, the high and low closing
sales price per share of the Common Stock, as reported on the Nasdaq National
Market, since the Company's initial public offering in August 1996.

<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1996
Third Quarter (from August 8, 1996) $22.125 $15.000
Fourth Quarter 20.875 11.125
1997
First Quarter (through March 26, 1997) 17.875 13.875
</TABLE>

On March 26, 1997, the closing price for a share of Common Stock as reported by
The Nasdaq Stock Market was $13.88. The Company has not paid any dividends
since inception and currently intends to retain all earnings for use in its
business. The declaration and payment of dividends in the future will be
determined by the Board of Directors in light of conditions then existing,
including the Company's earnings, financial condition, capital requirements and
other factors.

ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data of the Company, and the acquired direct
marketing, direct mail and fulfillment and customer care businesses, are
derived in part from the more detailed financial statements and notes thereto
of the Company, as well as the financial statements of Somar, Inc. ("SOMAR"),
NBG Services, Inc. ("NBG"), Harris Direct Marketing, Inc. and Harris
Fulfillment, Inc. (together, "Harris"), The Reich Group Companies ("Reich"),
The Response Center, Inc. and The Tab House, Inc. (together, "The Response
Center") and TeleSpectrum Inc. and TeleSpectrum Training Services Inc.
(together, "TeleSpectrum Maryland") (collectively, the "Initial Operating
Businesses"), included elsewhere in this Form 10-K. The balance sheet data as
of December 31, 1996, and the statement of income data for the period from
inception through December 31, 1996 for the Company have been derived from the
audited financial statements included elsewhere herein. The balance sheet data
as of December 31, 1994 and 1995, and the statement of income data for each of
the three years in the period ended December 31, 1995 and for the period
January 1, 1996 through August 12, 1996 for SOMAR, Harris and Reich have been
derived from the audited financial statements included elsewhere herein. The
balance

8
<PAGE>

sheet data as of December 31, 1992 and 1993, and the statement of income data
for the year ended December 31, 1992 for SOMAR, Harris and Reich have been
derived from unaudited data. The balance sheet data as of September 30, 1994
and 1995, and the statement of income data for each of the two years in the
period ended September 30, 1995 and for the period October 1, 1995 through
August 12, 1996 for The Response Center have been derived from the audited
financial statements included elsewhere herein. The balance sheet data as of
September 30, 1992 and 1993, and the statement of income data for each of the
two years in the period ended September 30, 1993 for The Response Center have
been derived from unaudited data. The balance sheet data as of December 30,
1994 and December 29, 1995, and the statement of income data for the years
ended December 31, 1993, December 30, 1994 and December 29, 1995 and for the
period December 30, 1995 through August 12, 1996 for NBG have been derived from
the audited financial statements included elsewhere herein. The balance sheet
data as of December 25, 1992 and December 31, 1993, and the statement of income
data for the year ended December 25, 1992 for NBG have been derived from
unaudited data. The balance sheet data as of December 31, 1995, and the
statement of income data for the year then ended and for the period January 1,
1996 through August 12, 1996 for TeleSpectrum Maryland have been derived from
the audited financial statements included elsewhere herein. The balance sheet
data as of December 31, 1992, 1993 and 1994, and the statement of income data
for each of the three years ended December 31, 1994 for TeleSpectrum Maryland
have been derived from unaudited data.

In the opinion of the Company, the unaudited financial statements of the
Initial Operating Businesses reflect all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the financial
position and results of operations for those above mentioned periods in
accordance with Generally Accepted Accounting Principles ("GAAP"). Selected
Financial Data of the Initial Operating Businesses should be read in
conjunction with the financial statements and notes thereto included elsewhere
in this Form 10-K. All Initial Operating Businesses have fiscal years ending
December 31 with the exceptions of The Response Center, whose year end was
September 30, and NBG, which operated on a fifty-two, fifty-three week fiscal
year ending on the last Friday of the calendar year.

9
<PAGE>

SELECTED FINANCIAL DATA (CONTINUED)

TELESPECTRUM WORLDWIDE INC. (1)

<TABLE>
<CAPTION>
PERIOD FROM
APRIL 26, 1996
(INCEPTION)
TO
12/31/96
--------------
DOLLARS IN
THOUSANDS
-EXCEPT
PER SHARE
AMOUNTS
<S> <C>
STATEMENT OF OPERATIONS:
REVENUES:
Total revenue 61,474
EXPENSES:
Cost of services 40,871
Selling, general and administrative 12,519
Amortization 2,568
-------
Earnings before interest and taxes 5,516
Interest income, net 440
Income tax expense 2,306
-------
Net income $ 3,650
=======
Earnings Per share $0.20
=======
Weighted Average Number of Common Shares and Equivalent Shares
Outstanding 17,898
=======
<CAPTION>
AS OF
12/31/96
--------------
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents $30,715
Working capital 18,276
Total assets 299,055
Long-term debt, including capital lease obligations, less
current portion 4,199
Stockholders' equity 240,511
</TABLE>
- --------
(1) TeleSpectrum Worldwide Inc. was incorporated on April 26, 1996;
accordingly, there were no historical results prior to that date. On a pro
forma basis, as if the acquisitions of the Initial Operating Businesses and
TARP occurred on January 1, 1995, revenues, operating income and net income
for the year ended December 31, 1996 would have been $142.8 million, $13.8
million and $8.3 million, respectively.

10
<PAGE>

TELESPECTRUM WORLDWIDE INC.

PREDECESSOR COMPANY (INITIAL OPERATING BUSINESSES) SELECTED FINANCIAL DATA
(CONTINUED)
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1,
1996
FISCAL YEAR ENDED TO
--------------------------------- AUGUST 12,
1992 1993 1994 1995 1996
------ ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS) DOLLARS IN THOUSANDS
STATEMENT OF OPERATIONS:
SOMAR
Revenues $6,594 $10,703 $20,785 $31,900 $26,421
Cost of services 5,194 7,731 15,623 25,048 21,406
Selling, general and
administrative expenses 1,775 2,787 4,115 5,162 3,817
Operating income (loss) (375) 185 1,047 1,690 1,198
Net income (loss) (474) 96 627 979 637
NBG
Revenues 2,875 4,849 5,778 12,829 11,311
Cost of services 1,838 3,200 4,259 8,572 7,686
Selling, general and
administrative expenses 1,028 1,289 1,443 2,115 1,645
Operating income 9 360 76 2,142 1,980
Net income (loss) (35) 285 33 2,106 1,868
HARRIS
Revenues 5,734 7,018 10,115 12,690 6,304
Cost of services 3,008 3,834 5,530 6,402 3,140
Selling, general and
administrative expenses 2,273 2,473 2,680 2,986 1,986
Operating income 453 711 1,905 3,302 1,178
Net income 281 569 1,719 3,158 1,134
REICH
Revenues 3,252 4,375 5,424 12,253 14,558
Cost of services 2,388 3,172 4,225 7,836 8,550
Selling, general and
administrative expenses 1,019 1,111 976 2,534 1,466
Operating income (loss) (155) 92 223 1,883 4,542
Net income (loss) (220) 71 199 1,840 4,511
TELESPECTRUM MARYLAND
Revenues 6,827 9,916 9,386 11,854 10,529
Cost of services 4,555 7,429 6,754 8,338 6,974
Selling, general and
administrative expenses 1,622 2,628 2,636 3,072 2,929
Operating income (loss) 650 (141) (4) 444 626
Net income (loss) 552 (240) (154) 278 497
THE RESPONSE CENTER
Revenues 3,946 6,061 6,183 6,719 5,279
Cost of services 1,771 2,911 3,426 3,583 2,849
Selling, general and
administrative expenses 972 2,806 2,800 2,717 1,954
Operating income (loss) 1,203 344 (43) 419 476
Net income (loss) 1,208 356 (37) 429 496
</TABLE>

11
<PAGE>

TELESPECTRUM WORLDWIDE INC.

PREDECESSOR COMPANY (INITIAL OPERATING BUSINESS) SELECTED FINANCIAL DATA
(CONTINUED)

<TABLE>
<CAPTION>
AT FISCAL YEAR END
-------------------------------
1992 1993 1994 1995
------ ------ ------ -------
DOLLARS IN THOUSANDS
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
SOMAR
Cash and cash equivalents $ 1 $ 16 $ 2 $ 25
Working capital (deficit) (280) (149) (242) (1,990)
Total assets 1,694 2,014 5,526 10,792
Long-term debt, including capital lease
obligations, less current portion 786 755 1,145 1,639
Stockholders' equity (deficit) (487) (391) 478 771
NBG
Cash and cash equivalents 14 9 -- 700
Working capital (deficit) (95) (102) (238) 1,270
Total assets 616 1,162 1,483 4,234
Long-term debt, including capital lease
obligations, less current portion 208 265 277 454
Stockholders' equity 78 363 396 2,254
HARRIS
Cash and cash equivalents 469 334 975 2,919
Working capital 623 931 2,260 3,741
Total assets 5,679 7,101 8,773 10,803
Long-term debt, less current portion 2,006 1,818 1,863 1,530
Stockholders' equity 2,465 3,007 4,580 6,375
REICH
Cash and cash equivalents 30 28 31 220
Working capital (deficit) (220) (243) (59) 821
Total assets 795 827 1,111 4,318
Long-term debt, including capital lease
obligations, less current portion 159 226 273 371
Stockholders' equity (deficit) (541) (470) (272) 1,668
TELESPECTRUM MARYLAND
Cash and cash equivalents 330 28 163 15
Working capital (deficit) (97) (85) (241) 37
Total assets 3,217 3,224 3,182 3,549
Long-term debt, including capital lease
obligations, less current portion 293 470 217 57
Stockholders' equity 765 481 409 687
THE RESPONSE CENTER
Cash and cash equivalents 98 213 72 282
Working capital 1,508 1,179 1,111 1,665
Total assets 1,947 2,034 1,863 2,298
Long-term debt -- -- -- --
Stockholders' equity 1,569 1,353 1,283 1,812
</TABLE>

12
<PAGE>

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

Background

TeleSpectrum Worldwide Inc. ( "the Company", or "TeleSpectrum") was founded in
April 1996 to create a premier provider of teleservice products. To attain this
goal, the Company provides a single source for complete, integrated solutions
to clients' teleservice needs, including but not limited to, business
acquisition, customer activation/service/retention, consumer affairs, catalogue
sales, help desk services and reservations services. The Company believes that
its ability to bundle teleservices will enable its clients to more efficiently
manage their teleservice marketing efforts at a lower cost while delivering a
unified, consistent message.

On August 12, 1996, the Company completed its initial public offering,
generating net cash proceeds to the Company of approximately $162 million.
Concurrently with the offering, the Company began material operations with the
acquisition of the assets of a number of telemarketing, market research and
direct mail and fulfillment businesses (collectively, the "Initial Operating
Businesses").

Subsequent to the acquisitions of the Initial Operating Businesses, the Company
completed the acquisitions of TARP and PR Response (collectively, the "Fourth
Quarter Acquisitions"), which were acquired as of October 1, 1996 and November
1, 1996, respectively. The aggregate purchase price of these acquisitions was
$22.0 million in cash and stock. The TARP acquisition expanded the Company's
customer care consulting capabilities. The acquisition of PR Response added two
Canadian call centers, and represented the Company's initial penetration into
the Canadian teleservices market.

The Company currently operates 26 call centers across the United States and
Canada. The Company will continue to expand its capacity and capabilities by
investing in additional call centers to support internal growth and pursuing
strategic acquisitions. See Liquidity and Capital Resources.

13
<PAGE>

Results of Operations

As discussed above, the Company was incorporated in April, 1996, and did not
commence full-scale operations within the teleservices industry until August,
1996, when it acquired the businesses and the net assets of the Initial
Operating Businesses. Accordingly, no historical comparison for the twelve
months ended December 31, 1996 to the twelve months ended December 31, 1995 is
available.

Based upon the unique means of entry into the teleservices industry, and to
properly understand its operations and their relation to those of the Initial
Operating Businesses, management is presenting the actual results of operations
for the period from April 26, 1996 (inception) to December 31, 1996,
Supplemental Pro Forma(/1/) results of operations for the full year 1996
compared to the Supplemental Pro Forma(/1/) results of operations for the full
year 1995. The Company has also chosen to present individual management
discussions and analysis for each of the Initial Operating Businesses, for the
period January 1, 1996 through August 12, 1996 (the final date of their
operations prior to acquisition by the Company), and for 1995 as compared to
1994.
- --------
/(1)/ For 1995, the Supplemental Pro Forma results of operations only include
the results of the Initial Operating Businesses. For 1996, the
Supplemental Pro Forma results of operations include the results for the
Initial Operating Businesses for all of 1996, and the results of
operations for the Fourth Quarter Acquisitions as of their respective
dates of acquisitions.

14
<PAGE>

Actual results of operations for the period from April 26, 1996 (inception) to
December 31, 1996

The Company was incorporated on April 26, 1996, but did not commence operations
within the teleservices field until August 13, 1996, the date at which it
acquired the net assets of the Initial Operating Businesses described above.
The results of operations from April 26, 1996 through December 31, 1996 include
the revenues, costs of services, selling, general and administrative expenses,
and net interest income for the Initial Operating Businesses only from August
13, 1996, for TARP from October 1, 1996 and for PR Response from November 1,
1996. Amortization expense of the excess of the aggregate purchase price of the
net assets acquired of the Initial Operating Businesses and the Fourth Quarter
Acquisitions are included from the date of acquisition through December 31,
1996 and assume an amortization period of 25 years.

Actual results, as a percentage of revenues were as follows:

<TABLE>
<CAPTION>
1996 AS A %
($ MILLIONS) OF REVENUES
------------ -----------
<S> <C> <C>
REVENUES:
Direct marketing $40.3 66%
Customer care 12.8 21
Market research, direct mail and fulfillment 8.4 13
----- ---
TOTAL REVENUE $61.5 100
Cost of services 40.9 67
Selling, general and administrative 12.5 20
Amortization 2.6 4
----- ---
Earning before interest and taxes 5.5 9
Interest income, net .5 1
Income tax expense 2.3 4
----- ---
NET INCOME $ 3.7 6
===== ===
</TABLE>

Revenues. Revenues are related to the operations of the Initial Operating
Business from August 13, 1996 through December 31, 1996 as well as the
operations of the Fourth Quarter Acquisitions from their respective dates of
Acquisition. The revenues per day have been steadily increasing from the
acquisition dates for the Initial Operating Businesses due to the addition of
new call centers and as other new business is generated.

Cost of Services. Cost of services are related to the operations of the Initial
Operating Business from August 13, 1996 through December 31, 1996 as well as
the operations of the Fourth Quarter Acquisitions from their respective dates
of Acquisition. Cost of Services have been decreasing as a percentage of
revenues due to certain operating efficiencies, among other factors, however,
the favorable effects of these cost savings have been offset by additional
start-up costs of the new centers. Overall margins have been consistent
throughout the period.

Selling, General and Administrative expenses. Selling, general and
administrative expenses are related to the operations of the Initial Operating
Business from August 13, 1996 through December 31, 1996 as well as the
operations of the Fourth Quarter Acquisitions from their respective dates of
acquisition. As a percentage of revenues, selling, general and administrative
expenses have been decreasing since the inception of the Company due to the
Company's increasing revenues from the Initial Operating Businesses and the
Fourth Quarter Acquisitions. Included in results for the period presented are
certain overhead costs incurred prior to the acquisitions of the Initial
Operating Businesses. These costs were approximately $0.6 million.

15
<PAGE>

Supplemental Pro Forma results of operations for the full year 1996 compared to
the Supplemental Pro Forma results of operations for the full year 1995

The following discussions should be read in conjunction with the Consolidated
Financial Statements contained within this report on Form 10-K. For purposes of
this discussion, the following table presents supplementary pro forma results
of operation as if the acquisition of the Initial Operating Businesses occurred
on January 1, 1995, and include the acquisitions of TARP and PR Response as of
October 1, 1996 and November 1, 1996 respectively. (The Fourth Quarter
Acquisitions are not in the Supplemental Pro Forma results until their actual
acquisition date in the fourth quarter of 1996.) Management believes the
following presentation is informative in analyzing its businesses.

<TABLE>
<CAPTION>
SUPPLEMENTAL PRO FORMA RESULTS OF OPERATIONS
----------------------------------------------------------
1996 1995
$- AS A % $- AS A %
MILLIONS OF REVENUES MILLIONS OF REVENUES
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES:
Direct marketing........ $ 92.6 69% $ 57.0 65%
Customer care........... 23.4 17 11.9 13
Market research, direct
mail and fulfillment... 18.5 14 19.1 22
------------ ---------- ------------ ----------
Total revenue........... 134.5 100 88.0 100
Cost of services........ 90.7 67 59.6 68
Selling, general and
administrative......... 25.7 19 17.5 20
Amortization............ 6.4 5 5.9 6
------------ ---------- ------------ ----------
Earning before interest
and taxes.............. 11.7 9 5.0 6
Interest income, net.... .3 -- -- --
Income tax expense...... 4.9 4 2.4 3
------------ ---------- ------------ ----------
Net income.............. $ 7.1 5 $ 2.6 3
============ ========== ============ ==========
</TABLE>

Revenues--Aggregate Supplemental Pro Forma revenues increased $46.5 million, or
53% from 1995 to 1996, and is principally attributable to increased direct
marketing and customer care call volume, both from existing clients and the
addition of new clients. Direct marketing and Customer care teleservice
capabilities went from 975 workstations in 12 call centers at December 31, 1995
to 2,490 workstations in 26 calls center at December 31, 1996. These increases
were partially offset by lower direct mail and fulfillment revenues resulting
from lower revenues from a significant customer. Supplemental Pro Forma
revenues for the twelve months ended December 31, 1996 included actual revenues
related to the Fourth Quarter Acquisitions from the dates of their respective
acquisitions. Excluding the effect of these Fourth Quarter Acquisitions,
revenues increased by 48% from 1995 Supplemental Pro Forma revenues.

Cost of Services--Supplemental Pro Forma costs of services increased by 52%
from 1995 to 1996. Excluding the effect of the cost of services of the Fourth
Quarter Acquisitions, cost of services increased 48%. This increase is
principally attributable to the costs associated with the expansion of the
Company's revenues and the increased number of workstations. Included within
the 1996 results are certain start up costs associated with additional
capacity. The Company believes that as it continues to expand both the number
of its teleservice call centers and the size of these call centers, the cost of
services as a percentage of revenue will decrease, although there can be no
assurance that the Company will be able to achieve any cost savings.

Selling, General and Administrative--Supplemental Pro Forma selling, general,
and administrative expenses increased from $17.5 million in 1995 to $25.7
million in 1996, an increase of $8.2 million or 47%. Included in the
Supplemental Pro Forma selling, general, and administrative expenses in 1996
are Fourth Quarter Acquisition selling general and administrative expenses of
$1.2 million. As a percentage of revenues, these expenses dropped from 20% of
revenues to 19%, primarily as a result of the spreading of expenses over
increasing revenues. The Company anticipates that selling, general and
administrative expenses will continue to increase as a result of the growth and
integration of its businesses. The Company believes that as it achieves
anticipated economies of scale,

16
<PAGE>

and as it spreads these costs over an increasing base of revenues that selling,
general and administrative expenses as a percentage of revenues will decrease.
However, there can be no assurance that the Company will actually be able to
achieve the desired economies. Such a failure could have a negative impact on
the future performance of the Company.

Amortization expense--Supplemental Pro Forma amortization expense for the
twelve months ended December 31, 1996 includes the amortization of the excess
of the aggregate purchase price over the assets acquired of the Initial
Operating Businesses for the full year of 1996 as well as the amortization of
the excess of the aggregate purchase price over the assets acquired of the
Fourth Quarter Acquisitions from their respective dates of acquisition. For the
twelve months ended December 31, 1995, amortization expense relates solely to
the amortization of the excess of the aggregate purchase price over the assets
acquired of the Initial Operating Businesses for the full year of 1995 and
excludes the Fourth Quarter Acquisitions.

Supplemental pro forma net income was 5% of revenues in 1996. Excluding the
effects of the Fourth Quarter Acquisitions, this 1996 percentage would have
been 4.4%.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1996, the Company had cash and short term investments of $30.7
million.

During the period from inception (April 26, 1996) to December 31, 1996, the
Company used $2.1 million to fund operations, principally related to the
funding of working capital.

In January, 1997, the Company entered into a $50.0 million secured credit
facility. This facility can be used for certain acquisitions, the satisfaction
of indebtedness, working capital, and certain other purposes. This facility is
secured by accounts receivable, equipment, and other assets of the Company and
contains financial covenants including restrictions on the payment of
distributions, the undertaking of asset sales, engaging in mergers and
consolidations, among others. Advances under this facility bear interest at
optional borrowing rates of either the then current prime rate plus 0.25%, or
the LIBOR rate plus a margin which ranges from 1.00% to 1.75%, depending upon
certain conditions specified in the agreement. The credit facility terminates
in January, 2001.

The purchase agreement for one of the Company's Initial Operating Businesses
contained earnout provisions based upon 1996 operating results. The 1996
results of operations for this Initial Operating Business resulted in an
earnout payment of $25.0 million which was paid in March 1997, in full
settlement of this earnout obligation. This payment required the Company to
access its line of credit discussed above for approximately $12.0 million.

Net cash used in investing activities during the period from April 26, 1996
(Inception) to December 31, 1996 was $117.6 million. The primary uses of cash
in investing activities was the $94.4 million cash portion of the aggregate
purchase price of the Initial Operating Businesses, the $12.6 million cash
portion of the purchase price of the Fourth Quarter Acquisitions, and $10.6
million of cash used to expand the companies call center capacities, and to
integrate the Company's operations.

During the period from inception (April 26, 1996) to December 31, 1996, the
Company obtained net cash from financing activities of $150.4 million. The
primary source of cash from financing activities was the Company's initial
public offering which generated net proceeds of $162.0 million. Repayments on
long term debt and capital leases were $11.0 million and $2.6 million
respectively.

The Company is currently pursuing an internal growth strategy and is planning
to open a significant number of call centers in the United States and Canada.
These additional call centers will expand the Company's telemarketing capacity.
The Company believes that this additional capacity can be utilized in the
generation of additional revenues.

17
<PAGE>

The Company may pursue additional acquisitions of operations it believes
compliment or expand its ability to provide its clients integrated teleservice
solutions while not detracting from the Company's core capabilities.

The Company believes that existing cash, cash to be generated from operations,
and the cash available under its revolving line of credit are sufficient to
meet its operating, expansion and business acquisition needs for the
foreseeable future.

18
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND THE RESULTS OF OPERATIONS FOR THE INITIAL OPERATING BUSINESSES

(THE "PREDECESSOR COMPANIES")

Following this introduction are the management's discussion and analysis of
financial condition and the results of operations for the Initial Operating
Businesses. These commentaries should be read in conjunction with their
historical financial statements contained within this annual report on Form 10-
K.

19
<PAGE>

SOMAR

Prior to its acquisition by TeleSpectrum Worldwide Inc., ("TeleSpectrum")
SOMAR, Inc., founded in 1982, ("SOMAR") was one of the nation's largest
providers of outsourced telephone-based sales, marketing and customer
management services, principally to clients in the insurance industry and also
to clients in the financial services, telecommunications and consumer products
industries.

On August 12, 1996, SOMAR sold substantially all of its assets and liabilities
to TeleSpectrum and is a predecessor company to TeleSpectrum.

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED DECEMBER 31, FROM JANUARY 1,
--------------------------------- 1996 TO
1994 1995 AUGUST 12, 1996
---------------- ---------------- ----------------
DOLLARS IN THOUSANDS
<S> <C> <C> <C> <C> <C> <C>
Revenues.................... $ 20,785 100.0% $ 31,900 100.0% $ 26,421 100.0%
Cost of services............ 15,623 75.2 25,048 78.5 21,406 81.0
Selling, general and
administrative expenses.... 4,115 19.8 5,162 16.2 3,817 14.5
-------- -------- --------
Total operating
expenses............... 19,738 95.0 30,210 94.7 25,223 95.5
Operating income............ 1,047 5.0 1,690 5.3 1,198 4.5
Interest expense, net....... 420 2.0 711 2.2 561 2.1
-------- -------- --------
Pre-tax income.............. $ 627 3.0 $ 979 3.1 $ 637 2.4
======== ======== ========
</TABLE>

For the Period from January 1, 1996 through August 12, 1996 (the "Stub Period")

Revenues--If the Stub Period revenues were annualized and compared to 1995 the
revenue comparison would show a significant increase period over period;
revenues per day increased from $87,000 per day in 1995 to $118,000 per day in
the Stub Period.

The increase in revenues resulted primarily from increased call volume from
existing insurance clients and the addition of new telecommunications clients.

Cost of Services--Cost of services primarily consists of labor, telephone and
other call center-related operating and support expenses. As a percentage of
revenues, cost of services increased to 81.0% during the Stub Period, primarily
the result of a temporary shift to lower margin services to fill capacity
resulting from an unexpected reduction in demand from SOMAR's largest client,
costs associated with revenues lost due to inclement weather and start-up costs
associated with the opening of the Beckley, West Virginia call center on March
1, 1996. Start-up costs included recruiting and education of new call center
management and staff.

