ZD INC, S-1, 1998-12-22

ZD INC
S-1, 1998-12-22
PERIODICALS: PUBLISHING OR PUBLISHING & PRINTING

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 22, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
ZIFF-DAVIS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 2721 13-3987754
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
--------------
ONE PARK AVENUE
NEW YORK, NEW YORK 10016
(212) 503-3500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
COPIES TO:
STEPHEN A. GRANT MARK G. BORDEN
ALAN J. SINSHEIMER PETER L. GRAY
SULLIVAN & CROMWELL HALE AND DORR LLP
125 BROAD STREET 60 STATE STREET
NEW YORK, NEW YORK 10004 BOSTON, MASSACHUSETTS 02109

TIMOTHY C. O'BRIEN
ZIFF-DAVIS INC.
ONE PARK AVENUE
NEW YORK, NEW YORK 10016
(212) 503-3500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)

--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.

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

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 of the Securities Act of 1933,
check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]

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

CALCULATION OF REGISTRATION FEE
<TABLE>
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED OFFERING PRICE(1)(2) REGISTRATION FEE
- ----------------------------------------------------------------------------
<S> <C> <C>
Ziff-Davis Inc.--ZDNet Group Common
Stock,
par value $.01 per share $115,000,000 $31,970

- ----------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(1) A portion of the shares to be registered represents shares that are to be
offered outside of the United States but that may be resold from time to
time in the United States. Such shares are not being registered for the
purpose of sales outside the United States.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933.
--------------
WE WILL AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE
NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL WE FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE IN
ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES
AND EXCHANGE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY +
+NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN +
+OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE +
+SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION. DATED , 1999.

,000,000 Shares

ZIFF-DAVIS INC.--ZDNET GROUP
Common Stock

----------

This is an initial public offering of shares of a new series of common stock
of Ziff-Davis Inc. We intend these shares to reflect the performance of ZDNet
(our online business division).

ZDNet Stock will have voting rights that will fluctuate depending on its
Market Value from time to time as compared to the Market Value of ZD Stock (our
other series of common stock). We will have the right, in certain
circumstances, to issue ZD Stock or deliver stock of a subsidiary succeeding to
the assets, liabilities and businesses of ZDNet in exchange for outstanding
shares of ZDNet Stock. If we dispose of All or Substantially All of the Assets
of ZDNet, we will generally be required to distribute to holders of ZDNet Stock
their Proportionate Interest in the Net Proceeds of the disposition or issue ZD
Stock in exchange for outstanding shares of ZDNet Stock. Please read the
information in "Summary--ZDNet Stock" and the more detailed information in
"Description of Capital Stock" for additional information concerning the terms
of ZDNet Stock.

This prospectus relates to an offering of shares in the United States. In
addition, shares are being offered outside the United States in an
international offering. We anticipate that the initial public offering price
will be between $ and $ per share. We will attribute the net proceeds from
shares to ZDNet and the net proceeds from the remaining shares to our ZD
division. ZDNet will advance the net proceeds it receives to ZD, and ZD will
use those net proceeds, together with the net proceeds attributed to it, to
reduce our outstanding indebtedness.

We intend to list ZDNet Stock on the New York Stock Exchange under the symbol
" ".

Read the risk factors beginning on page 16 of this prospectus to learn about
certain factors you should consider before buying shares of ZDNet Stock.

----------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY
HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

----------

<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Initial public offering price................................... $ $
Underwriting discount........................................... $ $
Proceeds, before expenses, to Ziff-Davis Inc.................... $ $
</TABLE>

The U.S. Underwriters may, under certain circumstances, purchase up to an
additional shares from us at the initial public offering price less the
underwriting discount.

----------

The Underwriters expect to deliver the shares against payment in New York,
New York on , 1999.

Joint Global Coordinators and Joint Book-Running Managers
GOLDMAN, SACHS & CO. DONALDSON, LUFKIN & JENRETTE
----------
HAMBRECHT & QUIST

----------

Prospectus dated , 1999.
<PAGE>

DESCRIPTION OF PHOTOGRAPHS WILL BE PROVIDED

2
<PAGE>

Our logo and certain titles of our Internet sites, publications, products and
services referenced in this prospectus are our trademarks. Each trade name,
trademark or service mark of any other company appearing in this prospectus is
the property of its owner.

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

Unless we indicate otherwise in this prospectus, references to the "COMPANY",
"ZIFF-DAVIS", "WE" or "OUR" mean Ziff-Davis Inc. and its subsidiaries, taken as
a whole.

3
<PAGE>

SUMMARY

This summary highlights certain information contained elsewhere in this
prospectus. This summary is not complete and should be read together with the
more detailed information contained in the rest of this prospectus. In
particular, see "Description of Capital Stock". Capitalized terms used in this
summary have the meanings given them elsewhere in this prospectus. See "Index
of Certain Terms" on page 173.

THE COMPANY, ZDNET AND ZD

THE COMPANY

Ziff-Davis Inc. is a leading integrated media and marketing company focused
on computing and Internet-related technology. We provide global technology
companies with marketing strategies for reaching key decision-makers. From an
accounting standpoint, we have separated our online business division (which we
call the "ZDNET GROUP" or "ZDNET") from the rest of our businesses (which we
call the "ZD GROUP" or "ZD") and we have allocated all of our consolidated
assets, liabilities, revenue, expenses and cash flow between ZD and ZDNet. Our
principal executive offices are located at One Park Avenue, New York, New York
10016. Our telephone number is (212) 503-3500.

ZDNET

ZDNet is our online business division and is a leading provider of
technology-related content to Internet users worldwide. ZDNet focuses on
content, community and commerce. ZDNet creates real-time, authoritative and
comprehensive branded content divided broadly into "channels" that focus on
specific topics or audience groups. ZDNet's network of over 60 interconnected
sites offers over 800 news stories per month, 39,000 product listings, 30,000
product reviews and 12,000 downloadable programs. The community of ZDNet users
interacts through bulletin boards, chat rooms, moderated forums and e-mail.
ZDNet facilitates commerce by providing users with the ability to evaluate,
compare and purchase products and services and by providing advertisers and
merchants with access to a highly targeted user group with attractive
demographics.

According to Media Metrix, in October 1998 zdnet.com ranked first among all
Web sites in the category of news, information and entertainment, ahead of such
sites as cnet.com, cnn.com, msnbc.com, Disney Online and espn.com. ZDNet
estimates that its Web sites served more than 185 million page views during
October 1998, up from 105 million in October 1997. ZDNet delivered
approximately 386 million ad-bearing pages during the third quarter of 1998, up
from 182 million during the same period of 1997. In addition, ZDNet had
localized editions in more than 16 countries as of September 30, 1998.

4
<PAGE>

15% annually over the next five years. The prevalence of technology and the
growing number of technological choices heighten the demand for up-to-date,
comprehensive information about technology-related products and services.

ZDNet's objective is to be the leading online content site focused on
technology products and services and the preferred online platform for
advertisers and merchants. ZDNet's strategy is to:

. continue to offer differentiated technology-related content,

. grow ZDNet's user community,

. build ZDNet's brand strength,

. increase advertising and commerce revenue,

. strengthen and expand strategic alliances and

. extend ZDNet's international presence.

ZDNet derives many benefits from its relationship with ZD, including the
ability to leverage the ZD brand, access content from ZD publications and
cross-market across all of ZD's platforms. ZDNet's revenue has grown from $13.6
million in 1995 to $32.2 million in 1997 and was $37.6 million in the first
nine months of 1998.

ZD includes:

. The following Company businesses: print publishing, trade shows and
conferences, market research, education (including ZDU, our Internet-
based educational service) and television (including an online
component).

. A Retained Interest in ZDNet. This Retained Interest is currently 100%,
but will decline to reflect the initial issuance of ZDNet Stock as well
as any future issuances.

5
<PAGE>

THE OFFERING

<TABLE>
<C> <S>
SHARES OF ZDNET STOCK OFFERED BY THE COMPANY:
U.S. OFFERING................................ . shares
INTERNATIONAL OFFERING....................... . shares
TOTAL OFFERED................................ . shares(1)
TOTAL OFFERED FOR ACCOUNT OF
ZD IN RESPECT OF ITS RETAINED
INTEREST.................................... . shares(1)
TOTAL OFFERED FOR ACCOUNT
OF ZDNET.................................... . shares
TOTAL NUMBER OF NOTIONAL ZDNET SHARES DEEMED
OUTSTANDING AFTER THE OFFERING.............. . shares(2)
USE OF PROCEEDS: We will attribute the net
proceeds from . shares to ZDNet
(in a manner analogous to a
primary offering of common
stock) and the net proceeds from
the remaining shares to our ZD
division (in a manner analogous
to a secondary offering of
common stock of a subsidiary
owned by a parent). ZDNet will
advance the net proceeds it
receives to ZD, and ZD will use
those net proceeds, together
with the net proceeds attributed
to it, to reduce our outstanding
indebtedness.
NEW YORK STOCK EXCHANGE SYMBOL: ".".
</TABLE>
- --------
(1) Assumes the U.S. Underwriters do not exercise their option to purchase up
to . additional shares.
(2) Includes offered shares and notional shares representing ZD's Retained
Interest in ZDNet. Does not include . shares that may be purchased for $.
per share upon exercise of outstanding stock options.

6
<PAGE>

ZDNET STOCK

BASIC INVESTMENT We intend ZDNet Stock to reflect the performance
CHARACTERISTICS: of our online business division (i.e., ZDNet).

RETAINED INTEREST AND We use the following terms relating to the
RELATED MATTERS: interest in ZDNet that we attribute to ZD:

"RETAINED INTEREST": The Company's interest in
ZDNet, excluding the interest intended to be
represented by outstanding shares of ZDNet Stock.
ZD currently has a 100% Retained Interest in
ZDNet.

"NUMBER OF SHARES ISSUABLE WITH RESPECT TO ZD'S
RETAINED INTEREST": The number of shares that we
are entitled to issue for the account of ZD in
respect of its Retained Interest. We have
initially designated this number as . shares.
Shares we issue in the Offering for the account
of ZD in respect of its Retained Interest will
correspondingly reduce this number.

"TOTAL NUMBER OF NOTIONAL ZDNET SHARES DEEMED
OUTSTANDING": The number of shares of ZDNet Stock
outstanding plus the Number of Shares Issuable
with Respect to ZD's Retained Interest. Shares we
issue in the Offering for the account of ZD in
respect of its Retained Interest will increase
the number of shares outstanding but will
correspondingly reduce the Number of Shares
Issuable with Respect to ZD's Retained Interest
in ZDNet; thus, those shares will have no effect
on the Total Number of Notional ZDNet Shares
Deemed Outstanding. However, the shares we issue
for the account of ZDNet will correspondingly
increase the number of shares outstanding and the
Total Number of Notional ZDNet Shares Deemed
Outstanding.

After giving effect to the Offering (and assuming
the U.S. Underwriters do not exercise their
option to purchase additional shares), there will
be . shares outstanding, the remaining Number of
Shares Issuable with Respect to ZD's Retained
Interest will be . and the Total Number of
Notional ZDNet Shares Deemed Outstanding will be
..

7
<PAGE>

DIVIDENDS: We currently intend to retain all of our earnings
to finance our operations, repay our indebtedness
and fund future growth. We do not expect to pay
any dividends on ZDNet Stock for the foreseeable
future.

MANDATORY DIVIDEND, If we dispose of All or Substantially All of the
REDEMPTION OR EXCHANGE ON Assets of ZDNet and the disposition is not an
DISPOSITION OF ASSETS: Exempt Disposition, we would be required to
either:
. pay a dividend to holders of ZDNet Stock in an
amount equal to their Proportionate Interest in
the Net Proceeds of such disposition,
. redeem from holders of ZDNet Stock, for an
amount equal to their Proportionate Interest in
the Net Proceeds of such disposition,
outstanding shares of ZDNet Stock or

. issue ZD Stock in exchange for outstanding
ZDNet Stock at a 10% premium (based on the
average Market Value of ZDNet Stock as compared
to the average Market Value of ZD Stock over a
specified 20 Trading Day period prior to the
exchange).

At any time within one year after completing a
special dividend or partial redemption referred
to above, we will have the right to issue ZD
Stock in exchange for outstanding ZDNet Stock at
a 10% premium (based on the average Market Value
of ZDNet Stock as compared to the average Market
Value of ZD Stock over a specified 20 Trading Day
period prior to the exchange).

EXCHANGE FOR ZD STOCK AT We will have the right, at any time before ZDNet
COMPANY'S OPTION: Stock exceeds the 65% of Total Market
Capitalization Trigger, to issue ZD Stock in
exchange for outstanding ZDNet Stock at a premium
(based on the average Market Value of ZDNet Stock
as compared to the average Market Value of ZD
Stock over a specified 20 Trading Day period
prior to the exchange). The premium will
initially be 25% (for exchanges occurring in the
first quarter after issuance) and will decline
quarterly over a period of 3 years to 15%.

8
<PAGE>

We will have the right, at any time after ZDNet
Stock exceeds the 65% of Total Market
Capitalization Trigger and before ZDNet Stock
falls below the 50% of Total Market
Capitalization Threshold, to issue ZDNet Stock in
exchange for outstanding ZD Stock at a 15%
premium (based on the average Market Value of ZD
Stock as compared to the average Market Value of
ZDNet Stock over a specified 20 Trading Day
period prior to the exchange).

In addition, we will have the right, if ZDNet
Stock exceeds the 65% of Total Market
Capitalization Trigger and thereafter falls below
the 50% of Total Market Capitalization Threshold,
to issue shares of one series in exchange for
shares of the other series on a value for value
basis (based on the average Market Value of ZD
Stock as compared to the average Market Value of
ZDNet Stock over a specified 20 Trading Day
period prior to the exchange). Once this right
arises, we will not lose it even if ZDNet Stock
thereafter exceeds the 50% of Total Market
Capitalization Threshold or the 65% of Total
Market Capitalization Trigger.

ZDNet Stock will exceed the "65% of Total Market
Capitalization Trigger" if the Market
Capitalization of the outstanding ZDNet Stock
exceeds 65% of the total Market Capitalization of
both series of Common Stock for 30 Trading Days
during any 60 consecutive Trading Day period.
Thereafter, ZDNet Stock will fall below the "50%
of Total Market Capitalization Threshold" if the
Market Capitalization of the outstanding ZDNet
Stock falls below 50% of the total Market
Capitalization of both series of Common Stock for
30 Trading Days during any 60 consecutive Trading
Day period.

EXCHANGE FOR STOCK OF A We will have the right, at any time, to transfer
SUBSIDIARY AT COMPANY'S all of the assets and liabilities of ZDNet to a
OPTION: subsidiary and deliver shares of that subsidiary
in exchange for outstanding shares of ZDNet.

VOTING RIGHTS: Each share will have a number of votes equal to
the average Market Value of a share of ZDNet
Stock

9
<PAGE>

divided by the average Market Value of a share of
ZD Stock over a specified 20 Trading Day period
prior to the date of that vote.

Holders of ZD Stock and ZDNet Stock will vote
together as a single class (except in certain
limited circumstances).

LIQUIDATION: Upon liquidation of the Company, holders of ZD
Stock and ZDNet Stock will be entitled to receive
the net assets of the Company, if any, remaining
for distribution to stockholders (after payment
or provision for all liabilities of the Company
and payment of the liquidation preference payable
to any holders of Preferred Stock). Amounts due
upon liquidation in respect of shares of ZD Stock
and shares of ZDNet Stock will be distributed pro
rata in accordance with the average Market Value
of ZD Stock and the average Market Value of ZDNet
Stock over a specified 20 Trading Day period
prior to the liquidation.

RISK FACTORS

You should carefully consider the risk factors described under "Risk Factors"
beginning on page 16 as well as the other information and data included in this
prospectus, before buying shares of ZDNet Stock.

10
<PAGE>

ZDNET

SUMMARY HISTORICAL COMBINED FINANCIAL AND OTHER DATA

The following table presents Summary Historical Combined Financial and Other
Data for ZDNet as of September 30, 1998, for the ten month period ended
December 31, 1996, for the year ended December 31, 1997 and for the nine month
periods ended September 30, 1997 and 1998. This data was derived from the
Combined Financial Statements of ZDNet included in this prospectus. An
affiliate of the Company acquired ZDNet on February 29, 1996; therefore, no
results of ZDNet are shown for periods before that date. Data as of and for the
periods ended September 30, 1997 and 1998 are derived from ZDNet's unaudited
financial statements. This table should be read in conjunction with the
Selected Historical Combined Financial and Other Data, Management's Discussion
and Analysis of Financial Condition and Results of Operations and Combined
Financial Statements for each of the Company, ZD and ZDNet included in this
prospectus.

<TABLE>
<CAPTION>
TEN MONTHS NINE MONTH PERIOD PRO FORMA
ENDED YEAR ENDED ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
------------ ------------ ----------------------- ----------------
1996 1997 1997 1998 1998(1)
------------ ------------ -------- ------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue, net............ $ 16,215 $ 32,218 $ 21,277 $37,566 $
Cost of operations:
Production and
content............... 14,863 23,543 17,638 19,025
Selling, general and
administrative
expenses.............. 13,280 23,475 17,757 22,049
Depreciation and
amortization.......... 5,485 7,681 5,524 4,780
Loss from operations.... (17,413) (22,481) (19,642) (8,288)
Interest income......... -- -- -- --
Minority interest....... -- 400 436 330
Loss before income
taxes.................. (17,413) (22,081) (19,206) (7,958)
Net loss................ (16,925) (21,238) (18,463) (7,655)
Net loss per notional
share (2).............. -- -- -- --
Weighted average
notional shares
outstanding (3)........ -- -- -- --
OTHER DATA:
EBITDA (4).............. $(11,928) $(14,400) $(13,682) $(3,178) $
Capital expenditures.... (1,010) 2,374 1,345 3,181
Investments and
acquisitions, net of
cash acquired.......... -- 2,998 2,998 5,000
<CAPTION>
PRO FORMA
AS OF AS OF
SEPTEMBER 30, DECEMBER 31,
1998 1998(1)
------------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total current assets....................................... $16,169 $
Total assets............................................... 95,505
Total liabilities.......................................... 6,683
Division equity............................................ 88,822
</TABLE>
(Footnotes on following page)

11
<PAGE>

- --------
(1) Pro forma financial information has been prepared assuming the Offering
and planned use of proceeds occurred on January 1, 1998 in the case of
statement of operations data and other data and December 31, 1998 in the
case of balance sheet data. Pro forma adjustments include interest income
of $. as well as the related tax provision of $., resulting in an
improvement of net loss by $..
Pro forma financial information is not necessarily indicative of the actual
results of operations or financial position of ZDNet at December 31, 1998
and does not purport to represent ZDNet's results of operations for future
periods or its future financial position.
(2) No historical earnings per share of share data are presented as the
Company does not consider such data to be meaningful. After the issuance
of ZDNet Stock, the Company will report earnings per share data for ZD and
ZDNet but not for the Company. Pro forma net loss per notional share
equals ZDNet's net loss divided by the weighted average of notional shares
outstanding, assuming no exercise of Company stock options (i.e., the
weighted average of Total Number of Notional ZDNet Shares Deemed
Outstanding).
(3) Weighted average notional shares outstanding (i.e., weighted average Total
Number of Notional ZDNet Shares Deemed Outstanding assumes ZDNet shares
being issued in the Offering have been outstanding since January 1, 1998).
(4) "EBITDA" is defined as income before provision for income taxes, interest
expense, depreciation and amortization. EBITDA is not intended to represent
cash flows from operations and should not be considered as an alternative
to net income as an indicator of the Company's operating performance or to
cash flows as a measure of liquidity. The Company believes that EBITDA is a
standard measure commonly reported and widely used by analysts, investors
and other interested parties in the media industry.

12
<PAGE>

SUMMARY HISTORICAL COMBINED FINANCIAL AND OTHER DATA

The following table presents Summary Historical Combined Financial and Other
Data for ZD as of September 30, 1998, for the years ended December 31, 1995,
1996 and 1997 and for the nine month periods ended September 30, 1997 and 1998.
This data was derived from the Combined Financial Statements of ZD included in
this prospectus. An affiliate of the Company acquired an events business
(COMDEX) on April 1, 1995 and a print publishing business (ZD Publishing) on
February 29, 1996; the data does not include results from the acquired
businesses for periods before the respective dates of acquisition. Data as of
and for the periods ended September 30, 1997 and 1998 are derived from ZD's
unaudited financial statements. On May 4, 1998, the Company completed a
reorganization described in Note 2 to the Combined Financial Statements of ZD;
results for periods before the reorganization are not directly comparable to
results for periods after the reorganization. This table should be read in
conjunction with the Selected Historical Combined Financial and Other Data,
Management's Discussion and Analysis of Financial Condition and Results of
Operations and Combined Financial Statements for each of the Company, ZD and
ZDNet included in this prospectus.

<TABLE>
<CAPTION>
NINE MONTH PERIOD
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- -----------------------
1995 1996 1997 1997 1998
-------- ---------- ---------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue, net............ $202,729 $ 938,924 $1,121,543 $728,910 $ 692,981
Depreciation and
amortization........... 24,305 134,251 147,259 112,173 109,814
Income (loss) from
operations............. 62,675 104,594 131,713 8,548 (9,107)
Interest expense, net... 44,005 120,646 190,445 141,333 111,185
Income (loss) before
income taxes........... 22,869 (26,636) (71,648) (144,051) (119,465)
Net income (loss)(1).... 10,945 (52,081) (71,179) (143,810) (86,179)
OTHER DATA:
EBITDA(2)............... $ 91,179 $ 228,261 $ 266,056 $109,455 $ 101,534
Capital expenditures.... 3,367 21,355 27,822 17,291 24,218
Capital contributions to
ZDNet.................. -- 13,630 20,664 15,799 13,298
Investments and
acquisitions, net of
cash acquired.......... 814,520 2,124,283 11,002 60 8,192
<CAPTION>
AS OF
SEPTEMBER 30,
1998
-------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents....................................... $ 26,728
Total assets.................................................... 3,411,644
Total long-term debt............................................ 1,526,047
Division equity................................................. 1,344,048
</TABLE>
- -------
(1) No historical earnings per share or share data are presented as the Company
does not consider such data meaningful. After the issuance of ZDNet Stock,
the Company will report earnings per share data for ZD and ZDNet but not
for the Company.

(2) "EBITDA" is defined as income before provision for income taxes, interest
expense, depreciation and amortization. EBITDA is not intended to represent
cash flows from operations and should not be considered as an alternative
to net income as an indicator of the Company's operating performance or to
cash flows as a measure of liquidity. The Company believes that EBITDA is a
standard measure commonly reported and widely used by analysts, investors
and other interested parties in the publishing and media industries.

13
<PAGE>

ZIFF-DAVIS INC.

SUMMARY HISTORICAL COMBINED FINANCIAL AND OTHER DATA

The following table presents Summary Historical Combined Financial and Other
Data for the Company as of September 30, 1998, for the years ended December 31,
1995, 1996 and 1997 and for the nine month periods ended September 30, 1997 and
1998. This data was derived from the Combined Financial Statements of the
Company included in this prospectus. An affiliate of the Company acquired an
events business (COMDEX) on April 1, 1995 and a print publishing business (ZDI)
on February 29, 1996; the data does not include results from the acquired
businesses for periods before the respective dates of acquisition. Data as of
and for the periods ended September 30, 1997 and 1998 are derived from the
Company's unaudited financial statements. On May 4, 1998, the Company completed
a reorganization described in Note 2 to the Combined Financial Statements of
the Company; results for periods before the reorganization are not directly
comparable to results for periods after the reorganization. This table should
be read in conjunction with the Selected Historical Combined Financial and
Other Data, Management's Discussion and Analysis of Financial Condition and
Results of Operations and Combined Financial Statements for each of the
Company, ZD and ZDNet included in this prospectus.

<TABLE>
<CAPTION>
NINE MONTH PERIOD ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- ------------------------
1995 1996 1997 1997 1998
-------- ---------- ---------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue, net............ $202,729 $ 955,139 $1,153,761 $ 750,187 $ 730,547
Depreciation and amorti-
zation................. 24,305 139,736 154,940 117,697 114,594
Income (loss) from oper-
ations................. 62,675 87,181 109,232 (11,094) (17,395)
Interest expense, net... 44,005 120,646 190,445 141,333 111,185
Income (loss) before
income taxes........... 22,869 (27,124) (72,491) (144,794) (119,768)
Net income (loss)(1).... 10,945 (52,081) (71,179) (143,810) (86,179)
OTHER DATA:
EBITDA(2)............... $ 91,179 $ 233,258 $ 272,894 $ 114,236 $ 106,011
Capital expenditures.... 3,367 22,365 30,196 18,636 27,399
Investments and
acquisitions, net of
cash acquired.......... 814,520 2,124,823 14,000 3,058 13,192
</TABLE>

<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30,
1998
-------------
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents......................................... $ 27,153
Total assets...................................................... 3,412,701
Total long-term debt.............................................. 1,526,047
Stockholders' equity.............................................. 1,344,048
</TABLE>
- -------

(1) No historical earnings per share or share data are presented as the Company
does not consider such data meaningful. See Note 2 to the Combined
Financial Statements of the Company for certain pro forma earnings per
share information concerning the Company. After the issuance of ZDNet
Stock, the Company will report earnings per share data for ZD and ZDNet but
not for the Company.

14
<PAGE>

CAUTIONARY STATEMENT REGARDING

FORWARD-LOOKING STATEMENTS

Some of the information in this prospectus may constitute forward-looking
statements which are subject to various risks and uncertainties. Such
statements can be identified by the use of forward-looking terminology such as
"may", "will", "expect", "anticipate", "estimate", "continue", "plan" or other
similar words. These statements discuss future expectations, contain
projections of results of operations or of financial condition or state other
"forward-looking" information. When considering such forward-looking
statements, you should keep in mind the factors described in "Risk Factors" and
other cautionary statements appearing in Management's Discussion and Analysis
of Financial Condition and Results of Operations for each of the Company, ZD
and ZDNet appearing elsewhere in this prospectus. Such risk factors and
statements describe circumstances which could cause actual results to differ
materially from those contained in any forward-looking statement.