Selling, General and Administrative--Selling general and administrative costs,
as a percentage of revenue, decreased to 14.5% of revenues in the Stub Period
as compared to 1995, primarily as a result of the spreading of expenses over
increasing revenues.

Year ended December 31, 1995 Compared to Year ended December 31, 1994

Revenues--Revenues increased to $31.9 million in 1995 from $20.8 million in
1994, an increase of $11.1 million, or 53.5%. This increase primarily resulted
from increased call volume from existing insurance clients and the addition of
new insurance clients.

20
<PAGE>

Cost of Services--Cost of services increased to $25.0 million in 1995 from
$15.6 million in 1994, an increase of $9.4 million, or 60.3%. As a percentage
of revenues, cost of services increased to 78.5% in 1995 from 75.2% in 1994.
This increase resulted primarily from start-up costs related to the opening of
two new call centers in Huntington, West Virginia in March and August 1995, and
a delay in anticipated new business. The start-up costs included new management
and staff training, insurance licensing and education.

Selling General and Administrative--Selling, general and administrative expense
increased to $5.2 million in 1995 from $4.1 million in 1994, an increase of
$1.1 million, or 25.4%. This increase primarily resulted from additional
administrative, personnel and corporate expenses associated with the growth in
existing facilities. As a percentage of revenues, selling, general and
administrative expenses decreased to 16.2% in 1995 from 19.8% in 1994,
primarily as a result of the spreading of expenses over increasing revenues.

Interest Expense, net--Interest expense, net, increased to $0.7 million in 1995
from $0.4 million in 1994, an increase of $0.3 million, or 69.3%. This increase
resulted from higher average borrowings outstanding during 1995 compared to
1994. The borrowed funds were used primarily to finance working capital
requirements, to open the Huntington, West Virginia call centers and to
purchase new equipment. As a percentage of revenues, interest expense, net,
increased to 2.2% in 1995 from 2.0% in 1994.

LIQUIDITY AND CAPITAL RESOURCES

SOMAR's principal source of liquidity was borrowings under credit facilities.
The following table sets forth selected information from SOMAR's statements of
cash flows for the periods indicated:

<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED JANUARY 1, 1996
DECEMBER 31, TO
-------------------- AUGUST 12,
1994 1995 1996
--------- ---------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net cash provided by operating activi-
ties................................. $ 57 $ 441 $ 2,124
Net cash provided by (used in)
investment activities................ 346 (2,870) (1,923)
Net cash provided by (used in) financ-
ing activities....................... (417) 2,452 (221)
</TABLE>

During the Stub Period, SOMAR generated $2.1 million in net cash from
operations, primarily as a result of increased pre-tax income, the growth in
its accounts payable in anticipation of the purchase by TeleSpectrum, partially
offset by the growth in accounts receivable.

During the Stub Period, SOMAR also used $1.9 million of cash to purchase
additional call center capital items, and to provide certain advances to
certain stockholders and affiliates.

From 1994 through the end of 1995 SOMAR generated $0.5 million in net cash from
operating activities. During this period, $3.0 million of cash was generated
primarily from pre-tax income plus non-cash charges, and was reduced by $2.5
million of cash used to fund increases in working capital resulting from the
increase in revenues over the same period.

Cash used in investment activities was attributable to equipment purchases to
support additional call centers, including expenditures for information
technology equipment, investments in database management, telephone systems and
other management information systems.

Financing activities have included distributions to shareholders and borrowing
activity. Dividends paid to shareholders were payments to cover shareholder
taxes related to SOMAR's S-corporation status.

21
<PAGE>

NBG

Founded in 1991, and prior to its acquisition by TeleSpectrum, NBG Services,
Inc. ("NBG") provided outbound telemarketing services to clients in the
financial services, telecommunications and high technology industries. NBG's
revenues are derived primarily from service fees charged to clients on a
performance/results basis, rather than on an hourly basis.

On August 12, 1996, NBG sold substantially all of its assets and liabilities to
TeleSpectrum, and is a predecessor company to TeleSpectrum.

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED FOR THE PERIOD FROM
DECEMBER 30, DECEMBER 29, DECEMBER 30, 1995 TO
1994 1995 AUGUST 12, 1996
------------ ------------- ----------------------
DOLLARS IN THOUSANDS
<S> <C> <C> <C> <C> <C> <C>
Revenues................... $5,778 100.0% $12,829 100.0% $ 11,311 100.0%
Cost of services........... 4,259 73.7 8,572 66.8 7,686 68.0
Selling, general and
administrative expenses... 1,443 25.0 2,115 16.5 1,645 14.5
------ ------- -----------
Total operating
expenses.............. 5,702 98.7 10,687 83.3 9,331 82.5
Operating income........... 76 1.3 2,142 16.7 1,980 17.5
Interest expense, net...... 43 0.7 36 0.3 33 0.3
------ ------- -----------
Pre-tax income............. $ 33 0.6 $ 2,106 16.4 $ 1,947 17.2
====== ======= ===========
</TABLE>

For the period from December 30, 1995 through August 12, 1996 (the "Stub
Period")

Revenues--If the Stub Period revenues were annualized and compared to 1995, the
revenue comparison would show a significant increase period over period,
revenues per day increased from $35,000 per day in 1995 to $50,000 per day in
1996. This increase was primarily a result of an increases in revenues from two
of NBG's most significant clients.

Cost of Services--Cost of services, which primarily consists of labor,
telephone and other call center-related operating and support expenses,
increased as a percentage of revenues, from 66.8% in 1995 to 68.0% in 1996.
This increase primarily resulted from higher performance-based revenue per unit
of cost.

Selling, General, and Administrative--Selling, general, and administrative
expenses decreased as a percentage of revenues, from 16.5% in 1995 to 14.5% in
the Stub Period, primarily as a result of the spreading of expenses over
increased revenues.

Year Ended December 29, 1995 Compared to Year Ended December 30, 1994

Revenues--Revenues increased to $12.8 million in 1995 from $5.8 million in
1994, an increase of $7.0 million, or 122.0%. This increase was primarily a
result of an increase in revenues from two of NBG's most significant clients.
Revenues from these clients increased primarily as a result of increased
telemarketing call volume and in particular, a full year of revenues in 1995
from one of these clients, compared to approximately four months of revenues in
1994. The remaining increase was due to the addition of several clients in the
high technology and financial services industries.

22
<PAGE>

Cost of Services--Cost of services increased to $8.6 million in 1995 from $4.3
million in 1994, an increase of $4.3 million, or 101.3%. As a percentage of
revenues, cost of services decreased to 66.8% in 1995 from 73.7% in 1994. This
decrease primarily resulted from the spreading of certain fixed costs over
increased revenues.

Selling, General and Administrative--Selling, general and administrative
expenses increased to $2.1 million in 1995 from $1.4 million in 1994, an
increase of $0.7 million, or 46.6%. This increase primarily resulted from
additional administrative, personnel and related corporate expenses associated
with NBG's growth. As a percentage of revenues, selling, general and
administrative expenses decreased to 16.5% in 1995 from 25.0% in 1994,
primarily as a result of the spreading of expenses over increased revenues.

LIQUIDITY AND CAPITAL RESOURCES

NBG's primary sources of liquidity were cash flows from operating activities
and available borrowing capacity under credit facilities. The following table
sets forth selected information from NBG's statements of cash flows for the
periods indicated.

<TABLE>
<CAPTION>
FOR THE PERIOD
YEAR ENDED YEAR ENDED FROM DECEMBER 30,
DECEMBER 30, DECEMBER 29, TO AUGUST 12,
1994 1995 1996
------------ ------------ -----------------
DOLLARS IN THOUSANDS
<S> <C> <C> <C>
Net cash provided by operating
activities................... $215 $1,383 $1,334
Net cash used in investment
activities................... (42) (594) (81)
Net cash used in financing
activities................... (182) (89) (880)
</TABLE>

Net cash used in investing activities were generally expended for equipment and
other capital to support expansion of NBG's call center operations, including
additions to NBG's data management, telephone and management information
systems.

Financing activities have included limited borrowings, and distributions to
stockholders. NBG financed the majority of its equipment purchases with capital
leases.

HARRIS

Prior to the acquisition by TeleSpectrum, Harris Direct Marketing, Inc.
("HDM"), founded in 1931, and Harris Fulfillment, Inc. ("HFI" and with HDM,
"Harris") was a vertically-integrated direct mail and fulfillment organization
that provided services primarily to companies in the pharmaceuticals and health
care, financial services and insurance industries. HDM clients and certain of
HFI clients compensate Harris on a per project basis.

On August 12, 1996, Harris sold substantially all its assets and liabilities to
TeleSpectrum, and is a predecessor company to TeleSpectrum.

23
<PAGE>

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
FOR THE PERIOD
FROM
JANUARY 1,
1996 TO
YEAR ENDED DECEMBER 31, AUGUST 12,
---------------------------- ---------------
1994 1995 1996
------------- ------------- ---------------
DOLLARS IN THOUSANDS
<S> <C> <C> <C> <C> <C> <C>
Revenues................. $10,115 100.0% $12,690 100.0% $ 6,304 100.0%
Cost of services......... 5,530 54.7 6,402 50.5 3,140 49.8
Selling, general and ad-
ministrative expenses... 2,680 26.5 2,986 23.5 1,986 31.5
------- ------- -------
Total operating ex-
penses................. 8,210 81.2 9,388 74.0 5,126 81.3
Operating income......... 1,905 18.8 3,302 26.0 1,178 18.7
Interest expense, net.... 186 1.8 144 1.1 44 0.7
------- ------- -------
Pre-tax income........... $ 1,719 17.0 $ 3,158 24.9 $ 1,134 18.0
======= ======= =======
</TABLE>

For the period from January 1, 1996 through August 12, 1996, (the "Stub
Period")

Revenues--If the Stub Period revenues were annualized and compared to 1995, the
revenue comparison would show a decrease from 1995 to 1996. This decrease is
due to lower volume from two significant customers partially offset by revenue
growth from existing and incremental customers.

Cost of Services--Cost of services which primarily consists of labor and other
direct mail and fulfillment-related operating and support expenses as a
percentage of revenues remained comparable between 1995 and the 1996 Stub
Period.

Selling, General and Administrative--Selling, general and administrative
expenses increased to 31.5% in the Stub Period from 23.5% in 1995, primarily a
result of a decrease in revenues at HFI.

Year Ended December 31, 1995 Compared to Year Ended December 31, 1994

Revenues--Revenues increased to $12.7 million in 1995 from $10.1 million in
1994, an increase of $2.6 million, or 25.5%. This increase primarily resulted
from an increase in HFI revenues to $8.3 million in 1995 from $5.4 million in
1994. The increase in HFI revenues reflected a $2.4 million increase generated
from a single pharmaceuticals client and a 23.5% increase from the remaining
HFI client base. The increase in HFI revenues was partly offset by a decrease
in HDM revenues to $4.6 million in 1995 from $5.0 million in 1994, primarily as
a result of the loss of two significant direct mail clients, partially offset
by revenues from several new clients.

Cost of Services--Cost of services increased to $6.4 million in 1995 from $5.5
million in 1994, an increase of $0.9 million, or 15.8%. As a percentage of
revenues, cost of services decreased to 50.5% in 1995 from 54.7% in 1994. This
decrease primarily resulted from the spreading of certain fixed costs of HFI's
operations over increased revenues. HDM's cost of services as a percentage of
revenues in 1995 remained consistent with that of 1994.

Selling, General and Administrative--Selling, general and administrative
expenses increased to $3.0 million in 1995 from $2.7 million in 1994, an
increase of $0.3 million, or 11.4%. This increase primarily resulted from
additional infrastructure needed to support Harris' growth. As a percentage of
revenues, selling, general and administrative expenses decreased to 23.5% in
1995 from 26.5% in 1994. This decrease was primarily a result of the spreading
of expenses over increased revenues.

24
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Harris' primary sources of liquidity were cash flows from operating activities,
availability of borrowings on its lines of credit, and bank financing for
equipment purchases. The following table sets forth selected information from
Harris' statements of cash flows for the periods indicated.

<TABLE>
<CAPTION>
YEAR ENDED FOR THE PERIOD
DECEMBER 31, JANUARY 1, 1996
--------------- TO
1994 1995 AUGUST 12, 1996
------ ------- ---------------
DOLLARS IN THOUSANDS
<S> <C> <C> <C>
Net cash provided by operating activities.. $1,883 $ 4,149 $ 802
Net cash provided by used in investment
activities................................ (903) (460) (289)
Net cash provided by used in financing ac-
tivities.................................. (339) (1,745) (1,729)
</TABLE>

Harris historically generated cash flow from operations, generating $6.8
million from 1994 through August 12, 1996.

Net cash used in investing activities supported HDM equipment purchases and
growth of HFI. Harris incurred significant capital equipment expenditures in
its HDM operations, including expenditures for printing, insertion and
commingled equipment.

Financing activities included payments on HDM's facility mortgage and
distributions to stockholders. Harris' two lines of credit expired in April
1996 and Harris did not renew them.

REICH

Prior to the acquisition of substantially all of its assets and liabilities by
TeleSpectrum, the Reich Group Companies ("Reich"), founded in 1978, offered
telemarketing services to clients in the financial services, telecommunications
and insurance industries. Reich also offered additional value-added services to
its clients, such as marketing planning, database marketing, creative
development, situation analysis, in-house copy and art services and production
management. Reich earned revenue for telemarketing services on an hourly basis
and is compensated for planning and marketing services on a fee-for-service
basis.

On August 12, 1996, Reich sold substantially all of its assets and liabilities
to TeleSpectrum, and is a predecessor company to TeleSpectrum.

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
FOR THE PERIOD
FROM JANUARY 1,
1996 TO
YEAR ENDED DECEMBER 31, AUGUST 12,
--------------------------- ----------------
1994 1995 1996
------------ ------------- ----------------
DOLLARS IN THOUSANDS
<S> <C> <C> <C> <C> <C> <C>
Revenues................. $5,424 100.0% $12,253 100.0% $ 14,558 100.0%
Cost of services......... 4,225 77.9 7,836 63.9 8,550 58.7
Selling, general and ad-
ministrative expenses... 976 18.0 2,534 20.7 1,466 10.1
------ ------- --------
Total operating ex-
penses................. 5,201 95.9 10,370 84.6 10,016 68.8
Operating income......... 223 4.1 1,883 15.4 4,542 31.2
Interest expense, net.... 24 0.4 43 0.4 31 0.2
------ ------- --------
Pre-tax income........... $ 199 3.7 $ 1,840 15.0 $ 4,511 31.0
------ ------- --------
</TABLE>

25
<PAGE>

For the period from January 1, 1996 through August 12, 1996 (the "Stub Period")

Revenues--If the Stub Period revenues were annualized and compared to 1995, the
revenue per day would show a significant increase period over period. This
increase primarily resulted from increased telemarketing call volume from two
existing clients in the financial services industry and one existing client in
the telecommunications industry. Reich's call center in West Virginia, which
opened in May 1995, and the relocation and expansion of its Delaware and West
Virginia call centers provided additional capacity for the increased call
volume.

Cost of Services--Cost of services, as a percentage of revenues, decreased to
58.7% in the Stub Period from 63.9% in 1995. This decrease primarily resulted
from lower long-distance service rates and a lower average cost of labor.

Selling, General and Administrative--Selling, general and administrative costs,
as a percentage of revenues, decreased to 10.1% for the Stub Period compared to
20.7% in 1995, primarily as a result of the spreading of expenses over
increased revenues.

Year Ended December 31, 1995 Compared to Year Ended December 31, 1994

Revenues--Revenues increased to $12.3 million in 1995 from $5.4 million in
1994, an increase of $6.9 million, or 125.9%. This increase primarily resulted
from increased telemarketing call volume from a financial services client and
the addition of new clients in the telecommunications and financial services
industries. The opening of Reich's call center in West Virginia in May 1995
provided the capacity for the increased call volume. Revenues from non-
telemarketing-related services decreased to $0.9 million in 1995 from $1.3
million in 1994, as Reich focused its attention on telemarketing activities.

Cost of Services--Cost of services increased to $7.8 million in 1995 from $4.2
million in 1994, an increase of $3.6 million, or 85.5%. As a percentage of
revenues, however, cost of services decreased to 63.9% in 1995 from 77.9% in
1994. This decrease primarily resulted from the increased utilization of
existing capacity.

Selling, General and Administrative--Selling, general and administrative
expenses increased to $2.5 million in 1995 from $1.0 million in 1994, an
increase of $1.5 million, or 159.6%. The majority of this increase was due to a
one-time $0.8 million increase in compensation to Reich's president and sole
shareholder to $0.9 million in 1995 from $0.1 million in 1994. The remaining
increase was primarily due to salaries and related expenses attributable to
personnel added to the executive management team in 1995, as well as additional
general and administrative costs associated with the increase in business
activity.

LIQUIDITY AND CAPITAL RESOURCES

Reich's principal sources of liquidity were cash flows from operating
activities and available borrowing capacity under credit facilities and capital
leases. The following table sets forth selected information from Reich's
statements of cash flows for the periods indicated.

<TABLE>
<CAPTION>
FOR THE PERIOD
YEAR ENDED JANUARY 1,
DECEMBER 31, 1996 TO
-------------- AUGUST 12,
1994 1995 1996
----- ------- --------------
DOLLARS IN THOUSANDS
<S> <C> <C> <C>
Net cash provided by (used in) operating ac-
tivities.................................... $ 219 $ 745 $ 2,535
Net cash provided by (used in) investment ac-
tivities.................................... (138) (1,212) (935)
Net cash provided by (used in) financing ac-
tivities.................................... (78) 656 (1,703)
</TABLE>

Reich's net cash provided by operating activities were primarily generated from
pre-tax income. During the period, operating cash flow was negatively impacted
by increases in working capital (excluding cash and current maturities on long-
term debt). The additional working capital was principally related to the
increase in accounts receivable that resulted from the growth in the
telemarketing business over the same period.

26
<PAGE>

Net cash used in investing activities was attributable to equipment and other
capital to support the opening of new call centers and relocation and expansion
of Reich's Delaware and West Virginia call center facilities.

Financing activities primarily included borrowing activities under various
long-term debt arrangements, capital leases and shareholder loans. In December
1995, Reich received commitments for a low interest loan of up to $0.7 million
from the City of Wheeling, West Virginia and the WVEDA. These loans were used
to fund the cost associated with the relocation and expansion of Reich's West
Virginia call center which was originally funded by operating cash flows.

TELESPECTRUM, INC. AND TELESPECTRUM TRAINING SERVICES, INC.

Prior to the acquisition of substantially all of its assets by TeleSpectrum,
TeleSpectrum, Inc. and TeleSpectrum Training Services, Inc. (collectively,
"TeleSpectrum Maryland"), founded in 1984, specialized in providing both
inbound and outbound telemarketing services to the high technology,
pharmaceuticals and health care and consumer products industries. TeleSpectrum
Maryland's revenues primarily were derived from inbound teleservices and call
center management services. TeleSpectrum Maryland was typically paid on an
hourly basis for telemarketing services and on a negotiated, project-by-project
basis for other services.

On August 12, 1996, Telespectrum Maryland sold substantially all of its assets
and liabilities to Telespectrum, and is a predecessor company to Telespectrum.

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
FOR THE PERIOD
FROM JANUARY 1,
1996 TO
YEAR ENDED DECEMBER 31, AUGUST 12,
---------------------------- ----------------
1994 1995 1996
------------- ------------- ----------------
DOLLARS IN THOUSANDS
<S> <C> <C> <C> <C> <C> <C>
Revenues................ $9,386 100.0% $11,854 100.0% $ 10,529 100.0%
Cost of services........ 6,754 72.0 8,338 70.2 6,974 66.3
Selling, general and ad-
ministrative expenses.. 2,636 28.0 3,072 26.0 2,929 27.8
------ ------- --------
Total operating ex-
penses................ 9,390 100.0 11,410 96.2 9,903 94.1
Operating income........ (4) -- 444 3.8 626 5.9
Interest expense, net... 150 1.6 184 1.6 129 1.2
------ ------- --------
Pre-tax income.......... $ (154) (1.6) $ 260 2.2 $ 497 4.7
====== ======= ========
</TABLE>

For the period from January 1, 1996 through August 12, 1996 (the "Stub Period")

Revenue--If the Stub Period revenues were annualized and compared to 1995, the
comparison would show a significant increase, period to period. This increase
primarily resulted from increased call volume from existing inbound clients and
the addition of new inbound clients, principally in the pharmaceuticals and
health care industry.

Cost of Services--As a percentage of revenues, cost of services decreased to
66.3% in the Stub Period from 70.2% in 1995, primarily as a result of the
spreading of fixed costs over increased revenues.

Selling, General and Administrative--Selling, general and administrative
expenses increased as a percentage of sales from 1995 to the 1996 Stub Period
as a result of additional administrative, personnel and related corporate
expenses associated with anticipated TeleSpectrum Maryland growth.

27
<PAGE>

Year Ended December 31, 1995 Compared to Year Ended December 31, 1994

Revenues--Revenues increased to $11.9 million in 1995 from $9.4 million in
1994, on increase of $2.5 million, or 26.3%. This increase primarily resulted
from increased call volume from existing inbound clients and the addition of
new inbound clients, principally in the pharmaceuticals and health care
industry.

Cost of Services--Cost of services increased to $8.3 million in 1995 from $6.8
million in 1994, an increase of $1.5 million, or 23.5%. As a percentage of
revenues, cost of services decreased to 70.2% in 1995 from 72.0% in 1994,
primarily as a result of the spreading of fixed costs over increased revenues.

Selling, General and Administrative.--Selling, general and administrative
expenses increased to $3.1 million in 1995 from $2.6 million in 1994, an
increase of $0.5 million, or 16.5%. This increase primarily resulted from
additional administrative, personnel and corporate expenses associated with the
growth in revenues. As a percentage of revenues, selling, general and
administrative expenses decreased to 26.0% in 1995 from 28.0% in 1994,
primarily as a result of the spreading of expenses over increased revenues.

LIQUIDITY AND CAPITAL RESOURCES

TeleSpectrum Maryland's primary sources of liquidity were cash flows from
operating activities and available borrowing capacity under credit facilities.
The following sets forth selected information from TeleSpectrum Maryland's
statement of cash flows for the periods indicated:

<TABLE>
<CAPTION>
FOR THE PERIOD
YEAR ENDED JANUARY 1,
DECEMBER 31, 1996 TO
-------------- AUGUST 12,
1994 1995 1996
------ ------ --------------
DOLLARS IN THOUSANDS
<S> <C> <C> <C>
Net cash provided by (used in) operating ac-
tivities..................................... $ (260) $ (4) $ 969
Net cash provided by (used in) investment ac-
tivities..................................... 37 (99) (2,044)
Net cash provided by (used in) financing ac-
tivities..................................... 359 (45) 1,716
</TABLE>

Net cash used in operating activities in 1994 and 1995 resulted principally
from increases in working capital to support increases in revenue, offset by
net income. The net cash flow from operations in 1996 resulted from higher
operating income.

Net cash used in investing activities was expended primarily for the purchase
of telecommunications and computer equipment. Net cash provided by financing
activities included borrowings under TeleSpectrum Maryland's line of credit
facility and payments of debt and capital lease obligations.

In May 1996, TeleSpectrum Maryland obtained a $4.0 million revolving line of
credit. This revolving credit facility was used for refinancing of existing
debt, working capital purposes and capital expenditure purposes.

Prior to consummation of the acquisition of TeleSpectrum Maryland by
TeleSpectrum, CRW Financial (a TeleSpectrum related party), advanced
TeleSpectrum Maryland $0.5 million, evidenced by a promissory note due one year
from the date the proceeds were received with interest at 9.0%. The note was
contributed by CRW Financial to TeleSpectrum Worldwide as part of the Initial
Capitalization. Upon the closing of the Acquisition, TeleSpectrum Worldwide
paid a portion of the purchase price by cancellation of this promissory note.

THE RESPONSE CENTER

Prior to the acquisition of substantially all of its assets by TeleSpectrum,
The Response Center, Inc. and The Tab House, Inc., founded in 1987
(collectively, "The Response Center"), was a full service custom market
research

28
<PAGE>

firm primarily serving clients in the telecommunications, financial services,
utilities, pharmaceuticals and health care industries, deriving its revenues
from the provision of market research services.

On August 12, 1996, The Response Center sold substantially all its assets and
liabilities to TeleSpectrum, and is a predecessor company to TeleSpectrum.

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
FOR THE PERIOD
YEAR ENDED SEPTEMBER 30 FROM OCTOBER 1
---------------------------- 1995 TO
1994 1995 AUGUST 12 1996
------------- ------------- ----------------
DOLLARS IN THOUSANDS
<S> <C> <C> <C> <C> <C> <C>
Revenues........................ $6,183 100.0% $6,719 100.0% $ 5,279 100.0%
Cost of services................ 3,426 55.4 3,583 53.3 2,849 54.0
Selling, general and
administrative expenses........ 2,800 45.3 2,717 40.5 1,954 37.0
------ ------ -------
Total operating expenses...... 6,226 100.7 6,300 93.8 4,803 91.0
Operating income (loss)......... (43) (0.7) 419 6.2 476 9.0
Interest expense, (income),
net............................ (6) (0.1) (10) (0.2) (20) (0.4)
------ ------ -------
Pre-tax income.................. $ (37) (0.6) $ 429 6.4 $ 496 9.4
====== ====== =======
</TABLE>

For the Period from October 1, 1995 through August 12, 1996 (the "Stub Period")

Revenues--If the Stub Period revenues were annualized and compared to 1995, the
revenue comparisons would show a decrease from period to period. This decrease
was the result of reduced revenues from The Response Center's largest client
and revenues from federal elections tracking surveys performed in 1995, which
were not repeated in the Stub Period.

Cost of Services--Cost of services, which primarily consists of labor,
telephone and other call center-related operating and support expenses,
increased to 54.0% in the Stub Period from 53.3% in 1995 as a result of the
spreading of relatively fixed call center-related operating and support
expenses over reduced revenues.

Selling, General and Administrative--Selling, general and administrative
expenses decreased as a percentage of revenues to 37% in the Stub Period from
40.5% in 1995 as a result of lower executive compensation.

Year Ended September 30, 1995 Compared to Year Ended September 30, 1994

Revenues--Revenues increased to $6.7 million in 1995 from $6.2 million in 1994,
an increase of $0.5 million, or 8.7%. The Response Center generated
approximately 20.0% of 1995 revenues from new clients. This increase in
revenues was partially offset by a decrease in revenues from an existing
client.

Cost of Services--Cost of services increased to $3.6 million in 1995 from $3.4
million in 1994, an increase of $0.2 million, or 4.6%. As a percentage of
revenues, cost of services decreased to 53.3% in 1995 from 55.4% in 1994. This
decrease primarily resulted from reduced recruitment cost due to more cost
effective agreements with temporary agencies, and reduced telephone expense as
a percentage of revenues, partially offset by increased interviewer payroll
costs as a percentage of revenues. Reduced telephone expense resulted from
lower rates negotiated in a new long distance contract.

Selling, General and Administrative--Selling, general and administrative
expenses decreased to $2.7 million in 1995 from $2.8 million in 1994, a
decrease of $0.1 million, or 3.0%. As a percentage of revenues, selling,
general

29
<PAGE>

and administrative expenses decreased to 40.5% in 1995 from 45.3% in 1994,
primarily as a result of economics of scale related to increased revenues
despite increased data processing payroll costs. Selling, general and
administrative expenses include compensation paid to The Response Center's
officers totaling $1.5 million in each of 1994 and 1995.

LIQUIDITY AND CAPITAL RESOURCES

The Response Center's principal source of liquidity was historically cash flows
from operating activities and loans from shareholders. The following table sets
forth selected information from The Response Center's statements of cash flows
for the periods indicated.

<TABLE>
<CAPTION>
YEAR ENDED FOR THE PERIOD
SEPTEMBER 30, FROM OCTOBER 1,
--------------- 1995 TO
1994 1995 AUGUST 12, 1996
------- ------ ---------------
DOLLARS IN THOUSANDS
<S> <C> <C> <C>
Net cash provided by (used in) operating
activities................................ $ 111 $ 188 $ 799
Net cash provided by (used in) investment
activities................................ (59) 44 (151)
Net cash provided by (used in) financing
activities................................ (193) (22) (820)
</TABLE>

For the Stub Period, net cash flows from operations were $799 reflecting the
positive increase in net income and the collection of accounts receivable.

Investing activities have included distributions to and borrowing activity from
shareholders.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this item is incorporated by reference to pages F-1
through F-77 and page S-2 of this document.

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

Information required by this item is incorporated by reference from the
Company's Proxy Statement for the 1997 Annual Meeting.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth certain information concerning each of the
executive officers and directors of the Company.

<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
J. Brian O'Neill........ 37 Chairman of the Board and Chief Executive Officer
Michael C. Boyd......... 55 President, Chief Operating Officer and Director
Richard C. Schwenk,
Jr. ................... 46 Senior Vice President and Chief Financial Officer
William F. Rhatigan..... 52 President, Direct Marketing Group and Director
Gregory M. Alcorn....... 39 President, Sales Group
Patrick M. Baldasare.... 41 President, Market Research Group
Richard W. Virtue....... 52 Director
Kevin W. Walsh.......... 42 Director
Joseph V. Del Raso...... 44 Director
</TABLE>

30
<PAGE>

J. Brian O'Neill has been Chairman of the Board and Chief Executive Officer
since the formation of TeleSpectrum Worldwide in April 1996. Mr. O'Neill is
also Chairman of the Board of Directors and Chief Executive Officer of CRW
Financial. From July 1992 to May 1995, Mr. O'Neill was Chairman and Chief
Executive Officer of Casino and Credit Services, Inc. from May 1988 to July
1992, Mr. O'Neill was Chairman of O'Neill Properties, Inc., a real estate
development company.

Michael C. Boyd has been President and Chief Operating Officer of TeleSpectrum
Worldwide since its formation in April 1996 and a director since May 1996. Mr.
Boyd was a co-founder of QVC Network, Inc., a home shopping television company,
in 1986, and served as its President and Chief Operating Officer until 1994.
From 1994 to 1996, Mr. Boyd was an independent consultant.

Richard C. Schwenk, Jr. has served as Senior Vice President and Chief Financial
Officer of TeleSpectrum Worldwide since May 1996. Mr. Schwenk served as Chief
Financial Officer and Executive Vice President of Electronic Payment Services,
Inc., a provider of automated teller machine and point-of-sale transaction
processing services, from November 1992 to January 1996. From January 1991 to
July 1992, Mr. Schwenk was the Chief Financial Officer and Vice President for
Harris Adacom Corporation, a manufacturer and distributor of data communication
and computer peripheral equipment.

William F. Rhatigan has served as President of the Company's Direct Marketing
Group and as a director of the Company since August 8, 1996. Mr. Rhatigan was
Chairman and Chief Executive Officer of NBG Services, Inc. from 1991 until
August 8, 1996.

Gregory M. Alcorn has served as President of the Company's Sales Group since
August 8, 1996. Mr. Alcorn served as President of SOMAR, Inc. from 1982 until
August 8, 1996.

Patrick M. Baldasare has served as President of the Company's Market Research
division since August 8, 1996. Mr. Baldasare was President of The Response
Center, Inc. from 1987 until August 8, 1996.

Richard W. Virtue has served as a director of the Company since August 8, 1996.
Mr. Virtue served as Chief Executive Officer of SOMAR, Inc. from 1982 until
August 8, 1996.

Kevin W. Walsh has been a director of the Company since August 8, 1996. Mr.
Walsh has been a partner of the law firm Adelman Lavine Gold and Levin, a
professional corporation, since 1988.

Joseph V. Del Raso has been a partner at the law firm of Stradley Ronon Stevens
& Young since 1992. From 1988 to 1992 he was a partner at the law firm of
Holland and Knight in Ft. Lauderdale, Florida. He has been a director of the
Company since February 3, 1997.

ITEM 11. EXECUTIVE COMPENSATION

Information required by this item is incorporated herein by reference from the
Company's Proxy Statement for the 1997 Annual Meeting of Shareholders.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information required by this item is incorporated herein by reference from the
Company's Proxy Statement for the 1997 Annual Meeting of Shareholders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information required by this item is incorporated herein by reference from the
Company's Proxy Statement for the 1997 Annual Meeting of Shareholders.

31
<PAGE>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORT ON FORM 8-K

(a) 1. Financial Statements.

The financial statements listed in the accompanying Index to Financial
Statements and Financial Statement Schedules at page F-1 are filed as part of
this Form 10-K.

2. Financial Statement Schedule.

The financial statement schedule listed in the accompanying Index to Financial
Statements and Financial Statement Schedule at page F-1 are filed as part of
this Form 10-K.

All other schedules have been omitted because they are not applicable, or not
required, or the information is shown in the Financial Statements or notes
thereto.

3. Exhibits. (See (c) below)

(b) Report on Form 8-K

The Company filed a Current Report on Form 8-K with the Commission on November
13, 1996. The Company also filed a Current Report on Form 8-K/A with the
Commission on January 13, 1997.

The following is a list of exhibits filed as part of this annual report on Form
10-K. Where so indicated by footnote, exhibits which were previously filed are
incorporated by reference. For exhibits incorporated by reference, the location
of the exhibit in the previous filing is indicated in parentheses.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3.01 Restated Certificate of Incorporation of TeleSpectrum Worldwide Inc.
is incorporated by reference to exhibit 3.01 of the Company's
Registration Statement on Form S-1 (File No. 333-04349)
3.02 Bylaws of TeleSpectrum Worldwide Inc. are incorporated by reference to
exhibit 3.02 of the Company's Registration Statement on Form S-1 (File
No. 333-04349).
10.01 Asset Purchase Agreement, dated as of April 4, 1996, supplemented
April 6, 1996 and restated as of May 22, 1996, by and among CRW
Financial, Inc., TeleSpectrum Worldwide Inc., Harris Direct Marketing,
Inc., Harris Fulfillment, Inc., Bruce M. Schorle and Edward M. Idzik
is incorporated by reference to exhibit 10.01 of the Company's
Registration Statement on Form S-1
(File No. 333-04349).
10.02 Asset Purchase Agreement, dated as of April 5, 1996 and amended and
restated as of May 22, 1996, by and among CRW Financial, Inc.,
TeleSpectrum Worldwide Inc., DialDirect, Inc., InsureDirect, Inc.,
DialDirect Telemarketing, Ltd., TRG/Communications, Inc., The Reich
Group, Inc. and Morton A. Reich incorporated by reference to exhibit
10.02 of the Company's Registration Statement on Form S-1 (File No.
333-04349).
10.03 Asset Purchase Agreement, dated as of April 10, 1996 and amended and
restated as of May 22, 1996, by and among CRW Financial, Inc.,
TeleSpectrum Worldwide Inc., TeleSpectrum, Inc., TeleSpectrum Training
Services, Inc., Karen Schweitzer and Sherry Paterra incorporated by
reference to exhibit 10.03 of the Company's Registration Statement on
Form S-1
(File No. 333-04349).
10.04 Asset Purchase Agreement, dated as of April 26, 1996 and amended and
restated as of May 22, 1996, by and among SOMAR, Inc., Richard W.
Virtue, CRW Financial, Inc. and TeleSpectrum Worldwide Inc. is
incorporated by reference to exhibit 10.04 of the Company's
Registration Statement on Form S-1 (File No. 333-04349).
</TABLE>

32
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.05 Asset Purchase Agreement, dated as of April 30, 1996 and amended and
restated as of May 22, 1996, by and among TeleSpectrum Worldwide Inc.,
The Response Center, Inc., The Tab House, Inc., Patrick M. Baldasare,
Richard Racquet and Edward Olesky is incorporated by reference to
exhibit 10.05 of the Company's Registration Statement on Form S-1
(File No. 333-04349).
10.06 Asset Purchase Agreement, dated as of May 3, 1996 and amended and
restated as of May 22, 1996, by and among TeleSpectrum Worldwide Inc.,
CRW Financial, Inc., NBG Services, Inc., William F. Rhatigan and
Michael J. Gallant is incorporated by reference to exhibit 10.06 of
the Company's Registration Statement on Form S-1 (File No. 333-04349).
10.07 Asset Purchase Agreement, dated as of October 1, 1996, by and among
TeleSpectrum Worldwide Inc., Technical Research Assistance Research
Programs, Inc., TARP Information Systems, Inc., John Goodman and Mark
Grainer is incorporated by reference to the current report on Form 8-K
(file No. 000-21107).
10.08 Exchange Agreement, dated as of October 1, 1996, by and among
TeleSpectrum Worldwide Inc., John Goodman and Mark Grainer is
incorporated by reference to the current report on Form 8-K (file No.
000-21107).
10.09 Employment Agreement among TeleSpectrum Worldwide Inc., CRW Financial,
Inc. and Patrick M. Baldasare is incorporated by reference to exhibit
10.10 of the Company's Registration Statement on Form S-1 (File No.
333-04349).
10.10 Employment Agreement among TeleSpectrum Worldwide Inc., CRW Financial,
Inc. and Gregory M. Alcorn is incorporated by reference to exhibit
10.11 of the Company's Registration Statement on Form S-1 (File No.
333-04349).
10.11 Employment Agreement between TeleSpectrum Worldwide Inc. and William
F. Rhatigan is incorporated by reference to exhibit 10.13 of the
Company's Registration Statement on Form S-1 (File No. 333-04349).
10.12 Consulting Agreement between TeleSpectrum Worldwide Inc. and Richard
W. Virtue incorporated by reference to exhibit 10.14 of the Company's
Registration Statement on Form S-1
(File No. 333-04349).
10.13 Employment Agreement, dated as of May 21, 1996, between TeleSpectrum
Worldwide Inc. and Brian J. O'Neill incorporated by reference to
exhibit 10.15 of the Company's Registration Statement on Form S-1
(File No. 333-04349) is incorporated by reference to exhibit 10.15 of
the Company's Registration Statement on Form S-1 (File No. 333-04349).
10.14 Employment Agreement, dated as of April 22, 1996, between TeleSpectrum
Worldwide Inc. and Michael C. Boyd is incorporated by reference to
exhibit 10.16 of the Company's Registration Statement on Form S-1
(File No. 333-04349).
10.15 Employment Agreement, dated as of May 6, 1996, between TeleSpectrum
Worldwide Inc. and Richard S. Schwenk, Jr. is incorporated by
reference to exhibit 10.17 of the Company's Registration Statement on
Form S-1 (File No. 333-04349)
10.16 TeleSpectrum Worldwide Inc. 1996 Equity Compensation Plan is
incorporated by reference to exhibit 10.18 of the Company's
Registration Statement on Form S-1 (File No. 333-04349).
23.01 Consent of Arthur Andersen LLP.*
24.01 Power of Attorney (included as part of the Signature Page).
</TABLE>
- --------
* Filed herewith.

33
<PAGE>

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.

Telespectrum Worldwide Inc.

By: /s/ J. Brian O'Neill
---------------------------------
J. BRIAN O'NEILL
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER

Date: March 27, 1997
---------------------------------

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.

EACH PERSON, IN SO SIGNING ALSO MAKES, CONSTITUTES AND APPOINTS J. BRIAN
O'NEILL, CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER OF TELESPECTRUM
WORLDWIDE INC., AND RICHARD C. SCHWENK, JR., SENIOR VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER OF TELESPECTRUM WORLDWIDE INC. AND EACH OF THEM ACTING ALONE,
AS HIS TRUE AND LAWFUL ATTORNEYS-IN-FACT, IN HIS NAME, PLACE AND STEAD, TO
EXECUTE AND CAUSE TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ANY
OR ALL AMENDMENTS TO THIS REPORT.

NAME CAPACITY DATE

/s/ J. Brian O'Neill Chairman of the March 27, 1997
- ------------------------------------- Board, Chief
J. BRIAN O'NEILL Executive Officer
and Director
(Principal
Executive Officer)

/s/ Michael C. Boyd President, Chief March 27, 1997
- ------------------------------------- Operating Officer
MICHAEL C. BOYD and Director

/s/ Richard C. Schwenk, Jr. Senior Vice March 27, 1997
- ------------------------------------- President and Chief
RICHARD C. SCHWENK, JR. Financial Officer
(Principal
Financial and
Accounting Officer)

/s/ William F. Rhatigan President, Direct March 27, 1997
- ------------------------------------- Marketing Group and
WILLIAM F. RHATIGAN Director

34
<PAGE>

NAME CAPACITY DATE

/s/ Gregory M. Alcorn President, Sales March 27, 1997
- ------------------------------------- Group
GREGORY M. ALCORN

/s/ Patrick M. Baldasare President, Market March 27, 1997
- ------------------------------------- Research Group
PATRICK M. BALDASARE

/s/ Richard W. Virtue Director March 27, 1997
- -------------------------------------
RICHARD W. VIRTUE

/s/ Kevin W. Walsh Director March 27, 1997
- -------------------------------------
KEVIN W. WALSH

/s/ Joseph V. Del Raso Director March 27, 1997
- -------------------------------------
JOSEPH V. DEL RASO

35
<PAGE>

TELESPECTRUM WORLDWIDE INC.

TABLE OF CONTENTS

PART II--FINANCIAL INFORMATION

ITEM 8. FINANCIAL STATEMENTS

<TABLE>
<S> <C>
REGISTRANT
TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
Report of Independent Public Accountants................................ F-3
Consolidated Balance Sheet as of December 31, 1996...................... F-4
Consolidated Statement of Income for the Period from April 26, 1996
(Inception) to
December 31, 1996...................................................... F-5
Consolidated Statement of Stockholders' Equity for the Period from April
26, 1996 (Inception) to December 31, 1996.............................. F-6
Consolidated Statement of Cash Flows for the Period from April 26, 1996
(Inception) to December 31, 1996....................................... F-7
Notes to Consolidated Financial Statements.............................. F-8
PREDECESSOR COMPANIES
SOMAR, INC. (SOMAR)
Report of Independent Public Accountants................................ F-19
Balance Sheet as of December 31, 1995................................... F-20
Statements of Income for the Years Ended December 31, 1994 and 1995, and
for the Period from January 1, 1996 to August 12, 1996................. F-21
Statements of Stockholders' Equity (Deficit) for the Years Ended
December 31, 1994 and 1995, and for the Period from January 1, 1996 to
August 12, 1996........................................................ F-22
Statements of Cash Flows for the Years Ended December 31, 1994 and 1995
and for the Period from January 1, 1996 to August 12, 1996............. F-23
Notes to Financial Statements........................................... F-24
NBG SERVICES, INC. (NBG)
Report of Independent Public Accountants................................ F-31
Balance Sheet as of December 29, 1995................................... F-32
Statements of Income for the Years Ended December 30, 1994 and December
29, 1995, and for the Period from December 30, 1995 to August 12,
1996................................................................... F-33
Statements of Shareholders' Equity for the Years Ended December 30, 1994
and December 29, 1995, and for the Period from December 30, 1995 to
August 12, 1996........................................................ F-34
Statements of Cash Flows for the Years Ended December 30, 1994 and
December 29, 1995, and for the Period from December 30, 1995 to August
12, 1996............................................................... F-35
Notes to Financial Statements........................................... F-36
HARRIS DIRECT MARKETING, INC. AND HARRIS FULFILLMENT, INC. (HARRIS)
Report of Independent Public Accountants................................ F-40
Combined Balance Sheet as of December 31, 1995.......................... F-41
Combined Statements of Income for the Years Ended December 31, 1994 and
1995, and for the Period from January 1, 1996 to August 12, 1996....... F-42
Combined Statements of Shareholders' Equity for the Years Ended December
31, 1994 and 1995, and for the Period from January 1, 1996 to August
12, 1996............................................................... F-43
Combined Statements of Cash Flows for the Years Ended December 31, 1994
and 1995, and for the Period from January 1, 1996 to August 12, 1996... F-44
Notes to Combined Financial Statements.................................. F-45
</TABLE>

F-1
<PAGE>

<TABLE>
<S> <C>
THE REICH GROUP COMPANIES (REICH)
Report of Independent Public Accountants................................ F-49
Combined Balance Sheet as of December 31, 1995.......................... F-50
Combined Statements of Income for the Years Ended December 31, 1994 and
1995, and for the Period from January 1, 1996 to August 12, 1996....... F-51
Combined Statements of Shareholder's Equity (Deficit) for the Years
Ended December 31, 1994 and 1995, and for the Period from January 1,
1996 to August 12, 1996................................................ F-52
Combined Statements of Cash Flows for the Years Ended December 31, 1994
and 1995, and for the Period from January 1, 1996 to August 12, 1996... F-53
Notes to Combined Financial Statements.................................. F-54
THE RESPONSE CENTER, INC. AND THE TAB HOUSE, INC. (THE RESPONSE CENTER)
Report of Independent Public Accountants................................ F-60
Combined Balance Sheet as of September 30, 1995......................... F-61
Combined Statements of Income for the Years Ended September 30, 1994 and
1995, and for the Period from October 1, 1995 to August 12, 1996....... F-62
Combined Statements of Shareholders' Equity for the Years Ended
September 30, 1994 and 1995, and for the Period from October 1, 1995 to
August 12, 1996........................................................ F-63
Combined Statements of Cash Flows for the Years Ended September 30, 1994
and 1995, and for the Period from October 1, 1995 to August 12, 1996... F-64
Notes to Combined Financial Statements.................................. F-65
TELESPECTRUM, INC. AND TELESPECTRUM TRAINING SERVICES, INC.
(TELESPECTRUM MARYLAND)
Report of Independent Public Accountants................................ F-69
Combined Balance Sheet as of December 31, 1995.......................... F-70
Combined Statements of Income for the Year Ended December 31, 1995, and
for the Period from January 1, 1996 to August 12, 1996................. F-71
Combined Statements of Stockholders' Equity for the Year Ended December
31, 1995, and for the Period from January 1, 1996 to August 12, 1996... F-72
Combined Statements of Cash Flows for the Year Ended December 31, 1995,
and for the Period from January 1, 1996 to August 12, 1996............. F-73
Notes to Combined Financial Statements.................................. F-74
FINANCIAL STATEMENT SCHEDULES:
Report of Independent Public Accountants................................ S-1
Schedule II--Valuation and Qualifying Accounts for the Period from April
26, 1996 (Inception) to December 31, 1996.............................. S-2
</TABLE>

F-2
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To TeleSpectrum Worldwide Inc.:

We have audited the accompanying consolidated balance sheet of TeleSpectrum
Worldwide Inc. and subsidiaries (Delaware corporations) as of December 31,
1996, and the related consolidated statements of income, stockholders' equity
and cash flows for the period from April 26, 1996 (Inception) to December 31,
1996. 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 audit.

We conducted our audit in accordance with generally accepted auditing
standards. 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of TeleSpectrum
Worldwide Inc. and subsidiaries as of December 31, 1996, and the results of
their operations and their cash flows for the period from April 26, 1996
(Inception) to December 31, 1996, in conformity with generally accepted
accounting principles.

Arthur Andersen LLP

Philadelphia, Pa.,
February 17, 1997
(except with respect to the matter
discussed in Note 13, as to which
the date is March 21, 1997)

F-3
<PAGE>

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
(IN THOUSANDS--EXCEPT SHARE AMOUNTS)

<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......................................... $ 30,715
Accounts receivable, net of allowance for doubtful accounts of
$583.............................................................. 33,064
Deferred income taxes.............................................. 435
Prepaid expenses and other......................................... 2,507
--------
Total current assets............................................. 66,721
PROPERTY AND EQUIPMENT, net.......................................... 30,171
GOODWILL, net........................................................ 200,187
OTHER ASSETS......................................................... 1,976
--------
Total assets..................................................... $299,055
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt............................... $ 1,768
Accounts payable................................................... 6,185
Accrued compensation............................................... 3,980
Other accrued expenses............................................. 5,042
Notes payable to sellers of businesses............................. 27,005
Deferred revenue................................................... 2,300
Other current liabilities.......................................... 2,165
--------
Total current liabilities........................................ 48,445
--------
DEFERRED INCOME TAXES................................................ 655
--------
LONG-TERM DEBT....................................................... 4,199
--------
ACQUISITION RELATED LIABILITIES...................................... 4,810
--------
OTHER NONCURRENT LIABILITIES......................................... 435
--------
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value, 5,000,000 shares authorized,
no shares issued or outstanding................................... --
Common Stock, $.01 par value, 200,000,000 shares authorized,
25,210,984 shares issued and outstanding.......................... 252
Additional paid-in capital......................................... 236,678
Retained earnings.................................................. 3,650
Cumulative translation adjustments................................. (69)
--------
Total stockholders' equity....................................... 240,511
--------
Total liabilities and stockholders' equity....................... $299,055
========
</TABLE>

The accompanying notes are an integral part of this statement.

F-4
<PAGE>

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME
FOR THE PERIOD FROM APRIL 26, 1996 (INCEPTION) TO DECEMBER 31, 1996
(IN THOUSANDS--EXCEPT PER SHARE AMOUNTS)

<TABLE>
<S> <C>
REVENUES............................................................. $61,474
OPERATING EXPENSES:
Cost of services................................................... 40,871
Selling, general and administrative................................ 12,519
Goodwill amortization.............................................. 2,568
-------
Total operating expenses......................................... 55,958
-------
Operating income................................................. 5,516
INTEREST INCOME...................................................... 885
INTEREST EXPENSE..................................................... (445)
-------
Income before taxes.............................................. 5,956
INCOME TAXES......................................................... 2,306
-------
NET INCOME........................................................... $ 3,650
=======
EARNINGS PER SHARE................................................... $ 0.20
=======
WEIGHTED AVERAGE NUMBER OF COMMON SHARES AND EQUIVALENT SHARES
OUTSTANDING......................................................... 17,898
=======
</TABLE>

The accompanying notes are an integral part of this statement.