This prospectus also includes statistical data regarding the publishing,
trade show and Internet industries. This data was obtained from industry
publications and reports which we believe to be reliable sources; however, the
accuracy and completeness of such information is not guaranteed. We have not
independently verified such data nor sought the consent of any organizations to
refer to their reports herein.

15
<PAGE>

RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS DESCRIBED BELOW, AS WELL AS
THE OTHER INFORMATION INCLUDED IN THIS PROSPECTUS, BEFORE BUYING SHARES OF
ZDNET STOCK.

RISK FACTORS RELATED TO THE ZDNET STOCK

STOCKHOLDERS OF ONE COMPANY; FINANCIAL EFFECTS ON ONE GROUP COULD AFFECT THE
OTHER GROUP

We cannot assure you that the market value of ZDNet Stock will in fact
reflect the performance of ZDNet as we intend.

Even though we have allocated all of our consolidated assets, liabilities,
revenue, expenses and cash flow between the two Groups in order to prepare
their respective financial statements, that allocation will not change the
legal title to any assets, responsibility for any liabilities or rights of any
of our creditors. Further, holders of ZDNet Stock will not have any legal
rights related to specific assets of either Group and in any liquidation will
receive a share of the net assets of the Company that depends on the relative
trading prices of ZDNet Stock and ZD Stock rather than any assessment of the
actual value of the respective Groups. Holders of ZDNet Stock will continue to
be common stockholders of the Company and, as such, will be subject to all
risks associated with an investment in the entire Company and all of our
businesses, assets and liabilities. For example, if the cash flow of ZD is
insufficient to satisfy inter-Group loans or other debt owed by ZD to ZDNet,
ZDNet would be adversely affected. See "--Other Company Risks--Significant Debt
Obligations".

Financial events occurring at ZD that affect our consolidated results of
operations, financial position or borrowing costs could affect the results of
operations, financial position or borrowing costs of ZDNet or the market price
of ZDNet. In addition, net losses of ZD, and any dividends or distributions on,
or repurchases of, ZD Stock, will reduce the assets of the Company legally
available for dividends on ZDNet Stock. Accordingly, you should read financial
information for ZDNet together with financial information for ZD and financial
information for the consolidated Company.

FIDUCIARY DUTIES OF OUR BOARD OF DIRECTORS

Principles of Delaware law established in cases involving differing treatment
of two classes of common stock provide that a board of directors owes an equal
duty to all common stockholders regardless of class or series and does not have
separate or additional duties to either group of stockholders. We are not aware
of any legislative or judicial precedent involving the fiduciary duties of
directors of a Delaware corporation with two classes of common stock with
separate rights related to specified operations of the corporation. However,
under the principles of Delaware law referred to above and the related
principle known as the "business judgment rule", our Board should be protected
in

16
<PAGE>

making decisions that have a disparate impact upon holders of ZD Stock and
ZDNet Stock so long as it is disinterested and adequately informed with respect
to such decisions and acts in good faith and in the honest belief that it is
acting in the best interests of the Company's stockholders.

If directors own disproportionate interests (in percentage or value terms) in
ZD Stock and ZDNet Stock, that disparity could create or appear to create
potential conflicts of interest when they are faced with decisions that could
have different implications for the different series. See "--Potential
Conflicts of Interest". Nevertheless, we believe that directors would be able
to discharge their fiduciary duties even if their interests in ZD Stock and
ZDNet Stock were disproportionate.

POTENTIAL CONFLICTS OF INTEREST

Having two series of Common Stock could give rise to occasions when the
interests of holders of one series might diverge or appear to diverge from the
interests of holders of the other series. Examples include, among others:

. our decisions as to whether to allocate the proceeds of issuances (or the
costs of repurchases) of ZDNet Stock to ZD in respect of its Retained
Interest or to the equity of ZDNet,

. our decisions as to how to allocate consideration to be received in
connection with a merger involving the Company between holders of ZD
Stock and ZDNet Stock,

. our decisions as to whether and when to exchange one series of Common
Stock for the other series of Common Stock,

. our decisions as to whether and when to approve dispositions of assets of
either Group,

. our decisions as to whether to pay dividends on ZD Stock and ZDNet Stock
and

. our decisions as to whether and how to make transfers of funds from one
Group to another and, more generally, our decisions as to other
operational and financial matters that could be considered detrimental to
one Group or the other.

When making decisions with regard to matters that create potential conflicts
of interest, we will act in accordance with the terms of our Restated
Certificate of Incorporation, our cash management and allocation policies as in
effect from time to time and our fiduciary duties. Each of the potential
conflicts described above is discussed in more detail below.

Allocation of Proceeds upon Issuances (or Costs of Repurchases) of ZDNet
Stock

We will determine in our sole discretion whether to allocate the proceeds of
issuances (or the costs of repurchases) of ZDNet Stock to ZD in respect of its
Retained Interest or to the equity of ZDNet. See "Certain Cash Management and
Allocation Policies" and "Description of Capital Stock--ZD's Retained Interest
in ZDNet; Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet".

17
<PAGE>

Allocation of Consideration to be Received in Connection with a Merger

Our Restated Certificate of Incorporation will not contain any provisions
governing how consideration to be received in connection with a merger or
consolidation involving the Company is to be allocated between holders of ZD
Stock and holders of ZDNet Stock. Neither holders of ZD Stock nor holders of
ZDNet Stock will have a separate class vote in any merger or consolidation so
long as we divide the type and amount of consideration between holders of ZD
Stock and holders of ZDNet Stock in a manner we determine, in our sole
discretion, to be fair. In any such merger or consolidation, the different ways
we may divide the consideration might have materially different results. As a
result, the consideration to be received by holders of ZDNet Stock in any such
merger or consolidation may be materially less valuable than the consideration
they would have received if they had a separate class vote on such merger or
consolidation.

Optional Exchange of One Series of Common Stock for the Other Series

We will have certain rights to issue shares of one series of Common Stock in
exchange for outstanding shares of the other series of Common Stock. Because
certain exchanges would be at a premium, and since we could determine to effect
an exchange at a time when either or both of ZD Stock and ZDNet Stock may be
considered to be overvalued or undervalued, any such exchange may be
disadvantageous to holders of ZDNet Stock. In addition, any such exchange would
preclude holders of the exchanged series of Common Stock from retaining their
investment in a security that is intended to reflect separately the performance
of the related Group.

Disposition of Assets of Either Group

Delaware law requires stockholder approval only for a sale or other
disposition of all or substantially all of the assets of the entire Company. As
long as the assets attributed to a Group represent less than substantially all
of the Company's assets, we may approve sales and other dispositions of any
amount of the assets of that Group without any stockholder approval. If we
dispose of All or Substantially All of the Assets of either Group, we would be
required, if the disposition is not an Exempt Disposition, to either:

. declare and pay a dividend to holders of the relevant series of Common
Stock in an amount equal to their Proportionate Interest in the Net
Proceeds of such Disposition,

. redeem from holders of the relevant series of Common Stock, for an amount
equal to their Proportionate Interest in the Net Proceeds of such
Disposition, outstanding shares of the relevant series of Common Stock or

. issue shares of one series of Common Stock in exchange for outstanding
shares of the relevant series of Common Stock at a 10% premium (based on
the average Market Value of the relevant series of Common Stock as
compared to the average Market Value of the other series of Common Stock
over a specified 20 Trading Day period prior to the exchange).

Consequently, holders of either series of Common Stock may receive greater or
lesser value for their shares than the value that a third-party buyer might pay
for All or

18
<PAGE>

Substantially All of the Assets of such Group. In addition, if we elect to
complete an exchange in connection with the Disposition, we could do so as one
of the three alternatives required in connection with the Disposition or as an
optional exchange that may in some cases be at no premium, and any such
exchange could be completed at a time when ZDNet Stock or ZD Stock may be
considered to be overvalued or undervalued. We are not required to select the
option that would result in the highest value to holders of ZDNet Stock. We
will select an option in our sole discretion in the exercise of our fiduciary
duties. See "--Fiduciary Duties of Our Board of Directors".

Dividends

Our various debt instruments currently prohibit the payment of dividends, and
in any event, we do not expect to pay any dividends for the foreseeable future
on either series of Common Stock. If we were to begin paying dividends at some
point in the future, we have the right to pay dividends on ZD Stock or ZDNet
Stock (or both) in equal or unequal amounts, notwithstanding the performance of
each Group, the amount of assets available for dividends on either series, the
amount of prior dividends declared on either series or any other factor. In
addition, net losses of ZD, and any dividends or distributions on, or
repurchases of, ZD Stock, will reduce the assets of the Company legally
available for dividends on ZDNet Stock.

Operational and Financial Decisions

The Board will, in its sole discretion, make operational and financial
decisions and implement policies that affect the businesses of ZD and ZDNet
differently. Examples include:

. transfers of funds between ZD and ZDNet (and the manner of accounting for
those transfers),

. allocation of funds for capital expenditures,

. other transactions between ZD and ZDNet,

. the allocation of financing opportunities in public markets and

. the allocation of business opportunities, resources and personnel.

The Board's decisions may favor either Group at the expense of the other. For
example, the decision to provide funds for ZD may adversely affect the ability
of ZDNet to obtain funds sufficient to implement its growth strategies. These
decisions would, however, be subject to the Board's general fiduciary duties as
described above.

CERTAIN CASH MANAGEMENT AND ALLOCATION POLICIES SUBJECT TO CHANGE

The Board has adopted certain policies relating to cash management and
allocations between ZD and ZDNet. The Board may, in its sole discretion,
modify, rescind or add to any of these policies (although it has no present
intention to do so). The decision of the Board to modify, rescind or add to any
of these policies would, however, be subject to the

19
<PAGE>

Board's general fiduciary duties as described above. See "Certain Cash
Management and Allocation Policies".

ATTRIBUTION OF DEBT OR PREFERRED STOCK; TRANSFERS OF FUNDS BETWEEN THE GROUPS;
INTER-GROUP REVOLVING CREDIT ADVANCES; CAPITAL CONTRIBUTIONS AND RETURNS OF
CAPITAL

Our current policies provide that we will attribute each incurrence or
issuance of external debt or preferred stock (and the proceeds thereof) to ZD,
except in cases where the Board determines otherwise. The Board may determine
from time to time to attribute an incurrence or issuance of debt or preferred
stock (and the proceeds thereof) to ZDNet to the extent that we incur or issue
the debt or preferred stock for the benefit of ZDNet, but the Board will not be
required to do so.

Whenever ZDNet holds cash (other than cash of ZDNet's foreign operations or
of ZDNet's subsidiaries that are not wholly owned), ZDNet will normally
transfer that cash to ZD. Conversely, whenever ZDNet has a cash need (other
than cash needs of ZDNet's foreign operations or of ZDNet's subsidiaries that
are not wholly owned), ZD will normally fund that cash need. However, the Board
will determine, in its sole discretion, whether to provide any particular funds
to either Group and will not be obligated to do so.

Our current policies provide that the Company will account for all cash
transfers between the Groups (other than transfers in return for assets or
services rendered or transfers in respect of ZD's Retained Interest that
correspond to dividends paid on ZDNet Stock) as inter-Group revolving credit
advances unless:

. the Board determines that a given transfer (or type of transfer) should
be accounted for as a long-term loan,

. the Board determines that a given transfer (or type of transfer) from ZD
to ZDNet should be accounted for as a capital contribution increasing
ZD's Retained Interest in ZDNet or

. the Board determines that a given transfer (or type of transfer) from
ZDNet to ZD should be accounted for as a return of capital reducing ZD's
Retained Interest in ZDNet.

There are no specific criteria to determine when we will account for a cash
transfer as a long-term loan, a capital contribution or a return of capital
rather than an inter-Group revolving credit advance. The Board would make such
a determination in the exercise of its business judgment at the time of such
transfer (or the first of such type of transfer) based upon all relevant
circumstances. Factors the Board would consider include:

. the current and projected capital structure of each Group,

. the relative levels of internally generated funds of each Group,

. the financing needs and objectives of the recipient Group,

. the investment objectives of the transferring Group,

20
<PAGE>

. the availability, cost and time associated with alternative financing
sources and

. prevailing interest rates and general economic conditions.

The Board's determination as to how to account for a cash transfer will
affect the amount of interest expense and interest income, stockholders' equity
and Retained Interest reflected in the financial statements of the two Groups.

Under our current policies, (1) any cash transfer we determine to account for
as an inter-Group revolving credit advance will bear interest at the rate at
which the Company could borrow such funds on a revolving credit basis (as the
Board determines in its sole discretion) and (2) any cash transfer we determine
to account for as a long-term loan will have interest rate, amortization,
maturity, redemption and other terms that generally reflect the then prevailing
terms on which the Company could borrow such funds on a long-term basis (as the
Board determines in its sole discretion).

If ZD is unable to repay advances or loans owed to ZDNet, ZDNet would be
adversely affected. Also, if ZDNet extends an advance or loan to ZD at an
interest rate below ZDNet's cost of funds or opportunity cost, ZDNet's results
would be adversely affected to the extent of the difference.

Any cash transfers we determine to account for as capital contributions or
returns of capital will increase or decrease ZD's Retained Interest in ZDNet.
Although we would calculate any change in the Retained Interest by reference to
the then current Market Value of ZDNet Stock, the change could come at a time
when ZDNet Stock is considered to be overvalued or undervalued. Also, any
increase in the Retained Interest will reduce the percentage of ZDNet intended
to be represented by outstanding ZDNet Stock.

LIMITED SEPARATE VOTING RIGHTS; VARIABLE VOTING RIGHTS

Holders of ZD Stock and ZDNet Stock will vote together as a single class,
except in certain limited circumstances provided under the Delaware General
Corporation Law. When holders of ZD Stock and ZDNet Stock vote together as a
single class, holders of the series of Common Stock entitled to a majority of
the votes will be in a position to control the outcome of the vote even if the
matter involves a conflict of interest between holders of ZD Stock and holders
of ZDNet Stock. See "--Potential Conflicts of Interest--Allocation of
Consideration to be Received in Connection with a Merger" and "Other Company
Risks--Control by Principal Stockholders and Potential Conflicts of Interest".

Each share of ZD Stock will have one vote and each share of ZDNet Stock will
have a variable number of votes (based on the Market Value of a share of ZDNet
Stock as compared to the Market Value of a share of ZD Stock over a specified
20 Trading Day period prior to the date of the vote). Accordingly, the relative
voting power of ZD Stock and ZDNet Stock will fluctuate from time to time based
on the respective Market Values of the two series of Common Stock.

21
<PAGE>

LIMITED STOCKHOLDER APPROVAL RIGHTS FOR FUTURE AUTHORIZATIONS AND ISSUANCES OF
STOCK

The Restated Certificate of Incorporation will allow the Board, in its sole
discretion, to issue authorized but unissued shares of Common Stock. The Board
may issue ZD Stock or ZDNet Stock to, among other things:

. raise capital,

. provide compensation or benefits to employees or

. pay stock dividends or acquire companies or businesses.

Under the Delaware General Corporation Law, the Board would not need your
approval for these issuances. We would not expect to seek your approval for any
such issuances unless:

. stock exchange regulations or other applicable law require approval or

. the Board deems it advisable.

DILUTION

Purchasers of ZDNet Stock will experience an immediate and substantial
dilution in the net tangible book value of their shares. See "Dilution".

NO PRIOR MARKET FOR ZDNET STOCK; UNCERTAINTY AS TO MARKET PRICE; POSSIBLE
VOLATILITY

There is currently no public trading market for ZDNet Stock and we cannot
assure you that one will develop or be sustained after the Offering. We cannot
predict the prices at which ZDNet Stock will trade after the Offering. The
initial public offering price for ZDNet Stock will be determined through our
negotiations with the underwriters and may not bear any relationship to the
market price at which ZDNet Stock will trade after the Offering or to any other
established criteria for value.

In addition, the stock market has experienced extreme price and volume
fluctuations. The market prices of securities of Internet-related companies, in
particular, have been especially volatile. In the past, companies that have
experienced such volatility have sometimes been the object of securities class
action litigation. Securities class action litigation may result in substantial
costs and a diversion of management's attention and resources. See "ZDNet
Description of Business--Legal Proceedings".

Furthermore, we do not know how certain terms of ZD Stock and ZDNet Stock
(e.g., the Board's right to exchange shares of one series for shares of the
other series, the Board's discretion in making various determinations and the
variable voting power of ZDNet Stock as compared to ZD Stock) will affect the
market price of ZDNet Stock.

We cannot assure you that the market price of ZDNet Stock will in fact
reflect the performance of ZDNet as we intend. Holders of ZDNet Stock will
continue to be common stockholders of the Company and, as such, will be subject
to all risks associated with an investment in the entire Company and all of our
businesses, assets and liabilities.

22
<PAGE>

LIMITATIONS ON POTENTIAL UNSOLICITED ACQUISITIONS; ANTI-TAKEOVER
CONSIDERATIONS

If ZD and ZDNet were separate independent companies, any person interested in
acquiring either Group without negotiating with management could seek control
of that entity by obtaining control of its outstanding voting stock by means of
a tender offer or proxy contest. Although we intend ZD Stock and ZDNet Stock to
reflect the separate performance of ZD and ZDNet, a person interested in
acquiring only one Group without negotiation with the Company's management
could obtain control of that Group only by obtaining control of the outstanding
voting stock of the entire Company.

The existence of two series of Common Stock could present complexities and
could in certain circumstances pose obstacles, financial and otherwise, to an
acquiring person. The existence of two series of Common Stock could, under
certain circumstances, prevent stockholders from profiting from an increase in
the market value of their shares as a result of a change in control of the
Company by delaying or preventing such a change in control.

After giving effect to the Offering, there will be more than . million shares
of Common Stock available for future issuance without further stockholder
approval. One of the effects of the existence of authorized and unissued Common
Stock and preferred stock could be to enable the Board to issue shares to
persons friendly to current management, which could render more difficult or
discourage an attempt to obtain control of the Company by means of a merger,
tender offer, proxy contest or otherwise, and thereby protect the continuity of
our management. Such additional shares also could be used to dilute the stock
ownership of persons seeking to obtain control of the Company.

For additional anti-takeover considerations, see "--Other Company Risks--
Control by Principal Stockholders and Potential Conflicts of Interest".

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, we expect to have . shares of ZDNet Stock
outstanding (approximately . million shares if the U.S. underwriters' over-
allotment option is exercised in full). These shares will be freely tradeable
without restriction by persons other than "affiliates" of the Company. We
expect . shares will be owned by certain "affiliates" and will therefore be
deemed "restricted" securities within the meaning of the Securities Act. In
addition, members of management will at that time have the right to purchase .
additional shares of ZDNet Stock and we will be entitled to issue another .
shares in respect of ZD's Retained Interest in ZDNet.

We cannot predict the effect, if any, that sales of ZDNet Stock, or the
availability of shares for sale, will have on the market price prevailing from
time to time. Nevertheless, sales of significant amounts of ZDNet Stock in the
public market, or the perception that such sales may occur, could adversely
affect prevailing market prices. See "Shares Eligible for Future Sale".

23
<PAGE>

RISK FACTORS RELATING TO ZDNET

EXTREMELY LIMITED OPERATING HISTORY; HISTORY OF NET LOSSES

ZDNet has an extremely limited operating history and an investor must
consider the risks, expenses and difficulties frequently encountered by such
companies, particularly in the new and rapidly evolving market for Internet
products, content and services. We cannot assure you that ZDNet will be
successful in addressing such risks. Although ZDNet has experienced revenue
growth in recent periods, we cannot assure you that ZDNet's revenue will
continue to grow or continue at its current level.

ZDNet has incurred significant net losses in the past ($21.2 million in 1997
and $7.7 million in the first nine months of 1998). See "ZDNet Selected
Historical Combined Financial and Other Data" and "Combined Financial
Statements". We cannot assure you that ZDNet will report net income in the
future.

UNPREDICTABILITY OF FUTURE REVENUE; POTENTIAL FLUCTUATIONS IN QUARTERLY
OPERATING RESULTS

As a result of the evolving nature of the Internet and ZDNet's limited
operating history, we cannot accurately forecast its revenue. Current and
future expense levels are based principally on estimated future revenue and are
to a large extent fixed. Accordingly, ZDNet may be unable to adjust spending to
compensate for any unexpected revenue shortfall. If ZDNet's actual revenue is
less than its estimated revenue, this could have an immediate material adverse
effect on ZDNet's business, financial condition and results of operations.

ZDNet's quarterly operating results may fluctuate significantly because of a
variety of factors, many of which are outside our control, including:

. overall usage levels of the Internet and of ZDNet's sites in particular,

. demand for Internet advertising and the loss of advertisers,

. seasonal trends in Internet use and advertising,

. the amount and timing of ZDNet's capital expenditures,

. costs relating to the expansion of ZDNet's operations and the
introduction of new sites and services,

. price competition or pricing changes in Internet advertising and

. costs relating to technical difficulties or system downtime.

We believe Internet advertising typically slows in the first quarter of the
year. Historically, ZDNet has experienced lower advertising and lower revenue
in the first quarter of each year as compared to the fourth quarter of the
prior year. Seasonality and cyclicality in the level of Internet advertising
expenditures generally could become more pronounced in the future as the
Internet becomes more accepted as an advertising vehicle. Quarterly comparisons
of ZDNet's results of operations are not reliable as an indication of its
future performance. See "ZDNet Management's Discussion and Analysis of
Financial Condition and Results of Operations".

24
<PAGE>

DEPENDENCE ON GROWTH IN INTERNET USE AND ACCEPTANCE AS AN ADVERTISING AND
COMMERCE MEDIUM

ZDNet's future revenue will depend largely on the widespread acceptance and
use of the Internet as an information source and as an advertising and commerce
vehicle. Rapid growth in Internet use is a recent trend and market acceptance
of the Internet as an advertising and commercial medium is highly uncertain.

The Internet may not be accepted as a viable advertising and commerce medium
for distribution of information and engaging in commerce for a number of
reasons, including:

.inadequate development of the network infrastructure,

.inadequate development of enabling technologies,

.insufficient commercial support for Internet advertising,

.concerns about privacy and security among users and

.lack of widely accepted standards for measuring the effectiveness of
advertising on the Internet.

DEPENDENCE ON ADVERTISING REVENUE

ZDNet has derived a substantial portion of its revenue from the sale of
advertising on its Internet sites and we expect that advertising revenue will
continue to be the principal source of its revenue in the foreseeable future.
ZDNet's top 20 advertising customers accounted for approximately 35% of ZDNet's
net advertising revenue for the first nine months of 1998. Most of ZDNet's
advertising contracts are either short-term contracts and/or can be terminated
by the advertiser at any time with little notice. We cannot assure you that
ZDNet will be able to retain current advertisers or obtain new advertising
contracts.

ZDNet's ability to generate advertising revenue will depend on several
factors, including:

.the continued development of the Internet as an advertising medium,

.the pricing of advertising on other Internet sites,

.the amount of traffic on ZDNet's network of sites,

.pricing pressures, delays and new product launches,

.ZDNet's ability to achieve, demonstrate and maintain attractive user
demographics and

.ZDNet's ability to develop and retain a skilled advertising sales force.

DEPENDENCE ON THIRD PARTIES FOR INTERNET TRAFFIC

ZDNet's ability to advertise on and maintain links from other Internet sites
is an important element to its success. Traffic originating from links existing
on other Internet sites (particularly search engines, directories and other
navigational tools managed by Internet service providers and Web browser
companies) is an important segment of the overall

25
<PAGE>

traffic on ZDNet's Internet sites. ZDNet has special linking arrangements to
generate additional traffic with Yahoo!, Excite and MSNBC which are either
short-term contracts and/or can be terminated with little notice. There is
intense competition for these types of linking arrangements. We cannot assure
you that these arrangements will be maintained or that advertising or links
will continue to be available on reasonable commercial terms or at all.

DEPENDENCE ON LICENSED TECHNOLOGY

ZDNet relies on certain technology licensed from third parties such as
Vignette's Storyserver, Thunderstone's Texis Search Engine and Netscape's Web
Server Software for use in operating and managing its Internet sites and
providing related services to users and advertisers. ZDNet's ability to
generate revenue from Internet commerce may also depend on data encryption and
authentication technologies that it may be required to license from third
parties. We cannot assure you that such technology licenses will be available
at all, that they will be available on reasonable commercial terms or that they
will operate as intended.

DEPENDENCE ON QUALIFIED PERSONNEL

ZDNet's performance is substantially dependent on the continued services and
performance of its senior management and other key personnel. ZDNet does not
have long-term employment agreements with any of its key personnel and
maintains no "key person" life insurance policies. ZDNet's future success also
depends on its ability to identify, attract, retain and motivate highly skilled
editorial, technical, managerial, sales, marketing and customer service
personnel. Competition for such persons is intense. We cannot assure you that
ZDNet will be able to attract or retain such personnel. The failure to do so
could have a material adverse effect on ZDNet's business, financial condition
and results of operations.

RAPID TECHNOLOGICAL CHANGE

The market for Internet products and services is characterized by rapid
technological developments, frequent new product introductions and evolving
industry standards. ZDNet will be required to continually improve the
performance, features and reliability of its network infrastructure and
Internet sites, particularly in response to competition and changing customer
demands. We cannot assure you that ZDNet will be successful in responding
rapidly, cost-effectively or adequately to such developments.

COMPETITION

Competition among Internet content providers is intense and is expected to
increase significantly in the future. The market for Internet content sites is
rapidly evolving and barriers to entry are low, enabling newcomers to launch
competitive sites at relatively low cost. We believe ZDNet competes most
directly with c|net, CMP, Internet.com and IDG in the broad-based technology
related content sector. ZDNet also generally competes for

26
<PAGE>

users and advertisers with Internet portals, search sites and content
aggregators (such as Excite, Infoseek, Lycos and Yahoo!), general news sites
(such as those provided by CNN and ABC) and general purpose online service
providers (such as America Online and MSN). In addition, ZDNet competes with
traditional media content businesses such as newspapers, magazines, radio and
television. In order to compete successfully and attract users, advertisers and
strategic partners, ZDNet must continue to provide high quality, engaging
content in a timely and cost-effective manner. See "ZDNet Description of
Business--Competition". We cannot assure you that ZDNet will be able to do so.
Moreover, increased competition could result in price reductions, reduced
margins or loss of market share, any of which could have a material adverse
effect on ZDNet's business, financial condition and results of operations.