F-5
<PAGE>

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS--EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL CUMULATIVE TOTAL
----------------- ----------------- PAID-IN RETAINED TRANSLATION STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENTS EQUITY
------- -------- ---------- ------ ---------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Incorporation on April
26, 1996............... -- $ -- 8,510,137 $ 85 $ (75) $ -- $ -- $ 10
Capital contribution.... -- -- -- -- 2,100 -- -- 2,100
Issuance of equity owned
by CRW................. -- -- -- -- 18,749 -- -- 18,749
Issuance of common stock
upon public offering,
net of offering costs.. -- -- 11,879,000 119 161,847 -- -- 161,966
Issuance of common stock
to the sellers of the
initial operating
businesses............. -- -- 4,403,863 44 44,647 -- -- 44,691
Issuance of options and
warrants to purchase
common stock to the
sellers of the Initial
Operating Businesses... -- -- -- -- 4,827 -- -- 4,827
Issuance of common stock
to the sellers of
Fourth Quarter
Acquisitions........... -- -- 417,984 4 4,583 -- -- 4,587
Net income.............. -- -- -- -- -- 3,650 -- 3,650
Current translation
adjustments............ -- -- -- -- -- -- (69) (69)
------ -------- ---------- ---- -------- ------ ----- --------
Balance, December 31,
1996................... -- $ -- 25,210,984 $252 $236,678 $3,650 $ (69) $240,511
====== ======== ========== ==== ======== ====== ===== ========
</TABLE>

The accompanying notes are an integral part of this statement.

F-6
<PAGE>

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM APRIL 26, 1996 (INCEPTION) TO DECEMBER 31, 1996
(IN THOUSANDS)

<TABLE>
<S> <C>
OPERATING ACTIVITIES:
Net income......................................................... $ 3,650
Adjustments to reconcile net income to net cash used in operating
activities--
Depreciation..................................................... 1,930
Amortization of goodwill......................................... 2,568
Provision for bad debts.......................................... 606
Provision for deferred taxes..................................... 220
Changes in certain operating assets and liabilities--
Accounts receivable............................................ (9,754)
Prepaid expenses and other..................................... 1,289
Accounts payable............................................... (984)
Accrued compensation........................................... 3,980
Other accrued expenses......................................... (1,907)
Deferred revenue............................................... 1,995
Other liabilities.............................................. (5,729)
--------
Net cash used in operating activities........................ (2,136)
--------
INVESTING ACTIVITIES:
Purchases of property and equipment................................ (10,567)
Purchases of Initial Operating Businesses and Fourth Quarter Acqui-
sitions,
net of cash acquired.............................................. (106,993)
--------
Net cash used in investing activities........................ (117,560)
--------
FINANCING ACTIVITIES:
Capital contribution received...................................... 2,110
Proceeds of public offering, net of offering costs................. 162,016
Repayments on long-term debt....................................... (11,078)
Payments on capital lease obligations.............................. (2,637)
--------
Net cash provided by financing activities.................... 150,411
--------
NET INCREASE IN CASH AND CASH EQUIVALENTS............................ 30,715
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD....................... --
--------
CASH AND CASH EQUIVALENTS, END OF PERIOD............................. $ 30,715
========
</TABLE>

The accompanying notes are an integral part of this statement.

F-7
<PAGE>

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996

1. NATURE OF BUSINESS:

TeleSpectrum Worldwide Inc. and subsidiaries (the "Company") was incorporated
in Delaware on April 26, 1996 (see Note 11). On August 12, 1996, the Company
completed its initial public offering and, concurrent with the offering, the
Company began material operations with the acquisition of the assets of a
number of telemarketing, market research and direct mail and fulfillment
businesses (see Note 3). The Company provides inbound and outbound
telemarketing, inbound customer services, direct mail and fulfillment, market
research and other services such as strategic and database telemarketing,
consulting and training.

2. SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation

The accompanying financial statements include the accounts of Telespectrum
Worldwide Inc. and its subsidiaries. All material intercompany balances and
transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles 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.
Actual results could differ from those estimates.

Revenue Recognition

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. At December
31, 1996, cash equivalents consisted primarily of investments in money market
accounts and a certificate of deposit.

Property and Equipment

Property and equipment are recorded at cost. Property and equipment
capitalized under capital leases are recorded at the present value of the
minimum lease payments due over the term of the lease. Depreciation and
amortization are provided using the straight-line method over the estimated
useful lives or the lease term, whichever is shorter.

Expenditures for maintenance, repairs and betterments that do not prolong the
useful life of an asset have been charged to operations as incurred. Additions
and betterments that substantially extend the useful life of the asset are
capitalized. Upon sale or other disposition of assets, the cost and related
accumulated

F-8
<PAGE>

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
depreciation and amortization are removed from the respective accounts, and the
resulting gain or loss, if any, is included in income.

Income Taxes

The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." Under SFAS No. 109, deferred income tax assets
and liabilities are determined based on differences between the financial
reporting and income tax basis of assets and liabilities measured using enacted
income tax rates and laws that are expected to be in effect when the
differences reverse.

Currency Translation

The accounts of the international subsidiaries are translated in accordance
with SFAS No. 52, "Foreign Currency Translation," which requires that assets
and liabilities of international operations be translated using the exchange
rate in effect at the balance sheet date. The results of operations are
translated at average exchange rates during the year. The effects of exchange
rate fluctuations in translating assets and liabilities of international
operations into U.S. dollars are accumulated and reflected as a cumulative
translation adjustment in the consolidated statement of stockholders' equity.
Transaction gains or losses are included in net income. There are no material
transaction gains or losses in the accompanying financial statements for the
period presented.

Impairment of Long Lived Assets

The Company has adopted SFAS No. 121 "Accounting for Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." SFAS No. 121 requires that
long-lived assets and certain identifiable intangibles to be held and used by
the Company be reviewed for possible impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. If changes in circumstances indicate that the carrying amount of
an asset that an entity expects to hold and use may not be recoverable, future
cash flows expected to result from the use of the asset and its disposition
must be estimated. If the undiscounted value of the future cash flows is less
than the carrying amount of the asset, an impairment will be recognized. The
Company believes that there are no material impairment losses as of December
31, 1996.

Earnings Per Share

Earnings per share is based on the weighted average number of shares of
Common stock and equivalent shares (dilutive stock options and warrants using
the treasury stock method) outstanding during the year. On May 21, 1996, the
Company effected a 8.510137-for-1 split of its Common stock. All share and per-
share amounts included in the accompanying financial statements reflect this
split.

3. INITIAL PUBLIC OFFERING AND ACQUISITIONS:

Initial Public Offering

In August 1996, the Company sold 11,879,000 shares of its stock in a public
offering (the "Offering") at $15 per share which raised net proceeds to the
Company of $161,966,000 net of offering costs of $3,746,000.

F-9
<PAGE>

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996

Initial Operating Businesses

In May 1996, CRW Financial, Inc. ("CRW") assigned to the Company its rights
to acquire substantially all of the net assets of SOMAR, Inc., NBG Services,
Inc., Harris Direct Marketing, Inc. and Harris Fulfillment, Inc., The Reich
Group Companies, The Response Center, Inc. and The Tab House, Inc., and
TeleSpectrum, Inc. and TeleSpectrum Training Services, Inc.; (together, the
"Initial Operating Businesses"). These acquisitions occurred contemporaneously
with the closing of the Offering on August 12, 1996, and were accounted for
using the purchase method. The total purchase price of the Initial Operating
Businesses was $199.9 million, which consisted of (i) $90.9 million in cash
paid to the sellers; (ii) forgiveness of a $0.5 million promissory note; (iii)
$44.7 million estimated fair value of 4,403,863 shares of the Company's Common
Stock issued to the Sellers; (iv) $2.1 million estimated fair value of warrants
to purchase 593,400 shares of Common Stock at the Offering price of $15 per
share; (v) $18.7 million deemed value for accounting purposes of the CRW Lender
Warrants and CRW Management Warrants to purchase 2,272,562 shares of Common
Stock (owned by CRW) at $1.50 per share (see Note 11); (vi) $28.4 million in
the form of a note payable and options to settle certain earnout provisions
with two of the sellers of the Initial Operating Businesses (see Notes 9 and
13); (vii) $5.7 million relating to accrued separation costs (of which $0.9
million is included in other current liabilities and $4.8 million is recorded
as acquisition related liabilities) for certain former owners of the Initial
Operating Businesses; (viii) $4.0 million of additional purchase price payable
to the Sellers under the purchase agreements; and (ix) transaction costs of
$4.9 million. The $181.8 million excess of the total purchase price over the
estimated fair value of net assets acquired was recorded as goodwill and is
being amortized on a straight-line basis over 25 years.

Fourth Quarter Acquisitions

On October 1, 1996, the Company acquired substantially all of the assets (and
assumed substantially all of the liabilities) of Technical Assistance Research
Programs, Inc. and Tarp Information Systems, Inc. and acquired all of the
outstanding stock of Tarp (Europe) Limited (together, "TARP"). In addition, on
November 1, 1996 the Company acquired all of the outstanding stock of 1095404
Ontario, Inc., PR Response, Inc. and PR Response West, Inc. (together, "PR
Response"). The combined purchase price for TARP and PR Response consisted of
$17.25 million in cash, $4.6 million of estimated fair value of the Company's
Common Stock and $0.9 million in transaction costs. The purchase price was
reduced by approximately $0.8 million due from the sellers. The $20.9 million
excess of the total purchase price of TARP and PR Response over the estimated
fair value of net assets acquired was recorded as goodwill and is being
amortized on a straight-line basis over 25 years. The TARP purchase agreement
also contains certain earn-out provisions. In addition, the Company entered
into employment agreements with the selling shareholders.

The policy of the Company is to continually evaluate whether later events and
circumstances have occurred that indicate that the remaining balance of
goodwill may not be recoverable or the remaining estimated useful life may
warrant revision. If factors indicate that goodwill should be evaluated for
possible impairment, the Company will use an estimate of the related
undiscounted cash flows over the remaining life of the goodwill in measuring
whether the goodwill is recoverable. If the amount of such estimated
undiscounted future cash flows is less then the net book value of the related
goodwill, the goodwill would then be written down to the amount of the
discounted cash flows. As of December 31, 1996, the Company has determined that
the goodwill related to the above acquisitions is recoverable.

At December 31, 1996, accumulated amortization related to Goodwill amounted
to $2,568,000.

F-10
<PAGE>

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996

The following table summarizes the unaudited pro forma combined results of
operations for the years ended December 31, 1995 and 1996, assuming that the
Initial Operating Businesses and the acquisition of TARP had occurred on
January 1, 1995 (for purposes of this disclosure PR Response is not deemed
material):

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
------------------
(IN THOUSANDS)
1995 1996
------------------
<S> <C> <C>
Revenues.............................................. $ 98,940 $ 142,808
Operating income...................................... 7,891 13,818
Net income............................................ 4,245 8,347
Earnings per share.................................... $ 0.19 $ 0.36
</TABLE>

4. SUPPLEMENTAL CASH FLOWS INFORMATION:

For the period from April 26, 1996 (Inception) to December 31, 1996, the
Company paid interest of $188,000, income taxes of $2,447,000 and financed
equipment purchases with capital leases of $1,917,000.

The following table displays the net noncash assets that were acquired during
1996, as a result of the business acquisitions described in Note 3 (in
thousands):

<TABLE>
<CAPTION>
INITIAL FOURTH
OPERATING QUARTER
BUSINESSES ACQUISITIONS TOTAL
---------- ------------ --------
<S> <C> <C> <C>
Noncash assets (liabilities):
Accounts receivable...................... $21,416 $ 2,500 $ 23,916
Prepaid expenses and other............... 4,672 467 5,139
Property and equipment................... 18,472 1,115 19,587
Other assets............................. 415 219 634
Goodwill................................. 181,811 20,944 202,755
Accounts payable......................... (6,000) (1,169) (7,169)
Other accrued expenses................... (5,020) (1,303) (6,323)
Deferred revenue......................... (305) -- (305)
Other current liabilities................ (1,757) (4,874) (6,631)
Debt..................................... (17,116) (649) (17,765)
Other noncurrent liabilities............. (297) (183) (480)
------- ------- --------
Net noncash assets acquired.............. 196,291 17,067 213,358
Less: Common stock issued................ (44,691) (4,587) (49,278)
Options and warrants issued to
sellers............................... (4,827) -- (4,827)
CRW Warrants........................... (18,749) -- (18,749)
(Notes payable) to/notes receivable
from sellers of Businesses, net of
payments through December 31, 1996 of
$1,804................................ (27,805) 800 (27,005)
Acquisition related liabilities........ (5,786) (720) (6,506)
------- ------- --------
Cash paid for business acquisitions,
net..................................... $94,433 $12,560 $106,993
======= ======= ========
</TABLE>

F-11
<PAGE>

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996

5. PROPERTY AND EQUIPMENT:

<TABLE>
<CAPTION>
DECEMBER 31,
USEFUL LIVES 1996
------------ --------------
(IN THOUSANDS)
<S> <C> <C>
Telemarketing equipment......................... 5 years $15,220
Machinery and equipment......................... 7 years 1,246
Furniture and office equipment.................. 5-7 years 9,712
Building........................................ 40 years 3,877
Leasehold improvements.......................... 3-7 years 1,540
Land............................................ 486
-------
32,081
Less--Accumulated depreciation and amortiza-
tion........................................... (1,910)
-------
$30,171
=======
</TABLE>

Depreciation and amortization expense for the period from April 26, 1996
(Inception) to December 31, 1996, was $1,930,000.

The carrying value of property and equipment under capital lease obligations
included above amounted to $5,739,000 at December 31, 1996.

6. INCOME TAXES:

The components of income before income taxes are as follows:

<TABLE>
<CAPTION>
PERIOD FROM
APRIL 26, 1996 TO
DECEMBER 31, 1996
-----------------
(IN THOUSANDS)
<S> <C>
Domestic............................................... $5,424
Foreign................................................ 532
------
$5,956
======
</TABLE>

The components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
PERIOD FROM
APRIL 26, 1996 TO
DECEMBER 31, 1996
-----------------
(IN THOUSANDS)
<S> <C>
Current:
Federal.............................................. $1,736
State................................................ 130
Foreign.............................................. 220
------
Total.............................................. $2,086
======
Deferred:
Federal.............................................. $ 209
State................................................ 11
Foreign.............................................. --
------
Total.............................................. $ 220
======
$2,306
======
</TABLE>

F-12
<PAGE>

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996

The reconciliation of the statutory federal income tax rate to the Company's
effective income tax rate is as follows:

<TABLE>
<CAPTION>
PERIOD FROM
APRIL 26, 1996 TO
DECEMBER 31, 1996
-----------------
(IN THOUSANDS)
<S> <C>
Statutory federal income tax rate...................... 34.0%
State income taxes, net of federal tax benefit......... 1.7
Impact of foreign subsidiaries subject to higher tax
rates................................................. .6
Nondeductible expenses, principally goodwill........... 2.4
----
38.7%
====
</TABLE>

Deferred taxes are determined based upon the estimated future tax effects of
differences between the financial statements and income tax basis of assets and
liabilities given the provisions of the enacted tax laws. The tax effect of
temporary differences as established in accordance with SFAS No. 109 that give
rise to deferred taxes are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
(IN THOUSANDS)
<S> <C>
Gross deferred tax assets:
Accruals and reserves not currently deductible.......... $ 592
Book/tax difference of recorded assets.................. 201
-------
$ 793
=======
Gross deferred tax liability:
Goodwill amortization................................... $ (889)
Other................................................... (124)
-------
$(1,013)
=======
</TABLE>

The Company did not have any valuation allowances against deferred tax assets
at December 31, 1996, as it believes it is more likely than not that the
deferred tax assets will be realized.

7. LONG-TERM DEBT:

Long-term debt at December 31, 1996 is summarized as follows (in thousands):

<TABLE>
<S> <C>
The West Virginia Economic Development Authority; the notes are
secured by assets of the Company and are payable in monthly
installments of $21,250 including interest, through July 1999, at
an interest rate of 4%............................................. $ 625
Other............................................................... 319
Capital lease obligations (see Note 8).............................. 5,023
------
5,967
Less--Current maturities............................................ 1,768
------
$4,199
======
</TABLE>

F-13
<PAGE>

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996
Minimum principal repayments of long-term debt as of December 31, 1996,
excluding capitalized lease obligations (see Note 8), are as follows (in
thousands):

In January 1997, the Company entered into a Loan and Security Agreement (the
loan "Agreement") with a bank which provides for a $50 million credit facility
to be repaid in January 2001. The Company can draw down on the credit facility
in increments of $500,000 or more. The Company can elect at the time of the
draw down to pay interest at prime plus 0.25% or at the LIBOR rate plus a
margin, which ranges from 1.00% to 1.75% and will pay a commitment fee ranging
from 1/8% to 3/8% on the unused borrowing capacity. The Agreement also makes
available to the Company letters of credit which can be issued on the
outstanding undrawn amount of the credit facility. The letters of credit shall
not exceed $3 million and have a fee equal to 1.00% per annum on the face
amount of each letter of credit. Borrowings under the Agreement are
collateralized by substantially all the assets of the Company. The Agreement
also contains various financial and non-financial covenants.

8. COMMITMENTS AND CONTINGENCIES:

The Company leases facilities and equipment under capital and noncancelable
operating leases through October 1, 2006. Interest rates on the capital leases
range from 4% to 20%. Rent expense under operating leases for the period from
April 26, 1996 (Inception) through December 31, 1996 was $1,448,000.

Future minimum lease payments as of December 31, 1996 are as follows (in
thousands):

<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
--------- -------
<S> <C> <C>
1997................................................... $ 4,404 $1,484
1998................................................... 3,909 1,069
1999................................................... 3,609 747
2000................................................... 3,139 650
2001................................................... 2,729 417
Thereafter............................................. 6,444 1,600
------- ------
Total minimum lease payments........................... $24,234 5,967
=======
Less--Amount representing interest..................... 944
------
</TABLE>

<TABLE>
<S> <C>
Present value of future minimum lease payments.................... 5,023
Less--Current portion of principal payments....................... 1,327
------
$3,696
======
</TABLE>

The Company has entered into employment contracts with several of its senior
executives with terms ranging from three to four years. The contracts provide
for aggregate annual minimum compensation of approximately $800,000 plus
bonuses until 1999 and $605,000 in 2000. Additionally, the Company has agreed
to grant options in future years to certain of these senior executives (see
Note 9).

F-14
<PAGE>

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996

The Company is party to various claims and other matters arising in the
ordinary course of business. In the opinion of management, the outcome of these
matters will not have a material adverse effect on the Company's financial
position or results of operations.

9. OPTIONS AND WARRANTS:

On May 17, 1996, the Company adopted The 1996 Equity Compensation Plan (the
"Plan"). A committee of the Board of Directors administers the Plan and awards
grants under the Plan at its sole discretion. The Plan reserves up to 2.3
million shares of Common Stock for issuance in connection with the exercise
and/or grant of incentive and nonqualified stock options, restricted stock,
stock appreciation rights and performance units to key employees, officers,
directors, independent contractors and consultants. In addition, the Plan
provides for grants of formula stock options to nonemployee directors.

At December 31, 1996, the exercise price for all options outstanding under
the Plan was $15. Stock option activity for the period from April 26, 1996
(Inception) to December 31, 1996, is as follows:

<TABLE>
<CAPTION>
SHARES PRICE
--------- ------
<S> <C> <C>
Outstanding at April 26, 1996.......................... -- $ --
Granted................................................ 1,447,600 15.00
Exercised.............................................. -- --
Cancelled.............................................. (38,110) 15.00
--------- ------
Outstanding at December 31, 1996....................... 1,409,490 $15.00
--------- ------
Options exercisable at December 31, 1996............... 232,560 $15.00
--------- ------
</TABLE>

The unvested options at December 31, 1996 will vest over three years and all
are exercisable over ten years. No options were exercised as of December 31,
1996.

In addition, 400,000 shares are issuable upon the exercise of options that
the Company has committed to grant over the next four years pursuant to
employment agreements with two of its officers.

In December 1996, the Company agreed to grant options to purchase up to 1.5
million shares of the Company's Common Stock at a price of $14.13 per share in
lieu of a certain earnout agreement with one of the Initial Operating
Businesses.

The Company issued warrants to purchase 593,400 shares of Common Stock to the
former principals of the Initial Operating Businesses at $15 per share. These
warrants were valued at their estimated fair value of $2,077,000 and were
included in the purchase price of the Initial Operating Business. These
warrants are exercisable for ten years. No warrants were exercised as of
December 31, 1996.

The Company has elected to follow APB Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB No. 25") and related Interpretations in accounting
for its employee stock options because, as discussed below, the alternative
fair value accounting provided for under SFAS No. 123, "Accounting for Stock-
Based Compensation," ("SFAS 123") requires use of option valuation models that
were not developed for use in valuing employee stock options. Under APB No. 25,
because the exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of the grant, no compensation
expense is recognized.

F-15
<PAGE>

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996

Pro forma information regarding net income and earnings per share required by
SFAS No. 123 has been determined as if the Company had accounted for its
employee stock options under the fair value method of that statement. The
determination of the fair value of the options noted above was estimated at the
date of grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for 1996: risk free interest rate of 6.7%,
dividend yield of 0%, volatility factor of the expected market price of the
Company's common stock of 65% and an expected life of the options of six years.
The weighted average fair value of the options granted was $9.84 per option.

The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the option's vesting period. The Company's
1996 pro forma information is as follows (in thousands except for earnings per
share information):

<TABLE>
<S> <C>
Pro forma net income.............................................. $2,237
Pro forma earnings per share...................................... $ 0.13
</TABLE>

10. EMPLOYEE RETIREMENT SAVINGS PLAN:

On January 1, 1997, the Company adopted a defined contribution 401(k) Savings
Plan (the "Plan"). Employees who have met certain eligibility requirements, as
defined, may contribute up to 15% of their pre-tax gross wages, subject to
certain restrictions. The Plan provides for Company matching contributions of
25% of the first 6% of employee contributions to the Plan, which vest 25% per
year over a four year period.

11. RELATED-PARTY TRANSACTIONS:

On May 22, 1996, CRW Financial, Inc. ("CRW"), made an initial capital
contribution of $2.1 million representing the proceeds of borrowings by CRW
under subordinated notes issued to certain officers and directors of CRW and
the Company, CRW consultants and CRW outside investors. As additional
consideration, the lenders to CRW received warrants from CRW to purchase
1,433,454 shares of the Company's Common Stock owned by CRW at $1.50 per share
("CRW Lender Warrants"). In addition, CRW issued to its bank, warrants to
purchase 75,445 shares of the Company's Common Stock owned by CRW at $1.50 per
share. These warrants were issued as consideration for CRW's Bank issuing a
waiver under its loan facility with CRW, permitting the May 22, 1996 capital
contribution to the Company.

CRW also issued warrants to purchase 839,108 shares of the Company's Common
Stock owned by CRW at $1.50 per share to certain officers of CRW and the
Company ("CRW Management Warrants"). The warrants were granted by CRW to these
individuals for services provided to CRW.

The deemed value for accounting purposes of the CRW Lender Warrants and the
CRW Management Warrants is based upon the difference between $9.75 (35%
discount to the initial public offering price) and the $1.50 warrant exercise
price. The deemed value for accounting purposes of $18.7 million is treated as
additional purchase price consideration of the acquisitions of the Initial
Operating Businesses (see Note 3).

F-16
<PAGE>

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996

The Company subleases an aggregate of 21,000 square feet in King of Prussia
(suburban Philadelphia), Pennsylvania, from CRW. The sublease commenced on May
9, 1996, and requires monthly base rent payments through September 30, 2004, of
approximately $35,000. Total rent expense for the period April 26, 1996
(Inception) to December 31, 1996 was $106,000.

12. CONCENTRATIONS OF RISK

Financial instruments which potentially subject the Company to significant
concentrations of credit risk consist principally of cash equivalents and
accounts receivables. The Company places its cash equivalents with high-credit-
quality financial institutions. The Company maintains cash accounts which, at
times, may exceed federally insured limits. However, the Company has not
experienced any losses from maintaining cash accounts in excess of these limits
and believes that it is not exposed to any significant risks on these cash
accounts.

Concentrations of credit risk with respect to accounts receivable are limited
due to the large number of customers comprising the Company's customer base and
their dispersion across many different industries and geographies. The Company
does not require collateral or other securities to support customer
receivables. The Company performs periodic reviews of its clients' financial
condition to reduce the collection risk on accounts receivable.

For the period from April 26, 1996 (Inception) to December 31, 1996, the
Company had no individual customers which accounted for more than 10% of the
Company's consolidated revenues, while 34% and 10% of the Company's revenues
during this period were from customers in the financial services and insurance
industries, respectively.

13. SUBSEQUENT EVENT

On March 21, 1997, the Company settled the earn-out agreement with the seller
of The Reich Group Companies under which the Company paid $25.0 million on
March 21, 1997 and agreed to pay $600,000 in twenty four equal installments of
$25,000 commencing on April 21, 1997. Additionally, the settlement agreement
cancelled the existing employment agreement between the Company and the seller
and provided for a new two year consulting agreement whereby the seller will
receive $150,000 per year.

F-17
<PAGE>

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

INITIAL OPERATING BUSINESSES

PREDECESSOR COMPANIES' HISTORICAL FINANCIAL STATEMENTS

INTRODUCTION

In connection with the initial public offering, the Initial Operating
Businesses were deemed to be predecessor companies to TeleSpectrum Worldwide
Inc. Accordingly, the following historical financial statements are presented
to comply with the historical financial statement requirements in a Form 10-K.

F-18
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To SOMAR, Inc.:

We have audited the accompanying balance sheet of SOMAR, Inc. (a North
Carolina corporation) as of December 31, 1995, and the related statements of
income, stockholders' equity (deficit) and cash flows for each of the two years
in the period ended December 31, 1995, and for the period from January 1, 1996
to August 12, 1996. 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 generally accepted auditing
standards. 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 SOMAR, Inc. as of December 31,
1995, and the results of its operations and its cash flows for each of the two
years in the period ended December 31, 1995, and for the period from January 1,
1996 to August 12, 1996, in conformity with generally accepted accounting
principles.

Arthur Andersen LLP

Charlotte, N.C.,
September 30, 1996

F-19
<PAGE>

SOMAR, INC.

BALANCE SHEET

AS OF DECEMBER 31, 1995
(IN THOUSANDS--EXCEPT SHARE DATA)

<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash................................................................ $ 25
Accounts receivable net of reserve of $40........................... 4,825
Amounts due from-
Stockholders....................................................... 881
Affiliates......................................................... 210
Prepaid expenses and other.......................................... 451
-------
Total current assets.............................................. 6,392
PROPERTY AND EQUIPMENT, net........................................... 4,400
-------
Total assets...................................................... $10,792
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit...................................................... $ 1,182
Note payable--Bank.................................................. 1,000
Current portion of long-term debt................................... 2,182
Current portion of capital lease obligations........................ 852
Accounts payable.................................................... 1,959
Accrued compensation................................................ 523
Other accrued expenses.............................................. 122
Amounts due to an affiliate......................................... 562
-------
Total current liabilities......................................... 8,382
-------
LONG-TERM DEBT........................................................ 767
-------
CAPITAL LEASE OBLIGATIONS............................................. 872
-------
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' EQUITY:
Common stock, $1 par value; 100,000 shares authorized; 11,765 shares
issued and outstanding............................................. 12
Additional paid-in capital.......................................... 789
Accumulated deficit................................................. (30)
-------
Total stockholders' equity........................................ 771
-------
Total liabilities and stockholders' equity........................ $10,792
=======
</TABLE>

The accompanying notes are an integral part of this statement.

F-20
<PAGE>

SOMAR, INC.

STATEMENTS OF INCOME

(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
FOR THE YEAR ENDED JANUARY 1,
DECEMBER 31 1996 TO
-------------------- AUGUST 12,
1994 1995 1996
--------- --------- -----------
<S> <C> <C> <C>
REVENUES..................................... $ 20,785 $ 31,900 $26,421
--------- --------- -------
OPERATING EXPENSES:
Cost of services........................... 15,623 25,048 21,406
Selling, general and administrative ex-
penses.................................... 4,115 5,162 3,817
--------- --------- -------
Total operating expenses................. 19,738 30,210 25,223
--------- --------- -------
Operating income......................... 1,047 1,690 1,198
INTEREST INCOME.............................. 12 45 11
INTEREST EXPENSE............................. (432) (756) (572)
--------- --------- -------
NET INCOME................................... $ 627 $ 979 $ 637
========= ========= =======
PRO FORMA DATA (UNAUDITED):
Historical net income...................... $ 627 $ 979 $ 637
Pro forma provision for income taxes....... 261 414 237
--------- --------- -------
Pro forma net income....................... $ 366 $ 565 $ 400
========= ========= =======
</TABLE>

The accompanying notes are an integral part of these statements.

F-21
<PAGE>

SOMAR, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

(IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONAL RETAINED TOTAL
COMMON PAID-IN STOCKHOLDER EARNINGS STOCKHOLDERS'
STOCK CAPITAL LOAN (DEFICIT) EQUITY (DEFICIT)
------ ---------- ----------- --------- ----------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1,
1994................... $12 $474 $(612) $(265) $(391)
Net income............ -- -- -- 627 627
Distributions......... -- -- -- (668) (668)
Repayments of stock-
holder loan.......... -- -- 612 -- 612
Stock options......... -- 298 -- -- 298
--- ---- ----- ----- -----
BALANCE, DECEMBER 31,
1994................... 12 772 -- (306) 478
Net income............ -- -- -- 979 979
Distributions......... -- -- -- (703) (703)
Stock options......... -- 17 -- -- 17
--- ---- ----- ----- -----
BALANCE, DECEMBER 31,
1995................... 12 789 -- (30) 771
Net income............ -- -- -- 637 637
Distributions......... -- -- -- (535) (535)
--- ---- ----- ----- -----
BALANCE, AUGUST 12,
1996................... $12 $789 $ -- $ 72 $ 873
=== ==== ===== ===== =====
</TABLE>

The accompanying notes are an integral part of these statements.

F-22
<PAGE>

SOMAR, INC.

STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
FOR THE YEAR ENDED JANUARY 1,
DECEMBER 31 1996 TO
-------------------- AUGUST 12,
1994 1995 1996
--------- --------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income................................. $ 627 $ 979 $ 637
Adjustments to reconcile net income to net
cash provided by operating activities--
Depreciation and amortization............. 288 775 749
Stock option compensation expense......... 298 17 --
Changes in operating assets and liabili-
ties--
Accounts receivable...................... (1,987) (2,003) (1,705)
Prepaid expenses and other............... (123) (144) (85)
Accounts payable......................... 559 614 1,706
Accrued expenses......................... 395 203 822
--------- --------- -------
Net cash provided by operating activi-
ties.................................. 57 441 2,124
--------- --------- -------
INVESTING ACTIVITIES:
Purchases of property and equipment........ (174) (2,309) (828)
Advances to stockholder.................... (103) (352) (847)
Advances to affiliates..................... (2) (209) (248)
Repayments of advances to affiliates....... 13 -- --
Repayment of stockholder loan.............. 612 -- --
--------- --------- -------
Net cash (used in) provided by invest-
ing activities........................ 346 (2,870) (1,923)
--------- --------- -------
FINANCING ACTIVITIES:
Borrowings on long-term debt............... 25 2,824 1,286
Repayments on long-term debt............... (31) (257) (1,498)
Borrowings (repayments) on note payable--
Bank...................................... -- 1,000 (1,000)
Borrowings (repayments) from affiliates.... (491) 458 (102)
Distributions paid to shareholders......... (669) (703) (535)
Payments on capital lease obligations...... (297) (623) (641)
Net (repayments) borrowings on line of
credit agreement.......................... 1,046 (247) 2,269
--------- --------- -------
Net cash provided by (used in) financ-
ing activities........................ (417) 2,452 (221)
--------- --------- -------
NET INCREASE (DECREASE) IN CASH.............. (14) 23 (20)
CASH, BEGINNING OF PERIOD.................... 16 2 25
--------- --------- -------
CASH, END OF PERIOD.......................... $ 2 $ 25 $ 5
========= ========= =======
</TABLE>

The accompanying notes are an integral part of these statements.

F-23
<PAGE>

SOMAR, INC.

NOTES TO FINANCIAL STATEMENTS

1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:

Industry Information

SOMAR, Inc. (the "Company") is a provider of outsourced telephone-based
sales, marketing and customer management services, to clients principally in
the insurance industry and also to clients in the financial services,
telecommunications and consumer products industries.

On August 12, 1996, the Company sold substantially all of its assets and
liabilities to TeleSpectrum Worldwide Inc. SOMAR is a predecessor company to
TeleSpectrum Worldwide Inc.

Use of Estimates

Revenue Recognition and Concentration of Credit Risk

The Company recognizes revenues on programs as services are performed for its
clients, generally based upon hours incurred.

The nature of the industry is such that the Company is dependent on several
large clients for a significant portion of its annual revenues. For the years
ended December 31, 1994 and 1995, and for the period from January 1, 1996 to
August 12, 1996, the Company had four, three and two clients, respectively,
that each accounted for more than 10% of the Company's revenues. For the period
ended December 31, 1994, the four clients accounted for 20%, 17%, 16% and 13%
of the Company's revenues, respectively. For the period ended December 31,
1995, the three clients accounted for 33%, 16% and 15% of the Company's
revenues, respectively. For the period from January 1, 1996 to August 12, 1996,
the two clients accounted for 19% and 12% of the Company's revenues,
respectively. The loss of one or more of these major clients could have a
materially adverse effect on the Company's business.

Concentration of credit risk is limited to trade accounts receivable and is
subject to the financial conditions of certain major clients described above.
Two of these clients are engaged in transactions with each other and represent
a single credit risk to the Company. The Company does not require collateral to
secure clients' receivables. The Company performs periodic reviews of its
clients' financial condition to reduce collection risk on trade accounts
receivable.

Property and Equipment

Property and equipment are recorded at cost. Depreciation is provided using
the straight-line method for financial reporting purposes and accelerated
methods for income tax reporting purposes over the estimated useful lives of
the respective assets. Assets recorded under capital leases are amortized using
the straight-line method over the estimated useful lives of the leased assets.
Upon sale or retirement, the related cost and accumulated depreciation are
removed from the accounts, and any gain or loss is recognized in the statement
of income.

Major improvements are capitalized and charged to expense through
depreciation. Repairs and maintenance are charged to expense as incurred.
Certain general and administrative expenses associated with the opening of new
call centers are expensed prior to the opening of the call center.

F-24
<PAGE>

SOMAR, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Statement of Cash Flows

For the years ended December 31, 1994 and 1995, and for the period from
January 1, 1996 to August 12, 1996, the Company paid interest of $366,000,
$750,000 and $552,000, respectively.

Income Taxes

The Company had elected to be taxed as an S Corporation under the provisions
of the Internal Revenue Code and North Carolina General Statutes. As a result,
the Company was not subject to federal income taxes, and the taxable income of
the Company was included in the individual tax returns of the Company's
stockholders. Accordingly, no provision for federal or state income taxes has
been recorded in the accompanying financial statements.

The Company reported certain income and expense items for income tax purposes
on a basis different from that reflected in the accompanying statements. The
principal differences relate to the timing of the recognition of accrued
expenses that are not deductible for federal income tax purposes until paid and
the use of accelerated methods of depreciation for income tax purposes. At
December 31, 1995, the financial reporting basis of the Company's net assets
exceeds the tax basis of the net assets by approximately $580,000.

Fair Value of Financial Instruments

Cash, accounts receivable, accounts payable and accrued liabilities are
reflected in the financial statements at fair value due to the short-term
nature of those instruments. The carrying amounts of the line of credit, note
payable and long-term debt approximate fair value on the balance sheet dates.

Prepaid Agent License Fees

The Company capitalizes the cost of licensing its agents and amortizes
license fees over a 12-month period. Prepaid agent license fees amounted to
$172,000 at December 31, 1995.

Accounting of Stock-Based Compensation

The Company currently utilizes Accounting Principles Board Opinion No. 25 in
its accounting for stock options. In October 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards ("SFAS") No.
123, "Accounting for Stock-Based Compensation." The accounting method as
provided in the pronouncement is not required to be adopted; however, it is
encouraged. The Company does not anticipate adopting the accounting provisions
of the statement but will include in the footnotes to the financial statements
the disclosures required by SFAS No. 123 in fiscal 1996.

Training Costs

The Company maintains ongoing training programs for its employees. The cost
of this training is charged to expense when incurred. As of December 31, 1995,
the Company recorded a $407,000 receivable from a State Economic Development
Agency for certain educational and training costs that are to be reimbursed.

Pro Forma Data (Unaudited)

Given the sale of the business, for informational purposes, the accompanying
statements of income include an unaudited pro forma adjustment for income taxes
that would have been recorded if the Company had not been an S Corporation,
based on the tax laws in effect during the respective periods. The differences
between the federal statutory income tax rate and the pro forma income tax rate
primarily relate to state and local income taxes and expenses not deductible
for tax purposes.

F-25
<PAGE>

SOMAR, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

2. PROPERTY AND EQUIPMENT:

<TABLE>
<CAPTION>
USEFUL DECEMBER 31,
LIVES 1995
--------- --------------
(IN THOUSANDS)
<S> <C> <C>
Furniture and fixtures.......................... 5-7 years $2,265
Telemarketing equipment......................... 5 years 3,263
Leasehold improvements.......................... 5-6 years 359
------
5,887
Less--Accumulated depreciation and amortiza-
tion........................................... (1,487)
------
$4,400
======
</TABLE>

The gross cost of equipment under capital lease obligations included above
amounted to $2,547,000 at December 31, 1995.

Depreciation and amortization expense for the years ended December 31, 1994
and 1995, and for the period from January 1, 1996 to August 12, 1996, was
$288,000, $775,000 and $749,000, respectively.

3. LINE OF CREDIT AND NOTE PAYABLE--BANK:

At December 31, 1995, the Company had a line of credit with Fremont Financial
Corporation ("Fremont"). The Company has entered into an agreement with
NationsBank of Georgia ("NationsBank") for a revolving line of credit with a
maximum borrowing limit of $6,500,000 and bears interest at the bank's prime
rate (8.5% at December 31, 1995) plus 1%.

The Company's borrowing base under the NationsBank revolver is limited to 85%
of eligible receivables as defined by the agreement. The line is secured by
trade accounts receivable, equipment and other assets of the Company. At July
12, 1996, the Company's availability under the NationsBank revolver was
approximately $780,000.

The agreement terminates on January 1, 1997, and contains certain restrictive
covenants that, among other things, require the maintenance of certain
financial ratios, limitations and capital expenditures and bonuses, and
restrictions on future indebtedness. As of March 31, 1996, the Company was in
violation of certain loan covenants for which it has obtained a waiver letter
from the bank. This waiver letter modified the loan covenants related to
certain required financial ratios. As of June 30, 1996, the Company is in
compliance with these revised loan covenants.

At December 31, 1995, the Company was transitioning its line of credit
arrangement from Fremont to NationsBank. In connection with the transition, the
Company borrowed $1,000,000 from NationsBank on a short-term basis at an
interest rate equal to the bank's prime rate (8.5%) plus 1%. This note was
repaid on January 3, 1996, with the proceeds from the new revolving line of
credit arrangement.

F-26
<PAGE>

SOMAR, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. LONG-TERM DEBT:

<TABLE>
<CAPTION>
DECEMBER 31,
1995
--------------
(IN THOUSANDS)
<S> <C>
Note payable to MCI Telecommunications Corporation,
unsecured, payable in monthly installments of $128,300
through July 1996, and remaining payment of $118,700 due in
August 1996, interest at 9.75% (on June 15, 1996, this note
was refinanced; the refinanced note is payable in monthly
installments of $128,300 through March 1997 and $43,400 in
April 1997, at an interest rate of 9.75%).................. $ 981
Notes payable to a bank, secured by related equipment,
payable on July 1, 1996, interest payable monthly at the
bank's prime rate plus 150 basis points (10% at December
31, 1995), guaranteed by the Company's two principal
stockholders and two affiliated companies (on July 5, 1996,
these notes were refinanced by the West Virginia Economic
Development Authority; the refinanced notes are secured by
assets of the Company and are payable in monthly
installments of $21,250 including interest, through July
1999, at an interest rate of 4%)........................... 720
Installment note payable to a bank, secured by related
equipment, payable in monthly installments of $11,900
including interest, through August 1998, at the bank's
prime interest rate plus 150 basis points (10% at December
31, 1995), guaranteed by the Company's two principal
stockholders and two affiliated companies.................. 331
Note payable to Network Sampling Services, balance due July
1, 1997, including interest at 10%, guaranteed by one of
the Company's principal stockholders....................... 300
Installment note payable to a bank, secured by related
equipment, payable in monthly installments of $11,957
including interest, through April 1998, at the bank's prime
interest rate plus 150 basis points (10% at December 31,
1995), guaranteed by the Company's two principal
stockholders and two affiliated companies.................. 288
Installment note payable to a bank, secured by related
equipment, payable in monthly installments of $21,774
including interest, through October 1996, at the bank's
prime rate plus 150 basis points (10% at December 31,
1995), guaranteed by the Company's two principal
stockholders and two affiliated companies.................. 226
Installment note payable to a finance company, unsecured,
payable in monthly installments of $3,800 including
interest, through August 1998 at an interest rate of 9%.... 103
-------
2,949
Less--Current portion....................................... (2,182)
-------
$ 767
=======
</TABLE>

Minimum principal repayments of long-term debt as of December 31, 1995, are
as follows (in thousands):

The notes payable to a bank contain certain restrictive covenants. As of June
30, 1996, the Company was in violation of one of the loan covenants for which
it has obtained a waiver from the bank.

F-27
<PAGE>

SOMAR, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. COMMITMENTS AND CONTINGENCIES:

The Company is party to various claims and other matters arising in the
normal course of business. In the opinion of management, the outcome of these
matters will not have a material adverse effect on the Company's financial
position or results of operations.

Leases

The Company leases administrative offices, telephone call centers and
equipment under noncancelable operating leases. In addition, the Company has
capital leases covering certain operating equipment. Future minimum lease
payments at December 31, 1995, are as follows (in thousands):

<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
--------- -------
<S> <C> <C>
1996................................................... $ 673 $ 989
1997................................................... 549 647
1998................................................... 449 280
1999................................................... 221 16
2000................................................... 179 --
Thereafter............................................. 503 --
------ ------
Total.................................................. $2,574 1,932
======
Less- Amount representing interest..................... (208)
------
Present value of future minimum lease payments......... 1,724
Less- Current portion.................................. (852)
------
$ 872
======
</TABLE>

Rent expense under operating leases was approximately $599,000, $673,000 and
$479,000 for the years ended December 31, 1994 and 1995, and for the period
from January 1, 1996 to August 12, 1996 (including amounts paid to related
parties), respectively (see Note 7).

The Company financed purchases of approximately $1,488,000, $1,000,000 and
$1,948,000 through capital leases in 1994 and 1995 and for the period from
January 1, 1996 to August 12, 1996, respectively.

Employee Benefit Plan

The Company sponsors a defined contribution 401(k) profit sharing plan for
eligible employees. Company contributions to the plan, which are based on a
company match percentage, amounted to $21,000, $30,000 and $28,000 for the
years ended December 31, 1994 and 1995, and for the period from January 1, 1996
to August 12, 1996, respectively.

6. STOCK OPTIONS:

In December 1991, the Company's two principal stockholders granted stock
options to three key employees for the purchase of up to 2,588 shares of their
common stock at an exercise price of $10 per share. The options vested
immediately and were exercisable through December 31, 1994. The deemed value of
the options for accounting purposes at the date of grant was less than the $10
exercise price. Accordingly, no compensation expense was recorded at the date
of these grants.

In December 1994, the principal stockholders extended all option exercise
dates from December 31, 1994 to March 31, 1996. All remaining option terms,
including the $10 per-share exercise price, remained unchanged.

F-28
<PAGE>

SOMAR, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The deemed value of the options for accounting purposes at the extension date
was $125 per share. Accordingly, $298,000 of compensation expense was recorded
at the date of extension.

In May 1995, the Company's two principal stockholders granted stock options
to another key employee for the purchase of up to 117 shares of their common
stock at an exercise price of $10 per share through March 31, 1996. The deemed
value of the options for accounting purposes at the date of grant was $156 per
share. Accordingly, $17,000 of compensation expense was recorded at the date of
grant.

At December 31, 1994 and 1995, no options had been exercised and 2,588 and
2,705 options were outstanding, respectively.

In March 1996, all options were exercised and 2,705 shares were issued by the
Company's principal shareholders to the option holders.

7. RELATED-PARTY TRANSACTIONS:

Southern Investments (a partnership), The Development Group, Inc. ("DGI"),
Southern Alloy of America, Inc., SOMAR Telecommunications, Inc. ("STI") and
Engineered Machine Technologies, Inc. ("EMTI") are affiliated with the Company
through common ownership.

The Company leases residential real estate, automobiles, computer equipment,
and furniture and equipment from Southern Investments on a month-to-month
basis. Rent expense related to these operating leases totaled approximately
$363,000, $278,000 and $183,000 for the years ended December 31, 1994 and 1995,
and for the period from January 1, 1996 to August 12, 1996, respectively.

Following is a schedule of amounts due from stockholders and affiliates (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
Stockholders................................................ $ 881
Southern Investments........................................ 102
DGI......................................................... 42
EMTI........................................................ 5
STI......................................................... 61
------
$1,091
======
</TABLE>

At December 31, 1995, the Company had an amount due to an affiliate, Southern
Alloy of America, Inc., of $562,000.

Included in interest expense and interest income in the accompanying
financial statements is interest income (expense) from (to) related parties
(including allocated interest expense) as follows (in thousands):

<TABLE>
<CAPTION>
FOR THE
FROM (TO) PERIOD FROM
DECEMBER 31, JANUARY 1, 1996
-------------- TO AUGUST 12,
1994 1995 1996
------ ------ ---------------
<S> <C> <C> <C>
Southern Alloy of America, Inc........... $ (99) $ (94) $(57)
Southern Investments..................... 12 -- --
------ ------ ----
$ (87) $ (94) $(57)
====== ====== ====
</TABLE>

F-29
<PAGE>

SOMAR, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
In 1994 and 1995 and for the period from January 1, 1996 to August 12, 1996,
the Company was allocated interest expense from Southern Alloy of America,
Inc., amounting to approximately $99,000, $94,000 and $57,000, respectively.

The Company's senior management are employees of DGI. DGI charges the Company
for services provided by these individuals. These expenses amounted to
approximately $1,132,000, $1,136,000 and $744,000 in 1994 and 1995 and for the
period from January 1, 1996 to August 12, 1996, respectively.

The Company has guaranteed a line of credit agreement for Southern Alloy of
America, Inc. The outstanding balance under this agreement amounted to
$1,424,000 at December 31, 1995. The guarantee related to this line of credit
agreement is not being assumed in connection with the sale of the business
discussed in Note 1.

F-30
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To NBG Services, Inc.:

We have audited the accompanying balance sheet of NBG Services, Inc. (a
Massachusetts corporation--see Note 1) as of December 29, 1995, and the related
statements of income, shareholders' equity and cash flows for each of the two
fiscal years in the period ended December 29, 1995 and for the period from
December 30, 1995 to August 12, 1996. 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.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of NBG Services, Inc. as of
December 29, 1995, and the results of its operations and its cash flows for
each of the two fiscal years in the period ended December 29, 1995, and for the
period from December 30, 1995 to August 12, 1996, in conformity with generally
accepted accounting principles.

Arthur Andersen LLP

Philadelphia, Pa.,
September 30, 1996

F-31
<PAGE>

NBG SERVICES, INC.

BALANCE SHEET

AS OF DECEMBER 29, 1995
(IN THOUSANDS--EXCEPT SHARE DATA)

<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................. $ 700
Short-term investments................................................ 210
Accounts receivable, net of reserve of $90............................ 1,757
Prepaid expenses and other............................................ 129
------
Total current assets................................................ 2,796
PROPERTY AND EQUIPMENT, net............................................. 1,336
OTHER ASSETS............................................................ 102
------
Total assets........................................................ $4,234
======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of capital lease obligations.......................... $ 277
Demand note........................................................... 500
Accounts payable...................................................... 212
Accrued expenses...................................................... 537
------
Total current liabilities........................................... 1,526
======
CAPITAL LEASE OBLIGATIONS............................................... 454
------
COMMITMENTS AND CONTINGENCIES (Note 5)
SHAREHOLDERS' EQUITY:
Common stock, no par value; 10,000 shares authorized; 100 shares is-
sued and outstanding................................................. --
Retained earnings..................................................... 2,254
======
Total shareholders' equity.......................................... 2,254
======
Total liabilities and shareholders' equity.......................... $4,234
======
</TABLE>

The accompanying notes are an integral part of this statement.

F-32
<PAGE>

NBG SERVICES, INC.

STATEMENTS OF INCOME

(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
FOR THE FISCAL YEAR ENDEDDECEMBER 30,
------------------------- 1995 TO
DECEMBER 30, DECEMBER 29, AUGUST 12,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES................................ $5,778 $12,829 $11,311
------ ------- -------
OPERATING EXPENSES:
Cost of services...................... 4,259 8,572 7,686
Selling, general and administrative
expenses............................. 1,443 2,115 1,645
------ ------- -------
Total operating expenses............ 5,702 10,687 9,331
------ ------- -------
Operating income.................... 76 2,142 1,980
INTEREST INCOME......................... 17 19 37
INTEREST EXPENSE........................ (60) (55) (70)
------ ------- -------
Income before income taxes.......... 33 2,106 1,947
INCOME TAXES............................ -- -- (79)
------ ------- -------
NET INCOME.............................. $ 33 $ 2,106 $ 1,868
====== ======= =======
PRO FORMA DATA (UNAUDITED):
Historical net income................. $ 33 $ 2,106 $ 1,868
Pro forma provision for income taxes.. 25 864 765
------ ------- -------
Pro forma net income.................. $ 8 $ 1,242 $ 1,103
====== ======= =======
</TABLE>

The accompanying notes are an integral part of these statements.

F-33
<PAGE>

NBG SERVICES, INC.