NEW SERVICE RISKS

ZDNet's future success may depend in part on its ability to continue
expanding its Internet sites to include new subject matters and services. Costs
related to developing new content areas and services are expensed as they are
incurred while revenue related to these new content areas and services
typically builds over time and, accordingly, ZDNet's profitability from year to
year may be adversely affected by the number and timing of new launches. In
addition, we cannot assure you that any new areas or services will be developed
in a timely or cost-effective manner or that they will be successful.

RISKS ASSOCIATED WITH BRAND DEVELOPMENT

ZDNet believes brand identity is important to attracting and expanding its
user base, Internet traffic and advertising and commerce relationships. ZDNet
believes the significance of brand recognition will intensify as the number of
Internet sites increases. We cannot assure you that ZDNet will be able to
continue to develop its brand.

RISK OF CAPACITY CONSTRAINTS AND SYSTEM DISRUPTIONS

The performance and reliability of ZDNet's Internet sites and network
infrastructure are critical to its reputation and ability to attract and retain
users, advertisers and strategic partners. Any system error or failure, or a
sudden and significant increase in traffic, may result in the unavailability of
sites and significantly delay response times. Individual, sustained or repeated
occurrences could result in a loss of potential or existing users, advertisers
or strategic partners. In addition, because ZDNet's advertising revenue is
directly related to the number of advertisements it delivers to users, system
interruptions or delays would reduce the number of impressions delivered and
thereby reduce its revenue.

ZDNet's systems and operations are vulnerable to interruption or malfunction
due to certain events beyond its control, including natural disasters,
telecommunications failures and computer hacking. ZDNet also relies on Web
browsers and online service providers to provide Internet access to its sites.
We cannot assure you that ZDNet will be able to expand its network
infrastructure, either itself or through use of third-party hosting systems or
service providers, on a timely basis sufficient to meet demand. ZDNet presently
has only

27
<PAGE>

a limited amount of redundant facilities or systems, no formal disaster
recovery plan and no sufficient business interruption insurance to compensate
for losses that may occur. Any interruption to its systems or operations could
have a material adverse effect on ZDNet's business, financial condition and
results of operations.

SECURITY RISKS

ZDNet's networks may be vulnerable to unauthorized access, computer viruses
and other security problems. A user who circumvents security measures could
misappropriate proprietary information or cause interruptions or malfunctions
in ZDNet's operations. ZDNet may be required to expend significant resources to
protect against the threat of such security breaches or to alleviate problems
caused by such breaches. Although ZDNet intends to continue to implement
industry-standard security measures, such measures may be inadequate.

GOVERNMENT REGULATION AND LEGAL UNCERTAINTY

Due to the increasing popularity and use of the Internet and other online
services, new laws and regulations may be adopted in the U.S. or elsewhere
covering issues such as online privacy, copyright and trademark, sales taxes
and fair business practices or which require qualification to do business as a
foreign corporation in certain jurisdictions. For instance, the European
Union's recently adopted privacy regulations may limit the collection and use
of certain user information. Increased government regulation, or the
application of existing laws to online activities, could inhibit Internet
growth, expose ZDNet to additional liabilities and increase the cost of doing
business.

RELIANCE ON INTELLECTUAL PROPERTY RIGHTS

To establish and protect its trademark, service mark and other proprietary
rights in its products and services, ZDNet relies on a combination of:

. copyright, unfair competition, trademark, service mark and trade secret
laws and

. confidentiality agreements with its licensees and other third parties and
confidentiality agreements and policies covering its employees.

We cannot assure you that these measures will be adequate, that ZDNet will be
able to secure registrations for all of its marks in the U.S. or
internationally or that third parties will not infringe upon or misappropriate
its proprietary rights. Any infringement or misappropriation, or litigation
relating to intellectual property rights, may have a material adverse effect on
ZDNet's business, financial condition and results of operations.

Legal standards relating to the validity, enforceability and scope of
protection of certain proprietary rights in Internet-related business are
uncertain and evolving. In particular, new registration and ownership priority
procedures may be adopted which may make it more difficult for ZDNet to retain
or obtain desirable domain names.

28
<PAGE>

LIABILITY FOR INTERNET CONTENT AND USER DATA

As a content provider, ZDNet may face potential liability for intellectual
property infringement, defamation, indecency and other claims. In addition,
ZDNet may incur liability for unauthorized duplication or distribution of
third-party content or materials or for information collected from and about
its users. We cannot assure you that third parties or users will not bring
claims against ZDNet relating to proprietary rights or use of personal
information. Although ZDNet seeks to obtain indemnification from strategic
partners for any liability resulting from licensed content or linked sites, we
cannot assure you that such indemnities will always be obtainable or adequate.
ZDNet's general liability insurance may not cover or be adequate for potential
claims of this type.

NEED TO MANAGE GROWTH

ZDNet will need to effectively plan and manage its business to succeed in the
rapidly evolving Internet industry. ZDNet continues to increase the scope of
its operations and has grown its workforce substantially. As of December 31,
1997, ZDNet had a total of 252 employees and, as of September 30, 1998, ZDNet
had a total of 304 employees (growth of 20.6%). This growth has placed, and
future growth may place, a significant strain on ZDNet's management systems and
resources. ZDNet expects that it will need to continue to improve its financial
and management controls and reporting systems and procedures, and will need to
continue to expand, train and manage its workforce.

RISKS ASSOCIATED WITH POTENTIAL ACQUISITIONS OR INVESTMENTS

ZDNet may acquire or make investments in new or complementary businesses,
products, services or technologies. We cannot assure you that ZDNet will be
able to identify suitable acquisition or investment candidates. Even if ZDNet
does identify suitable candidates, we cannot assure you that ZDNet will be able
to make such acquisitions or investments on reasonable commercial terms or
successfully assimilate personnel, operations, products, services or
technologies into its operations. This could disrupt ZDNet's ongoing business,
distract ZDNet's management and employees, increase ZDNet's expenses (including
amortization of goodwill) and materially and adversely affect ZDNet's results
of operations. Furthermore, the incurrence or issuance of debt or equity
securities may be attributed to ZDNet to fund any future ZDNet acquisitions.

YEAR 2000 COMPLIANCE

29
<PAGE>

exists concerning the potential costs and effects associated with Year 2000
compliance. Any Year 2000 compliance problem of the Company, ZDNet or our
users, advertisers, equipment vendors or software licensors could have a
material adverse effect on ZDNet's business, financial condition and results of
operations. See "ZDNet Management's Discussion and Analysis of Financial
Condition and Results of Operations--Year 2000 Issues".

RISKS ASSOCIATED WITH INTERNATIONAL EXPANSION

One component of ZDNet's growth strategy is to further expand into
international markets. ZDNet's international operations are at an early stage
of development and have an extremely limited operating history. In addition,
the markets in which ZDNet has undertaken international expansion have
technology and online industries that are less well developed than in the U.S.

There are certain risks inherent in doing business in international markets,
such as the following:

. uncertainty of product acceptance by different cultures,

. unforeseen changes in regulatory requirements,

. difficulties in staffing and managing multinational operations,

. state-imposed restrictions on the repatriation of funds,

. currency fluctuations,

. difficulties in finding appropriate foreign licensees or joint venture
partners and

. potentially adverse tax consequences.

There is a risk that such factors will have an adverse effect on ZDNet's
future international operations and its financial condition and results of
operations.

OTHER COMPANY RISKS

LIMITED HISTORY AS A STAND-ALONE COMPANY; LIMITED RELEVANCE OF HISTORICAL
FINANCIAL INFORMATION

We have only operated as a stand-alone company since May 1998. Until October
1997, our publishing business and our trade show and conference businesses were
managed as separate SOFTBANK Corp. subsidiaries. Our success depends in part on
our continued ability to manage the combined enterprise.

Concurrently with the initial public offering of our existing Common Stock
and the sale of $250 million in principal amount of senior subordinated notes,
the Company reorganized its structure so that:

. All of the stock of the corporations owning our publishing and trade show
and conference businesses, ZD Inc. and ZD Events Inc., was contributed to
the Company in exchange for approximately 72% of our Common Stock.

30
<PAGE>

. We purchased certain operations owned by MAC Inc. ("MAC") but managed by
our publishing business, including certain publications, international
trade shows and ZDNet.

. We entered into a credit facility with a group of financial institutions
and borrowed $1.25 billion under that facility.

. Approximately $909 million of our obligations to SOFTBANK Corp. and its
affiliates ("SOFTBANK") were converted to equity.

. We repaid approximately $1.59 billion of our obligations to Softbank.

Our financial information included in this prospectus does not reflect what
the actual results of operations, financial position and cash flows would have
been had the Company existed and the reorganization described above been
completed prior to the periods presented. In addition, the financial
information is not necessarily indicative of our future results of operations,
financial position and cash flows. The financial statements also include the
MAC assets described above that were transferred to the Company pursuant to our
reorganization. See "Company Management's Discussion and Analysis of Financial
Condition and Results of Operations--Presentation of Financial Information".

CONTROL BY PRINCIPAL STOCKHOLDERS AND POTENTIAL CONFLICTS OF INTEREST

Softbank owns approximately 72% of our outstanding shares of Common Stock. As
a result, Softbank could elect all the members of our Board. Softbank could
also control those actions requiring the approval of the holders of a majority
of the voting stock of the Company, including amendments to our Amended and
Restated Certificate of Incorporation and any business combinations. Softbank's
concentration of ownership could prevent a change in control of the Company
that might otherwise be beneficial to stockholders. Section 141 of the Delaware
General Corporation Law, however, imposes upon directors a fiduciary duty to
stockholders.

We have entered into certain agreements with Softbank governing ongoing
relationships. These agreements include certain licensing and management
agreements relating to publications, events, ZDNet and ZDTV. In addition,
SOFTBANK Corp. has given us an undertaking that, as long as it owns 40% of the
voting power in our stock and can elect a majority of the Board, it will not
expand its operations outside Japan involving:

. publishing information on computing and Internet-related technology
through print media, CD-ROM/DVD, Internet and television or

. producing trade shows, conferences, exhibitions and similar events
primarily related to computing and Internet-related technology

that compete with us without the prior approval of our employee directors after
consulting with our independent directors.

This undertaking does not preclude investments by venture capital funds
managed by Softbank which invest in, among other things, computer and Internet-
related companies. These funds may be able to co-invest with or compete with us
with respect to new

31
<PAGE>

investments. In addition, Softbank may also develop new funds which may compete
with us for investment opportunities. We have agreed not to compete with
SOFTBANK Corp. in Japan without the prior approval of SOFTBANK Corp.'s Board of
Directors and have given Softbank the continuing right to license all of our
products and services in Japan. These arrangements and undertakings may be
different from arrangements negotiated at arm's length between unrelated
parties.

SIGNIFICANT DEBT OBLIGATIONS

At September 30, 1998:

. ZD's total debt (and the Company's total debt) was approximately $1.5
billion.

. ZD's total division equity (and the Company's stockholders' equity) was
approximately $1.3 billion.

. ZD's total debt (and the Company's total debt) was 53% of total
capitalization.

Our indebtedness is substantial in relation to stockholders' equity. The
degree to which we are leveraged is important because:

. It may impair our ability to obtain additional financing for working
capital, capital expenditures, acquisitions or general corporate
purposes.

. It may reduce the funds available to us for our operations if a
substantial portion of our cash flow from operations is dedicated to the
payment of principal and interest on our indebtedness.

. It may impair our ability to incur additional debt because of financial
and other restrictive covenants, including those relating to the
incurrence of additional indebtedness, the creation of liens, the payment
of dividends and sales of assets.

Our indebtedness requires us to use a substantial portion of our cash flow to
pay principal and interest on indebtedness. This reduces the funds available
for capital expenditures and future business opportunities. Our indebtedness
could also increase our vulnerability to adverse general economic conditions
(including increases in interest rates).

On December 11, 1998 Standard & Poors lowered its corporate credit and bank
loan ratings for the Company to BB- from BB and the Company's subordinated debt
rating to B from B+.

On December 16, 1998 the lenders on our $1.35 billion credit facility agreed
to amend certain provisions of that facility. The amended provisions include an
increase to our allowed leverage ratios. In return, we have agreed to pay a
one-time fee and increase our interest rates on amounts borrowed under the
facility. See "Company Management's Discussion and Analysis of Financial
Condition and Results of Operations--Credit Facility".

DEPENDENCE ON DEMAND FOR ADVERTISING; RESTRUCTURING

A significant portion of our total revenue in the first nine months of 1998
(55.5%) was from advertising sales. In addition, our top 20 advertising
customers accounted for 37.8% of

32
<PAGE>

total advertising revenue for the first six months of 1998. If a general
economic downturn or a U.S. recession occurs in the future, our advertisers may
reduce their advertising budgets. In addition, factors such as pricing
pressures, delays and new product launches may affect technology product
advertisers. We cannot assure you that technology product advertisers will
maintain current levels of advertising in special interest magazines and events
instead of advertising in more general interest media. Any material decline in
the demand for advertising by technology product advertisers could have an
adverse effect on our business, financial condition and results of operations.

Margin pressure on computer equipment manufacturers, industry and product
delays, lower demand in Asia and a focus on the Year 2000 transition are
contributing to a reduced demand for advertising in our magazines (principally
PC Magazine, PC/Computing, Computer Shopper and PC Week). We believe these
factors will continue, and as announced on October 8, 1998, expect that EBITDA
for the fourth quarter of 1998 will be significantly lower than EBITDA for the
fourth quarter of 1997.

As a result of this reduced demand, we also announced on October 8, 1998 a
company-wide restructuring in which we discontinued three publications
(Internet Business, Equip and Windows Pro), and will streamline operating
support services, consolidate certain facilities and reduce our workforce by
approximately 10%. We expect to take a one-time pre-tax charge of $50-60
million in the fourth quarter of 1998 as part of this restructuring.

IMPORTANCE OF CERTAIN PUBLICATIONS AND TRADE SHOWS

Certain of our publications have represented a significant portion of our
historic revenue. We expect that such publications will continue to do so in
the future. ZD's business publications accounted for 47% of our publishing
revenue in the first nine months of 1998. Although we believe we have a
diversified portfolio of special interest publications and are not dependent on
any single publication, a significant decline in the performance of any of
these publications could have an adverse effect on our business, financial
condition and results of operations.

Certain of our trade shows and conferences have represented a significant
portion of our historic revenue. We expect that such trade shows and
conferences will continue to do so. COMDEX/Fall accounted for 34% of our trade
show and conference revenue in 1997. Although we believe we have a diversified
portfolio of trade shows worldwide, a significant decline in the performance of
COMDEX/Fall could have an adverse effect on our business, financial condition
and results of operations.

SEASONALITY OF REVENUE; FLUCTUATIONS IN REVENUE FROM PERIOD TO PERIOD

Our business is seasonal. Revenue typically reaches its highest level during
the fourth quarter of each calendar year. This is largely due to the timing of
our single largest trade show event, COMDEX/Fall, and the general increase in
publishing revenue in the fourth quarter due to increased consumer buying
activity during the holiday season.

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<PAGE>

In 1997:

. 19.5% of our revenue was generated during the first quarter.

. 26.1% of our revenue was generated during the second quarter.

. 19.4% of our revenue was generated during the third quarter.

. 35.0% of our revenue was generated during the fourth quarter.

Our revenue may fluctuate from period to period based on how much our
advertising customers spend on marketing. Many of our large customers
concentrate their advertising expenditures around major new product launches.
Marketing expenditure by technology companies can also be affected by factors
affecting the computer industry generally, including: changes in end-user
demand, pricing pressures and inventory surpluses. Furthermore, our revenue may
fluctuate as a result of the number and timing of new product launches and the
timing of events. The launch of new publications, trade shows and services are
funded with cash flow from operations and are expensed as incurred.

HISTORICAL NET LOSSES

We and our predecessor have incurred significant net losses in the past (see
the Company Consolidated Financial Statements and Selected Historical Financial
and Other Data) and we cannot assure you that we will report net income in the
future.

NEW PRODUCT RISKS

Our success depends in part on our ability to monitor rapidly changing
technologies and market trends and offer new publications, trade shows and
services, including online services, that address the needs of specific target
audiences. The process of internally researching and developing new products
and services and whether they will achieve market acceptance and profitability
can be risky and costly. We cannot assure you that our efforts to introduce
new, or assimilate acquired, publications, trade shows or services will be
successful or profitable. Costs to develop new products are expensed as
incurred. Accordingly, our profitability from year to year may be adversely
affected by the number and timing of new product launches.

We have a license and services agreement to manage ZDTV and have an option
(which, unless extended, expires December 31, 1998) from MAC Holdings America
Inc. to purchase ZDTV. MAC Holdings America Inc. is wholly owned by Mr.
Masayoshi Son, a director of the Company. The option price is equal to the
amount of its investment plus 10% per year for the period of its investment. We
are currently funding ZDTV's operations on behalf of MAC Holdings America Inc.
through unsecured advances which, for approved levels of spending, are to be
reimbursed by them. We have announced our intention to exercise our option to
purchase ZDTV for a purchase price expected to be approximately $85 million. Of
this amount, we expect to make a cash payment of approximately $32 million and
convert the advances previously paid to MAC Holdings America Inc. estimated at
$53 million. ZDTV has entered into a non-binding letter of intent with Vulcan
Programming Inc. whereby Vulcan Programming Inc. would invest approximately $54
million

34
<PAGE>

in ZDTV, in exchange for a one-third interest. Assuming we exercise our option,
we cannot assure you that ZDTV will ultimately obtain sufficient cable carriage
and commercial acceptance to be profitable.

RISKS ASSOCIATED WITH FLUCTUATIONS IN PAPER AND POSTAGE COSTS

ZD's principal raw material is paper. Paper costs constitute a significant
expense, accounting for 15.2% of our total U.S. print publishing operating
expenses in 1997 and 18.1% in the first nine months of 1998. Paper prices have
been volatile over the past several years, rising from 1994 through 1996,
declining in 1997 and remaining relatively flat in 1998. Management anticipates
that paper prices will remain relatively stable in 1999. We do not use forward
contracts and most of our paper supply contracts (which are generally for a
two-to-three year renewable term) provide for price adjustments to reflect
changing market prices. Accordingly, significant increases in paper prices
could adversely affect ZD's future results of operations.

Postage for magazine distribution is also one of ZD's significant expenses,
accounting for 11.3% of our total U.S. print publishing operating expenses in
1997 and 8.3% in the first nine months of 1998. Postage costs increase
periodically and can be expected to increase in the future. Management
estimates postage costs will increase approximately 3.5% in 1999. We may not be
able to recover, in whole or in part, paper or postage cost increases.
Accordingly, significant cost increases could have an adverse effect on ZD's
business, financial condition and results of operations.

COMPETITION

We face significant competition with respect to our print publications, trade
shows and conferences and other technology information services. If we are
unable to compete effectively for advertisers, readers, exhibitors and/or
attendees, our business, financial condition and results of operations could be
adversely affected.

In our publishing business, we principally compete for advertising and
circulation revenue with publishers of other computer technology publications.
We also face broad competition from media companies that produce general
interest magazines and newspapers. Competition for advertising dollars is
primarily based on advertising rates, the nature and scope of readership,
reader response to advertisers' products and services and the effectiveness of
sales teams. Overall competitive factors in publishing include product
positioning, editorial quality, circulation, price and customer service. In our
trade show and conference business, we compete with other producers of trade
shows and conferences for exhibition space, exhibitors and attendees, primarily
on the basis of the quality of the conference, its content and organizational
efficiency.

CONSOLIDATION OF PRINCIPAL VENDORS; SIGNIFICANT SUPPLIER

Our principal vendors include paper suppliers, printers, subscription
fulfillment houses and national newsstand distributors. Each of these
industries is currently experiencing consolidation among their principal
participants. Such consolidation may result in:

35
<PAGE>

. decreased competition, which may lead to increased prices,

. interruptions and delays in services provided by such vendors and

. greater dependence on certain vendors.

Such factors could adversely affect our results of operations. One printing
company accounted for approximately 50% of our U.S.-based publications'
manufacturing expenditures in both 1997 and the first nine months of 1998.
While we believe there are adequate alternatives available, an interruption or
delay in service from, or the loss of, this printer could have an adverse
effect on our financial condition and results of operations.

RISKS ASSOCIATED WITH INTERNATIONAL EXPANSION

One component of our growth strategy is to further expand into international
markets. There are certain risks inherent in doing business in international
markets. For example:

. the uncertainty of product acceptance by different cultures,

. the risks of divergent business expectations,

. difficulties in finding appropriate foreign licensees or establishing
joint ventures with foreign partners,

. difficulties in staffing and managing multinational operations,

. currency fluctuations,

. state-imposed restrictions on the repatriation of funds and

. potentially adverse tax consequences.

There can be no assurance that one or more of such factors will not have an
adverse effect on our future international operations and, consequently, on our
financial condition and results of operations.

RISKS ASSOCIATED WITH LITIGATION

In connection with our initial public offering of our existing Common Stock,
the repricing of certain stock options and a former joint venture between
Softbank and certain third parties, we have been named as a defendant in
several lawsuits. While we believe there are substantial defenses to all of the
claims, we cannot assure you that we will prevail. Defense costs and/or
settlement costs relating to these actions could be substantial, and the
defense of these actions may divert management's attention and resources. If
the plaintiffs prevail in these actions, any judgments awarded by the courts
could have a material adverse effect on our business, financial condition or
results of operations. See "ZDNet Description of Business--Legal Proceedings".

36
<PAGE>

YEAR 2000 COMPLIANCE

Programming codes in existing computer systems may not reliably recognize
date-sensitive information when the calendar year changes to 2000. Systems that
do not properly recognize such information could generate erroneous data or
fail. We are in the process of identifying and testing our computer systems and
related software for Year 2000 readiness. In addition, we are in the process of
working with third parties on whom we rely for system and database management
to ensure Year 2000 readiness. We have not verified that such third parties are
Year 2000 compliant. We cannot assure you that our systems, or third-party
systems on which we rely, will be Year 2000 compliant. Significant uncertainty
exists concerning the potential costs and effects associated with Year 2000
compliance. Any Year 2000 compliance problem of the Company or our users,
advertisers, equipment vendors or software licensors could have a material
adverse effect on our business, financial condition and results of operations.
See "ZD Management's Discussion and Analysis of Financial Condition and Results
of Operations--Year 2000 Issues".

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<PAGE>

TRADING PRICES OF AND DIVIDENDS ON EXISTING COMMON STOCK

Our shares of existing Common Stock are traded on the NYSE under the trading
symbol "ZD". On December 21, 1998, the closing price per share of existing
Common Stock as reported on the NYSE Composite Tape was $11 11/16. As of
December 21, 1998, there were 100 million shares of existing Common Stock
outstanding and . holders of record of existing Common Stock.

YOU ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES OF EXISTING
COMMON STOCK.

The high and low sales prices of our existing Common Stock, as reported on
the NYSE Composite Tape, for that portion of the second quarter of 1998 since
our existing Common Stock began trading and for the third and fourth quarters
of 1998 are shown below.

<TABLE>
<CAPTION>
1998 HIGH LOW
---- ------ ------
<S> <C> <C>
Second Quarter (April 29, 1998-June 30, 1998).................. $19.00 $12.81
Third Quarter ................................................. 16.38 5.38
Fourth Quarter................................................. . .
</TABLE>

There currently is no trading market for ZDNet Stock.

We have never declared or paid dividends on our existing Common Stock. For a
description of our intended dividend policy following the Offering, see
"Dividend Policy" and "Description of Capital Stock--Dividends".

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<PAGE>

USE OF PROCEEDS

Based upon an initial public offering price of $. per share (the midpoint of
the range of initial public offering prices set forth on the cover page of this
prospectus), we estimate that we will receive net proceeds from the initial
public offering of ZDNet Stock (the "OFFERING") of $.million (or $.million if
the U.S. Underwriters' option to purchase additional shares is exercised in
full), after deducting estimated underwriting discounts and expenses of $.. We
will attribute the net proceeds from . shares to ZDNet (in a manner analogous
to a primary offering of common stock) and the net proceeds from the remaining
shares to our ZD division (in a manner analogous to a secondary offering of
common stock of a subsidiary owned by a parent). ZDNet will advance the net
proceeds it receives to ZD, and ZD will use those net proceeds, together with
the net proceeds attributed to it, to reduce outstanding indebtedness under our
revolving credit facility. The indebtedness owed under our revolving credit
facility is currently bearing interest at a weighted average interest rate of .
(based on various LIBOR rates) and matures on March 31, 2005. The advance of
cash by ZDNet to ZD will be treated as an inter-Group revolving credit advance
and will bear interest at the rate at which we could borrow such funds on a
revolving credit basis. See "Certain Cash Management and Allocation Policies".

DIVIDEND POLICY

We currently intend to retain all of our earnings to finance our operations,
repay indebtedness and fund future growth. We do not expect to pay any
dividends on ZD Stock or ZDNet Stock for the foreseeable future.

Although certain of our debt instruments currently prohibit the payment of
dividends, and in any event, as stated above, we do not expect to pay any
dividends for the foreseeable future on either series of Common Stock,

. we will otherwise be permitted to pay dividends on the ZD Stock out of
assets of the Company legally available for the payment of dividends
under Delaware law, but the total amounts paid as dividends on the ZD
Stock cannot exceed the Available Dividend Amount for ZD and

. we will otherwise be permitted to pay dividends on the ZDNet Stock (and
transfer corresponding amounts to ZD in respect of its Retained Interest
in ZDNet), but the total of the amounts paid as dividends on the ZDNet
Stock and the corresponding amounts transferred to ZD in respect of its
Retained Interest cannot exceed the Available Dividend Amount for ZDNet.