STATEMENTS OF SHAREHOLDERS' EQUITY

(IN THOUSANDS--EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
TOTAL
RETAINED SHAREHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
------ ------ -------- -------------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994.................. 100 $ -- $ 363 $ 363
Net income.............................. -- -- 33 33
--- ----- ------ ------
BALANCE, DECEMBER 30, 1994................ 100 -- 396 396
Net income.............................. -- -- 2,106 2,106
Distributions........................... -- -- (248) (248)
--- ----- ------ ------
BALANCE, DECEMBER 29, 1995................ 100 -- 2,254 2,254
Net income.............................. -- -- 1,868 1,868
Distributions........................... -- -- (895) (895)
Net unrealized gain on short-term in-
vestments.............................. -- -- 20 20
--- ----- ------ ------
BALANCE, AUGUST 12, 1996.................. 100 $ -- $3,247 $3,247
=== ===== ====== ======
</TABLE>

The accompanying notes are an integral part of these statements.

F-34
<PAGE>

NBG SERVICES, INC.

STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
FOR THE FISCAL YEAR ENDEDDECEMBER 30,
------------------------- 1995 TO
DECEMBER 30, DECEMBER 29, AUGUST 12,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income............................ $ 33 $ 2,106 $1,868
Adjustments to reconcile net income to
net cash provided by operating
activities--
Depreciation and amortization........ 205 319 273
Provision for loss on accounts
receivable.......................... 37 113 --
Changes in operating assets and
liabilities--
Accounts receivable.................. (182) (1,343) (952)
Due from TeleSpectrum Worldwide
Inc................................. -- -- (62)
Prepaid expenses and other........... (46) (106) (91)
Accounts payable..................... 93 16 184
Accrued expenses..................... 75 278 114
----- ------- ------
Net cash provided by operating
activities......................... 215 1,383 1,334
----- ------- ------
INVESTING ACTIVITIES:
Purchase of short-term investments.... (35) (205) --
Proceeds from short-term investments.. 62 9 45
Purchases of property and equipment... (69) (398) (126)
----- ------- ------
Net cash used in investing
activities......................... (42) (594) (81)
----- ------- ------
FINANCING ACTIVITIES:
Bank overdraft........................ 82 (82) --
Repayment of capital lease
obligations.......................... (264) (259) (260)
Proceeds from demand note............. -- 500 --
Repayment of demand note.............. -- -- (500)
Distributions to shareholders......... -- (248) (120)
----- ------- ------
Net cash used in financing
activities......................... (182) (89) (880)
----- ------- ------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS............................ (9) 700 373
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD................................. 9 -- 700
----- ------- ------
CASH AND CASH EQUIVALENTS,END OF
PERIOD................................. $ -- $ 700 $1,073
===== ======= ======
</TABLE>

The accompanying notes are an integral part of these statements.

F-35
<PAGE>

NBG SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS

1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:

Industry Information

RG Associates, Inc., d/b/a NBG Services, Inc., was incorporated in June 1991.
In April 1996, RG Associates, Inc., d/b/a NBG Services, Inc., amended its
Articles of Incorporation to change the name of the corporation to NBG
Services, Inc. (the "Company"). The Company provides outbound telemarketing
data processing and fulfillment services in the financial services,
telecommunications and high technology industries.

On August 12, 1996, the Company sold substantially all of its assets and
liabilities to TeleSpectrum Worldwide Inc. NBG is a predecessor company to
TeleSpectrum Worldwide Inc.

The Company operates on a fifty-two, fifty-three week fiscal year ending on
the last Friday of the calendar year.

Use of Estimates

Revenue Recognition and Concentration of Credit Risk

The Company recognizes revenues as services are performed for its clients.
Cash received in advance of services performed is deferred and recorded as
deferred revenue in the accompanying balance sheet. For the fiscal years ended
December 30, 1994 and December 29, 1995, and for the period from December 30,
1995 to August 12, 1996, the Company had two clients for each period, that
accounted for more than 10% of the Company's revenues. For the fiscal year
ended December 30, 1994, the two clients accounted for 13% and 77% of the
Company's revenues, respectively. For the fiscal year ended December 29, 1995,
the two clients accounted for 40% and 53% of the Company's revenues,
respectively. For the period from December 30, 1995 to August 12, 1996, the two
clients accounted for 30% and 64% of the Company's revenue, respectively. The
loss of either of these significant clients would have a material adverse
effect on the Company's business.

The concentration of credit risk is limited to trade accounts receivables and
is subject to the financial conditions of the Company's clients. The Company
does not require collateral or other securities to support customer
receivables.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. At December
29, 1995, cash equivalents consist of money market accounts.

Short-Term Investments

Investments are held at market value, and at December 29, 1995, were
classified as short-term. Short-term investments, at December 29, 1995
consisted of $196,000 in common stocks and $14,000 of mutual funds.

Pursuant to Statement of Financial Accounting Standards ("SFAS") No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," the Company
determines the appropriate classification of debt and equity securities at the
time of purchase and reevaluates such decision at each balance sheet date. At
December 29, 1995, all short-term investments were classified as available-for-
sale. Available-for-sale securities are carried

F-36
<PAGE>

NBG SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
at fair value, based on quoted market prices with unrealized gains or losses,
net of tax, reported as a separate component of shareholders' equity. At
December 29, 1995, there were no significant unrealized holding gains or
losses. Realized gains and losses, computed using specific identification, and
declines in value determined to be permanent are recognized in the statement of
income.

Property and Equipment

Statement of Cash Flows

For the fiscal years ended December 30, 1994 and December 29, 1995, and for
the period from December 30, 1995 to August 12, 1996, the Company paid interest
of $60,000, $55,000 and $70,000, respectively.

For the fiscal years ended December 30, 1994 and December 29, 1995, and for
the period from December 30, 1995 to August 12, 1996, the Company financed
equipment purchases with capital leases of $302,000, $440,000 and $854,000,
respectively.

Income Taxes

The Company had elected to be taxed under Subchapter S of the Internal
Revenue Code. As a result, the Company was not subject to federal income taxes,
and the taxable income of the Company was included in the shareholders' tax
returns. Therefore, no provision for federal taxes had been made for the fiscal
years ended December 30, 1994 and December 29, 1995, and for the period from
December 30, 1995 to August 12, 1996. A provision of $79,000 for the period
from December 30, 1995 to August 12, 1996 for state income taxes had been made
in accordance with a Massachusetts state tax for 4.5% of cash basis net income
which is levied on S Corporations with greater than $9 million of revenue.

The Company was on the cash basis of accounting for income tax reporting
purposes and on the accrual basis for financial reporting purposes. Therefore,
the Company reports certain income and expense items for income tax purposes on
a basis different from that reflected in the accompanying financial statements.
At December 29, 1995, the Company's financial reporting basis of the net assets
exceeded the tax basis of the net assets by approximately $1.5 million.

Fair Value of Financial Instruments

Cash, accounts receivable, accounts payable and accrued liabilities are
reflected in the financial statements at fair value due to the short-term
nature of those instruments. The carrying amount of the demand note and capital
lease obligations approximates fair value at December 29, 1995.

F-37
<PAGE>

NBG SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Pro Forma Data (Unaudited)

Given the sale of the business, for informational purposes, the accompanying
statements of income include an unaudited pro forma adjustment for income taxes
that would have been recorded if the Company had not been an S Corporation,
based on the tax laws in effect during the respective periods. The differences
between the federal statutory income tax rate and the pro forma income tax rate
primarily relates to state and local income taxes and expenses not deductible
for tax purposes.

2. PROPERTY AND EQUIPMENT:

<TABLE>
<CAPTION>
USEFUL DECEMBER 29,
LIVES 1995
------ ------------
(IN THOUSANDS)
<S> <C> <C>
Telemarketing equipment............................ 5 $1,845
Furniture and office equipment..................... 7 195
Leasehold improvements............................. 7 50
------
2,090
Less--Accumulated depreciation and amortization.... (754)
------
$1,336
======
</TABLE>

Depreciation and amortization expense for the fiscal years ended December 30,
1994 and December 29, 1995, and for the period from December 30, 1995 to August
12, 1996, was $205,000, $319,000 and $273,000, respectively.

3. ACCRUED EXPENSES:

<TABLE>
<CAPTION>
DECEMBER 29,
1995
--------------
(IN THOUSANDS)
<S> <C>
Accrued compensation...................................... $174
Accrued profit sharing.................................... 139
Accrued telephone......................................... 77
Accrued other............................................. 147
----
$537
====
</TABLE>

4. DEBT:

<TABLE>
<CAPTION>
DECEMBER 29,
1995
--------------
(IN THOUSANDS)
<S> <C>
Demand note............................................... $ 500
Capitalized lease obligations (Note 5).................... 731
------
1,231
Less--Current portion..................................... (777)
------
$ 454
======
</TABLE>

On December 29, 1995, the Company borrowed $500,000 from a bank under a demand
note that bears interest at prime rate (8.5% at December 29, 1995). The note
was repaid on March 29, 1996. Interest expense on this note was $15,000 for the
period from December 30, 1995 to August 12, 1996.

F-38
<PAGE>

NBG SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

The Company has a line of credit with a bank that provides for maximum
borrowings of $500,000. The line is collateralized by all of the assets of the
Company and is personally guaranteed by the shareholders. The line of credit
expires on May 31, 1997. At December 29, 1995, there was no outstanding balance
on this line of credit.

5. COMMITMENTS AND CONTINGENCIES:

The Company leases facilities and equipment under capital and noncancelable
operating leases through December 2002. Interest rates on the capital leases
range from 4% to 18%. Rent expense under operating leases for the fiscal years
ended December 30, 1994 and December 29, 1995, and the period from December 30,
1995 to August 12, 1996, was $213,000, $331,000 and $343,000, respectively.

Future minimum lease payments under the Company's leases as of December 29,
1995, are as follows:

<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
--------- -------
(IN THOUSANDS)
<S> <C> <C>
1996...................................................... $ 747 $ 328
1997...................................................... 512 277
1998...................................................... 514 154
1999...................................................... 524 57
2000...................................................... 470 --
Thereafter................................................ 462 --
------ -----
Total minimum lease payments.............................. $3,229 816
======
Less--Amount representing interest........................ (85)
-----
Present value of future minimum lease payments............ 731
Less- Current portion of principal payments............... (277)
-----
$ 454
=====
</TABLE>

The Company subleases two of its facilities under noncancelable operating
leases through December 31, 1996. Total minimum lease payments have not been
reduced by the minimum sublease rentals of $90,000 due to the Company under
these two noncancelable subleases.

6. EMPLOYEE BENEFIT PLANS:

The Company sponsors a noncontributory profit sharing plan for employees. The
Company's contributions to the plan are at the discretion of the Board of
Directors. For the fiscal years ended December 30, 1994 and December 29, 1995,
the Company's discretionary contributions to the plan were $110,000 and
$139,000, respectively. There were no contributions to the plan for the period
from December 30, 1995 to August 12, 1996.

On January 1, 1996, the Company adopted a defined contribution 401(k) savings
plan. The plan provides for a matching contribution by the Company based on
employee contributions. Additional Company contributions may be made at the
discretion of management. For the period from December 30, 1995 to August 12,
1996, the Company contributed $10,000 to the plan.

F-39
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Harris Direct Marketing, Inc. and Harris Fulfillment, Inc.:

We have audited the accompanying combined balance sheet of Harris Direct
Marketing, Inc. and Harris Fulfillment, Inc. (Pennsylvania corporations) as of
December 31, 1995, and the related combined statements of income, shareholders'
equity and cash flows for each of the two years in the period ended December
31, 1995, and for the period from January 1, 1996 to August 12, 1996. These
financial statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of Harris Direct
Marketing, Inc. and Harris Fulfillment, Inc. as of December 31, 1995, and the
results of their operations and their cash flows for each of the two years in
the period ended December 31, 1995, and for the period from January 1, 1996 to
August 12, 1996, in conformity with generally accepted accounting principles.

Arthur Andersen LLP

Philadelphia, Pa.,
September 30, 1996

F-40
<PAGE>

HARRIS DIRECT MARKETING, INC. AND HARRIS FULFILLMENT, INC.

COMBINED BALANCE SHEET

AS OF DECEMBER 31, 1995
(IN THOUSANDS--EXCEPT SHARE DATA)

<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................................... $ 2,919
Accounts receivable, net of reserve of $161......................... 2,930
Prepaid expenses and other.......................................... 651
-------
Total current assets.............................................. 6,500
PROPERTY AND EQUIPMENT, net........................................... 4,139
OTHER ASSETS.......................................................... 164
-------
Total assets...................................................... $10,803
=======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt................................... $ 299
Accounts payable.................................................... 362
Accrued expenses.................................................... 635
Customer advances................................................... 1,463
-------
Total current liabilities......................................... 2,759
-------
LONG-TERM DEBT........................................................ 1,530
-------
DEFERRED RENT......................................................... 120
-------
OTHER NONCURRENT LIABILITIES.......................................... 19
-------
COMMITMENTS AND CONTINGENCIES (Note 7)
SHAREHOLDERS' EQUITY:
Common stock (Harris Direct Marketing, Inc.), no par value, 10,000
shares authorized, 99 shares issued................................ 1
Common stock (Harris Fulfillment, Inc.), $1 par value, 1,000 shares
authorized, 111- 1/9 shares issued and outstanding................. --
Additional paid-in capital.......................................... 45
Retained earnings................................................... 6,454
Treasury stock, at cost............................................. (125)
-------
Total shareholders' equity........................................ 6,375
-------
Total liabilities and shareholders' equity........................ $10,803
=======
</TABLE>

The accompanying notes are an integral part of this statement.

F-41
<PAGE>

HARRIS DIRECT MARKETING, INC. AND HARRIS FULFILLMENT, INC.

COMBINED STATEMENTS OF INCOME

(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE
FOR THE PERIOD FROM
YEAR ENDED JANUARY 1,
DECEMBER 31 1996 TO
---------------- AUGUST 12,
1994 1995 1996
------- ------- -----------
<S> <C> <C> <C>
REVENUES......................................... $10,115 $12,690 $6,304
------- ------- ------
OPERATING EXPENSES:
Cost of services............................... 5,530 6,402 3,140
Selling, general and administrative expenses... 2,680 2,986 1,986
------- ------- ------
Total operating expenses..................... 8,210 9,388 5,126
------- ------- ------
Operating income............................. 1,905 3,302 1,178
INTEREST INCOME.................................. 9 70 53
INTEREST EXPENSE................................. (195) (214) (97)
------- ------- ------
NET INCOME....................................... $ 1,719 $ 3,158 $1,134
======= ======= ======
PRO FORMA DATA (UNAUDITED):
Historical net income.......................... $ 1,719 $ 3,158 $1,134
Pro forma provision for income taxes........... 784 1,425 511
------- ------- ------
Pro forma net income........................... $ 935 $ 1,733 $ 623
======= ======= ======
</TABLE>

The accompanying notes are an integral part of these statements.

F-42
<PAGE>

HARRIS DIRECT MARKETING, INC. AND HARRIS FULFILLMENT, INC.

COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY

(IN THOUSANDS--EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
HARRIS DIRECT HARRIS
MARKETING, INC. FULFILLMENT, INC.
COMMON STOCK COMMON STOCK ADDITIONAL TOTAL
------------------ ------------------- PAID-IN RETAINED TREASURY SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS STOCK EQUITY
------- ------- ---------- -------- ---------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1,
1994................... 99 $ 1 111-1/9 $ -- $45 $3,086 $(125) $3,007
Net income............ -- -- -- -- -- 1,719 -- 1,719
Distributions......... -- -- -- -- -- (146) -- (146)
------- ------- ---------- ------- --- ------ ----- ------
BALANCE, DECEMBER 31,
1994................... 99 1 111-1/9 -- 45 4,659 (125) 4,580
Net income............ -- -- -- -- -- 3,158 -- 3,158
Distributions......... -- -- -- -- -- (1,363) -- (1,363)
------- ------- ---------- ------- --- ------ ----- ------
BALANCE, DECEMBER 31,
1995................... 99 1 111-1/9 -- 45 6,454 (125) 6,375
Net income............ -- -- -- -- -- 1,134 -- 1,134
Distributions......... -- -- -- -- -- (1,575) -- (1,575)
------- ------- ---------- ------- --- ------ ----- ------
BALANCE, AUGUST 12,
1996................... 99 $ 1 111-1/9 $ -- $45 $6,013 $(125) $5,934
======= ======= ========== ======= === ====== ===== ======
</TABLE>

The accompanying notes are an integral part of these statements.

F-43
<PAGE>

HARRIS DIRECT MARKETING, INC. AND HARRIS FULFILLMENT, INC.

COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE
FOR THE PERIOD FROM
YEAR ENDED JANUARY 1,
DECEMBER 31 1996 TO
-------------- AUGUST 12,
1994 1995 1996
------ ------ -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income...................................... $1,719 $3,158 $1,134
Adjustments to reconcile net income to net cash
provided by operating activities--
Depreciation and amortization.................. 527 591 347
Provision for loss on accounts receivable...... 25 136 36
Provision for deferred rent.................... 94 4 18
Changes in operating assets and liabilities--
Accounts receivable........................... (628) (195) 65
Prepaid expenses and other.................... (51) (159) 209
Accounts payable.............................. (152) 24 (33)
Accrued expenses.............................. 160 3 (164)
Customer advances............................. 189 587 (810)
------ ------ ------
Net cash provided by operating activities.... 1,883 4,149 802
------ ------ ------
INVESTING ACTIVITIES:
Purchases of property and equipment............. (903) (460) (289)
------ ------ ------
Net cash used in investing activities........ (903) (460) (289)
------ ------ ------
FINANCING ACTIVITIES:
Repayments on lines of credit................... (250) -- --
Repayment of long-term debt..................... (360) (382) (170)
Proceeds from long-term debt.................... 417 -- 16
Shareholder distributions....................... (146) (1,363) (1,575)
------ ------ ------
Net cash used in financing activities........ (339) (1,745) (1,729)
------ ------ ------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS...................................... 641 1,944 (1,216)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.... 334 975 2,919
------ ------ ------
CASH AND CASH EQUIVALENTS, END OF PERIOD.......... $ 975 $2,919 $1,703
====== ====== ======
</TABLE>

The accompanying notes are an integral part of these statements.

F-44
<PAGE>

HARRIS DIRECT MARKETING, INC. AND HARRIS FULFILLMENT, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS

1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:

Industry Information

Harris Direct Marketing, Inc. and Harris Fulfillment, Inc. (together, the
"Company") are a regional, vertically integrated direct mail and fulfillment
organization that provides its services primarily to companies in the
pharmaceutical, financial services and insurance industries.

On August 12, 1996, the Company sold substantially all of its assets and
liabilities to TeleSpectrum Worldwide Inc. Harris Direct Marketing, Inc. and
Harris Fulfillment, Inc. are predecessor companies to TeleSpectrum Worldwide
Inc.

The financial statements reflect the combined financial position, results of
operations and cash flows of Harris Direct Marketing, Inc. and Harris
Fulfillment, Inc. The Companies are engaged in related operations, and are
owned by the same shareholders who have identical ownership in each entity. The
financial statements reflect the elimination of all significant intercompany
accounts and transactions.

Use of Estimates

Revenue Recognition and Concentration of Credit Risk

The Company recognizes revenues on programs as services are performed for its
clients based upon hours incurred. Cash received in advance of services
performed is deferred and recorded as customer advances in the accompanying
balance sheet. For the years ended December 31, 1994 and 1995, and for the
period from January 1, 1996 to August 12, 1996, the Company had one customer in
the pharmaceutical industry that accounted for 32.0%, 44.0% and 48.0%,
respectively, of the Company's revenues. The loss of this significant customer
would have a material adverse effect on the Company's business.

The concentration of credit risk is limited to trade accounts receivables and
is subject to the financial conditions of the Company's customers. The Company
does not require collateral or other securities to support customer
receivables.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. At the
balance sheet date, cash equivalents were composed primarily of investments in
money market funds.

The Company maintains cash accounts that, at times, may exceed federally
insured limits. The Company has not experienced any losses from maintaining
cash accounts in excess of federally insured limits and believes that it is not
exposed to any significant risks on these cash accounts.

Property and Equipment

Property and equipment are recorded at cost. Depreciation and amortization
are provided using the straight-line method over the estimated useful lives.

F-45
<PAGE>

HARRIS DIRECT MARKETING, INC. AND HARRIS FULFILLMENT, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Expenditures for maintenance, repairs and improvements that do not prolong
the useful life of an asset have been charged to operations as incurred.
Additions and betterments that substantially extend the useful life of the
asset are capitalized. Upon sale or other disposition of assets, the cost and
related accumulated depreciation and amortization are removed from the
respective accounts, and the resulting gain or loss, if any, is included in
income.

Statement of Cash Flows

For the years ended December 31, 1994 and 1995, and for the period from
January 1, 1996 to August 12, 1996, the Company paid interest of $197,000,
$222,000 and $88,000, respectively.

Income Taxes

The Company had elected to be taxed under Subchapter S of the Internal
Revenue Code. As a result, the Company was not subject to federal income taxes,
and the taxable income of the Company was included in the shareholders' tax
returns. The Company had also elected S Corporation status for state income tax
purposes. Therefore, no provision for federal and state income taxes had been
made for the years ended December 31, 1994 and 1995, and for the period from
January 1, 1996 to August 12, 1996.

The Company reported certain income and expense items for income tax purposes
on a basis different from that reflected in the accompanying financial
statements. The principal differences relate to timing of the recognition of
bad debt expense, and the use of accelerated methods of depreciation for income
tax purposes. At December 31, 1995, the Company's financial reporting basis of
the net assets exceeds the tax basis of the net assets by approximately
$300,000.

Fair Value of Financial Instruments

Cash, accounts receivable, accounts payable and accrued liabilities are
reflected in the financial statements at fair value due to the short-term
nature of those instruments. The carrying amount of long-term debt obligations
approximates fair value at the balance sheet date.

Pro Forma Data (Unaudited)

Given the sale of the business, for informational purposes, the accompanying
statements of income include an unaudited pro forma adjustment for income taxes
that would have been recorded if the Company had not been an S Corporation,
based on the tax laws in effect during the respective periods. The differences
between the federal statutory income tax rate and the pro forma income tax rate
primarily relates to state and local income taxes and expenses not deductible
for tax purposes.

2. PREPAID EXPENSES AND OTHER:

<TABLE>
<CAPTION>
DECEMBER 31,
1995
--------------
(IN THOUSANDS)
<S> <C>
Prepaid postage........................................... $498
Other..................................................... 153
----
$651
====
</TABLE>

F-46
<PAGE>

HARRIS DIRECT MARKETING, INC. AND HARRIS FULFILLMENT, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
3. PROPERTY AND EQUIPMENT:

<TABLE>
<CAPTION>
USEFUL DECEMBER 31,
LIVES 1995
------ --------------
(IN THOUSANDS)
<S> <C> <C>
Machinery and equipment............................ 5-10 $3,543
Furniture and office equipment..................... 5-10 969
Building and building improvements................. 10-30 2,345
Leasehold improvements............................. 15 41
Land............................................... 80
------
6,978
Less--Accumulated depreciation and amortization.... (2,839)
------
$4,139
======
</TABLE>

Depreciation expense for the years ended December 31, 1994 and 1995, and for
the period from January 1, 1996 to August 12, 1996, was $527,000, $591,000 and
$347,000, respectively.

4. ACCRUED EXPENSES:

<TABLE>
<CAPTION>
DECEMBER 31,
1995
--------------
(IN THOUSANDS)
<S> <C>
Accrued vacation.......................................... $210
Accrued compensation...................................... 161
Accrued other............................................. 264
----
$635
====
</TABLE>

5. LINES OF CREDIT:

The Company had two lines of credit with the same bank that expired in April
1996 and had a combined borrowing limit of $850,000. The lines bear interest at
the bank's prime rate (8.25% at December 31, 1995). The Company had no
outstanding balances on the lines of credit at December 31, 1995. The maximum
borrowed under the lines was $850,000 in 1995, and the average amount
outstanding was $212,000 in 1995. The weighted average interest rate during
1995 was approximately 9.0%.

6. LONG-TERM DEBT:

<TABLE>
<CAPTION>
DECEMBER 31,
1995
--------------
(IN THOUSANDS)
<S> <C>
Mortgage payable to bank, payable in variable monthly
installments including interest at the bank's prime
rate plus .75% (10.25% at December 31, 1995) through
June 2005.............................................. $1,245
Note payable to bank, payable in monthly installments of
$17,000 plus interest at 8.25% through October 1998.... 584
------
1,829
Less--Current portion................................... 299
------
$1,530
======
</TABLE>

F-47
<PAGE>

HARRIS DIRECT MARKETING, INC. AND HARRIS FULFILLMENT, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The mortgage and notes payable are with the same bank and are collateralized
by all of the Company's assets. Minimum principal repayments of long-term debt
as of December 31, 1995, are as follows (in thousands):

<TABLE>
<S> <C>
1996............................................................... $ 299
1997............................................................... 298
1998............................................................... 273
1999............................................................... 112
2000............................................................... 124
Thereafter......................................................... 723
------
$1,829
======
</TABLE>

7. COMMITMENTS AND CONTINGENCIES:

The Company leases facilities through August 31, 2002. Rent expense under
operating leases for the years ended December 31, 1994 and 1995, and for the
period from January 1, 1996 to August 12, 1996, was $568,000, $583,000 and
$351,000, respectively.