The "Available Dividend Amount" for ZD or ZDNet, as the case may be, is based
on the amount that would be legally available for the payment of dividends
under Delaware law if ZD and ZDNet were each a separate Delaware corporation.
See "Description of Capital Stock--Dividends". We expect that determinations to
pay dividends on ZD Stock or ZDNet Stock would be based primarily upon the
financial condition, results of operations, capital requirements, any
restrictions contained in financing or other agreements binding upon us and
such other factors as our Board of Directors (the "BOARD") deems relevant.

39
<PAGE>

CAPITALIZATION

The tables below set forth the capitalization of ZDNet and the Company as of
September 30, 1998 and as adjusted to give effect to (1) the Offering at an
assumed initial public offering price of $. per share (the mid-point of the
range of initial public offering prices set forth on the cover page of this
prospectus) after deducting estimated underwriting discounts and expenses and
assuming the Underwriters do not exercise their option to purchase additional
shares, (2) the application of the net proceeds as described under "Use of
Proceeds" and (3) the re-designation of existing Common Stock as ZD Stock.
These tables should be read in conjunction with the Combined Financial
Statements and the notes thereto included elsewhere in this prospectus.

ZDNET

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998
-------------------------------
ACTUAL AS ADJUSTED
--------------- --------------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt.............. $ -- --
Division equity:
Total division equity..... 88,822 .
--------------- ---------
Total capitalization.... $ 88,822 $ .
=============== =========

THE COMPANY

<CAPTION>
AS OF SEPTEMBER 30, 1998
-------------------------------
ACTUAL AS ADJUSTED
--------------- --------------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt, excluding
current installments....... $ 1,526,047 $ .
--------------- ---------
Stockholders' equity:
Preferred stock........... -- --
ZDNet stock............... -- .
ZD stock.................. -- 1,000
Existing common stock..... 1,000 --
Additional paid in
capital.................. 1,550,239 .
Retained earnings
(deficit)................ (205,608) .
Deferred compensation..... (807) (807)
Cumulative translation
adjustment............... (776) (776)
--------------- ---------
Total stockholders'
equity................... 1,344,048 .
--------------- ---------
Total capitalization.... $ 2,870,095 $ .
=============== =========
</TABLE>

40
<PAGE>

DILUTION

At December 31, 1998, ZDNet had a net tangible book value of approximately $.
million or $. per share equivalent. "NET TANGIBLE BOOK VALUE PER SHARE
EQUIVALENT" at any date represents the amount of ZDNet's total tangible assets
minus total liabilities divided by the Total Number of Notional ZDNet Shares
Deemed Outstanding. After giving effect to the sale of . shares of ZDNet Stock
offered hereby (at an assumed initial offering price of $. per share) and the
application of the proceeds allocated to ZDNet, the pro forma net tangible book
value of ZDNet would have been approximately $. million or $. per share
equivalent. Thus, purchasers of ZDNet Stock offered by this prospectus will pay
$. per share and will receive shares with a net tangible book value per share
equivalent of $., which represents an immediate dilution of $. per share.

The foregoing computation of dilution excludes an aggregate of . shares of
ZDNet Stock purchasable at $. per share upon the exercise of outstanding
employee stock options. Assuming that all of the outstanding options were
exercised at ., 1998, the pro forma net tangible book value per share
equivalent would be $. and the dilution per share equivalent to new investors
would be $..

41
<PAGE>

ZDNET

SELECTED HISTORICAL COMBINED FINANCIAL AND OTHER DATA

The following table presents Selected Historical Combined Financial and Other
Data for ZDNet and its predecessor as of and for the years ended December 31,
1993, 1994 and 1995, as of and for the two month period ended February 28,
1996, as of and for the ten month period ended December 31, 1996, as of and for
the year ended December 31, 1997, for the nine month period ended September 30,
1997 and as of and for the nine month period ended September 30, 1998. This
data was derived from the Combined Financial Statements of ZDNet included
elsewhere in this prospectus. Data as of and for the years ended December 31,
1993 and 1994, for the periods ended September 30, 1997 and 1998 and as of
September 30, 1998 have been derived from ZDNet's unaudited financial
statements. This table should be read in conjunction with the Selected
Historical Combined Financial and Other Data, Management's Discussion and
Analysis of Financial Condition and Results of Operations and Combined
Financial Statements for each of the Company, ZD and ZDNet included in this
prospectus.

<TABLE>
<CAPTION>
PREDECESSOR(1) ZDNET
--------------------------------------- -------------------------------------------
NINE MONTH
YEAR ENDED TWO MONTH TEN MONTH PERIOD ENDED
DECEMBER 31, PERIOD ENDED PERIOD ENDED YEAR ENDED SEPTEMBER 30,
------------------------- FEBRUARY 28, DECEMBER 31, DECEMBER 31, -----------------
1993 1994 1995 1996 1996 1997 1997 1998
------- ------- ------- ------------ ------------ ------------ -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue, net............ $10,208 $13,349 $13,576 $ 2,903 $16,215 $ 32,218 $ 21,277 $37,566
Cost of operations:
Production and content.. 11,512 9,321 10,709 1,802 14,863 23,543 17,638 19,025
Selling, general and
administrative
expenses............... 8,987 7,276 8,360 1,774 13,280 23,475 17,757 22,049
Depreciation and
amortization........... 1,578 1,163 4,040 597 5,485 7,681 5,524 4,780
Loss from operations.... (11,869) (4,411) (9,533) (1,270) (17,413) (22,481) (19,642) (8,288)
Minority interest....... -- -- -- -- -- (400) (436) (330)
Loss before income
taxes.................. (11,869) (4,411) (9,533) (1,270) (17,413) (22,081) (19,206) (7,958)
Net loss (2)............ (11,869) (4,526) (5,755) (814) (16,925) (21,238) (18,463) (7,655)
OTHER DATA:
Capital expenditures.... $ 2,538 $ 513 $ 1,590 $ 168 $ 1,010 $ 2,374 $ 1,345 $ 3,181
Investments and
acquisitions, net of
cash acquired.......... -- -- -- -- -- 2,998 2,998 5,000
BALANCE SHEET DATA (AT PERIOD
END):
Total current assets.... $ 1,929 $ 2,432 $ 3,992 $ 4,951 $ 7,852 $ 11,521 $16,169
Total assets............ 4,944 3,557 91,772 92,717 82,507 87,326 95,505
Total liabilities....... 2,451 8,083 2,090 1,492 3,932 4,034 6,683
Division equity......... 2,493 (4,526) 89,682 91,225 78,575 83,292 88,822
</TABLE>
- --------
(1) An affiliate of the Company acquired ZDNet's predecessor on February 29,
1996. Data for ZDNet's predecessor has been presented for periods before
that date.

(2) No historical earnings per share or share data are presented as the Company
does not consider such data meaningful. After issuance of ZDNet Stock, the
Company will report earnings per share data for ZD and ZDNet but not for
the Company.

42
<PAGE>

ZDNET

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

ZDNet is our online business division.

ZDNet is a leading online provider of technology-related content to Internet
users worldwide. ZDNet creates real-time, authoritative and comprehensive
branded content. With news, analysis, product reviews, shopping guides and
videos and audio as well as content from ZD's leading publications, ZDNet's
network of over 60 interconnected sites provides an easy-to-use comprehensive
Internet destination. The community of ZDNet users interacts through bulletin
boards, chat rooms, moderated forums, and e-mails. ZDNet facilitates commerce
by providing users with the ability to evaluate, compare and purchase products
and services and by providing advertisers and merchants with access to a highly
targeted user group with attractive demographics. According to Media Metrix,
for October 1998 zdnet.com ranked first among all Web sites in the category of
news, information and entertainment, ahead of such sites as cnet.com, cnn.com,
msnbc.com, Disney Online and espn.com. ZDNet.com has been ranked number one by
Media Metrix in this category for 26 of the last 28 months. ZDNet estimates
that its Web sites served more than 185 million page views during October 1998,
up from 105 million in October 1997.

REVENUE

ZDNet's revenue consists of advertising revenue and revenue from subscription
based fees and services. Advertising revenue consists primarily of revenue
derived from the sale of advertisements on pages delivered to users of ZDNet's
Internet sites. ZDNet recognizes the delivery of a single view of an
advertisement as an "impression". Advertising revenue is derived principally
from arrangements with ZDNet's advertising customers that provide for a
guaranteed number of impressions. Advertising rates vary depending primarily on
the total number of guaranteed impressions purchased, the length of the
advertiser's commitment, the location in which the advertisements are displayed
and the type of advertising. Advertising revenue is recognized in the period in
which the advertisements are delivered. For contracts/campaigns that are longer
than one accounting period, the revenue from the contract/campaign is
recognized ratably over the term of the contract/campaign.

Revenue from barter transactions is recognized during the period in which
advertisements are displayed. Barter transactions are recorded at the lower of
estimated fair value of goods or services received or the estimated fair value
of advertising given. To date, barter transactions have been immaterial to
results.

During 1995 and part of 1996, ZDNet was focused on generating revenue from
subscription based fees and services. This revenue is generated primarily by
charging monthly membership fees to provide access to product reviews, software
reviews and

43
<PAGE>

shareware. During 1996, ZDNet shifted the focus of the business model from the
generation of subscription based fees and services to the generation of
advertising revenue.

As a result of this shift, ZDNet's advertising revenue increased from 6% of
total revenue for the year ended December 31, 1995 to 84% of total revenue for
the nine months ended September 30, 1998. Over this period subscription based
fees and services decreased correspondingly as a percentage of revenue.

No single customer accounted for more than 5.0% of ZDNet's total revenue for
the year ended December 31, 1997 or the nine months ended September 30, 1998.
ZDNet's top 20 customers accounted for 29.3% and 35.1% of total revenue for the
year ended December 31, 1997 and for the nine months ended September 30, 1998,
respectively.

COST OF OPERATIONS

Costs of production and content include costs to produce and edit content on
ZDNet's Internet sites as well as technical costs incurred to maintain ZDNet's
Internet sites. ZD provides certain editorial content and brand-marketing
services to ZDNet for which ZDNet pays a royalty to ZD based on revenue. This
charge is also included in production and content. See Note 4 to ZDNet's
Combined Financial Statements included in this prospectus.

The principal selling, general and administrative expenses of ZDNet are
payroll, sales commissions and related expenses, marketing and promotion. The
Company provides certain selling, general and administrative services and
shared services on a centralized basis (the "CENTRAL SERVICES"), and the costs
of these services are allocated between ZD and ZDNet. See Note 4 to ZDNet's
Combined Financial Statements included in this prospectus.

ZDNet also incurs a substantial amount of amortization expense related to
intangible assets created as a result of the December 21, 1994 and February 29,
1996 acquisitions of the Company's predecessors by Forstmann Little and Co. and
SOFTBANK Corp., respectively. The February 1996 acquisition created
$72.7 million of intangible assets for ZDNet. In addition, $5.5 million of
intangible assets were created by ZDNet's January 1997 acquisition of a 70%
equity interest in GameSpot, Inc., formerly SpotMedia Communications, Inc.
("GAMESPOT").

FACTORS AFFECTING FUTURE PERIODS

ZDNet's revenue and profitability are influenced by a number of external
factors, including the volume of new technology product introductions, the
amount and allocation of marketing expenditure by ZDNet's advertisers, the
extent to which merchants elect to advertise using online media and competition
among other technology marketers. Accordingly, ZDNet may experience
fluctuations in revenue from period to period. Marketing expenditures by
technology companies can also be affected by factors affecting the technology
industry generally, including pricing pressures and temporary surpluses of
inventory. Revenue and profitability are also influenced by product mix and the
timing and frequency of ZDNet's new product launches in new markets, as well as
by acquisitions.

44
<PAGE>

ZDNet has an extremely limited operating history upon which to base an
evaluation of ZDNet's prospects. ZDNet's prospects must be considered in light
of the risks, expenses and difficulties frequently encountered by start-up
companies in the new and rapidly evolving market for Internet products, content
and services. ZDNet's revenue and cost of operations have grown substantially
and ZDNet has incurred cumulative net losses since inception. These losses
reflect substantial expenditures to develop, launch and acquire ZDNet's
Internet sites and services. ZDNet believes that newly launched sites and
services require a certain period of growth before they begin to achieve
adequate revenue to support their operation.

ZDNet must, among other things, effectively develop new relationships and
maintain existing relationships with its advertisers, their advertising
agencies and other third parties, provide original and compelling content to
Internet users, develop and upgrade its technology, respond to competitive
developments and attract, retain and motivate qualified personnel. There can be
no assurance that ZDNet will succeed in addressing such risks and the failure
to do so could have a material adverse effect on ZDNet's business, financial
condition or operating results. Additionally, the limited operating history of
ZDNet makes the prediction of future operating results difficult or impossible,
and there can be no assurance that ZDNet's revenue will increase or even
continue at their current level, or that ZDNet will achieve or maintain
profitability or generate cash from operations in future periods. Since
inception, ZDNet has incurred significant losses and, for the period from
February 29, 1996 to September 30, 1998, had accumulated a deficit of $45.8
million. ZDNet may continue to incur losses in the future.

For a discussion of other factors that may affect results. See "Risk
Factors--Risk Factors Related to ZDNet".

PRESENTATION OF FINANCIAL INFORMATION

ZDNet is comprised of certain operations which were acquired at various times
and completed a reorganization in May 1998. See Note 1 to ZDNet's Combined
Financial Statements.

45
<PAGE>

RESULTS OF OPERATIONS

The table below presents the results of ZDNet as if the assets and operations
acquired by affiliates of the Company on February 29, 1996 (as described in
Note 1 to the ZDNet Combined Financial Statements) had been acquired on January
1, 1995. Purchase accounting adjustments relating to that acquisition have been
reflected through pro forma amortization and interest and income tax
adjustments, as described in note (a) to the table. Although the table presents
numbers that are not in accordance with generally accepted accounting
principles, management believes they present the most meaningful basis of
comparison. The financial information presented below may not necessarily
reflect the results of operations which would have occurred had the February
29, 1996 acquisition been completed on January 1, 1995.

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
PRO FORMA ACTUAL SEPTEMBER 30,
------------------ -------- -----------------
1995(A) 1996 1997 1997 1998
-------- -------- -------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenue, net.................. $ 13,576 $ 19,118 $ 32,218 $ 21,277 $37,566
Cost of operations:
Production and content...... 10,709 16,665 23,543 17,638 19,025
Selling, general and
administrative expenses.... 8,360 15,054 23,475 17,757 22,049
Depreciation and
amortization............... 678 693 1,495 896 1,362
Amortization of intangible
assets..................... 5,712 5,712 6,186 4,628 3,418
-------- -------- -------- -------- -------
Total operating expenses.. 25,459 38,124 54,699 40,919 45,854
-------- -------- -------- -------- -------
Loss from operations.......... (11,883) (19,006) (22,481) (19,642) (8,288)
Minority interest............. -- -- 400 436 330
-------- -------- -------- -------- -------
Loss before income taxes...... (11,883) (19,006) (22,081) (19,206) (7,958)
Income tax benefit............ (4,706) (1,073) (843) (743) (303)
-------- -------- -------- -------- -------
Net loss...................... $ (7,177) $(17,933) $(21,238) $(18,463) $(7,655)
======== ======== ======== ======== =======
Other data:
Capital expenditures........ $ 1,590 $ 1,178 $ 2,374 $ 1,345 $ 3,181
Investments and
acquisitions, net of cash
acquired................... -- -- 2,998 2,998 5,000
</TABLE>
- --------
(a) The February 29, 1996 acquisition gave rise to different bases of
accounting for the period after versus the period prior to the acquisition.
This is primarily due to a shorter amortization period of 20 years being
used by ZDNet, versus 40 years being used by the previous owners. The above
numbers assume that the acquisition took place on January 1, 1995. This
resulted in an increase to the "Amortization of intangible assets" and "Net
Loss" by $2,350 and $1,422, respectively, for the year ended December 31,
1995 and an increase by $323 and $194, respectively, for the year ended
December 31, 1996.

46
<PAGE>

The following table presents the foregoing amounts as a percentage of
revenue:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
PRO FORMA ACTUAL SEPTEMBER 30,
----------------------------- -------------------
1995 1996 1997 1997 1998
------- ------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenue, net............... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of operations:
Production and content... 78.9 87.2 73.1 82.9 50.6
Selling, general and
administrative
expenses................ 61.6 78.7 72.9 83.5 58.7
Depreciation and
amortization............ 5.0 3.6 4.6 4.2 3.6
Amortization of
intangible assets....... 42.0 29.9 19.2 21.7 9.1
------- ------- ------- -------- --------
Total operating
expenses.............. 187.5 199.4 169.8 192.3 122.0
------- ------- ------- -------- --------
Loss from operations....... (87.5) (99.4) (69.8) (92.3) (22.0)
Minority interest.......... -- -- 1.2 2.0 0.9
------- ------- ------- -------- --------
Loss before income taxes... (87.5) (99.4) (68.6) (90.3) (21.1)
Income tax benefit......... 34.6 5.6 2.7 3.5 0.8
------- ------- ------- -------- --------
Net loss................... (52.9)% (93.8)% (65.9)% (86.8)% (20.3)%
======= ======= ======= ======== ========
</TABLE>

NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1997

REVENUE, NET

Net revenue increased 77% to $37.6 million for the nine months ended
September 30, 1998 from $21.3 million for the nine months ended September 30,
1997. Revenue from advertising was 84% of net revenue for the nine months ended
September 30, 1998, compared to 71% for the same period in 1997.

Revenue from advertising increased 108% to $31.5 million for the nine months
ended September 30, 1998 from $15.1 million for the nine months ended September
30, 1997. The increase in advertising revenue was attributable to an increase
in the number of advertisers and the average monthly revenue per advertiser.
Subscription based fees and services decreased by 1% to $6.1 million for the
nine months ended September 30, 1998 from $6.2 million for the nine months
ended September 30, 1997.

COST OF OPERATIONS

Production and content

Production and content expenses were $19.0 million or 51% of net revenue for
the nine months ended September 30, 1998, compared to $17.6 million or 83% of
net revenue for the nine months ended September 30, 1997. The absolute dollar
increase in production and content charges was due to an increase in ZD's
revenue-based royalty charge to ZDNet, as well as an increase in production
costs to support higher user traffic levels and increased editorial costs
associated with the launch of new content areas. The cost of production and
content decreased as a percentage of revenue primarily due to economies of
scale. ZDNet

47
<PAGE>

expects this trend to continue. Royalty payments to ZD were $1.9 million and
$1.1 million for the nine-month periods ending September 30, 1998 and 1997,
respectively.

Selling, general and administrative expenses

Selling, general and administrative expenses were $22.0 million or 59% of net
revenue for the nine months ended September 30, 1998, compared to $17.8 million
or 83% of net revenue for the nine months ended September 30, 1997. The
absolute dollar increase in the selling, general and administrative expenses
was primarily due to increased personnel and services required to support the
growth of ZDNet, offset to some extent by cessation of payments to SOFTBANK
Interactive Marketing Inc. ("SIM"), as ZDNet sales and marketing teams replaced
SIM in these functions. Sales and marketing costs were $15.1 million or 40% of
net revenue for the nine months ended September 30, 1998, compared to $12.3
million or 58% of net revenue for the nine months ended September 30, 1997.
ZDNet intends to continue to increase the number of dollars spent on sales and
marketing and intends to launch a print ad campaign in the future. Sales and
marketing expenses are incurred both to drive traffic to ZDNet's Web site and
to increase the number of advertisers and advertising sales. Included in sales
and marketing costs was an allocation from the Company's Central Services
amounting to $0.2 million and $0.4 million for the nine months ended September
30, 1998 and 1997, respectively.

Administrative and overhead costs were $6.9 million or 18% of net revenue for
the nine months ended September 30, 1998, compared to $5.5 million or 26% of
net revenue for the nine months ended September 30, 1997. Included in
administrative and overhead costs was an allocation from the Company's Central
Services amounting to $3.1 million and $2.5 million for the nine months ended
September 30, 1998 and 1997, respectively. The selling, general and
administrative costs decreased as a percentage of revenue primarily due to
economies of scale. ZDNet expects this trend to continue.

Depreciation

Depreciation expense was $1.4 million for the nine months ended September 30,
1998, compared to $0.9 million for the nine months ended September 30, 1997.
The increase in depreciation expense related primarily to the increased capital
expenditures made by ZDNet for equipment necessary to expand its network and
infrastructure in order to support its continued growth.

Amortization of intangible assets

Amortization of intangible assets was $3.4 million for the nine months ended
September 30, 1998, compared to $4.6 million for the nine months ended
September 30, 1997. The decrease in amortization related to the advertising and
subscription lists becoming fully amortized as of March 1, 1998. This resulted
in only two months of the related amortization being included in the period
ending September 30, 1998 versus nine months amortization in the period ending
September 30, 1997. Annual amortization expense related to the remaining
goodwill balance will be approximately $4.1 million before giving effect to any
future increase in goodwill.

48
<PAGE>

MINORITY INTEREST

The minority interest of $0.3 million in 1998 and $0.4 million in 1997
represented losses attributed to the holders of the minority interest in
GameSpot.

INCOME TAXES

The income tax benefit decreased to $0.3 million for the nine months ended
September 30, 1998 from $0.7 million for the nine months ended September 30,
1997. The benefit represented an effective tax rate of approximately 3.8%,
which is substantially less than the federal statutory tax rate of 35.0%. ZDNet
has a substantial level of non-deductible expenses as losses which were
incurred while ZDNet was under MAC ownership are non-deductible to the Company.
As such, ZDNet does not reflect any income tax benefit associated with those
losses. In addition, the Company does not record any tax benefits associated
with the losses of GameSpot.

NET LOSS

As a result of the items described above, ZDNet's net loss decreased to $7.7
million from $18.5 million for the nine months ended September 30, 1998 and
1997, respectively.

YEAR ENDED DECEMBER 31, 1997 COMPARED WITH PRO FORMA YEAR ENDED DECEMBER 31,
1996

REVENUE, NET

Net revenue increased 69% to $32.2 million for the year ended December 31,
1997 from $19.1 million for the pro forma year ended December 31, 1996. An
increasing percentage of ZDNet's net revenue was derived from advertising for
the year ended December 31, 1997, accounting for 73% of net revenue, compared
to 37% for the same period in 1996. The increased percentage of net revenue
derived from advertising in the later period reflect a continuation of ZDNet's
strategic shift from a business model based subscription-based fees and
services to one based on advertising.

Revenue from advertising increased 228% to $23.6 million for year ended
December 31, 1997 from $7.2 million for the pro forma year ended December 31,
1996. The increase in advertising revenue was attributable to increases in the
number of advertisers, the average expenditures per advertiser and increasing
advertising rates. Subscription-based fees and services decreased by 28% to
$8.6 million from $11.9 million from the same period in 1996.

COST OF OPERATIONS

Production and content

Production and content expenses were $23.5 million or 73% of net revenue for
year ended December 31, 1997, compared to $16.7 million or 87% of net revenue
for the pro forma year ended December 31, 1996. The absolute dollar increase in
production and content charges was due an increase in the Company's revenue
based royalty charge to

49
<PAGE>

ZDNet, as well as an increase in production costs to support higher user
traffic levels, and increased editorial costs associated with the launch of new
content areas. The cost of production and content decreased as a percentage of
revenue primarily due to economies of scale. Royalty charges from ZD were $1.6
million and $1.0 million for the year ended December 31, 1997 and the pro forma
year ended December 31, 1996, respectively.

Selling, general and administrative expenses

Selling, general and administrative expenses were $23.5 million or 73% of net
revenue for the year ended December 31, 1997, compared to $15.1 million or 79%
of net revenue for the pro forma year ended December 31, 1996. The absolute
dollar increase in selling, general and administrative expenses was due to
higher sales commission costs paid to SIM and to the initial hiring of the
existing ZDNet sales and marketing teams. SIM was the exclusive sales team for
ZDNet prior to 1997. Sales and marketing costs were $15.9 million or 49% of net
revenue for the year ended December 31, 1997 compared to $11.0 million or 57%
of net revenue for the pro forma year ended December 31, 1996. Included in
sales and marketing costs was an allocation from the Company's Central Services
amounting to $0.5 million for the year ended December 31, 1997. There was no
such charge for the pro forma year ended December 31, 1996.

Administrative and overhead costs were $7.6 million or 23% of net revenue for
the year ended December 31, 1997 from $4.1 million or 21% of net revenue for
the pro forma year ended December 31, 1996. Included in administrative and
overhead costs was an allocation from the Company's Central Services amounting
to $3.4 million and $2.7 million for the year ended December 31, 1997 and the
pro forma year ended December 31, 1996, respectively. Selling, general and
administrative expenses decreased as a percentage of revenue primarily due to
economies of scale.

Depreciation

Depreciation expense was $1.5 million for the year ended December 31, 1997,
compared to $0.7 million for the pro forma year ended December 31, 1996. The
increase in depreciation primarily related to the increased capital
expenditures made by ZDNet for equipment necessary to expand its network and
infrastructure in order to support its continued growth.

Amortization of intangible assets

Amortization of intangible assets was $6.2 million for the year ended
December 31, 1997 compared to $5.7 million for the pro forma year ended
December 31, 1996. In February 1997, ZDNet purchased a 70% interest in
GameSpot, which created intangible assets of approximately $5.5 million. The
1997 period included approximately $0.5 million of amortization related to this
acquisition.

MINORITY INTEREST

The minority interest of $0.4 million for the year ended December 31, 1997,
represents losses attributed to the holders of the minority interest in
GameSpot (acquired in January 1997).

50
<PAGE>

INCOME TAXES

The income tax benefit decreased to $0.8 million for the year ended December
31, 1997 from $1.1 million for the pro forma year ended December 31, 1996. The
benefit represents an effective tax rate of approximately 3.8% and 5.6%,
respectively, which is significantly less than the federal statutory rate of
35.0% because ZDNet has a substantial level of non-deductible expenses, as
losses which were incurred while ZDNet was under MAC ownership are non-
deductible to the Company. As such, ZDNet does not reflect any tax benefits
associated with those losses.

NET LOSS

As a result of the items described above, ZDNet's net loss increased to $21.2
million for the year ended December 31, 1997 from $17.9 million for the pro
forma year ended December 31, 1996.

PRO FORMA YEAR ENDED DECEMBER 31, 1996 COMPARED WITH THE PRO FORMA YEAR ENDED
DECEMBER 31, 1995

REVENUE, NET

Net revenue increased 40% to $19.1 million for the pro forma year ended
December 31, 1996 from $13.6 million for the pro forma year ended December 31,
1995. An increasing percentage of ZDNet's net revenue was derived from
advertising for the pro forma year ended December 31, 1996, accounting for 38%
of net revenue compared to 6% for the same period in 1995.

Revenue from advertising increased to $7.2 million for the pro forma year
ended December 31, 1996 from $0.8 million for the pro forma year ended December
31, 1995. During 1996, ZDNet committed to a strategic shift in its business
model, transitioning from a business model based on membership and subscription
based fees and services to one supported primarily from the sale of
advertising. As a result, ZDNet substantially increased the number of
advertisers and the average expenditures per advertiser while subscription
based fees and services decreased by 7.0% to $11.9 million from $12.8 million
for the same period in 1995.

COST OF OPERATIONS

Production and content

Production and content expenses increased to $16.7 million or 87% of net
revenue for the pro forma year ended December 31, 1996, from $10.7 million or
79% of net revenue for the pro forma year ended December 31, 1995. The absolute
dollar increase in production and content charges was due to an increase in the
Company's revenue based royalty charge to ZDNet as well as increased production
costs to support higher user traffic levels, and increased editorial costs
associated with the launch of new content areas. The cost of production and
content decreased as a percentage of revenue primarily due to economies of
scale. Royalty payments to ZD were $1.0 million and $0.7 million for the pro
forma years ended December 31, 1996 and 1995, respectively.

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<PAGE>

Selling, general and administrative expenses

Selling, general and administrative expenses increased to $15.1 million or
79% or net revenue for pro forma year ended December 31, 1996, from $8.4
million or 62% of net revenue for the pro forma year ended December 31, 1995.
The absolute dollar increase in the selling, general and administrative
expenses were due to increased sales commissions paid to SIM. Sales and
marketing costs were $11.0 million or 57% of net revenue for the pro forma year
ended December 31, 1996 from $4.7 million or 35% of revenue for the pro forma
year ended December 31, 1995.

Administrative and overhead costs were $4.1 million or 21% of net revenue for
the pro forma year ended December 31, 1996 from $3.7 million or 27% of revenue
for the pro forma year ended December 31, 1995. Included in administrative and
overhead expenses is an allocation from the Company's Central Services
amounting to $2.7 million and $2.0 million for the pro forma years ended
December 31, 1996 and 1995, respectively. The selling, general and
administrative costs decreased as a percentage of net revenue primarily due to
economies of scale.

Depreciation

Depreciation expense was $0.7 million for the pro forma years ended December
31, 1996 and 1995.

Amortization of intangible assets

Amortization of intangible assets was $5.7 million for each of the pro forma
years ended December 31, 1996 and 1995.

INCOME TAXES

The income tax benefit decreased to $1.1 million for the pro forma year ended
December 31, 1996 from $4.7 million for the pro forma year ended December 31,
1995. The benefit represents an effective tax rate of approximately 5.6% and
39.6% respectively. The lower income tax benefit resulted from the acquisition
of ZDNet by MAC in February 1996. Since losses incurred under the ownership of
MAC are non-deductible to the Company, no income tax benefit has been recorded
for such losses for the pro forma year ended December 31, 1996.

NET LOSS

As a result of the items described, ZDNet's net loss increased to $17.9
million from $7.2 million for the pro forma years ended December 31, 1996 and
1995, respectively.

LIQUIDITY AND CAPITAL RESOURCES

FUNDING FROM ZD

In the financial statements of ZD and ZDNet, whenever ZDNet had a cash need
(other than cash needs of ZDNet's foreign operations or cash needs of ZDNet's
subsidiaries that

52
<PAGE>

are not wholly owned), that cash need was funded by ZD and accounted for as a
capital contribution (i.e., as an increase in ZDNet's division equity and ZD's
Retained Interest in ZDNet). Accordingly, no interest expense has been
reflected in the financial statements of ZDNet. After the date on which ZDNet
Stock is first issued, the Company will account for all cash transfers from one
Group to or for the account of the other Group (other than transfers in return
for assets or services rendered or transfers in respect of ZD's Retained
Interest that correspond to dividends paid on ZDNet Stock) as inter-Group
revolving credit advances (bearing interest at the rate at which the Company
could borrow such funds on a revolving credit basis (as the Board determines in
its sole discretion)) unless the Board determines that a given transfer (or
type of transfer) should be accounted for as a long-term loan, a capital
contribution increasing ZD's Retained Interest in ZDNet or a return of capital
reducing ZD's Retained Interest in ZDNet.

SOURCES AND USES OF CASH

Cash and cash equivalents were $0.4 million at September 30, 1998 and $0.0
million at December 31, 1997. The balance increased due to the factors
discussed below:

Cash used by operations was $4.7 million for the nine months ended September
30, 1998 and $11.4 million for the nine months ended September 30, 1997,
respectively. The improvement in the 1998 period was due primarily to a
reduction in net loss. The loss for the nine months ended September 30, 1998
was $7.7 million compared to $18.5 million for the same period in 1997.

Cash used by investing activities was $8.2 million for the nine months ended
September 30, 1998 and $4.3 million for the nine months ended September 30,
1997. Cash used for capital expenditures for the nine months ended September
30, 1998 increased by $1.9 million to $3.2 million from $1.3 million for the
nine months ended September 30, 1997. ZDNet intends to continue to invest in
equipment as necessary to support the increasing user traffic. Capital
expenditures on equipment is expected to be approximately $4 million in 1999.
In addition, in July 1998, ZDNet invested $5.0 million in preferred stock of
Deja News, Inc., an Internet discussion group. During the nine months ended
September 30, 1997, ZDNet spent approximately $3.0 million to acquire a 70%
interest in GameSpot.

Cash provided by financing activities decreased to $13.3 million for the nine
months ended September 30, 1998 from $15.8 million for the nine months ended
September 30, 1997, reflecting the improved operating performance of ZDNet. As
discussed under "--Funding from ZD" above, all funding from ZD was accounted
for as a capital contribution.

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<PAGE>

SEASONALITY

The following table sets forth certain unaudited quarterly combined statement
of operations data for each of the eight quarters in the period ended September
30, 1998. In the opinion of the Company's management, this unaudited
information has been prepared on a basis consistent with the audited Combined
Financial Statements of ZDNet appearing elsewhere in this prospectus and
includes all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the information set forth therein when read in
conjunction with the Combined Financial Statements and related notes thereto.
The operating results for any quarter are not necessarily indicative of results
for any future period.

<TABLE>
<CAPTION>
QUARTER ENDED
(IN THOUSANDS)
---------------------------------------------------------------------------------------
DECEMBER 31 MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 MARCH 31 JUNE 30 SEPTEMBER 30
1996 1997 1997 1997 1997 1998 1998 1998
----------- -------- ------- ------------ ----------- -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue, net............ $ 6,374 $ 5,283 $ 7,862 $ 8,132 $10,941 $ 9,938 $12,873 $14,755
Cost of operations...... 12,360 11,597 14,921 14,401 13,780 16,063 15,435 14,356
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) from
operations............. (5,986) (6,314) (7,059) (6,269) (2,839) (6,125) (2,562) 399
Minority interest....... -- (46) (201) (189) 36 (125) (145) (60)
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before
taxes.................. (5,986) (6,268) (6,858) (6,080) (2,875) (6,000) (2,417) 459
Provision (benefit) for
taxes.................. (195) (244) (267) (232) (100) (228) (92) 17
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)....... $(5,791) $(6,024) $(6,591) $(5,848) $(2,775) $(5,772) $(2,325) $ 442
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------------
DECEMBER 31 MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 MARCH 31 JUNE 30 SEPTEMBER 30
1996 1997 1997 1997 1997 1998 1998 1998
----------- -------- ------- ------------ ----------- -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue, net............ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of operations...... 193.9 219.5 189.8 177.1 125.9 161.6 119.9 97.3
----- ------ ----- ----- ----- ----- ----- -----
Income (loss) from
operations............. (93.9) (119.5) (89.8) (77.1) (25.9) (61.6) (19.9) 2.7
Minority interest....... -- 0.9 2.6 2.3 0.3 1.3 1.1 0.4
----- ------ ----- ----- ----- ----- ----- -----
Income (loss) before
taxes.................. (93.9) (118.6) (87.2) (74.8) (25.6) (60.3) (18.8) 3.1
Provision (benefit) for
taxes.................. (3.1) (4.6) (3.4) (2.9) (0.9) (2.3) (0.7) 0.1
----- ------ ----- ----- ----- ----- ----- -----
Net income (loss)....... (90.8)% (114.0)% (83.8)% (71.9)% (24.7)% (58.0)% (18.1)% 3.0%
===== ====== ===== ===== ===== ===== ===== =====
</TABLE>

On a historical basis, ZDNet has experienced lower revenue in the first
quarter when compared to the revenue in the preceding fourth quarter. This
fluctuation is a result of seasonal changes common to the media industry.

YEAR 2000 ISSUES

During 1997, the Company began a review of its computer systems and related
software (including those utilized in the operation of ZDNet's business) to
identify systems and software which might malfunction due to a
misidentification of the Year 2000. The Company is using both internal and
external resources to identify, correct or reprogram and test systems for Year
2000 readiness. Some of the Company's computer systems and databases, including
its subscription fulfillment payroll systems, are managed by third parties
under contractual arrangements. The Company has requested those third parties
to advise the Company as to whether they anticipate difficulties in addressing
Year 2000 problems and, if so, the nature of such difficulties. Management of
the Company has not

54
<PAGE>

finally determined the cost associated with its Year 2000 readiness efforts and
the related potential impact on the Company's results of operations. Amounts
expended to date have not been material. There can be no assurances that the
Company's systems or systems of other companies on which the Company relies
will be converted in time or that any such failure to convert by the Company or
another company will not have an adverse effect on ZDNet's business, financial
condition or results of operations. After evaluating its internal compliance
efforts as well as the compliance of third parties as described above by the
end of calendar year 1998, the Company will develop during 1999 appropriate
contingency plans to address situations in which various systems of the
Company, or of third parties with which the Company does business, are not Year
2000 compliant. Any year 2000 compliance problem could have a material adverse
effect on ZDNet's business, results of operations and financial condition.
Management believes a likely "worst case scenario" is that some customers and
vendors will be unable to complete transactions on a timely basis which may
have an adverse impact on the timing of ZDNet's cash flows and potentially the
ZDNet's ability to deliver products or services. Such transactions historically
have not been material to ZDNet.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

SFAS No. 130, "Reporting Comprehensive Income", issued in June 1997, will
require the Company to disclose, in financial statement format, all non-owner
changes in equity. Such changes include, for example, cumulative foreign
currency translation adjustments, certain minimum pension liabilities and
unrealized gains and losses on securities available for sale. This statement is
effective for fiscal years beginning after December 15, 1997 and requires
presentation of prior period financial statements for comparability purposes.
Such transactions historically have not been material.

SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information", issued in June 1997, establishes standards for reporting
information about operating segments in annual financial statements and interim
financial reports. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. Generally,
financial information is required to be reported on the basis that is used
internally for evaluating segment performance and deciding how to allocate
resources to segments.

SFAS No. 132, "Employer's Disclosure about Pensions and Other Postretirement
Benefits", is effective for the year ended December 31, 1998. This statement
revises the disclosure requirements for employers' pension and other retiree
benefits.

ZDNet expects to adopt the above statements beginning with its 1998 financial
statements.

In June 1998, the Financial Accounting Standards Board issued SFAS 133
"Accounting for Derivative Instruments and Hedging Activities." SFAS 133
establishes accounting and reporting standards for derivative instruments and
for hedging activities and is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. The Company does not expect the adoption of SFAS
133 to have a material impact on the ZDNet's results of operations.

55
<PAGE>

ZDNET
DESCRIPTION OF BUSINESS

INDUSTRY BACKGROUND

GROWTH OF THE INTERNET AND DEMAND FOR TECHNOLOGY-RELATED CONTENT

The Internet has emerged as a global mass medium, enabling millions of people
to access and share information and conduct business electronically. Forrester
Research, Inc. estimates that the number of adult Web users will reach 51
million in the U.S. by the end of 1998 and will grow to 99 million by the end
of 2001. Major factors driving this growth include the increasing familiarity
and acceptance of the Internet by businesses and consumers, the increasing
number of personal computers in homes and offices, the ease, speed and lower
cost of Internet access and improvements in network infrastructure.

The growing acceptance of the Internet as a mass medium parallels the
increasing role of technology in everyday life. According to Dataquest, the
worldwide market for information technology products is expected to be
approximately $1 trillion in 1998 and grow 10% to 15% annually over the next
five years. With the growth of the Internet and the widespread use of personal
computers, cellular phones, pagers and personal digital assistants, technology
has become an area of broad general interest. Users of technology products and
services confront an increasingly complex marketplace due to the rapid pace of
technological change and the frequent introduction of new products and
services. The prevalence of technology and the growing number of technological
choices heighten the demand for up-to-date, comprehensive information about
technology-related products and services.

ADVERTISING AND COMMERCE ON THE INTERNET

As the Internet and the technology industry continue to grow, the value of
the Internet to advertisers and merchants can be expected to increase as a
result of:

. the growth in the number of Web users,

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<PAGE>

. the Internet's global reach,

. the attractive demographic profile of Web users,

. the interactive nature of the medium,

. the increased willingness of users to conduct transactions online and

. the ability to effectively target user groups, customize promotions and
measure Web usage and viewer demographics.

ZDNet believes these characteristics allow Internet advertisers to build
valuable customer relationships through targeted advertising and sales
campaigns. The overall market for advertising on the Internet was approximately
$900 million in 1997 and $775 million in the first six months of 1998, as
measured by the Internet Advertising Bureau. According to Forrester Research,
Inc., advertising spending on the Internet will exceed $4 billion in the year
2000 and double to more than $8 billion by 2002.

The Internet also provides an efficient means for merchants to sell their
products and services directly to consumers. Forrester Research, Inc. forecasts
that worldwide commerce revenue on the Internet will increase from
approximately $35 billion in 1998 to $1.4 trillion in 2003. Internet
transactions are expected to increase as merchants improve Web-based
transaction-processing technology and as consumers become more accustomed to
purchasing online.

ZDNet believes technology-focused Internet sites are particularly well-suited
to promote advertising and commerce because they offer a large user base with
attractive demographics for technology and general consumer product companies.
Historically, technology-focused sites have attracted primarily technology
advertisers, which, according to the Internet Advertising Bureau, accounted for
39% of all U.S. online advertising dollars during the second quarter of 1998.
Recently, many of the largest advertisers on traditional media, including
consumer product companies, automobile manufacturers and travel-related
companies, have expanded their use of Internet advertising. Such consumer-
related advertising accounted for 24% of all U.S. online advertising in the
second quarter of 1998 according to the Internet Advertising Bureau, and ZDNet
believes Internet advertising will become an increasing percentage of consumer
product companies' overall advertising budgets in the future. Internet sites
with well-recognized brand names that focus on technology should be well-
positioned to capitalize on emerging Internet advertising and commerce
opportunities.

THE ZDNET SOLUTION

ZDNet's Web sites are designed to capitalize on the market opportunities
created by the increasing importance of technology, the emergence of the
Internet as a mass medium and the appealing demographics of technology-oriented
Web users. ZDNet focuses on content, community and commerce, enabling users to
research topics of interest, interact with other users, download software and
evaluate and purchase a wide range of products

57
<PAGE>

and services at a single destination. The Company was among the first content
providers to focus its efforts on the Internet, launching its zdnet.com service
in the fall of 1994. The ZDNet solution is based on the following
distinguishing attributes:

BROAD-BASED COMPREHENSIVE TECHNOLOGY AND INTERNET-RELATED CONTENT

ZDNet's interconnected and easily navigable sites offer depth and breadth of
coverage on the technology industry as well as topics of general interest,
including financial information and general news. ZDNet divides its content
broadly into "channels" that focus on specific topics or audience groups. Over
60 channels can be reached through the zdnet.com home page or through their own
distinct domains, and channels are generally organized with similar navigation
and layout to ensure consistency throughout the network. ZDNet's online
editorial and technical staff of industry experts develops high-quality
original content specifically for online interactive use. ZDNet offers over 800
news stories per month, 39,000 product listings, 30,000 product reviews and
12,000 downloadable programs. In addition, through ZDNet's relationship with
ZD, ZDNet has access to the content of all of ZD's computer and technology
publications, including PC Magazine, PC/Computing, PC Week and Yahoo! Internet
Life.

STRONG COMMUNITY AFFINITY

ZDNet has developed an extensive user community and encourages active
participation by enabling users to personalize their content and join user
groups based on common interests. ZDNet provides forums, chat groups and other
interactive online environments that allow users to express views and share
information. In addition, its industry personalities host interactive forums
that encourage user comments and feedback. To promote its community, ZDNet has
instituted a common registration system for chat, discussion and e-mail
capabilities. As of October 1998, ZDNet had over two million registered users
and provided over 48 million e-mail messages to its users in that month.
Registered users are able to access member-only software downloads and are
eligible for special offers such as trial enrollment in ZDU (part of ZD's
education business). ZDNet provides e-mail messages corresponding to each
user's specific interests.

ATTRACTIVE ENVIRONMENT FOR ADVERTISING AND COMMERCE

ZDNet facilitates commerce on its sites by providing users with the ability
to evaluate, compare and purchase products and services and by providing
advertisers and merchants with access to a highly targeted user group with
attractive demographics. According to the Fall 1998 @Plan study, among users of
ZDNet's Web sites:

. 61% have college degrees,

. 75% have an annual household income of at least $45,000 (and 22% in
excess of $100,000),

. 49% use the Web every day and

. 58% purchased a product in the prior six months after gathering
information on the Internet.

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<PAGE>

In addition, ZDNet has developed an array of sales and marketing options
(banners, sponsorship wraps, buttons, text and graphical links, e-mail
sponsorships and custom microsites) designed to assist advertisers in crafting
unique and distinctive programs to
target and reach their audiences. ZDNet is also the first non-ad agency to win
a prestigious "Creative Excellence in Business Advertising" (CEBA) award,
presented by the American Business Press.

RELATIONSHIP WITH ZD

ZDNet derives many benefits from its relationship with ZD, including the
ability to leverage the ZD brand, access content from ZD publications and
cross-market across all of ZD's platforms. ZD publishes leading technology
print publications (including PC Magazine, PC/Computing, PC Week and Yahoo!
Internet Life), produces leading trade shows and conferences (including COMDEX,
NetWorld+Interop and Seybold Seminars) and maintains well-recognized market
research and education platforms (including ZDU). For over a decade, the "Ziff-
Davis" name has been a leading brand associated with technology content.

THE ZDNET STRATEGY

ZDNet's objective is to be the leading online content site focused on
technology products and services for users and the preferred online platform
for advertisers and merchants. The key elements of ZDNet's strategy are:

CONTINUE TO OFFER DIFFERENTIATED TECHNOLOGY AND INTERNET-RELATED CONTENT

ZDNet will continue to provide comprehensive and authoritative coverage of
the technology field in order to attract users and increase the value of its
sites to advertisers and merchants. Based on market research and user traffic
and feedback, ZDNet will continue to identify technology trends and develop
innovative sites that appeal to specific market segments and user interests. In
the past 12 months, ZDNet has introduced 16 new sites (or new areas within
existing sites) including special areas addressing Year 2000 issues, small
businesses, electronic commerce and technology-related careers.

GROW THE ZDNET COMMUNITY

ZDNet seeks to further grow its membership base by continuing to provide
interesting forums, chat groups and user groups, developing additional
interactive capabilities, promoting new online personalities and offering
insights from a broad range of experts. As a response to these efforts, ZDNet's
registered user community has increased by 92% over the last 12 months. ZDNet
also plans to offer additional member-only services, such as the recently
launched ZDRewards.

BUILD ZDNET BRAND STRENGTH

ZDNet seeks to reinforce its brand recognition and extend its reputation as a
leading site among users of technology information by continuing to leverage
the Ziff-Davis and

59
<PAGE>

ZDNet names. ZDNet's brand-building initiatives include displaying the ZDNet
brand on all ZDNet site pages (including those accessed through the portals of
its strategic partners),
providing consistent formats for easy navigation on all its sites and promoting
a common registration program for users. ZDNet plans to continue to promote the
ZDNet brand in ZD publications and events and to otherwise coordinate marketing
efforts with ZD.

INCREASE ADVERTISING AND COMMERCE REVENUE

ZDNet seeks to increase revenue generated from advertising and commerce by
continuing to develop innovative content, growing its user community, expanding
its base of technology advertisers, attracting consumer and other advertisers
and facilitating commerce opportunities. ZDNet continually refines its online
tracking reports to better enable advertisers and merchants to demonstrate
their advertising effectiveness, evaluate their marketing initiatives and
increase the rate of return on their advertising investments. ZDNet plans to
increase the number of its revenue-sharing commerce relationships with leading
technology and consumer product providers. ZDNet also plans to increase the
number of product listings on its ComputerShopper.com channel and expand its
ability to facilitate electronic commerce.

STRENGTHEN AND EXPAND STRATEGIC ALLIANCES

ZDNet seeks to attract traffic and revenue to its sites through its strategic
alliances with key Internet companies. ZDNet currently has strategic alliances
with many of the Web's leading sites, including Yahoo!, Excite, MSNBC and Deja
News, and plans to establish new alliances as opportunities arise. As part of
these alliances, ZDNet typically provides branded content for its partners'
sites in return for a variety of benefits including revenue and increased
access to a broader consumer base.

EXTEND INTERNATIONAL PRESENCE

ZDNet had localized editions in more than 16 countries as of September 30,
1998 and will continue to expand into selected overseas markets through
international launches as well as joint ventures and licensing arrangements
with local operating partners.

ZDNET SITES AND SERVICES

ZDNet offers more than 60 interconnected and easily navigable sites focused
on providing comprehensive, authoritative and timely online technology content,
creating an active community environment for its users and providing
opportunities for commerce.

ZDNet considers its content to be the most thorough and interesting content
on technology that is available online. ZDNet estimates that it currently
offers more than 300,000 pages of content on its interconnected sites where
users can research, evaluate, learn, interact, download and shop. ZDNet creates
original content using its own skilled and dedicated team of 143 editors,
online producers, developers and operations staff and also has access to
content from ZD publications and various strategic alliance partners. ZDNet's
content is divided broadly into "channels" that aggregate information from a
variety of

60
<PAGE>

sources around a specific topic area or audience focus, thereby facilitating
accessibility. All channels can be reached through the main zdnet.com home page
or through their own distinct domains, making browsing and searching easy.

ZDNet seeks to foster a sense of community and engage its users in an
interactive online experience where they can express opinions and share
information about technology-related products and issues. ZDNet offers a
variety of features and activities designed to facilitate its community growth
and build user loyalty and affinity. Users can personalize the content they
seek and join user groups with others who have similar interests. In addition,
users can activate the "talk-back" feature, which allows them to state their
views and "e-mail to a friend" feature, which allows them to easily send
articles of interest to others. During November 1998, ZDNet estimates that
100,000 e-mails were sent using the e-mail to a friend feature. Many of ZDNet's
channels provide moderated forums and chat events on a variety of current news
and segment topics and certain hosts of these forums have become popular
Internet personalities.

ZDNet seeks to facilitate commerce on the Internet by combining information
about hardware and software products and services with direct access to
vendors. ZDNet's primary computer commerce site, ComputerShopper.com, was one
of the first Web shopping services to integrate comparative pricing, how-to
guides, buying tips, specifications, product reviews and multiple direct
purchasing sources. ComputerShopper.com currently displays products from more
than 100 vendors in over 85 product categories and enables shoppers to both
evaluate products and directly make purchases online.

The following table highlights a number of ZDNet sites:

SELECTED SITES DESCRIPTION
- -------------- -----------
ANCHOR DESK..... Inside analysis of technology news and products
[LOGO]
AT HOME......... Resources for home computing
[LOGO]
CAREERS......... Employment center for computer industry professionals
[LOGO]

CLASSIFIEDS..... Ads and person-to-person auctions for computing products
[LOGO]
COMMUNITY
CENTRAL......... Worldwide computing community
[LOGO]
COMPUTERSHOPPER.COM.. Marketplace to shop, compare and buy
[LOGO]
DEVHEAD......... Tools, tips, and advice for Web developers
[LOGO]
E-BUSINESS...... Business advice on e-commerce opportunities
[LOGO]

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<PAGE>

SELECTED SITES DESCRIPTION
- -------------- -----------
ENTERPRISE...... News, reviews and analytical editorial for IT professionals
[LOGO]
EQUIP........... Guide to electronic gadgets for home and office
[LOGO]
GAMESPOT........ Popular destination for PC and video gamer users
[LOGO]
HELP CHANNEL.... Advice on optimizing the use of a PC or Mac
[LOGO]
INTER@CTIVE
INVESTOR........ Latest financial data and news for technology investors
[LOGO]
INTER@CTIVE
WEEK...........
[LOGO] News and resources for IT professionals in interactive
communications
PC/COMPUTING.... Getting the most out of technology
[LOGO]
PC MAGAZINE..... Comparative reviews, buying advice and commentary
[LOGO]
PC WEEK......... Breaking news and analysis on the technology industry
[LOGO]
PRODUCTS
CHANNEL......... Reviews to help evaluate and select products
[LOGO]
SM@RT RESELLER..
[LOGO] News and resources for computer resellers, integrators and
consultants
SMALL BUSINESS
ADVISOR......... Technology solutions for small business professionals
[LOGO]
SOFTWARE
LIBRARY......... Source for tested and reviewed software
[LOGO]
YAHOO! INTERNET
LIFE ONLINE.... Reviews and links to interesting Internet sites
[LOGO]
ZD NETWORK
NEWS............ Timely and comprehensive news on the technology industry
[LOGO]
ZDREWARDS....... Offering members discounted Ziff-Davis products and services
[LOGO]
ZDY2K........... News and resources about Year 2000 issues
[LOGO]

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<PAGE>

SELECT ZDNET SITES

ZDNet.com (www.zdnet.com) is the home page and gateway for all of ZDNet's
sites and was ranked first among Web sites in the category of news, information
and entertainment (as measured by net reach) in October 1998 according to Media
Metrix.