Future minimum lease payments under the Company's operating leases as of
December 31, 1995, are as follows (in thousands):

<TABLE>
<CAPTION>
OPERATING
LEASES
---------
<S> <C>
1996........................................................... $ 567
1997........................................................... 357
1998........................................................... 388
1999........................................................... 433
2000........................................................... 464
Thereafter..................................................... 821
------
Total minimum lease payments................................... $3,030
======
</TABLE>

8. PROFIT SHARING PLAN:

The Company has a noncontributory profit sharing plan to provide retirement
benefits to its eligible employees. The amount of the Company's contribution is
determined at the discretion of the Company's Board of Directors. For the years
ended December 31, 1994 and 1995, and for the period from January 1, 1996 to
August 12, 1996, the Company contributed $55,000, $49,000 and $0, respectively,
to the profit sharing plan.

F-48
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To The Reich Group Companies:

We have audited the accompanying combined balance sheet of The Reich Group
Companies identified in Note 1 as of December 31, 1995, and the related
combined statements of income, shareholder's equity (deficit) and cash flows
for each of the two years in the period ended December 31, 1995, and for the
period from January 1, 1996 to August 12, 1996. These financial statements are
the responsibility of the Companies' management. Our responsibility is to
express an opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of The Reich Group
Companies as of December 31, 1995, and the results of their operations and
their cash flows for each of the two years in the period ended December 31,
1995, and for the period from January 1, 1996 to August 12, 1996, in conformity
with generally accepted accounting principles.

Arthur Andersen LLP

Philadelphia, Pa.,
September 30, 1996

F-49
<PAGE>

THE REICH GROUP COMPANIES

COMBINED BALANCE SHEET

AS OF DECEMBER 31, 1995
(IN THOUSANDS--EXCEPT SHARE DATA)

<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash.................................................................. $ 220
Accounts receivable, net of reserve of $73............................ 2,544
Due from shareholder.................................................. 132
Prepaid expenses and other............................................ 79
------
Total current assets................................................ 2,975
PROPERTY AND EQUIPMENT, net............................................. 1,328
OTHER ASSETS............................................................ 15
------
Total assets........................................................ $4,318
======
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt..................................... $ 155
Current portion of deferred rent...................................... 68
Accounts payable...................................................... 930
Accrued salaries and wages............................................ 363
Notes payable to shareholder.......................................... 570
Other current liabilities............................................. 68
------
Total current liabilities........................................... 2,154
------
LONG-TERM DEBT.......................................................... 371
------
DEFERRED RENT........................................................... 125
------
COMMITMENTS AND CONTINGENCIES (Note 6)
SHAREHOLDER'S EQUITY:
Common stock (see Note 8)............................................. 2
Additional paid-in capital............................................ 450
Retained earnings..................................................... 1,455
Treasury stock, at cost (TRG/Communications, Inc., 150 shares)........ (239)
------
Total shareholder's equity.......................................... 1,668
------
Total liabilities and shareholder's equity.......................... $4,318
======
</TABLE>

The accompanying notes are an integral part of this statement.

F-50
<PAGE>

THE REICH GROUP COMPANIES

COMBINED STATEMENTS OF INCOME

(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE
FOR THE PERIOD FROM
YEAR ENDED JANUARY 1,
DECEMBER 31 1996 TO
--------------- AUGUST 12,
1994 1995 1996
------ ------- -----------
<S> <C> <C> <C>
REVENUES.......................................... $5,424 $12,253 $14,558
------ ------- -------
OPERATING EXPENSES:
Cost of services................................ 4,225 7,836 8,550
Selling, general and administrative expenses.... 976 2,534 1,466
------ ------- -------
Total operating expenses...................... 5,201 10,370 10,016
------ ------- -------
Operating income.............................. 223 1,883 4,542
INTEREST INCOME................................... 13 14 19
INTEREST EXPENSE.................................. (37) (57) (50)
------ ------- -------
NET INCOME........................................ $ 199 $ 1,840 $ 4,511
====== ======= =======
PRO FORMA DATA (UNAUDITED):
Historical net income........................... $ 199 $ 1,840 $ 4,511
Pro forma provision for income taxes............ 97 746 1,840
------ ------- -------
Pro forma net income............................ $ 102 $ 1,094 $ 2,671
====== ======= =======
</TABLE>

The accompanying notes are an integral part of these statements.

F-51
<PAGE>

THE REICH GROUP COMPANIES

COMBINED STATEMENTS OF SHAREHOLDER'S EQUITY (DEFICIT)

(IN THOUSANDS--EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
THE REICH DIALDIRECT TELE- TRG/COMMUNI- INSUREDIRECT
GROUP, INC. DIALDIRECT, INC. MARKETING, LTD. CATIONS, INC. AGENCY INC.
COMMON STOCK COMMON STOCK COMMON STOCK COMMON STOCK COMMON STOCK ADDITIONAL RETAINED
------------- ------------------ ------------------ ------------- ------------- PAID-IN EARNINGS TREASURY
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) STOCK
------ ------ -------- -------- -------- -------- ------ ------ ------ ------ ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY
1, 1994.......... 100 $-- 100 $ -- 100 $ -- 150 $ 2 100 $-- $350 $ (584) $(239)
Net income...... -- -- -- -- -- -- -- -- -- -- -- 199 --
--- ---- ------- -------- ------- -------- --- ---- --- ---- ---- ------- -----
BALANCE, DECEMBER
31, 1994......... 100 -- 100 -- 100 -- 150 2 100 -- 350 (385) (239)
Capital
contribution to
DialDirect
Telemarketing,
Ltd. by
shareholder..... -- -- -- -- -- -- -- -- -- -- 100 -- --
Net income...... -- -- -- -- -- -- -- -- -- -- -- 1,840 --
--- ---- ------- -------- ------- -------- --- ---- --- ---- ---- ------- -----
BALANCE, DECEMBER
31, 1995......... 100 -- 100 -- 100 -- 150 2 100 -- 450 1,455 (239)
Net income...... -- -- -- -- -- -- -- -- -- -- -- 4,511 --
Distribution to
shareholder..... -- -- -- -- -- -- -- -- -- -- -- (1,770) --
--- ---- ------- -------- ------- -------- --- ---- --- ---- ---- ------- -----
BALANCE, AUGUST
12, 1996......... 100 $-- 100 $ -- 100 $ -- 150 $ 2 100 $-- $450 $ 4,196 $(239)
=== ==== ======= ======== ======= ======== === ==== === ==== ==== ======= =====
<CAPTION>
TOTAL
SHAREHOLDER'S
EQUITY
(DEFICIT)
-------------
<S> <C>
BALANCE, JANUARY
1, 1994.......... $ (471)
Net income...... 199
-------------
BALANCE, DECEMBER
31, 1994......... (272)
Capital
contribution to
DialDirect
Telemarketing,
Ltd. by
shareholder..... 100
Net income...... 1,840
-------------
BALANCE, DECEMBER
31, 1995......... 1,668
Net income...... 4,511
Distribution to
shareholder..... (1,770)
-------------
BALANCE, AUGUST
12, 1996......... $4,409
=============
</TABLE>

The accompanying notes are an integral part of these statements.

F-52
<PAGE>

THE REICH GROUP COMPANIES

COMBINED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE
FOR THE PERIOD FROM
YEAR ENDED JANUARY 1,
DECEMBER 31 1996 TO
------------ AUGUST 12,
1994 1995 1996
---- ------ -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income......................................... $199 $1,840 $4,511
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation and amortization..................... 143 220 279
Amortization of deferred rent..................... (68) (68) (40)
Loss on disposal of property...................... 1 7 --
Changes in operating assets and liabilities--
Accounts receivable.............................. (193) (1,853) (2,025)
Due from shareholder............................. (40) (83) (5)
Prepaid expenses and other assets................ (33) (2) (81)
Accounts payable................................. 88 560 (264)
Accrued salaries and wages....................... 37 235 196
Other current liabilities........................ 85 (111) (36)
---- ------ ------
Net cash provided by operating activities....... 219 745 2,535
---- ------ ------
INVESTING ACTIVITIES:
Purchase of property and equipment, net of capital
lease obligations of $95 in 1995 and $250 in
1996.............................................. (138) (1,212) (935)
---- ------ ------
Net cash used in investing activities........... (138) (1,212) (935)
---- ------ ------
FINANCING ACTIVITIES:
Net borrowings (repayments) on line of credit...... 10 (70) 700
Repayment of long-term debt........................ (88) (109) (133)
Proceeds from long-term debt....................... -- 165 --
Capital contribution to DialDirect TeleMarketing,
Ltd. from shareholder............................. -- 100 --
Proceeds from (repayment of) notes payable to
shareholder....................................... -- 570 (500)
Distribution to shareholder........................ -- -- (1,770)
---- ------ ------
Net cash provided by (used in) financing activi-
ties........................................... (78) 656 (1,703)
---- ------ ------
NET INCREASE (DECREASE) IN CASH.................... 3 189 (103)
CASH, BEGINNING OF PERIOD.......................... 28 31 220
---- ------ ------
CASH, END OF PERIOD................................ $ 31 $ 220 $ 117
==== ====== ======
</TABLE>

The accompanying notes are an integral part of these statements.

F-53
<PAGE>

THE REICH GROUP COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS

1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:

Industry Information

The Reich Group Companies (the "Company") offers telemarketing services to
clients in the financial services, insurance, telecommunications and publishing
industries. In 1995, the Company derived 93% of its revenue from telemarketing
activities.

On August 12, 1996, the Company sold substantially all of its assets and
liabilities to TeleSpectrum Worldwide Inc. The Reich Group Companies are
predecessor companies to TeleSpectrum Worldwide Inc.

The 1994 and 1995 financial statements reflect the combined financial
position, results of operations and cash flows of The Reich Group, Inc.,
DialDirect, Inc., DialDirect Telemarketing, LTD., TRG/Communications, Inc. and
InsureDirect Agency, Inc. The accompanying financial statements are presented
on a combined basis, as all companies are owned by the same shareholder. The
financial statements reflect the elimination of all significant intercompany
accounts and transactions.

Use of Estimates

Revenue Recognition and Concentration of Credit Risk

The Company recognizes revenues on programs as services are performed for
customers, generally based upon hours incurred. For the years ended December
31, 1994 and 1995, and for the period from January 1, 1996 to August 12, 1996,
the Company had two, four and three clients, respectively, that each accounted
for more than 10% of the Company's revenues. For the year ended December 31,
1994, the two clients accounted for 47% and 24% of the Company's revenues,
respectively. For the year ended December 31, 1995, the four clients accounted
for 46%, 12%, 15% and 15% of the Company's revenues, respectively. For the
period from January 1, 1996 to August 12, 1996, the three clients accounted for
45%, 11% and 34% of the Company's revenues, respectively. The loss of one or
more of these major clients could have a materially adverse effect on the
Company's business.

Cash

The Company maintains cash accounts that, at times, may exceed federally
insured limits. The Company has not experienced losses from maintaining cash
accounts in excess of federally insured limits. The Company believes that it is
not exposed to significant credit risk in relation to these cash accounts.

Property and Equipment

F-54
<PAGE>

THE REICH GROUP COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Expenditures for maintenance, repairs and improvements that do not prolong
the useful life of an asset have been charged to expense as incurred. Additions
and betterments that extend the useful life of the properties are capitalized.
Upon sale or other disposition of assets, the cost and related accumulated
depreciation and amortization are removed from the respective accounts, and the
resulting gain or loss, if any, is included in income.

Profit Sharing Plan

The Company has a noncontributory profit sharing plan covering all eligible
employees. Contributions to the plan are at the sole discretion of the
management. Contributions of $62,000 were made for the year ended December 31,
1994. No contribution was made for the year ended December 31, 1995, or for the
period from January 1, 1996 to August 12, 1996.

Statement of Cash Flows

For the years ended December 31, 1994 and 1995, and for the period from
January 1, 1996 to August 12, 1996, the Company paid interest of $37,000,
$57,000 and $50,000, respectively.

Income Taxes

The Company had elected to be taxed under Subchapter S of the Internal
Revenue Code. As a result, the Company was not subject to federal or state
income taxes, and the taxable income of the Company was included in the
shareholder's tax returns. Therefore, no provision for federal and state income
taxes has been made for the years ended December 31, 1994 and 1995, and for the
period from January 1, 1996 to August 12, 1996.

The Company was on the cash basis of accounting for income tax reporting
purposes and on the accrual basis for financial reporting purposes. Therefore,
the Company reported certain income and expense items for income tax purposes
on a basis different from that reflected in the accompanying financial
statements. At December 31, 1995, the Company's financial reporting basis of
the net assets exceeds the tax basis of the net assets by approximately
$934,000.

Fair Value of Financial Instruments

Cash, accounts receivable, accounts payable and accrued liabilities are
reflected in the financial statements at fair value due to the short-term
nature of those instruments. The carrying amount of long-term debt obligations
approximates fair value at the balance sheet dates.

Pro Forma Data (Unaudited)

Given the sale of the business, for informational purposes, the accompanying
statements of income include an unaudited pro forma adjustment for income taxes
that would have been recorded if the Company had not been an S Corporation,
based on the tax laws in effect during the respective periods. The difference
between the federal statutory income tax rate and the pro forma income tax rate
primarily relates to state and local income taxes and expenses not deductible
for tax purposes.

F-55
<PAGE>

THE REICH GROUP COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

2. PROPERTY AND EQUIPMENT:

<TABLE>
<CAPTION>
USEFUL DECEMBER 31,
LIVES 1995
------ --------------
(IN THOUSANDS)
<S> <C> <C>
Telemarketing equipment............................ 5 $ 1,766
Furniture and office equipment..................... 5-7 768
Leasehold improvements............................. 7 76
-------
2,610
Less--Accumulated depreciation and amortization.... (1,282)
-------
$ 1,328
=======
</TABLE>

Depreciation expense for the years ended December 31, 1994 and 1995, and for
the period from January 1, 1996 to August 12, 1996, was $143,000, $220,000 and
$279,000, respectively.

3. OTHER CURRENT LIABILITIES:

<TABLE>
<CAPTION>
DECEMBER 31,
1995
--------------
(IN THOUSANDS)
<S> <C>
Advance billings.......................................... $60
Other accrued liabilities................................. 8
---
$68
===
</TABLE>

4. LINE OF CREDIT:

The Company has a revolving line of credit with a bank that provides for
maximum borrowings of $700,000. Borrowings under the line are limited to 60% of
eligible accounts receivable, as defined. The line is collateralized by the
Company's accounts receivable and general intangibles, a second mortgage on the
personal residences of the Company's shareholder and his wife and other
personal assets of the Company's shareholder and his wife. The line is also
personally guaranteed by the Company's shareholder and his wife. At December
31, 1995, there was no outstanding balance on this line of credit. Interest on
the outstanding balance is payable monthly and accrues on borrowings under the
revolving line of credit at the bank's base rate (10.5% at December 31, 1995).

The agreement shall continue until all indebtedness to the bank has been
repaid in full and the parties terminate the agreement.

F-56
<PAGE>

THE REICH GROUP COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

5. LONG-TERM DEBT:

<TABLE>
<CAPTION>
DECEMBER 31,
1995
--------------
(IN THOUSANDS)
<S> <C>
Note payable to bank, interest payable monthly at the
bank's rate plus 1/2% (11% on December 31, 1995); princi-
pal due in monthly installments of $4,000 through August
1998; collateralized by accounts receivable, equipment and
other assets of the Company and a second mortgage on the
personal residences of the Company's shareholder and his
wife; payment also guaranteed by the Company's shareholder
and his wife.............................................. $ 105
Note payable to regional industrial development authority,
interest accrues at 5%; principal and interest due in
monthly installments of $3,000 through August 2000; col-
lateralized by specified furniture and equipment of the
Company................................................... 155
Payable to landlord, no stated interest (discounted at
8.9%), unsecured, due in varying monthly installments from
$3,000 to $4,000 through October 31, 1998................. 96
Capitalized lease obligations (Note 6)..................... 170
-----
526
Less--Current portion...................................... (155)
-----
$ 371
=====
</TABLE>

Minimum principal repayments of long-term debt as of December 31, 1995,
excluding capitalized lease obligations (see Note 6), are as follows (in
thousands):

In December 1995, the City of Wheeling, West Virginia, issued a commitment to
provide $235,000 of financing at 5% interest for a term of five years.
Additionally, the West Virginia Economic Development Authority issued a
commitment to provide $500,000 of financing at prime less 4% (minimum rate of
5%) interest for a term of five years. Each loan is to be collateralized by the
furniture and equipment in the Company's West Virginia facility.

In 1995, the Company received a grant of $187,000 from the West Virginia
Economic Development Authority as a reimbursement for certain costs in
connection with the establishment of a calling center in West Virginia. The
grant has been recorded as an offset to cost of services in the combined
statement of income.

6. COMMITMENTS AND CONTINGENCIES:

The Company leases facilities and equipment under capital and noncancelable
operating leases with terms through 2000. Interest rates on the capital leases
range from 11.0% to 15.5%. At December 31, 1995, the capital leases are
collateralized by telemarketing equipment with a book value of $137,000 (net of
accumulated amortization of $313,000). Rent expense under operating leases for
the years ended December 31, 1994 and 1995, and for the period from January 1,
1996 to August 12, 1996, was $140,000, $195,000, and $183,000, respectively.

F-57
<PAGE>

THE REICH GROUP COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Future minimum lease payments under the Company's leases as of December 31,
1995, are as follows (in thousands):

<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
--------- -------
<S> <C> <C>
1996................................................... $238 $ 78
1997................................................... 220 78
1998................................................... 188 44
1999................................................... 11 1
2000................................................... 1 --
---- ----
Total minimum lease payments........................... $658 201
====
Less--Amount representing interest..................... (31)
----
Present value of future minimum lease payments......... 170
Less--Current portion of principal payments............ (60)
----
$110
====
</TABLE>

In February 1996, the Company entered into an additional capital lease for
the acquisition of furniture and equipment for the Company's Delaware facility.
The total amount of the future lease commitment was $250,000 with monthly
payments of $8,000 for 36 months.

In November and December 1995, the Company entered into two leases for new
office space in connection with the expansion of its telemarketing facilities
in Delaware and West Virginia. The lease for the Delaware facility commenced on
January 1, 1996, with a minimum monthly rental payment of $6,000 for a term of
three years. The lease for the West Virginia facility commenced on April 1,
1996, with a minimum monthly rental payment of $10,000 beginning June 15, 1996,
for a term of five years.

7. NOTES PAYABLE TO SHAREHOLDER:

In December 1995, the Company received the proceeds from two demand notes
payable to its shareholder for $500,000 (repaid subsequent to December 31,
1995) and $70,000, respectively. The remaining note of $70,000 accrues interest
at 8%.

F-58
<PAGE>

THE REICH GROUP COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

8. COMMON STOCK:

The description of the Company's common stock is as follows:

<TABLE>
<CAPTION>
COMMON STOCK
PAR VALUE
------------
<S> <C>
The Reich Group, Inc.
$1 par value, 1,000 shares authorized, 100 shares issued and
outstanding.................................................. $ 100
DialDirect, Inc.
$1 par value, 1,000 shares authorized, 100 shares issued and
outstanding.................................................. 100
DialDirect Telemarketing, Ltd.
$1 par value, 1,000 shares authorized, 100 shares issued and
outstanding.................................................. 100
TRG/Communications, Inc.
$2,000 stated value, 150 shares outstanding................... 2,000
InsureDirect Agency, Inc.
$1 par value, 1,000 shares authorized, 100 shares issued and
outstanding.................................................. 100
------
$2,400
======
</TABLE>

F-59
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To The Response Center, Inc. and The Tab House, Inc.:

We have audited the accompanying combined balance sheet of The Response
Center, Inc. and The Tab House, Inc. (Pennsylvania corporations) as of
September 30, 1995, and the related combined statements of income,
shareholders' equity and cash flows for each of the two fiscal years in the
period ended September 30, 1995, and for the period from October 1, 1995 to
August 12, 1996. These financial statements are the responsibility of the
Companies' management. Our responsibility is to express an opinion on these
financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of The Response Center,
Inc. and The Tab House, Inc. as of September 30, 1995, and the results of their
operations and their cash flows for each of the two fiscal years in the period
ended September 30, 1995, and for the period from October 1, 1995 to August 12,
1996, in conformity with generally accepted accounting principles.

As discussed in Note 2 to the combined financial statements, the Company
changed its method of accounting for marketable securities in fiscal 1995.

Arthur Andersen LLP

Philadelphia, Pa.,
September 30, 1996

F-60
<PAGE>

THE RESPONSE CENTER, INC. AND THE TAB HOUSE, INC.

COMBINED BALANCE SHEET

AS OF SEPTEMBER 30, 1995

(IN THOUSANDS--EXCEPT SHARE DATA)

<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................. $ 282
Marketable securities................................................. 324
Accounts receivable, net of reserve of $28............................ 1,522
Prepaid expenses and other............................................ 23
------
Total current assets................................................ 2,151
PROPERTY AND EQUIPMENT, net............................................. 139
OTHER ASSETS............................................................ 8
------
Total assets........................................................ $2,298
======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable...................................................... $ 119
Accrued expenses...................................................... 275
Deferred revenue...................................................... 92
------
Total current liabilities........................................... 486
------
COMMITMENTS AND CONTINGENCIES (Note 5)
SHAREHOLDERS' EQUITY:
Common stock (The Response Center, Inc.), no par value, 1,000 shares
authorized, 550 shares issued and outstanding........................ 51
Common stock (The Tab House, Inc.), $.01 par value, 1,000 shares
authorized, 550 shares issued and outstanding........................ --
Additional paid-in capital............................................ 1
Net unrealized gain on marketable securities available for sale....... 121
Retained earnings..................................................... 1,639
------
Total shareholders' equity.......................................... 1,812
------
Total liabilities and shareholders' equity.......................... $2,298
======
</TABLE>

The accompanying notes are an integral part of this statement.

F-61
<PAGE>

THE RESPONSE CENTER, INC. AND THE TAB HOUSE, INC.

COMBINED STATEMENTS OF INCOME

(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
FOR THE YEAR ENDED OCTOBER 1,
SEPTEMBER 30 1995 TO
-------------------- AUGUST 12,
1994 1995 1996
--------- --------- -----------
<S> <C> <C> <C>
REVENUES...................................... $ 6,183 $ 6,719 $5,279
--------- --------- ------
OPERATING EXPENSES:
Cost of services............................ 3,426 3,583 2,849
Selling, general and administrative ex-
penses..................................... 2,800 2,717 1,954
--------- --------- ------
Total operating expenses.................. 6,226 6,300 4,803
--------- --------- ------
Operating income (loss)................... (43) 419 476
INTEREST INCOME............................... 8 10 20
INTEREST EXPENSE.............................. (2) -- --
--------- --------- ------
NET INCOME (LOSS)............................. $ (37) $ 429 $ 496
--------- --------- ------
PRO FORMA DATA (UNAUDITED):
Historical net income (loss).................. $ (37) $ 429 $ 496
Pro forma provision (benefit) for income tax-
es........................................... (15) 180 196
--------- --------- ------
Pro forma net income (loss)................... $ (22) $ 249 $ 300
========= ========= ======
</TABLE>

The accompanying notes are an integral part of these statements.

F-62
<PAGE>

THE RESPONSE CENTER, INC. AND THE TAB HOUSE, INC.

COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY

(IN THOUSANDS--EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
THE RESPONSE THE TAB
CENTER, INC. HOUSE, INC. UNREALIZED
COMMON STOCK COMMON STOCK ADDITIONAL GAIN ON TOTAL
------------- ------------- PAID-IN MARKETABLE RETAINED SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL SECURITIES EARNINGS EQUITY
------ ------ ------ ------ ---------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, OCTOBER 1,
1993................... 550 $51 550 $-- $ 1 $-- $1,301 $1,353
Net loss.............. -- -- -- -- -- -- (37) (37)
Distributions......... -- -- -- -- -- -- (33) (33)
--- --- --- ---- --- ---- ------ ------
BALANCE, SEPTEMBER 30,
1994................... 550 51 550 -- 1 -- 1,231 1,283
Net income............ -- -- -- -- -- -- 429 429
Distributions......... -- -- -- -- -- -- (21) (21)
Net unrealized gain on
marketable
securities........... -- -- -- -- -- 121 -- 121
--- --- --- ---- --- ---- ------ ------
BALANCE, SEPTEMBER 30,
1995................... 550 51 550 -- 1 121 1,639 1,812
Net income............ -- -- -- -- -- -- 496 496
Distributions......... -- -- -- -- -- -- (820) (820)
Net unrealized gain
(loss) on marketable
securities........... -- -- -- -- -- (21) -- (21)
--- --- --- ---- --- ---- ------ ------
BALANCE, AUGUST 12,
1996................... 550 $51 550 $-- $ 1 $100 $1,315 $1,467
=== === === ==== === ==== ====== ======
</TABLE>

The accompanying notes are an integral part of these statements.