ComputerShopper.com (www.computershopper.com) (formerly called NetBuyer)
supplies users with a comprehensive display of computer and technology products
in one central location with direct links to vendors to facilitate commerce
transactions. ZDNet shoppers can easily browse and search pricing and product
information, access expert recommendations and buying tips and complete their
purchases online for a unified shopping experience. Users of
ComputerShopper.com can purchase products directly on the site using a secured
server or can place orders through individual vendors (by clicking through to
the vendors' Web sites, dialing the vendors' 1-800 numbers or faxing the orders
to the vendors). Over $27 million in commerce orders were initiated through
ComputerShopper.com and forwarded to vendors in November 1998.

ZDNet Products Channel (www.zdproducts.com) is a comprehensive and
authoritative source for information on purchasing computer products and
technology. This site is organized with user-friendly search and compare
capabilities and offers readily available expert advice and reviews for a full
range of users and systems.

ZDNet Anchordesk (www.anchordesk.com) was one of the first Web sites to
provide a combination of opinionated analysis and news in an interactive e-mail
environment featuring a talk-back capability for its subscribers. This site
offers a companion e-mail newsletter which is distributed to over 1.7 million
subscribers every business day.

ZDNetwork News (www.zdnn.com) provides 24 hours a day/7 days a week coverage
for computing and technology news and information. ZDNetwork News aggregates
news through its investigative and reporting staff, its relationship with ZDTV
and ZD publications such as PC Week, Inter@ctive Week and Sm@rt Reseller and
strategic partnerships with MSNBC, Excite and others. This site also provides
audio and video clip capabilities, e-mail and customized news with MSNBC's
NewsAlert, Backweb and Pointcast.

ZDNet Games Channel-GameSpot and Videogames.com (www.gamespot.com,
www.videogames.com) offers comprehensive news, reviews, previews and tips for
all game categories. GameSpot had the largest share of game advertising revenue
among all game Web sites for the first six months of 1998. GameSpot is 70%
owned by ZDNet with the remaining interest owned by the founders of the site
and certain other employees.

ZDNet Help Channel (www.zdhelp.com) offers comprehensive tips, advice and
trouble-shooting aids for a full range of hardware and software. Users can
search, browse or access experts in chat rooms and on bulletin boards.

ZDNet Software Library (www.hotfiles.com) offers over 12,000 files of
shareware, freeware and other downloadable software programs, all of which are
professionally reviewed, rated and tested for viruses and compatibility.

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<PAGE>

ZDNet Inter@ctive Investor (www.zdii.com) provides investors with extensive,
up-to-date financial company profiles and news on technology and Internet
stocks. It provides access to multiple third-party information services such as
The Red Herring magazine, institutional equity research commentary and research
reports through Multex Systems Inc. This site ranked eighth in Barron's 1998
annual survey of the top ten Internet investment sites.

OTHER ZDNET CHANNELS

ZIFF-DAVIS PRINT PUBLICATION SITES

Each of the Ziff-Davis print publications has a branded Web site within
ZDNet's interconnected sites. Each of the sites contains content adapted from
Ziff-Davis print media and original content developed specifically for these
sites. Among the print publication sites operated by ZDNet are the companion
sites of ZD's most successful print magazines, such as PC Magazine,
PC/Computing, PC Week and Yahoo! Internet Life.

TOPICAL SITES

ZDNet also has eight sites (four launched in 1998) that are targeted at
particular audiences or topics, providing an efficient means for advertisers
and marketers to reach highly focused consumer groups. Examples of ZDNet's
targeted sites are At Home (www.zdnet.com/athome), Enterprise
(www.zdnet.com/enterprise), Small Business Advisor
(www.zdnet.com/smallbusiness), Windows (www.zdwindows.com) and Year 2000
Challenge (www.zdy2k.com). ZDNet identifies and monitors technology trends to
effectively launch and introduce new sites that address the needs of its users.

RELATIONSHIP WITH ZD

ZDNet believes that its relationship with ZD provides it with substantial
advantages over other online content providers. ZDNet has rights to use ZD's
technology content online on a preferred basis. In addition, ZDNet has access
to ZD's experience in delivering technology content through print publishing
and trade shows and can leverage ZD's experience to the online medium.

With more than 75 publications distributed worldwide, the Ziff-Davis name is
seen by a combined circulation of approximately seven million primary readers
worldwide. ZD also produced over 50 trade shows and conferences worldwide on
technology and the Internet in 1997 with over two million estimated attendees.
Through ZDU, ZD provides online interactive training to paid subscribers. ZDTV,
which ZD intends to acquire from its affiliate MAC, is the first 24-hour cable
television channel and integrated Web site focused exclusively on computers,
technology and the Internet. ZDNet believes that its relationship with ZD
offers users the advantages of an integrated media and marketing company with
multiple platforms.

ZDNet's relationship with ZD allows it to integrate the Company's marketing
activities into one cohesive resource for print, trade show and conference and
online advertising. In addition, ZDNet and ZD are able to realize benefits from
cross-promotion.

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<PAGE>

STRATEGIC ALLIANCES

ZDNet's strategic alliances are important sources of content exchange,
revenue, brand visibility and increased user traffic. ZDNet has strategic
alliances with many of the Web's leading sites. For example, ZDNet has
arrangements with Yahoo!, Excite, MSNBC and Deja News pursuant to which ZDNet-
branded content is displayed on their sites in exchange for traffic, brand
recognition, content or a percentage of the revenue generated from those sites.

ZDNet is the exclusive high-technology content partner of MSNBC, one of the
Web's largest sites for general news and sports content. Under this arrangement
ZDNet licenses content and brands to MSNBC in exchange for the exclusive right
among online computer and technology content providers to use MSNBC's general
news content. ZDNet also recently started using Deja News' technology which
allows ZDNet's users to search Usenet and participate in discussion groups,
including Usenet newsgroups. In addition, ZDNet content is distributed by
various Internet service providers such as AT&T, WorldNet, MindSpring and
BellSouth to individual and corporate customers.

INTERNATIONAL

Through wholly owned sites and joint ventures, ZDNet currently operates
localized versions of certain of its Web sites in the United Kingdom, Germany,
France and Australia. In addition, through licensing arrangements with non-U.S.
operators, localized versions of ZDNet's Web sites were available as of
September 30, 1998 in more than 16 additional countries, including Denmark,
Japan, Italy, Latin America, South Africa, Spain and Switzerland. In order to
deliver high-quality content worldwide, each of ZDNet's international Web sites
offers content tailored specifically to its local market in addition to content
translated from ZDNet's U.S. Web sites. See "Risk Factors--Risk Factors
Relating to ZDNet--Risks Associated with International Expansion".

ADVERTISING SALES AND MARKETING

ZDNet derives the principal portion of its revenue from the sale of
advertisements. For 1997 and the first nine months of 1998 advertising revenue
represented 73% and 84%, respectively, of ZDNet's net revenue. Advertising
revenue is generally derived from short-term contracts on a per impression
basis and by the number of product listings for the ComputerShopper.com site.

ZDNet believes that its user demographics are attractive to technology and
general consumer product advertisers and merchants. ZDNet has developed
extensive sales and marketing programs designed to assist advertisers in
reaching their audiences through distinctive and customizable programs. ZDNet
sells display advertising in multiple formats
(banners, sponsorship wraps, buttons, text and graphical links and e-mail
sponsorships) that allow users to link directly to the advertisers' own Web
sites or to special promotional microsites created by ZDNet on behalf of its
advertisers. In addition, advertising can be purchased in selected areas or
across ZDNet's entire network of sites.

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<PAGE>

ZDNet believes that its focused and well-trained sales and marketing
organization is important to attaining and maintaining premium advertising
pricing and maximizing revenue. ZDNet's direct sales and marketing organization
consisted of 82 professionals as of September 30, 1998. Sales and marketing are
generally organized by geographic region.

During the third quarter of 1998, 297 companies advertised with ZDNet (as
compared to 249 in the third quarter of 1997). The following is a list of
ZDNet's top fifteen advertising customers (based on advertising revenue
recorded during the third quarter of 1998):

<TABLE>
<S> <C> <C>
Active Home/X-10 First USA Microsoft
Buying Chain Gateway Necx
Chumbo Hewlett Packard Onsale
Compaq IBM Symantec
E-Trade Kingston Technology 3Com/US Robotics
</TABLE>

No advertiser accounted for more than 5% of ZDNet's revenue during 1997 or
the nine months ended September 30, 1998. ZDNet's 20 largest customers
accounted for approximately 29.3% and 35.1% of net advertising revenue during
1997 and the nine months ended September 30, 1998, respectively.

TECHNOLOGY INFRASTRUCTURE AND OPERATIONS

ZDNet has developed an expandable operations infrastructure using open
standard hardware and software systems. ZDNet's network of sites are primarily
hosted on ZDNet servers maintained at multiple locations to facilitate load
balancing and reduce potential downtimes. Additionally, ZDNet outsources
certain hosting and related functions to NewsCorp/News Internet Services, Real
Networks and InterStep, Inc. The primary data center is designed to minimize
failures by utilizing redundant equipment and connectivity paths.

ZDNet has developed systems allowing it to efficiently create new content
channels and build in personalization capabilities. With respect to
advertising, publishing and systems management tools, ZDNet has licensed
technology from Vignette (StoryServer publishing system), Thunderstone (Texis
search software) and Proxicom (threaded messages). ZDNet also has developed
complementary proprietary systems and solutions to enhance traffic and
advertising measurement functions.

COMPETITION

Competition among Internet content sites is intense and is expected to
increase significantly in the future. The market for Internet content providers
is rapidly evolving and barriers to entry are low, enabling newcomers to launch
competitive sites at relatively low cost.

ZDNet competes for advertisers, merchants, users and strategic partners with
(1) Web sites specializing in technology information, such as sites provided by
c|net, CMP, IDG and Internet.com, (2) Internet portals, search sites and
content aggregators (such as Excite,

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<PAGE>

Infoseek, Lycos and Yahoo!), (3) general purpose online service providers (such
as America Online and MSN), (4) general news sites (such as those provided by
CNN and ABC), (5) browser/software companies offering information services,
such as Microsoft and Netscape and (6) large general-interest sites, such as
Time-Warner's pathfinder.com. In addition, ZDNet competes with traditional
media content businesses such as newspapers, magazines, radio and television.
In the broad-based technology-related content sector, ZDNet believes it
competes most directly with c|net, CMP, Internet.com and IDG. Additionally,
certain ZDNet channels compete with Web sites focused on a particular
corresponding content niche. For example, GameSpot competes with Web sites such
as those provided by Imagine Media and HappyPuppy, and the ZDNet Software
Library competes with several software download sites.

Primary competitive factors in attracting users are quality, reliability,
brand recognition and depth, breadth and presentation of content. Primary
competitive factors in attracting advertisers are user demographics and volume,
ability to deliver interactive and focused advertising and cost-effectiveness.
ZDNet's success will depend on its ability to continue to provide
comprehensive, engaging content to attract and maintain both users and
advertisers.

INTELLECTUAL PROPERTY

ZDNet relies on copyright, unfair competition, trademark, service mark and
trade secret laws to protect its proprietary rights in its products and
services. ZDNet pursues the registration of its service marks, trademarks,
domain names and related logos in the U.S. and internationally as it deems
appropriate and also generally enters into contractual agreements with
licensees and other third parties to establish and protect its intellectual
property rights. In addition, ZDNet licenses certain content from third parties
and may have increased exposure to copyright infringement actions as a result
thereof. Despite these precautions, misappropriation or infringement of
proprietary information is possible and effective protection may not be
available or sufficient. In addition, legal standards relating to the validity,
enforceability and scope of protection of certain proprietary rights in
Internet-related business are uncertain and evolving. Any infringement or
misappropriation, or litigation relating thereto, might have a material adverse
effect on ZDNet.

GOVERNMENT REGULATION

Due to the increasing popularity and use of the Internet and other online
services, it is possible that new laws or regulations will be proposed and
adopted in the U.S. or elsewhere covering issues such as online privacy,
copyright and trademark, sales taxes and fair business practices or requiring
qualification to do business as a foreign corporation in certain jurisdictions.
For instance, the European Union's recently adopted privacy regulations may
limit the collection and use of certain user information. Increased
government regulation, or the application of existing laws to online
activities, could inhibit Internet growth, expose ZDNet to additional
liabilities and increase the cost of doing business.

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<PAGE>

EMPLOYEES

As of September 30, 1998, ZDNet had 304 employees, including 143 in Web
design and content development, 82 in sales, marketing, customer support and
audience development, 66 in technical development and operations and 13 in
administration, planning and finance. ZDNet also uses independent contractors
and temporary employees. None of ZDNet's employees is represented by a labor
union. ZDNet considers its relationship with its employees to be satisfactory.

FACILITIES

ZDNet's headquarters are located in San Francisco and its other principal
offices are located in the Boston metropolitan area, New York, Chicago, Los
Angeles and Seattle. The Company leases all of the property and offices
occupied by ZDNet and as a result ZDNet pays an allocated portion of the
Company's lease payments. ZDNet believes that the properties it occupies are
adequate for its current operations, and that suitable additional or
alternative space, including space available under lease options, will be
available at commercially reasonable terms for future expansion.

LEGAL PROCEEDINGS

The Company was named a defendant in an action, filed on April 17, 1998 in
the Supreme Court of the State of New York, by minority stockholders of SIM,
formerly an indirect subsidiary of SOFTBANK Corp. The complaint alleges, among
other things, that SBH, SIM's majority stockholder, acting with the Company and
two of its senior officers and directors who were directors of SIM (and who
were also named as defendants), had conflicts of interest between SIM and other
Softbank investments (including investments in the Company) and failed to act
in the best interests of SIM and the minority stockholders by taking actions
which benefitted the Company. The complaint states claims based on common law
fraud, breach of fiduciary duty and aiding and abetting theories and seeks in
excess of $200 million in damages. The Company and the other defendants have
moved to dismiss all of the claims against them other than a breach of contract
claim which is solely against SBH. Although the outcome of this case cannot be
predicted, the Company believes that there are substantial defenses to the
claims and intends to defend vigorously.

In addition, eight securities class action suits have been filed against the
Company and certain of its directors and officers in the United States District
Court for the Southern District of New York. The complaints allege that
defendants violated Sections 11, 12(a)(2) and 15 of the Securities Act in
connection with the registration statement filed by the Company with the
Securities and Exchange Commission relating to the initial public offering of
the Company's Common Stock. More particularly, the complaints allege that the
registration statement contained false and misleading statements and failed to
disclose facts that could have indicated an impending decline in the Company's
revenue. The complaints seek, on behalf of a class of purchasers of the
Company's common stock from the date of the initial public offering through
October 8, 1998, unspecified damages, interest, fees and

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<PAGE>

costs, rescission, and injunctive relief such as the imposition of a
constructive trust upon the proceeds of the initial public offering. The
complaints are as follows: Napoli v. Ziff-Davis Inc., et al., No. 98 Civ. 7158
(filed Oct. 9, 1998); Steinberg, et al. v. Ziff-Davis Inc., et al., No. 98 Civ.
7205 (filed Oct. 13, 1998); Flinker v. Ziff-Davis Inc., et al., No. 98 Civ.
7231 (filed Oct. 14, 1998); Koenig v. Ziff-Davis Inc., et al., No. 98 Civ. 7260
(filed Oct. 15, 1998); Schindler v. Ziff-Davis Inc., et al., No. 98 Civ. 7418
(filed Oct. 19, 1998); Miller v. Ziff-Davis Inc., et al., No. 98 Civ. 7541
(filed Oct. 23, 1998); Felgoise v. Ziff-Davis Inc., et al., No. 98 Civ. 8045
(filed Nov. 9, 1998) and Javier v. Ziff-Davis Inc., et al., No. 98 Civ. 8201
(filed Nov. 17, 1998). All of the complaints have been assigned to Judge
Shirley Wohl Kram. Service has not yet been effected.

In addition, two derivative suits have been filed by stockholders against all
of the directors of the Company in the Court of Chancery of the State of
Delaware for New Castle County. The complaints allege that the directors
breached their fiduciary duties to the Company by repricing the stock options
awarded to certain directors and demand the nullification of the repricing and
an injunction against exercise by the directors of any repriced option. The
complaints are as follows: Jacobs v. Ziff-Davis Inc., et al., No. 16813NC
(filed Nov. 30, 1998) and Bernd Bilstein v. Ziff-Davis Inc., et al., No.
16835NC (filed Dec. 10, 1998). Both of the claims have been assigned to Vice-
Chancellor Jack B. Jacobs. Service has not yet been effected.

Although the outcome of the foregoing cases cannot be predicted, the Company
believes that there are substantial defenses to all of the claims.

There are no other legal proceedings to which the Company is a party, other
than ordinary routine litigation incidental to its business that is not
otherwise material to the business or financial condition of the Company.

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<PAGE>

MANAGEMENT OF ZDNET

EXECUTIVE OFFICERS

The executive officers of ZDNet are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Daniel L. Rosensweig..... 37 President
Daniel B. Farber......... 48 Vice President, Editor in Chief
Barry D. Briggs.......... 43 Vice President, Advertising Sales and Marketing
Massimo De Nadai......... 43 Vice President, Business Operations
Alan Phillips............ 40 Vice President, Internet Operations and Technology
Robert C. Smahl.......... 36 Vice President, Audience Development
</TABLE>

BIOGRAPHIES OF EXECUTIVE OFFICERS

Daniel L. Rosensweig. Daniel L. Rosensweig has been President of ZDNet since
1997, having served in 1996 and 1997 as Executive Vice President of ZD Inc.'s
Internet Publishing Group. From 1995 to 1996, Mr. Rosensweig was Vice President
and Publisher of PC Magazine, and from 1994 to 1995 was Publisher of PC
Magazine. Since joining ZD Inc. in 1983, Mr. Rosensweig has also held a number
of positions, including Associate Publisher positions at PC Magazine, Computer
Shopper and PC Sources.

Daniel B. Farber. Daniel B. Farber has been Vice President, Editor in Chief
of ZDNet since 1996. During his ten years with the Company, Mr. Farber has also
served as Vice President, Editor in Chief of PC Week and MacWeek. Prior to
joining the Company, Mr. Farber held a number of editorial positions at IDG
publications, including PC World and MacWorld.

Barry D. Briggs. Barry D. Briggs has been Vice President, Advertising Sales
and Marketing of ZDNet since 1997. During his five years with the Company he
has served as Network Director of Corporate Sales, Associate Publisher of
ComputerLife, and Publisher of FamilyPC. Prior to joining the Company, Mr.
Briggs held a number of positions at Time Warner Inc., including Director of
Marketing and Sales Development at Sports Illustrated, National Sales Manager
for Time Magazine and Eastern Regional Director for all Time Inc. magazines.

Massimo De Nadai. Massimo De Nadai has been Vice President, Business
Operations of ZDNet since November 1998 and is responsible for managing
finance, administration, customer service and paid-content services. Mr. De
Nadai has been associated with ZDNet since December 1991, holding a variety of
positions in business management, business development and planning. Prior to
joining ZDNet, Mr. De Nadai held positions in technical development, product
management and general management at Cullinet Database Systems, Strategic
Information and Monchik-Weber Investment Systems.

Alan Phillips. Alan Phillips has been Vice President, Internet Operations and
Technology of ZDNet since January 1998, having previously served as ZDNet's
Director of

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<PAGE>

Internet Operations and Technology since 1995. Prior to joining the Company,
Mr. Phillips was President and CEO of Instant Information, Inc., a leading
provider of enhanced fax services from 1990 to 1994. Prior to 1990, Mr.
Phillips held several executive positions at Information Marketing Businesses,
Inc., Tekscan, Inc., and Data Resources, Inc.

Robert C. Smahl. Robert C. Smahl has been Vice President, Audience
Development of ZDNet since September 1997. Prior to joining ZDNet, Mr. Smahl
served as General Manager of Windows NT Intranet Solutions at ZD Expos where he
worked in various roles from 1993 to 1997. From 1985 to 1993, Mr. Smahl held a
variety of positions within the circulation department of ZD Publishing.

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<PAGE>

SELECTED HISTORICAL COMBINED FINANCIAL AND OTHER DATA

The following table presents Selected Historical Combined Financial and Other
Data for ZD as of and for the years ended December 31, 1995, 1996 and 1997 and
as of and for the nine month periods ended September 30, 1997 and 1998. This
data was derived from the Combined Financial Statements of ZD included
elsewhere in this prospectus. An affiliate of the Company acquired an events
business ("COMDEX") on April 1, 1995 and a print publishing business ("ZD
Publishing") on February 29, 1996; the data does not include results from the
acquired businesses for periods before the respective dates of acquisition.
However, because ZD Publishing represents ZD's principal operations, the
following table also presents Selected Historical Combined Financial and Other
Data for ZD Publishing as of and for the years ended December 31, 1993, 1994
and 1995 and as of and for the two month period ended February 28, 1996. The
data as of and for the year ended December 31, 1995 and as of and for the two
months ended February 28, 1996 were derived from the Consolidated Financial
Statements of ZD Publishing included in this prospectus. ZD Publishing data as
of for the years ended December 31, 1993 and 1994, and ZD data as of and for
the periods ended September 30, 1997 and 1998, are derived from ZD Publishing
unaudited financial statements. On May 4, 1998, the Company completed a
reorganization described in Note 1 to the Combined Financial Statements of ZD;
results for period before the reorganization are not directly comparable to
results for period after the reorganization. This table should be read in
conjunction with the Selected Historical Combined Financial and Other Data,
Management's Discussion and Analysis of Financial Condition and Results of
Operations and Combined Financial Statements for the Company, ZD and ZDNet, and
the Consolidated Financial Statements for ZD Publishing, included in this
prospectus.

<TABLE>
<CAPTION>
ZD PUBLISHING(1) ZD GROUP
--------------------------------------------- -------------------------------------------------------
NINE MONTH
TWO MONTH PERIOD ENDED
YEAR ENDED DECEMBER 31, PERIOD ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- FEBRUARY 28, --------------------------------- --------------------
1993 1994 1995 1996 1995(2) 1996 1997 1997 1998
-------- ---------- ---------- ------------ ---------- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF (IN THOUSANDS)
OPERATIONS DATA:
Revenue, net........ $639,244 $ 698,030 $ 755,419 $ 122,562 $ 202,729 $ 938,924 $1,121,543 $728,910 $ 692,981
Depreciation and
amortization....... 36,650 33,045 87,506 14,540 24,305 134,251 147,259 112,173 109,814
Income (loss) from
operations......... 623,093 681,582 65,283 8,540 62,675 104,594 131,713 8,548 (9,107)
Interest expense,
net................ -- -- 92,609 14,030 44,005 120,646 190,445 141,333 111,185
Income (loss) before
income taxes....... 623,093 681,582 (36,472) (6,539) 22,869 (26,636) (71,648) (144,051) (119,465)
Net income
(loss)(3)(4)....... 25,569 82,176 (26,002) (4,547) 10,945 (52,081) (71,179) (143,810) (86,179)
OTHER DATA:
Capital
expenditures....... $ 13,603 $ 14,606 $ 12,573 $ 384 $ 3,367 $ 21,355 $ 27,822 $ 17,291 $ 24,218
Capital
contributions to
ZDNet.............. -- -- 7,106 2,350 -- 13,630 20,664 15,799 13,298
Investments and
acquisitions, net
of cash acquired... -- -- -- -- 814,520 2,124,823 11,002 60 8,192
BALANCE SHEET DATA
(AT PERIOD END):
Cash and cash
equivalents........ $ 34,371 $1,064,174 $ 10,083 $ 13,669 $ 27,908 $ 29,915 $ 30,273 $ 26,728
Total assets........ 303,323 2,747,968 1,625,426 1,622,438 1,090,981 3,584,963 3,548,108 3,411,644
Total long-term
debt............... 353,507 1,034,000 964,153 964,153 575,450 2,522,252 2,408,240 1,526,047
Division equity
(deficit).......... (216,848) 387,718 365,150 360,717 397,881 447,756 126,130 1,344,048
</TABLE>
- -------
(1) An affiliate of the Company acquired ZD Publishing on February 29, 1996.
Because ZD Publishing represents the ZD's principal operations, ZD
Publishing data has been presented for periods before that date.

(2) An affiliate of the Company acquired COMDEX on April 1, 1995 and ZD
Publishing on February 29, 1996; ZD data does not include results from the
acquired businesses for periods before the respective dates of acquisition.

(3) During 1993 and 1994, ZD Publishing conducted its operations through
various partnerships. Accordingly, there were no income tax provisions for
those years.

(4) No historical earnings per share or share data are presented as the Company
does not consider such data meaningful. After issuance of ZDNet Stock, the
Company will report earnings per share data for ZD and ZDNet but not for
the Company.

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<PAGE>

ZD
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Ziff-Davis Inc. is a leading integrated media and marketing company focused
on computer and Internet-related technology. ZD is the division of Ziff-Davis
Inc. that engages in the businesses of print publishing, trade shows and
conferences, market research and education, among others. ZD operates in two
business segments: (1) publishing and (2) events. ZD also currently holds a
100% Retained Interest in the ZDNet, the Company's online business division,
which is accounted for under the equity method of accounting.

ZD's 27 primary U.S. and international titles, including its joint ventures,
and over 50 licensed publications, total more than 75 publications distributed
worldwide, with a combined circulation of approximately seven million primary
readers. ZD also produces some of the world's most important trade shows
related to computer technology, with over two million estimated attendees at
over 50 trade shows and conferences worldwide in 1997. ZD's COMDEX/Fall event
is the number one ranked trade show for all industries in the U.S. as measured
by total revenue, total exhibit space and number of attendees. According to
Media Metrix, in October 1998 ZD's zdnet.com web site ranked first among all
Web sites in the category of news, information and entertainment, ahead of such
sites as cnet.com, cnn.com, msnbc.com, Disney Online and espn.com. ZD's other
media and marketing platforms include market research and education.

REVENUE

ZD had net revenue of $1.122 billion for 1997. A substantial portion of ZD's
revenue is derived from the sale of advertising, which in 1997 accounted for
51.4% of total revenue. No single advertiser has comprised more than 4% of ZD's
advertising revenue during any of the last three years. However, ZD's top 20
advertisers accounted for 38.8% of total advertising revenue for 1997.

In the publishing segment, ZD's principal sources of revenue are advertising
(67.1% of 1997 total publishing revenue), circulation (18.1%) and other (14.8%)
for the year ended December 31, 1997. Circulation comprises both paid
subscriptions (11.2%) and newsstand sales (6.9%) while other includes
educational and training materials (5.6%) and market research studies (6.5%)
with the balance primarily consisting of royalties, reprints and other
miscellaneous sales. In the events segment, revenue is derived from two
principal sources: sale of exhibit space (64.8% of 1997 total segment revenue)
and attendee conference and seminar fees (14.9%). Unlike many trade show
producers, ZD derives a significant portion of its trade show revenue from
other sources (20.3%), including advertising in show-related publications,
billboards, banners, fees from managing customer-sponsored events and other
show-related activities. ZD believes these other sources will continue to be an
important growth area, particularly for its content-focused events.

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<PAGE>

ZD provides certain editorial content for ZDNet for which ZDNet pays a
royalty to ZD based on ZDNet's revenue. See Note 5 to ZD's Combined Financial
Statements in this prospectus.

COST OF OPERATIONS

In the publishing business, the principal components of ZD's production costs
are raw materials, printing and distribution, which represented 35.1%, 38.0%
and 27.0%, respectively, of total 1997 publishing production expenses. ZD's
principal raw material is paper. Paper supply and prices are subject to
volatility and may be significantly affected by many factors, including market
and economic conditions. See "Risk Factors--Other Company Risks--Risks
Associated with Fluctuations in Paper and Postage Costs" and "--Inflation and
Fluctuations in Paper and Postage Costs". The principal components of
production costs within the events business are the costs of renting and
preparing the facilities to hold the events (33.6%), direct mail and the
related costs for promotion of the events (33.2%) and program development and
presentation costs (11.3%).

The other principal operating costs for ZD are selling, general and
administrative expenses, including editorial costs. Included in these costs are
salaries, sales commissions and benefits (50.3%) along with marketing and
promotion expenses related to advertising and circulation (19.1%).

The Company provides certain selling, general and administrative services and
shared services (the "Central Services"), and the costs of these services are
allocated between ZD and ZDNet. See Note 5 to ZD's Combined Financial
Statements in this prospectus.

FACTORS AFFECTING FUTURE PERIODS

ZD's revenue and profitability are influenced by a number of external
factors, including the volume of new technology product introductions, the
amount and allocation of marketing expenditure by ZD's clients, the extent to
which sellers elect to advertise using print and online media or participate in
trade shows and conferences, changes in paper prices, availability of
appropriate venues for its largest trade shows and conferences and competition
among computer technology marketers (including print publishers, producers of
trade shows and providers of other technology information services).
Accordingly, ZD may experience fluctuations in revenue from period to period.
Many of ZD's large customers concentrate their advertising expenditures around
major new product launches. Marketing expenditures by technology companies can
also be affected by factors affecting the computer industry generally,
including pricing pressures and temporary surpluses of inventory. Revenue and
profitability are also influenced by product mix and the timing and frequency
of ZD's new product launches and launches in new markets, as well as by
acquisitions. New publications generally require several years to achieve
profitability and upon achieving initial profitability, often have lower
margins than more established publications. The launch of new publications,
trade shows and services are funded with cash flow from operations and are
expensed as incurred. Accordingly, ZD's revenue from year to year may be
affected by the number and timing of new product launches. If ZD

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concludes that a new publication, trade show or service will not achieve
certain milestones with regard to revenues, profitability and cash flow within
a reasonable period of time, management may discontinue such publication, trade
show or service or merge it into another existing publication, trade show or
service. See "Risk Factors--Other Company Risks--New Product Risks".

REDUCED DEMAND FOR ADVERTISING; RESTRUCTURING

Margin pressure on computer equipment manufacturers, industry and product
delays, lower demand in Asia and a focus on the Year 2000 transition are
contributing to a reduced demand for advertising in ZD's magazines (principally
PC Magazine, PC/Computing, Computer Shopper and PC Week). ZD believes these
factors will continue, and as announced on October 8, 1998, expects that EBITDA
for the fourth quarter of 1998 will be significantly lower than EBITDA for the
fourth quarter of 1997.

As a result of this reduced demand, ZD also announced on October 8, 1998 a
company-wide restructuring in which it discontinued three publications
(Internet Business, Equip and Windows Pro), and will streamline operating
support services, consolidate certain facilities and reduce its workforce by
approximately 10%. ZD expects to take a one time pre-tax charge of $50-60
million in the fourth quarter as part of this restructuring.

See "--Liquidity and Capital Resources--Credit Facility" below.

PRESENTATION OF FINANCIAL INFORMATION

ZD is comprised of certain operations which were acquired at various times
and completed a recapitalization in May 1998 (See Notes 1 and 2 to ZD's
Combined Financial Statements in this prospectus).

ZD's Retained Interest in 100% of the division equity of ZDNet is reflected
as "Retained Interest in ZDNet" in ZD's historical balance sheets. Similarly,
ZD's Retained Interest in 100% of the division net losses of ZDNet is reflected
as "Net loss related to Retained Interest in ZDNet" in ZD's historical
statements of operations.

The book value associated with ZD's Retained Interest in ZDNet will be
increased proportionately for net income (or decreased proportionately for net
loss) of ZDNet. In addition, that book value will be adjusted from time to time
as set forth under Note 3 to ZD's Combined Financial Statements in this
prospectus.

The Company determined the accounting for ZD's Retained Interest in ZDNet, in
part, by analogy to APB No. 18, "The Equity Method of Accounting for
Investments in Common Stock".

RESULTS OF OPERATIONS

The table below presents the results of ZD as if the assets and operations
acquired by affiliates of the Company on February 29, 1996 (as described in
Note 1 to the Combined

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<PAGE>

Financial Statements in this prospectus) had been acquired on January 1, 1995.
Purchase accounting adjustments relating to that acquisition have been
reflected through pro forma amortization, interest and income tax adjustments,
as described in note (a) to the table. Although the table presents numbers that
are not in accordance with generally accepted accounting principles, management
believes they present the most meaningful basis of comparison. The financial
information presented below may not necessarily reflect the results of
operations which would have occurred had the February 29, 1996 acquisition been
completed on January 1, 1995.

<TABLE>
<CAPTION>
ZD
YEAR ENDED DECEMBER 31,
------------------------------- NINE MONTHS ENDED
PRO FORMA SEPTEMBER 30,
-------------------- ACTUAL --------------------
1995(A) 1996(A) 1997 1997 1998
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenue, net:
Publishing $ 755,419 $ 796,602 $ 834,015 $ 607,227 $ 570,291
Events................ 202,729 264,884 287,528 121,683 122,690
--------- --------- --------- --------- ---------
958,148 1,061,486 1,121,543 728,910 692,981
--------- --------- --------- --------- ---------
Cost of production:
Publishing............ 192,900 212,287 221,367 161,740 159,654
Events................ 68,810 87,373 99,533 51,964 47,002
--------- --------- --------- --------- ---------
261,710 299,660 320,900 213,704 206,656
Selling, general and
administrative
expenses............... 456,669 499,901 521,671 394,485 385,618
Depreciation and
amortization........... 147,773 154,855 147,259 112,173 109,814
--------- --------- --------- --------- ---------
Income (loss) from
operations............. 91,996 107,070 131,713 8,548 (9,107)
Interest expense, net... (133,130) (135,500) (190,445) (141,333) (111,185)
Loss related to Retained
Interest in ZDNet...... (7,177) (17,933) (21,238) (18,463) (7,655)
Other non-operating
income................. 808 6,107 8,322 7,196 8,482
--------- --------- --------- --------- ---------
Loss before income
taxes.................. (47,503) (40,256) (71,648) (144,052) (119,465)
Provision (benefit) for
income taxes........... 14,313 26,755 (469) (242) (33,286)
--------- --------- --------- --------- ---------
Net loss................ $ (61,816) $ (67,011) $ (71,179) $(143,810) $ (86,179)
========= ========= ========= ========= =========
OTHER DATA:
EBITDA(b)............... $ 233,400 $ 250,099 $ 266,056 $ 109,454 $ 101,534
Capital expenditures.... 15,940 21,739 27,822 17,291 24,218
Capital contributions to
ZDNet.................. 7,106 15,980 20,664 15,799 13,298
Investments and
acquisitions, net of
cash acquired.......... 814,520 2,124,823 11,002 60 8,192
</TABLE>
- --------

(a) The acquisition of the publishing segment on February 29, 1996 gave rise to
different bases of accounting for the period after the acquisition versus
the period prior to the acquisition. This is primarily due to a purchase
price which exceeded the book value of the assets acquired, financed by a
higher level of both debt and equity as compared to the pre-acquisition
capital structure. The above numbers assume that the acquisition took place
on January 1, 1995; therefore, depreciation and amortization, interest
expense and net loss have been increased (decreased) by approximately
$6,064, $824, and $10,383, respectively for 1996 and $35,962, $(3,484) and
$46,759, respectively for 1995.

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<PAGE>

(b) "EBITDA" is defined as income before provision for income taxes, interest
expense, depreciation and amortization. EBITDA is not intended to represent
cash flows from operations and should not be considered as an alternative
to net income as an indicator of ZD's operating performance or to cash
flows as a measure of liquidity. ZD believes that EBITDA is a standard
measure commonly reported and widely used by analysts, investors and other
interested parties in the publishing and media industries.

NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1997

REVENUE, NET

Net revenue for the nine months ended September 30, 1998 was $693.0 million
compared to $728.9 million for the nine month ended September 30, 1997, a
decrease of $35.9 million or 4.9%. The comparability of 1998 and 1997 nine
month results was affected by the accounting treatment for certain publications
transferred to or from joint ventures as well as the shift in timing of an
event. Excluding these factors, revenue for the nine months ended September 30,
1998 decreased by $13.0 million, or 6.0% compared to the same period in 1997.

Publishing--The decline in the publishing segment's net revenue relates to
transferring certain publications to or from joint ventures. Excluding such
transfers, publishing segment net revenue improved $7.9 million or 4.3%. The
decrease was due to lower advertising in business publications partly offset by
growth in advertising in consumer publications. Advertising revenue was lower
in the business publications principally due to factors affecting the computer
technology industry during the period (as described in "Reduced Demand for
Advertising; Restructuring" above.)

Net revenue for the Macuser and MacWeek magazines contributed to Mac
Publishing, LLC were $31.9 million for the first nine months ended September
30, 1997, but are no longer consolidated into ZD's results for 1998. On May 1,
1998, ZD acquired its joint venture partner's 50% interest in Family PC
magazine. ZD now owns 100% of the magazine and its results are included in the
consolidated results from the acquisition date. Revenue from Family PC included
in the 1998 nine months results is $4.8 million.

Events--Net revenue from the events segment increased $1.0 million or 0.8%,
primarily resulting from the shift in timing of Seybold San
Francisco/Publishing 98 offset by revenue declines on smaller events.

COST OF PRODUCTION

Cost of production decreased $7.0 million or 3.3% from the 1997 period.
Publishing cost of production declined $2.0 million due to lower advertising
pages produced. The events segment accounted for $5.0 million of this decrease,
primarily attributable to the shift in timing of Seybold San
Francisco/Publishing 98.

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<PAGE>

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses were $385.6 million for the nine
months ended September 30, 1998 compared to $394.5 million for the nine months
ended September 30, 1997, a decrease of $8.9 million or 2.2%. Included in the
1998 period were $3.2 million of one-time costs for office relocations along
with $9.9 million of costs related to launches of new publications. Excluding
the one-time costs, recurring expenses decreased 3.1% principally related to
efficiencies realized in combining the publishing and events business through
the reorganization and in particular, the consolidation of the two former
events entities into one business unit.

DEPRECIATION AND AMORTIZATION

Total depreciation and amortization expense was $109.8 million for the 1998
period compared to $112.2 million in the 1997 period, a decrease of $2.4
million or 2.1%. The decline was the result of certain assets being fully
depreciated or amortized in 1997.

INTEREST EXPENSE, NET

Net interest expense declined to $111.2 million for the 1998 period from
$141.3 million in 1997. The reduction was attributed to a lower level of debt
outstanding due to principal repayments and the capitalization of $908.7
million of intercompany indebtedness. The weighted average cost of debt did not
change significantly between the periods.

LOSS RELATED TO RETAINED INTEREST IN ZDNET

The loss from ZD's Retained Interest in ZDNet decreased to $7.7 million in
1998 from $18.5 million in 1997 due to the improved operating performance of
that business. See "ZDNet Management's Discussion and Analysis of Financial
Condition and Results of Operations".

OTHER NON-OPERATING INCOME, NET

Other non-operating income, net primarily reflects ZD's equity share of
earnings and losses from joint ventures and fees earned from management of
events not produced by ZD. Income of $8.5 million for the 1998 period increased
$1.3 million from the $7.2 million of income in 1997. The increase was
attributed to higher earnings from Mac Publishing, LLC partly offset by the
revised royalty and fee arrangement for the events business in Japan.

INCOME TAXES

The combined income tax benefit was $33.3 million and $0.2 million for the
nine months ended September 30, 1998 and 1997, respectively. The increase was
due primarily to the losses with respect to the MAC Assets, which were not
deductible until the MAC Assets were purchased by ZD from an affiliate on May
4, 1998. The income tax benefit for the period results from applying ZD's
estimated annual effective tax rate to the pretax loss of the nine months ended
September 30, 1998.

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<PAGE>

NET LOSS

As a result of the changes described above, the net loss for the nine months
ended September 30, 1998 was $86.2 million compared to a net loss of $143.8
million for the nine months ended September 30, 1997.

EBITDA

EBITDA for the nine months ended September 30, 1998 was $101.5 million
compared to $109.5 million for the period in 1997. Results were unfavorable as
compared to last year primarily due to a lower level of advertising in the
higher margin business publications as well as a decline in the earnings from
the COMDEX/Spring event partly offset by the shift in timing of Seybold San
Francisco/Publishing 98. In addition, during the nine months ended September
30, 1998, ZD recorded $3.2 million of one-time costs for office relocations and
incurred $6.4 million of losses from launching new publications.

YEAR ENDED DECEMBER 31, 1997 COMPARED WITH PRO FORMA YEAR ENDED DECEMBER 31,
1996

REVENUE, NET

Net revenue increased by $60.0 million or 5.7% from $1,061.5 million in 1996
to $1,121.5 million in 1997.

Publishing--Net revenue from publishing grew by $37.4 million or 4.7% from
$796.6 million to $834.0 million. Approximately $22 million was due to
inclusion of a full year of results for the electronic gaming publications
acquired in mid-1996 and two publications launched in late 1996. Increases in
advertising rates, generally ranging between 3% and 10%, and a 5.1% increase in
advertising pages contributed $11.5 million. Revenue from international
operations, which generated 9.5% of the segment's revenue, decreased by $1.5
million due to the strengthening of the U.S. dollar relative to the major
European currencies. Continued growth from new educational product launches and
sales of market research studies accounted for the balance of the revenue
growth.

Events--Net revenue from events increased $22.6 million or 8.5% from $264.9
million to $287.5 million. Approximately $15 million of the increase was due to
11 new trade show launches, including revenue from ancillary show-related
sources. The balance of revenue growth was due to higher exhibitor rates
charged at the major events, partly offset by a decline in revenue from
COMDEX/Spring and certain U.K. events.

COST OF PRODUCTION

Production costs increased $21.2 million or 7.1% from $299.7 million to
$320.9 million.

Publishing production costs increased $9.1 million or 4.3% from $212.3
million in 1996 to $221.4 million. Costs related to new launches and volume-
related growth increased approximately $20 million but were partly offset by
approximately $10 million of lower paper costs.

79
<PAGE>

The costs of producing events increased $12.2 million or 14.0% from $87.3
million to $99.5 million primarily as a result of costs related to new events
launched in 1997.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses increased $21.8 million or 4.4%
from $499.9 million to $521.7 million. The increase was due to the addition of
employees to support base business volume growth and launches of new products
and services. Results included a one-time $6.0 million charge for the
consolidation and restructuring of the events business which was announced in
the fourth quarter of 1997. Costs for the publishing segment rose 1.2% while
those for the events segment rose 22.1% due to the number of new launches and
the one-time restructuring charge.

DEPRECIATION AND AMORTIZATION

Total depreciation and amortization decreased $7.6 million to $147.3 million
in 1997. The decrease in depreciation and amortization expense was a result of
certain assets being fully depreciated in 1996.

INTEREST EXPENSE, NET

Net interest expense increased $54.9 million or 40.5% to $190.4 million in
1997 due to interest on an additional $900 million of intercompany indebtedness
to Softbank incurred to finance a return of capital.

LOSS RELATED TO RETAINED INTEREST IN ZDNET

The loss from ZD's Retained Interest in ZDNet increased to $21.2 million in
1997 from $17.9 in 1996 due to the operating performance of that business. See
"ZDNet Management's Discussion and Analysis of Financial Condition and Results
of Operations".

OTHER NON-OPERATING INCOME, NET

Other non-operating income, net increased $2.2 million from $6.1 million in
1996 to $8.3 million or 36.1% primarily due to a $2.2 million or 36.3% increase
in ZD's share of Mac Publishing, LLC's earnings.

INCOME TAXES

The 1997 combined income tax benefit of $0.5 million compares to a pro forma
income tax provision of $26.8 million in 1996. The improvement in the tax
provision is due to a higher pre-tax loss giving rise to a tax benefit. The
difference between the 1997 and 1996 effective tax rates and the federal
statutory tax rate of 35.0% is primarily due to non-recognition of tax losses
generated by the MAC Assets ($42.0 million and $63.0 million in 1997 and 1996,
respectively), non-deductible goodwill amortization ($10.2 million and $8.6
million, respectively) and state and local income taxes.

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<PAGE>

NET LOSS

As a result of the changes described above, net loss for the period increased
$4.1 million or 6.1% from $67.0 million to $71.1 million.

EBITDA

EBITDA for 1997 was $266.1 million, an increase of $16.0 million or 6.4% from
the $250.1 million generated in 1996. The increase was due to higher revenue
and management fee income, net of higher production costs and selling, general
and administrative expenses. The ratio of EBITDA to revenue remained relatively
constant at 23.7% for 1997 compared to the 1996 margin of 23.6%. Excluding the
one-time charge related to the consolidation and restructuring of the trade
shows and conferences business, the 1997 ratio would have been 24.3%.

PRO FORMA YEAR ENDED DECEMBER 31, 1996 COMPARED WITH PRO FORMA YEAR ENDED
DECEMBER 31, 1995

REVENUE, NET

Net revenue increased by $103.4 million or 10.8% from $958.1 million in 1995
to $1,061.5 million in 1996.

Publishing--Net revenue from publishing grew by $41.2 million or 5.5% from
$755.4 million to $796.6 million. Higher overall advertising rates combined
with a 12.4% growth in advertising pages contributed 59.3% of the net revenue
increase while the mid-1996 acquisition of several electronic gaming
publications accounted for 40.7% of the increase. New educational product
launches and growth in sales of market research studies accounted for the
balance of net revenue growth.

Events--Net revenue from events increased $62.2 million or 30.7% from $202.7
million to $264.9 million. The launch of new international trade shows
accounted for 32.2% of the growth while the introduction of customized events
contributed 19.3%. The balance of the increase was due to growth in exhibitor
square footage and rates at ZD's major U.S. shows.

COST OF PRODUCTION

Production costs increased $38.0 million or 14.5% from $261.7 million to
$299.7 million.

Publishing production costs increased $19.4 million or 10.1% from $192.9
million to $212.3 million, primarily due to volume-related growth and higher
paper costs. Approximately 35.1% of the increase was attributed to costs for
the magazines acquired mid-year while increased frequencies on certain
publications and a full year of costs for publications launched in late 1995
accounted for 20.1% of the increase.

The costs of producing events increased $18.6 million or 27.0% from $68.8
million to $87.4 million. The increase was driven by the cost of new product
launches as well as higher direct marketing and facility-related fees for the
major U.S. events.

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<PAGE>

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses rose $43.2 million or 9.5% from
$456.7 million to $499.9 million. This increase reflects the addition of
employees to support growth in the base business along with the launches of new
products and services. Costs for the publishing segment rose 3.6% while those
for the events segment rose 61.6%, reflecting a higher level of new launches
and the absence of COMDEX related expenses for the first three months of 1995
(COMDEX was acquired April 1, 1995).

DEPRECIATION AND AMORTIZATION

Total depreciation and amortization of $154.9 million increased $7.1 million
from $147.8 million in 1995 primarily due to the inclusion of a full year's
depreciation and amortization relating to COMDEX, which was acquired April 1,
1995.

INTEREST EXPENSE, NET

Net interest expense increased $2.4 million or 1.8% on a pro forma basis due
to higher average debt levels in 1996.

LOSS RELATED TO RETAINED INTEREST IN ZDNET

The loss from ZD's Retained Interest in ZDNet increased to $17.9 million in
1996 from the $7.2 million in 1995 due to the operating performance of that
business. See "ZDNet Management's Discussion and Analysis of Financial
Condition and Results of Operations".

OTHER NON-OPERATING INCOME, NET

Other non-operating income, net increased to $6.1 million compared to $0.8
million in 1995 due to ZD's share of earnings from Mac Publishing, LLC of $5.3
million.

INCOME TAXES

The combined income tax provision of $26.8 million compares to an income tax
provision of $14.3 million in 1995. The unfavorable variance in income taxes
and the difference in the 1996 and 1995 effective tax rates from the federal
statutory tax rate of 35% is primarily attributable to non-recognition of tax
losses generated by the MAC Assets ($63.0 million in 1996) and non-deductible
goodwill amortization ($8.6 million in 1996).

NET LOSS

As a result of the changes described above, net loss for the period increased
$5.2 million from $61.8 million to $67.0 million.

EBITDA

EBITDA for 1996 was $250.1 million, an increase of $16.3 million or 7.0% from
the $233.8 million generated in 1995. The increase was due to higher revenue
and

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<PAGE>

management fee income, net of higher production costs and selling, general and
administrative expenses. The cost of new product launches caused the growth
rate of expenses to exceed the revenue growth rate and, as a result, the ratio
of EBITDA to revenue of 23.6% in 1996 declined slightly compared to the 1995
margin of 24.4%.

LIQUIDITY AND CAPITAL RESOURCES

As a result of the May 4, 1998 reorganization, ZD's intercompany debt owed to
Softbank was reduced to $83.1 million. Such indebtedness bears interest at 9.9%
and matures in February 2009. Concurrently with the Company's initial public
offering, the Company (on behalf of ZD) issued and sold $250 million aggregate
principal amount of Notes. In addition, the Company (on behalf of ZD) entered
into a $1.35 billion credit facility, and borrowed $1.25 billion thereunder, to
provide additional funds for the repayment of intercompany debt to Softbank and
to provide for ZD's working capital requirements. See Note 2 to the Combined
Financial Statements included in this prospectus.

The credit facility, as amended, consists of a seven year $400 million
reducing revolving credit facility, a seven year $450 million term loan and an
eight year $500 million term loan. There are no scheduled reductions in the
revolving credit commitment or amortization under the term loan until September
2000.

At September 30, 1998, ZD's outstanding total debt was $1,534.6 million
(excluding unamortized discount) which consisted of $79.6 million due to
Softbank, $250 million in notes and $1,205 million under the credit facility.

Cash and cash equivalents were $26.8 million at September 30, 1998 and $37.7
million at September 30, 1997. The balance decreased $10.9 million due to the
factors discussed below:

Cash provided by operations was $87.5 million for the nine-months ended
September 30, 1998 compared to a use of $9.3 million for the nine-months ended
September 30, 1997. The increase from 1997 to 1998 was attributed to ZD's lower
losses and a decrease in funding to affiliates and to ZDNet.

Cash used for investing activities for the nine-months ended September 30,
1998 and 1997 was $45.7 million and $33.2 million, respectively. The majority
of these expenditures were for computer equipment and leasehold improvements as
well as funding the operation of ZDNet. In addition, in 1998 ZD acquired a
tradeshow in Canada, an additional 50% of Family PC and a European marketing
database company. Acquisitions in the 1997 period reflected the purchase of a
70% interest in GameSpot.

Cash used in financing activities totaled $45.4 million for the nine months
ended September 30, 1998, representing proceeds from the reorganization and
initial public offering of $1.863 million, net of transaction costs, and
funding from the parent company of $20.4 million offset by the repayment of
debt and amounts due to affiliates of $1,929.3 million. Cash provided by
financing activities in the same period in 1997 amounted to $50.2 million
representing capital contributions partly offset by repayments of intercompany
debt.

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<PAGE>

ZD believes based on its current level of operations and anticipated growth,
that ZD's ability to generate cash, together with cash on hand and available
lines of credit, will be adequate to make required payments of principal and
interest on ZD's indebtedness and to fund anticipated capital expenditures and
future working capital requirements for the next 12 months. However, actual
capital requirements may change, particularly as a result of any acquisitions
ZD may pursue. The ability of ZD to meet its debt service obligations and
reduce its total debt will depend upon the future performance of ZD.