F-63
<PAGE>

THE RESPONSE CENTER, INC. AND THE TAB HOUSE, INC.

COMBINED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE
FOR THE PERIOD FROM
YEAR ENDED OCTOBER 1,
SEPTEMBER 30 1995 TO
-------------- AUGUST 12,
1994 1995 1996
------ ------ -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)................................ $ (37) $ 429 $ 496
Adjustments to reconcile net income to net cash
provided by operating activities--
Depreciation and amortization................... 43 48 57
Gain on sale of marketable securities........... (7) (22) (2)
Changes in operating assets and liabilities--
Accounts receivable............................ 13 (165) 478
Due from TeleSpectrum Worldwide Inc. .......... -- -- (49)
Prepaid expenses and other..................... 41 (8) (81)
Other assets................................... (2) -- (82)
Accounts payable............................... (202) (7) 71
Accrued expenses............................... 219 (51) (37)
Deferred revenue............................... 43 (36) (52)
------ ------ -----
Net cash provided by operating activities..... 111 188 799
------ ------ -----
INVESTING ACTIVITIES:
Purchases of marketable securities............... (93) -- (17)
Proceeds on sales of marketable securities....... 73 67 25
Purchases of property and equipment.............. (39) (23) (159)
------ ------ -----
Net cash provided by (used in) investing ac-
tivities..................................... (59) 44 (151)
------ ------ -----
FINANCING ACTIVITIES:
Repayment of shareholder loan.................... (160) -- --
Distributions paid............................... (33) (22) (820)
------ ------ -----
Net cash used in financing activities......... (193) (22) (820)
------ ------ -----
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS....................................... (141) 210 (172)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD..... 213 72 282
------ ------ -----
CASH AND CASH EQUIVALENTS, END OF PERIOD........... $ 72 $ 282 $ 110
------ ------ -----
</TABLE>

The accompanying notes are an integral part of these statements.

F-64
<PAGE>

THE RESPONSE CENTER, INC. AND THE TAB HOUSE, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS

1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:

Industry Information

The Response Center, Inc. and The Tab House, Inc. (collectively, the
"Company") provide custom market research and analysis, principally to clients
in the telecommunications, financial services, pharmaceutical and health care
industries.

On August 12, 1996, the Company sold substantially all of its assets and
liabilities to TeleSpectrum Worldwide Inc. The Response Center and The Tab
House, Inc. are predecessor companies to TeleSpectrum Worldwide Inc.

The accompanying financial statements reflect the combined financial position
and results of operations of The Response Center, Inc. and The Tab House, Inc.
The accompanying financial statements are presented on a combined basis, as The
Response Center, Inc. and The Tab House, Inc. are owned by the same
shareholders who have identical ownership in each entity. The financial
statements reflect the elimination of all significant intercompany accounts and
transactions.

Use of Estimates

Revenue Recognition and Concentration of Credit Risk

The Company recognizes revenues as services are performed for customers on a
per-project basis. In fiscal 1994 and 1995 and the period from October 1, 1995
to August 12, 1996, the Company had one customer that accounted for 36%, 27%
and 24% of revenues, respectively. At September 30, 1994 and 1995, the Company
had one customer, which accounted for 24% and 27% of accounts receivable,
respectively.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. At the
balance sheet dates, cash equivalents were composed primarily of investments in
money market funds.

Marketable Securities

During fiscal 1995, the Company began reporting marketable securities in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 115.
All securities have been classified as available-for-sale and

F-65
<PAGE>

THE RESPONSE CENTER, INC. AND THE TAB HOUSE, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
reported at quoted market value with net unrealized gains being reported as a
separate component of shareholders' equity. Prior to 1995, marketable
securities were reported at the lower of cost or market.

Property and Equipment

Property and equipment are recorded at cost. Depreciation and amortization
are provided using the straight-line method over the estimated useful lives as
follows:

<TABLE>
<S> <C>
Computer and office equipment 5 years
Furniture and fixtures 7 years
Leasehold improvements The lesser of 6 years or the lease term.
</TABLE>

Expenditures for maintenance, repairs and betterments that do not prolong the
normal useful life of an asset have been charged to operations as incurred.
Additions and improvements that substantially extend the useful lives of the
properties are capitalized. Upon sale or other disposition of assets, the cost
and related accumulated depreciation and amortization are removed from the
respective accounts, and the resulting gain or loss, if any, is included in
income.

Income Taxes

The Company had elected to be taxed under Subchapter S of the Internal
Revenue Code. As a result, the Company was not subject to federal income taxes,
and the taxable income of the Company was included in the shareholders' tax
returns. The Company had also elected S Corporation status for state income tax
purposes. Therefore, no provision for federal and state income taxes has been
made in the accompanying financial statements.

The Company was on the cash basis of accounting for income tax purposes and
on the accrual basis for financial reporting purposes. Therefore, the Company
reports certain income and expense items for income tax purposes on a basis
different from that reflected in the accompanying financial statements. At
September 30, 1995, the Company's financial reporting basis of the net assets
exceeds the tax basis of the net assets by approximately $1,000,000.

Fair Value of Financial Instruments

Cash, accounts receivable, accounts payable and accrued liabilities are
reflected in the financial statements at the fair value due to the short-term
nature of those instruments.

401(k) Plan

On October 1, 1991, the Company adopted a 401(k) plan for its employees (the
"Plan"). The Plan allows all participants to contribute a percentage of their
compensation with Company contributions. The Company contributed $10,000,
$13,000 and $11,000 in fiscal 1994 and 1995 and for the period from October 1,
1995 to August 12, 1996, respectively.

Pro Forma Data (Unaudited)

Given the sale of the business, for informational purposes, the accompanying
statements of income include an unaudited pro forma adjustment for income taxes
that would have been recorded if the Company had not been an S Corporation,
based on the tax laws in effect during the respective periods. The difference
between the federal statutory income tax rate and the pro forma income tax rate
primarily relates to state and local income taxes and expenses not deductible
for tax purposes.

F-66
<PAGE>

THE RESPONSE CENTER, INC. AND THE TAB HOUSE, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

2. MARKETABLE SECURITIES:

The Company adopted SFAS No. 115, "Accounting for Certain Investments in Debt
and Equity Securities," effective October 1, 1994. SFAS No. 115 requires the
Company to classify its investment securities as (1) held-to- maturity, (2)
available-for-sale or (3) trading securities. At September 30, 1995, all of the
Company's marketable securities are classified as available for sale and
reported at market value; therefore, any unrealized holding gains or losses are
presented as a separate component of shareholders' equity. The cumulative
effect of adopting SFAS No. 115 was an increase in shareholders' equity of
$121,000.

The following is a summary of available-for-sale securities as of September
30, 1995 (in thousands):

<TABLE>
<CAPTION>
UNREALIZED UNREALIZED
HOLDING HOLDING MARKET
COST LOSSES GAINS VALUE
---- ---------- ---------- ------
<S> <C> <C> <C> <C>
Common stocks............................. $118 $ (6) $106 $218
Municipal bonds, maturity dates ranging
from 12/99 to 3/05....................... 59 -- 20 79
Mutual funds.............................. 26 -- 1 27
---- ---- ---- ----
Total marketable securities............... $203 $ (6) $127 $324
==== ==== ==== ====
</TABLE>

During the year ended September 30, 1995, the Company sold marketable
securities in the amount of $103,000. Under the specific identification method,
the Company realized gains of $22,000 on these sales.

3. PROPERTY AND EQUIPMENT:

<TABLE>
<CAPTION>
SEPTEMBER 30,
1995
--------------
(IN THOUSANDS)
<S> <C>
Computer equipment........................................... $ 154
Furniture and office equipment............................... 96
Leasehold improvements....................................... 19
-----
269
Less--Accumulated depreciation and amortization.............. (130)
-----
$ 139
=====

Depreciation and amortization expense for the fiscal years ended September
30, 1994 and 1995, and for the period from October 1, 1995 to August 12, 1996,
was $43,000, $48,000 and $56,000, respectively.

4. ACCRUED EXPENSES:

<CAPTION>
SEPTEMBER 30,
1995
--------------
(IN THOUSANDS)
<S> <C>
Accrued compensation and related expenses.................... $ 132
Accrued local taxes.......................................... 30
Other accrued liabilities.................................... 113
-----
$ 275
=====
</TABLE>

F-67
<PAGE>

THE RESPONSE CENTER, INC. AND THE TAB HOUSE, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
5. COMMITMENTS AND CONTINGENCIES:

The Company leases a facility and equipment. Such leases have terms that
extend through 2000. Rent expense for the fiscal years ended September 30, 1994
and 1995, and for the period from October 1, 1995 to August 12, 1996, was
$157,000, $161,000 and $108,000, respectively.

Future minimum lease payments under the Company's leases as of September 30,
1995, are as follows (in thousands):

<TABLE>
<S> <C>
1996................................................................ $138
1997................................................................ 111
1998................................................................ 58
1999................................................................ 55
2000................................................................ 55
----
Total minimum lease payments........................................ $417
====
</TABLE>

F-68
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To TeleSpectrum, Inc. and TeleSpectrum Training Services, Inc.:

We have audited the accompanying combined balance sheet of TeleSpectrum, Inc.
and TeleSpectrum Training Services, Inc. (Maryland corporations) as of December
31, 1995, and the related combined statements of income, stockholders' equity
and cash flows for the year ended December 31, 1995, and for the period from
January 1, 1996 to August 12, 1996. These financial statements are the
responsibility of the Companies' management. Our responsibility is to express
an opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of TeleSpectrum, Inc.
and TeleSpectrum Training Services, Inc. as of December 31, 1995, and the
results of their operations and their cash flows for the year ended December
31, 1995, and for the period from January 1, 1996 to August 12, 1996, in
conformity with generally accepted accounting principles.

Arthur Andersen LLP

Philadelphia, Pa.,
October 3, 1996

F-69
<PAGE>

TELESPECTRUM, INC. AND TELESPECTRUM TRAINING SERVICES, INC.

COMBINED BALANCE SHEET

AS OF DECEMBER 31, 1995
(IN THOUSANDS--EXCEPT SHARE DATA)

<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash.................................................................. $ 15
Accounts receivable, net of reserve of $22............................ 2,690
Due from shareholder/officer.......................................... 4
Prepaid expenses and other............................................ 95
------
Total current assets................................................ 2,804
PROPERTY AND EQUIPMENT, net........................................... 657
OTHER ASSETS.......................................................... 88
------
Total assets........................................................ $3,549
======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit........................................................ $1,350
Current portion of long-term debt..................................... 198
Accounts payable...................................................... 498
Accrued compensation.................................................. 161
Deferred revenue...................................................... 197
Other accrued expenses................................................ 363
------
Total current liabilities........................................... 2,767
------
LONG-TERM DEBT AND OTHER NONCURRENT LIABILITIES......................... 81
------
DEFERRED TAXES.......................................................... 14
------
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' EQUITY:
Common stock, TeleSpectrum, Inc. $.01 par value, 5,000 shares
authorized, 3,000 shares issued and outstanding...................... --
Common stock, TeleSpectrum Training Services, Inc. no par value, 5,000
shares authorized, 200 shares issued and outstanding................. 6
Additional paid-in capital............................................ 217
Retained earnings..................................................... 464
------
Total stockholders' equity.......................................... 687
------
Total liabilities and stockholders' equity.......................... $3,549
======
</TABLE>

The accompanying notes are an integral part of this statement.

F-70
<PAGE>

TELESPECTRUM, INC. AND TELESPECTRUM TRAINING SERVICES, INC.

COMBINED STATEMENTS OF INCOME

(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
FOR THE JANUARY 1,
YEAR ENDED 1996 TO
DECEMBER 31, AUGUST 12,
1995 1996
------------ -----------
<S> <C> <C>
REVENUES.............................................. $11,854 $10,529
OPERATING EXPENSES:
Cost of services.................................... 8,338 6,974
Selling, general and administrative expenses........ 3,072 2,929
------- -------
Total operating expenses.......................... 11,410 9,903
------- -------
Operating income.................................. 444 626
INTEREST EXPENSE...................................... (184) (129)
------- -------
Income before income taxes........................ 260 497
INCOME TAX BENEFIT.................................... 18 --
------- -------
NET INCOME............................................ $ 278 $ 497
------- -------
PRO FORMA DATA (UNAUDITED):
Historical net income............................... $ 278 $ 497
Pro forma provision for income taxes................ 112 196
------- -------
Pro forma net income................................ $ 166 $ 301
======= =======
</TABLE>

The accompanying notes are an integral part of these statements.

F-71
<PAGE>

TELESPECTRUM, INC. AND TELESPECTRUM TRAINING SERVICES, INC.

COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY

(IN THOUSANDS--EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
COMMON STOCK
---------------------------------
TELESPECTRUM
TRAINING
TELESPECTRUM, SERVICES, ADDITIONAL TOTAL
INC. INC. PAID-IN RETAINED STOCKHOLDERS'
SHARES SHARES AMOUNT CAPITAL EARNINGS EQUITY
------------- ------------ ------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1,
1995................... 3,000 200 $ 6 $217 $186 $ 409
Net income............ -- -- -- -- 278 278
----- --- --- ---- ---- ------
BALANCE, DECEMBER 31,
1995................... 3,000 200 6 217 464 687
Capital contribution.. -- -- -- 500 -- 500
Net income............ -- -- -- -- 497 497
----- --- --- ---- ---- ------
BALANCE, AUGUST 12,
1996................... 3,000 200 $ 6 $717 $961 $1,684
===== === === ==== ==== ======
</TABLE>

The accompanying notes are an integral part of these statements.

F-72
<PAGE>

TELESPECTRUM, INC. AND TELESPECTRUM TRAINING SERVICES, INC.

COMBINED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
FOR THE JANUARY 1,
YEAR ENDED 1996 TO
DECEMBER 31, AUGUST 12,
1995 1996
------------ -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income.......................................... $ 278 $ 497
Adjustments to reconcile net income to net cash
provided by (used in) operating activities--
Depreciation and amortization...................... 343 127
Changes in operating assets and liabilities--
Accounts receivable............................... (679) (1,193)
Due from stockholder/officer...................... 1 --
Prepaid expenses and other........................ (2) (257)
Other, net........................................ (114) --
Deferred revenue.................................. (205) --
Accounts payable and accrued liabilities.......... 374 1,795
----- -------
Net cash provided by (used in) operating activi-
ties............................................ (4) 969
----- -------
INVESTING ACTIVITIES:
Purchases of property and equipment................. (99) (2,044)
----- -------
Net cash used in investing activities............ (99) (2,044)
----- -------
FINANCING ACTIVITIES:
Net borrowings on line of credit.................... 807 3,060
Proceeds from notes payable......................... -- 500
Principal payments on long-term debt and capital
leases............................................. (852) (1,844)
----- -------
Net cash provided by (used in) financing activi-
ties............................................ (45) 1,716
----- -------
NET (DECREASE) INCREASE IN CASH....................... (148) 641
CASH, BEGINNING OF PERIOD............................. 163 15
----- -------
CASH, END OF PERIOD................................... $ 15 $ 656
----- -------
CASH PAID FOR:
Interest............................................ $ 182 $ 120
----- -------
Taxes............................................... $ 36 $ --
----- -------
</TABLE>

The accompanying notes are an integral part of these statements.

F-73
<PAGE>

TELESPECTRUM, INC. AND TELESPECTRUM TRAINING SERVICES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS

1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:

Industry Information

TeleSpectrum, Inc. and TeleSpectrum Training Services, Inc. (together, the
"Company") specialize in providing both outbound and inbound telemarketing
services and fulfillment to the high technology, pharmaceutical and health care
and consumer products industries.

On August 12, 1996, the Company sold substantially all of its assets and
liabilities to TeleSpectrum Worldwide Inc. TeleSpectrum, Inc. and TeleSpectrum
Training Services, Inc. are predecessor companies to TeleSpectrum Worldwide
Inc.

Upon signing the asset purchase agreement, TeleSpectrum Worldwide Inc.
advanced the Company $500,000 in the form of a promissory note due in one year
with interest at 9%. Upon the closing of the transaction on August 12, 1996, a
portion of the purchase price was paid by cancellation of the promissory note.

The financial statements reflect the combined financial position and results
of operations of TeleSpectrum, Inc. and TeleSpectrum Training Services, Inc.
The accompanying financial statements are presented on a combined basis, as
TeleSpectrum, Inc. and TeleSpectrum Training Services, Inc. are owned by the
same stockholders who have identical ownership in each entity. The financial
statements reflect the elimination of all significant intercompany accounts and
transactions.

Use of Estimates

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

Revenue Recognition and Concentration of Credit Risk

The Company recognizes revenues on programs as services are performed for the
clients, generally based upon hours incurred. In 1995, the Company had one
client that accounted for 12% of revenues and 15% of accounts receivable. For
the period from January 1, 1996 to August 12, 1996, the Company had one client
which accounted for 25% of revenues.

Property and Equipment

Property and equipment are recorded at cost. Property and equipment
capitalized under capital leases are recorded at the present value of the
minimum lease payment due over the term of the lease. Depreciation and
amortization are provided using the straight-line method over the estimated
useful lives of three to ten years.

Expenditures for maintenance, repairs and betterments that do not prolong the
normal useful life of an asset have been charged to operations as incurred.
Additions and betterments that substantially extend the useful life of the
properties are capitalized. Upon sale or other disposition of assets, the cost
and related accumulated

F-74
<PAGE>

TELESPECTRUM, INC. AND TELESPECTRUM TRAINING SERVICES INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
depreciation and amortization are removed from the respective accounts, and the
resulting gain or loss, if any, is included in income.

Income Taxes

TeleSpectrum, Inc. had elected to be taxed as an S Corporation under the
provision of the federal and state statutes. In lieu of federal and state
corporate income taxes, the stockholders were taxed on their proportionate
share of the Company's taxable income. Accordingly, no provision for federal or
state income taxes was recorded for the year ended December 31, 1995, or for
the period from January 1, 1996 to August 12, 1996.

The Company reported certain income and expense items for income tax purposes
on a basis different from that reflected in the accompanying financial
statements. The principal differences relate to the timing of the recognition
of accrued expenses that are not deductible for federal income tax purposes
until paid and the use of accelerated methods of depreciation for income tax
purposes. At December 31, 1995, the financial reporting basis of the Company's
net assets exceeds the tax basis of the net assets by approximately $140,000.

TeleSpectrum Training Services, Inc. was a C Corporation and followed the
provisions of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes." This standard requires an asset and liability approach to
the recognition of deferred tax assets and liabilities related to the expected
future consequences of events that have been recognized in the financial
statements or tax returns.

TeleSpectrum Training Services, Inc. had recorded $14,000 of long-term
deferred tax liabilities as of December 31, 1995. This amount related
principally to differences between the accelerated depreciation methods used
for income tax purposes and those used for financial reporting purposes.

At December 31, 1995, the benefit for income taxes for TeleSpectrum Training
Services, Inc. is comprised of the following (in thousands):

<TABLE>
<S> <C>
Current............................................................. $ 2
Deferred............................................................ (20)
----
Total benefit................................................... $(18)
====
</TABLE>

Fair Value of Financial Instruments

Cash, accounts receivable, accounts payable and accrued liabilities are
reflected in the financial statements at fair value due to the short-term
nature of those instruments. The carrying amounts of line of credit, long-term
debt and capital lease obligations approximate fair value at the balance sheet
dates.

Pro Forma Data (Unaudited)

Given the sale of the business, for informational purposes, the accompanying
statements of income include an unaudited pro forma adjustment for income taxes
that would have been recorded if the Company had not been an S Corporation,
based on the tax laws in effect during the respective periods. The differences
between the federal statutory income tax rate and the pro forma income tax rate
primarily related to state and local income taxes and expenses not deductible
for tax purposes.

F-75
<PAGE>

TELESPECTRUM, INC. AND TELESPECTRUM TRAINING SERVICES INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
2. PROPERTY AND EQUIPMENT:

<TABLE>
<CAPTION>
USEFUL DECEMBER 31,
LIVES 1995
------ --------------
(IN THOUSANDS)
<S> <C> <C>
Telemarketing equipment............................ 5-7 $ 825
Furniture and office equipment..................... 3-5 1,221
Leasehold improvements............................. 3-10 91
------
2,137
Less--Accumulated depreciation and amortization.. (1,480)
------
$ 657
======
</TABLE>

Depreciation expense for the year ended December 31, 1995, and for the period
from January 1, 1996 to August 12, 1996, was $343,000 and $127,000,
respectively.

3. LINE OF CREDIT:

The Company entered into a new line of credit agreement in May 1996 (the "new
line") and used proceeds from the new line to pay down the amount owed under
the existing line of credit (the "old line"). The amount available for
borrowing under the new line is $4 million, with interest at the bank's prime
rate plus 1.5% (under the old line, interest, calculated as the bank's prime
rate plus 2.5%, was 11% at December 31, 1995). At December 31, 1995, the
balance of the old line was $1.35 million. Interest expense on borrowings under
the old line amounted to $127,000 during 1995, and interest expense under the
old and new lines amounted to $98,000 during the period from January 1, 1996 to
August 12, 1996.

4. LONG-TERM DEBT:

<TABLE>
<CAPTION>
DECEMBER 31,
1995
--------------
(IN THOUSANDS)
<S> <C>
Note payable to bank (see Note 3), interest at the bank's
prime rate plus 2%, monthly principal payments of $13,000
plus interest, maturing July 1996, collateralized by all
assets of the Company; 80% guaranteed by the United States
Small Business Administration; personally guaranteed by the
Company's officers......................................... $ 91
Note payable, interest at 15%, monthly principal and inter-
est payments of $2,000, maturing October 1997, guaranteed
by an officer of the Company............................... 38
Capitalized lease obligations (Note 5)...................... 126
----
255
Less--Current portion....................................... (198)
----
$ 57
====

Minimum principal repayments of long-term debt as of December 31, 1995,
excluding capitalized lease obligations, are as follows (in thousands):

1996........................................................ $110
1997........................................................ 19
----
$129
====
</TABLE>

F-76
<PAGE>

TELESPECTRUM, INC. AND TELESPECTRUM TRAINING SERVICES INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
5. COMMITMENTS AND CONTINGENCIES:

The Company leases facilities and equipment at several locations. Rent
expense under operating leases for the year ended December 31, 1995, and for
the period from January 1, 1996 to August 12, 1996, was $264,000 and $240,000,
respectively.

Future minimum lease payments under the Company's leases as of December 31,
1995, are as follows (in thousands):

<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
--------- -------
<S> <C> <C>
1996................................................... $ 395 $ 99
1997................................................... 447 36
1998................................................... 441 4
1999................................................... 382 --
2000................................................... 19 --
------ ----
Total minimum lease payments........................... $1,684 139
======
Less--Amount representing interest..................... (13)
----
Present value of future minimum lease payments......... 126
Less--Current portion.................................. (88)
----
$ 38
====
</TABLE>

F-77
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To TeleSpectrum Worldwide Inc.:

We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements of TeleSpectrum Worldwide Inc. and
subsidiaries, included in this Form 10-K and have issued our report thereon
dated February 17, 1997 (except with respect to the matter discussed in Note
13, as to which the date is March 21, 1997). Our audit was made for the purpose
of forming an opinion on the basic financial statements taken as a whole. The
accompanying financial statement schedule is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.

Arthur Andersen LLP

Philadelphia, Pa.,
February 17, 1997

S-1
<PAGE>

TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

FOR THE PERIOD APRIL 26, 1996 (INCEPTION)
TO DECEMBER 31, 1996

<TABLE>
<CAPTION>
ADDITIONS
-------------------
BALANCE AT CHARGED BALANCE AT
APRIL 26, 1996 CHARGED TO TO OTHER DECEMBER 31,
(INCEPTION) EXPENSES ACCOUNTS DEDUCTIONS 1996
-------------- ---------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts receivable ... $-- $606,356 $-- $(23,757) $582,599
</TABLE>

S-2

<PAGE>

EXHIBIT 23.01

ARTHUR ANDERSEN LLP

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 10-K, into the Company's previously filed
Registration Statements File No. 333-04349.

Arthur Andersen LLP

Philadelphia, Pa.
March 28, 1997

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ITEM 8 OF
FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-26-1996
<PERIOD-END> DEC-31-1996
<CASH> $30,715
<SECURITIES> 0
<RECEIVABLES> 33,517
<ALLOWANCES> (453)
<INVENTORY> 0
<CURRENT-ASSETS> 66,721
<PP&E> 32,081
<DEPRECIATION> (1,910)
<TOTAL-ASSETS> 299,055
<CURRENT-LIABILITIES> 48,445
<BONDS> 0
0
0
<COMMON> 252
<OTHER-SE> 240,259
<TOTAL-LIABILITY-AND-EQUITY> 299,055
<SALES> 61,474
<TOTAL-REVENUES> 61,474
<CGS> 40,871
<TOTAL-COSTS> 55,958
<OTHER-EXPENSES> 15,087
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 445
<INCOME-PRETAX> 5,956
<INCOME-TAX> 2,306
<INCOME-CONTINUING> 3,650
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,650
<EPS-PRIMARY> .20
<EPS-DILUTED> .20

</TABLE>