FUNDING FOR ZDNET

In the financial statements of ZD and ZDNet, whenever ZDNet had a cash need
(other than cash needs of ZDNet's foreign operations or cash needs of ZDNet's
subsidiaries that are not wholly owned), that cash need was funded by ZD and
accounted for as a capital contribution (i.e., as an increase in ZDNet's
division equity and ZD's Retained Interest in ZDNet). Accordingly, no interest
income from ZDNet has been reflected in the financial statements of ZD. After
the date on which ZDNet Stock is first issued, the Company will account for all
cash transfers from one Group to or for the account of the other Group (other
than transfers in return for assets or services rendered or transfers in
respect of ZD's Retained Interest that correspond to dividends paid on ZDNet
Stock) as inter-Group revolving credit advances (bearing interest at the rate
at which the Company could borrow such funds on a revolving credit basis) (as
the Board determines in its sole discretion) unless the Board determines that a
given transfer (or type of transfer) should be accounted for as a long-term
loan, a capital contribution increasing ZD's Retained Interest in ZDNet or a
return of capital reducing ZD's Retained Interest in ZDNet.

CREDIT FACILITY

For the reasons described under "Reduced Demand for Advertising;
Restructuring" above, ZD expects its debt to EBITDA ratios at December 31, 1998
to be above the levels that had been required by its credit facility at such
date. On December 16, 1998, the lenders of the $1.35 billion credit facility
agreed to amend certain provisions of that facility. The amended provisions
include an increase to the allowed leverage ratios. In return, ZD agreed to pay
a one-time fee and increase rates on amounts borrowed under the credit
facility. Had the increased interest rates been in effect for the period from
the Company's initial public offering to September 30, 1998, interest expense
would have increased by approximately $7.3 million.

INTEREST RATE SWAPS

On June 10, 1998, ZD entered into interest rate swap agreements, with an
aggregate notional amount of $550 million. Under these swap agreements, which
commenced on August 10, 1998, ZD will receive a floating rate of interest based
on three-month LIBOR, which resets quarterly, and ZD will pay a fixed rate of
interest each quarter for the terms of the respective agreements. The weighted
average fixed rate ZD will pay under these agreements is 5.85%. ZD has entered
into these agreements solely to hedge its interest rate risk.

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<PAGE>

ZDTV

ZD has a license and services agreement to develop ZDTV. ZDTV is owned by MAC
Holdings America Inc. ("MHA"), but as part of the license and services
agreement, MHA has granted ZD an option, exercisable through December 31, 1998,
to purchase all of MHA's interest in ZDTV for an amount equal to MHA's
investment plus 10% per annum for the period of its investment. MHA is wholly
owned by Mr. Masayoshi Son, a director of the Company. Pursuant to the license
and services agreement, ZD has agreed to fund ZDTV's operations on behalf of
MHA through unsecured advances, which for approved levels of expenditures are
to be reimbursed by MHA. Such advances bear interest at the 30-day LIBOR rate
plus 0.50%. ZDTV's cash requirements for 1998 are currently expected to be
approximately $53.0 million, of which $40.3 million had been spent through
September 30, 1998. On November 17, 1998, ZD announced its intention to
exercise its option to purchase ZDTV for a purchase price expected to be
approximately $85 million. Of this amount, it is expected that the Company will
make a cash payment of approximately $32 million and convert the advances
previously paid to MHA estimated at $53 million. In addition, ZD announced a
letter of intent had been entered into with Vulcan Programming, Inc.
("VULCAN"), whereby Vulcan would purchase 33% of ZDTV for approximately $54
million. Other than advances to ZDTV which are reported on the Company's
balance sheet, the results of operations of ZDTV are not included in the
Company's results.

SEASONALITY

Historically, ZD's business has been seasonal as a significant portion of
revenue has occurred in the second and fourth quarters. The following table
sets forth certain unaudited quarterly combined statements of operations data
for each of the eight quarters in the period ended September 30, 1998. In the
opinion of the Company's management, this unaudited information has been
prepared on a basis consistent with the audited Combined Financial Statements
of ZD appearing elsewhere in this prospectus and includes all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the information set forth therein when read in conjunction with the Combined
Financial Statements and related notes thereto. The operating results for any
quarter are not necessarily indicative of results for any future period.

85
<PAGE>

<TABLE>
<CAPTION>
QUARTERS ENDED
(DOLLARS IN THOUSANDS)
-----------------------------------------------------------------------------------------------
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1996 1997 1997 1997 1997 1998 1998 1998
------------ --------- -------- ------------- ------------ --------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue, net:
Publishing............. $226,510 $204,281 $211,333 $191,613 $226,788 $190,995 $197,820 $181,476
Events................. 122,545 15,321 82,135 24,227 165,845 27,121 65,782 29,787
-------- -------- -------- -------- -------- -------- -------- --------
Total revenue........... $349,055 $219,602 $293,468 $215,840 $392,633 $218,116 $263,602 $211,263
Percentage of total
year.................. 32.9% 19.6% 26.2% 19.2% 35.0% n/a n/a n/a
Cost of production...... 92,923 60,842 91,152 61,710 107,196 69,048 74,710 62,898
Selling, general and
administrative expenses 143,235 130,837 132,015 131,633 127,186 131,165 127,084 127,369
Depreciation and
amortization........... 40,799 37,196 37,173 37,804 35,086 35,748 37,859 36,207
Income (loss) from
operations............. 72,098 (9,273) 33,128 (15,307) 123,166 (17,845) 23,948 (15,211)
Income (loss) before
taxes.................. 31,821 (59,901) (17,448) (66,703) 72,404 (68,059) (11,940) (39,466)
Net income (loss)....... 25,205 (59,817) (17,387) (66,606) 72,631 (5,121) (76,560) (4,498)
EBITDA.................. 109,531 24,008 66,624 18,822 156,602 13,628 62,072 25,834
Percentage of total
year.................. 43.8% 9.0% 25.0% 7.1% 58.9% n/a n/a n/a
</TABLE>

INFLATION AND FLUCTUATIONS IN PAPER AND POSTAGE COSTS

ZD continually assesses the impact of inflation and changes in paper prices.
ZD generally enters into contracts for the purchase of paper which adjust the
price on a quarterly basis. Paper prices began to rise in 1994, rose
significantly in 1995 and 1996 and then decreased in 1997. During 1998, paper
prices were relatively flat. Management anticipates that paper prices will
remain relatively stable in 1999. ZD will continue to monitor the impact of
inflation and paper prices and will consider these matters in setting its
pricing policies. ZD frequently reviews its purchasing and manufacturing
processes for opportunities to reduce costs and mitigate the impact of paper
price and postage rate increases (such as purchasing lighter-grade paper stock
or, when paper prices are at cyclical lows, increasing paper inventory or
entering into longer term contracts with suppliers). However, ZD has not
entered, and does not currently plan to enter, into long-term forward price or
option contracts for paper. Management estimates postage costs will increase
approximately 3.5% in 1999. See "Risk Factors--Other Company Risks--Risks
Associated with Fluctuations in Paper and Postage Costs" and "ZD Description of
Business--Print Publishing--Paper and Printing".

YEAR 2000 ISSUES

During 1997, the Company, including the businesses comprising ZD, began a
review of its computer systems and related software to identify systems and
software which might malfunction due to misidentification of the Year 2000. The
Company is using both internal and external resources to identify, correct or
reprogram, and test systems for Year 2000 readiness. Some of the Company's
computer systems and databases, including its subscription fulfillment and
payroll systems, are managed by third parties under contractual arrangements.
The Company has requested those third parties to advise the Company as to
whether they anticipate difficulties in addressing Year 2000 problems and, if
so, the

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nature of such difficulties. Management of the Company has not finally
determined the cost associated with Year 2000 readiness efforts and the related
potential impact on the Company's results of operations. Amounts expended to
date have not been material. There can be no assurances the Company's systems
or systems of other companies on which the Company relies will be converted in
time or that any such failure to convert by the Company or another company will
not have an adverse effect on ZD's financial condition or results of
operations. After evaluating its internal compliance efforts as well as the
compliance of third parties as described above, by the end of the calendar year
1998, the Company will develop during 1999 contingency plans to address
situation in which various systems of the Company or third parties with which
the Company does business, are not Year 2000 compliant. Any Year 2000
compliance problem could have a material adverse effect on ZD's business,
results of operations and financial condition. Management believes a likely
"worst case scenario" is that some customers and vendors will be unable to
complete transactions on a timely basis which may have an adverse impact on the
timing of ZD's cash flows and potentially ZD's ability to deliver products or
services.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

SFAS No. 130, "Reporting Comprehensive Income", issued in June 1997, will
require ZD to disclose, in financial statement format, all non-owner changes in
equity. Such changes include, for example, cumulative foreign currency
translation adjustments, certain minimum pension liabilities and unrealized
gains and losses on securities available for sale. This statement is effective
for fiscal years beginning after December 15, 1997 and requires presentation of
prior period financial statements for comparability purposes. Such transactions
historically have not been material to ZD.

ZD expects to adopt the above statements beginning with its 1998 financial
statements.

In June 1998, the Financial Accounting Standards Board issued SFAS 133
"Accounting for Derivative Instruments and Hedging Activities". SFAS 133
establishes accounting and reporting standards for derivative instruments and
for hedging activities and is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. The Company does not expect the adoption of SFAS
133 to have a material impact on ZD's results of operations.

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DESCRIPTION OF BUSINESS

Ziff-Davis Inc. is a leading integrated media and marketing company focused
on computing and Internet-related technology. ZD is the division of Ziff-Davis
Inc. focused on the businesses of print publishing, trade shows and
conferences, market research, education (including ZDU, our Internet-based
educational service) and television (including an online component). ZD
provides global technology companies with marketing strategies for reaching key
decision-makers.

ZD's PC Magazine, PC Week and Computer Shopper magazines are the top three
computer magazines in the U.S. and are among the top 25 U.S. magazines, each as
measured by total revenue in 1997. In 1997, ZD was the largest technology
publisher in the U.S. in terms of total magazine revenue (with at least 50%
more total magazine revenue than its closest competitor). In that same year, ZD
accounted for 36.8% of all advertising and circulation dollars spent in
computer periodicals. ZD believes its publications provide readers and
advertisers with comprehensive market and product coverage and quality
editorial content.

ZD also produces some of the world's most important trade shows serving
vendors, resellers, buyers and users of computer technology and the Internet.
In 1997, ZD produced over 50 trade shows and conferences worldwide with over
two million estimated attendees. ZD's COMDEX/Fall event is the number one
ranked trade show for all industries in the U.S. as measured by total revenue,
total exhibit space and number of attendees.

ZD's other media and marketing platforms include market research, education
and publication of computer-related newsletters and training manuals. ZD also
currently has a 100% Retained Interest in ZDNet (the Company's online business
division) (see "ZDNet Description of Business"), although that interest will
decline if the Company completes its offering of ZDNet Stock as currently
planned. In addition, ZD has a license and services agreement to manage ZDTV,
the first 24-hour cable television channel and integrated Web site focused
exclusively on computers, technology and the Internet. ZDTV was launched in May
1998. ZD has announced its intention to exercise its option (which, unless
extended, expires December 31, 1998) to purchase ZDTV from MHA, which is wholly
owned by Mr. Masayoshi Son, a director of the Company. See "--Television".

INDUSTRY BACKGROUND

Technology continues to be one of the largest and fastest growing sectors of
the U.S. economy. The market for technology goods and services is rapidly
expanding due to increased integration of computers into the workplace and
home, shortened product life cycles and increased use of the Internet. The
demand for computer technology to enhance productivity and the increasing
number of applications in the areas of education, entertainment and
communications has dramatically increased the number of computers in use
worldwide (from 150 million in 1993 to over 300 million in 1997). This increase
in

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computer usage has significantly broadened the consumer and business markets
for computer technology. In addition, rapid technological advances have
shortened product life cycles. Today, the estimated marketable product life of
a PC is less than six months as compared to five years in 1981. The Internet
has also become a widely accepted information tool. Forrester Research Inc.
estimates that the number of adult Web users will reach 51 million in the U.S.
by the end of 1998 and will grow to 99 million by the end of 2001.

These factors have led to increased demand among buyers and users of computer
technology product for objective, up-to-date information and analysis. To meet
this demand, sellers of computer technology products need to effectively
advertise to increase sales, educate consumers, improve end-user satisfaction
and build brand loyalty. Computer technology-focused media enables sellers to
communicate their message effectively by targeting a focused customer base. As
a result of a broadening consumer base containing favorable demographics,
computer technology publications and other media are becoming increasingly
attractive as a platform for consumer product advertising.

COMPUTER TECHNOLOGY PRINT PUBLICATIONS MARKET

Advertising and circulation revenue for computer-oriented print publications
grew on average 10% a year from 1994 to 1997, totaling $1.7 billion in 1997, an
11% increase from 1996. However, in the third quarter of 1998 computer
advertising pages decreased 12% as compared to the same period in 1997,
according to Adscope and CMR. The Company believes the decline in the
technology advertising market is due mainly to continuing margin pressure on
computer equipment manufacturers, industry and product delays, lower demand in
Asia and a focus on the Year 2000 transition.

COMPUTER TECHNOLOGY TRADE SHOWS

Trade show attendees are presented with product advertisements in the form of
exhibits and "editorial" content in the form of conferences and other ancillary
forums. Producers of trade shows and conferences generate revenue from exhibit
space sales, advertising and attendance fees. Trade shows and conferences allow
sellers to conduct a large volume of face-to-face sales presentations to
qualified buyers in a short period of time. Professional attendees include
hardware and software manufacturers and developers, sales and distribution
personnel and large volume end-users. Industry leaders such as Microsoft
Corporation and Cisco Systems, Inc. use these events to promote the launch of
important products in order to reach top-ranking decision-makers in the
computer technology industry.

Trade shows are an increasingly important marketing strategy for information
technology vendors and can be an effective medium for generating and closing
sales. In 1998 estimated exhibit space revenue from North American computer-
product trade shows was approximately $686 million, exhibit square footage rose
17% from 1997, the number of exhibiting firms increased 26% from 1997 and
attendance at such shows rose 20% from 1997.

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ZD STRATEGY

ZD's objective is to be the preferred marketing partner to technology vendors
and service providers seeking to reach primary decision-makers involved in the
specification and purchase of their products and services. The key elements of
ZD's strategy are:

FOCUS ON THE TECHNOLOGY MARKET

ZD believes that its focus on the technology market provides it with
substantial opportunities to attract both audiences and advertisers.

DEVELOP THE MOST COMPREHENSIVE, OBJECTIVE AND AUTHORITATIVE CONTENT

ZD strives to produce the most differentiated, high quality content to
attract category brand-specifiers and decision-makers. ZD Labs, its computer
testing facility, enables ZD to provide reliable and authoritative product
evaluations to the business and consumer markets. The ability to provide
focused audiences with targeted information attracts leading advertisers and
exhibitors to ZD's products and services.

BUILD BRAND STRENGTH

ZD seeks growth in its core portfolio of leading brands, such as PC Magazine,
PC Week and COMDEX. ZD seeks to expand its market share of audiences and
advertisers while enhancing the quality and accessibility of its content and
marketing services. The Company's variety of business platforms enables ZD to
offer multiple media presentations of its branded content.

LEVERAGE MULTIPLE MEDIA MARKETING PLATFORMS

ZD believes that the scope and depth of the Company's products and services
across multiple media platforms creates growth opportunities exceeding those
that ZD's businesses could achieve independently. Such opportunities include
the leveraging of strong relationships with advertisers in one media platform
into other platforms, cross-marketing products and services to the audiences of
its different platforms and packaging integrated marketing products across all
platforms for large advertisers. We believe that ZD has a competitive advantage
over single platform providers because of its ability to offer clients multiple
platform marketing solutions.

LAUNCH NEW PRODUCTS AND SERVICES

ZD believes that rapid advances in technology will create additional growth
opportunities to launch new products and expand its audience and advertiser
base. ZD seeks to identify new audiences and develop products and services that
respond to their informational needs. ZD believes that the scope of its
operations and its experience in launching new products across multiple media
platforms and geographic regions enable it to more readily achieve market
acceptance for new products and services.

EXPAND GLOBAL REACH

ZD intends to leverage its brand recognition and multinational experience to
expand further into overseas markets, focusing on key markets that have size
and growth

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characteristics to support ZD's strategy of cross-media operations. ZD seeks to
further expand internationally through the launch overseas of proven U.S.
properties, joint ventures and licensing arrangements with local operating
partners and selective acquisitions.

ZD expects to fund its business and operating strategy from internally
generated cash flow from operations, which are estimated to be sufficient to
fund investments as well as repay indebtedness. See "ZD Management's Discussion
and Analysis of Financial Condition and Results of Operations".

PRINT PUBLISHING

ZD is a leading computer-related magazine publisher, with 27 primary U.S. and
international titles, including its joint ventures, and over 50 licensed
publications, totaling more than 75 publications distributed worldwide. ZD's
publications have a combined circulation of approximately seven million primary
readers worldwide. Approximately 67% and 68% of ZD's total revenue for the year
ended December 31, 1997 and for the nine months ended September 30, 1998,
respectively, was attributable to its print publishing business. ZD's magazines
are designed to appeal to a target audience of sophisticated customers in the
business and consumer markets by providing high-quality editorial content. ZD
produces monthly magazines that provide comparative, laboratory-based product
reviews and news weeklies that provide product and industry news and analysis.
ZD also serves the developing market for lifestyle and entertainment
publications that focus on technology.

ZD believes its leading position in the computer publishing market is based
upon:

. LEADING BRANDS IN KEY CATEGORIES. In 1997, ZD's PC Magazine, PC Week and
Computer Shopper magazines were the top three computer magazines in the
U.S. and among the top 25 U.S. magazines, each as measured by total
revenue.

. STRENGTH IN ADVERTISING, CIRCULATION AND NEWSSTAND SALES. In 1997, ZD
accounted for 36.8% of all advertising and circulation dollars spent in
computer periodicals. ZD's U.S. publications have a total circulation of
approximately six million primary readers, and ZD has a worldwide
circulation of approximately seven million primary readers. In 1997, PC
Magazine's circulation was greater than that of Business Week, Fortune or
Forbes. With respect to newsstand sales, ZD's publications accounted for
50.1% of all computer magazines sold in the first six months of 1998.

. HIGH QUALITY EDITORIAL CONTENT. ZD's top editors and columnists are
supported by laboratory-testing facilities, producing widely acknowledged
authoritative benchmarks for determining product quality. ZD's
comprehensive content attracts focused audiences, thereby attracting
leading advertisers and exhibitors to its products and services.

. SUCCESSFUL DEVELOPMENT OF NEW PUBLICATIONS FOR EMERGING SECTORS. ZD has
successfully introduced publications targeted at the consumer market
(FamilyPC and Computer Gaming World), technology lifestyle (Yahoo!
Internet Life), Internet professionals (Inter@ctive Week) and resellers
(Sm@rt Reseller).

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The following table sets forth information relating to ZD's primary
publications for the first nine months of 1998.

<TABLE>
<CAPTION>
FIRST NINE
1998 MONTHS
CIRCULATION PUBLICATION 1998
FIRST ----------------- FREQUENCY ADVERTISING
PUBLICATION ISSUE TYPE(1) AMOUNT(2) (PER YEAR) PAGES(3)
----------- ----- ------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
U.S. BUSINESS
PC Magazine................... 1981 P 1,176,691 22x 3,832
PC/Computing.................. 1988 P 1,009,172 12x 1,851
Computer Shopper.............. 1979 P 561,591 12x 5,085
PC Week....................... 1983 C 340,115 51x 3,987
Inter@ctive Week.............. 1994 C 150,150 45x 1,565
Macworld(4)................... 1985 P 653,676 12x 950
eMediaweekly(4)(5)............ 1987 C 85,100 48x 1,186
Sm@rt Reseller................ 1998 C 60,431 12x 609
U.S. CONSUMER
Electronic Gaming Monthly..... 1988 P 370,311 12x 848
Yahoo! Internet Life.......... 1995 P 403,923 12x 434
Computer Gaming World......... 1981 P 244,711 12x 1,542
Expert Gamer(6)............... 1988 P 156,164 12x 395
Official U.S. PlayStation
Magazine..................... 1995 P 117,295 12x 502
FamilyPC(7)................... 1994 P 386,960 12x 662
INTERNATIONAL
PC Professionell (German)..... 1991 P 178,103 12x 1,515
PC Direkt (German)............ 1992 P 154,128 12x 2,228
Internet Professionell
(German)..................... 1997 P 33,978 12x 198
PC Magazine (UK).............. 1992 P 135,002 12x 3,425
PC Direct (UK)................ 1992 P 124,232 12x 6,627
PC Gaming World (UK).......... 1997 P 41,404 12x 381
IT Week (UK).................. 1998 C 55,000 45x 748
PC Expert (French)............ 1992 P 97,519 12x 1,665
PC Direct (French)............ 1992 P 92,659 12x 3,108
PC Week (China)(8)............ 1996 C 62,000 51x 3,828
PC/Computing (China)(8)....... 1994 P 48,000 12x .
PC Magazine (China)(8)........ 1994 P 55,000 12x 1,133
Sm@rt Reseller (China)(8)..... 1998 C 39,000 26x 429
</TABLE>
- --------
(1) P = Paid, C = Controlled.
(2) Based on circulation information provided by ZD to the Audit Bureau of
Circulations for paid publications and BPA International for controlled
publications for the six-month period ended June 30, 1998 for domestic
publications and based on ZD data for international publications.
(3) As reported by AdScope for the nine months ended September 30, 1998 for
domestic publications and based on ZD data for international publications.
(4) Joint venture with International Data Group, Inc.
(5) Formerly MacWeek.
(6) Formerly EGM/2/.
(7) Operated as a joint venture with an affiliate of The Walt Disney Company
through April 30, 1998; 100% owned by ZD thereafter.
(8) Joint venture with Richina Media Holdings and other local agencies in
China.

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CORPORATE SALES

ZD's corporate sales team integrates its marketing activities into one
cohesive resource for its largest customers. The corporate sales group,
originally established to provide discounts for advertisers buying across two
or more magazine titles, has been expanded to allow marketers to reach their
target buyers through any combination of the Company's business platforms.
Currently 25 professionals in U.S. corporate sales coordinate major
advertisers' campaigns across the Company's multiple platforms.

EDITORIAL, LABORATORY TESTING AND BENCHMARK SOFTWARE

ZD seeks to develop and maintain a high level of technical expertise to
provide quality technology content. ZD's editorial personnel includes award-
winning editors and experts. ZD believes its publications are widely regarded
as a reliable source of objective product evaluations and industry news because
of the quality and reputation of its laboratory tests. To maintain impartiality
and objectivity in its product reviews, ZD has policies governing separation of
editorial functions from advertising sales functions and restricts trading in
securities of technology-related companies by its journalists.

ZD is committed to laboratory-based product testing as an integral part of
its editorial mission. For the year ended December 31, 1997 and for the nine
months ended September 30, 1998, ZD spent over $10 million and $8 million,
respectively, in laboratory testing. The ZD Labs staff works with testers from
many of ZD's different publications to provide comprehensive, objective test
results to assist buying decisions. In addition to the core ZD Labs staff, the
PC Magazine, PC Week, Computer Shopper and PC/Computing publications maintain
their own staff and/or testing space. The ZD Labs testing facility tests
thousands of products and systems each year and conducts large-scale tests to
simulate corporate installations. ZD believes ZD Labs gives it a competitive
advantage in terms of staffing, equipment and access to the technology
necessary to effectively evaluate products.

ZD Labs produces the core, publicly available and widely distributed
benchmark software that its publications use to measure the performance of PCs,
Macintosh systems and servers. ZD's benchmarks have become industry standards
among major buyers of computer and Internet-related technology.

SOURCES OF PRINT PUBLISHING REVENUE

ZD's publications are generally either paid-circulation magazines--which
generate revenue from newsstand sales, subscriptions and advertising--or
controlled-circulation publications--which are distributed free of charge to
qualified information technology professionals, generate revenue principally
from advertising sales and provide valuable demographic information to ZD.

Advertising Sales

ZD seeks to assist its advertisers in maximizing the return on their
marketing investment. Advertising sales accounted for 78.4% and 77.1% of ZD's
total print publishing

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revenue for the year ended December 31, 1997 and for the nine months ended
September 30, 1998, respectively. The ZD sales force uses market research
tools, such as ZD's InternetTrak and BrandTrak services, to inform clients
about overall industry trends. ZD's sales staff provides customer service,
research, promotional support and value-added programs for advertisers.

Circulation

ZD maintains centralized circulation operations, enabling it to capitalize on
its successful practices on a timely basis across all publications. ZD strives
to increase its readership by building relationships with distributors,
retailers and subscribers. Revenue from circulation of ZD's paid-circulation
magazines accounted for 18.4% and 20.0% of ZD's total print publishing revenue
in 1997 and the first nine months of 1998, respectively. This was comprised of
subscription sales (10.1% in 1997 and 10.8% in the first nine months of 1998)
and newsstand sales (8.1% in 1997 and 9.2% in the first nine months of 1998).
ZD's publications have a total circulation of approximately seven million
primary readers worldwide.

ZD's newsstand strategy focuses on developing strong relationships with key
distributors and large retail accounts. For example, ZD is the principal
supplier of computer technology publications to Warner Publisher Services, a
division of Time Warner Inc. In addition, ZD has preferred distribution
arrangements with large retailers including WalMart and Barnes & Noble. These
arrangements include prominent magazine displays to strengthen ZD's brand
identity.

ZD's subscription strategy is to maintain a highly focused readership and
increase subscriber loyalty and renewal rates. This strategy provides ZD's
advertisers with access to a precisely focused target audience.

Licensing and Joint Ventures

In its international publications, ZD seeks to maximize global reach,
maintain content quality and reduce the cost of entering new markets. Through
subsidiaries, ZD currently has publishing operations in France, the United
Kingdom and Germany. ZD also has over 50 licensed publications worldwide. ZD's
licenses are generally three to five year agreements that provide for a minimum
annual royalty against a percentage of revenue. ZD also operates with a number
of joint venture partners, including IDG in the U.S., Richina Media Holdings
and other local agencies in China and APN Computing Group in Australia.

U.S. PUBLICATIONS

Business Magazines

In the U.S. market, ZD publishes eight computer publications directed to
business buyers, including four paid-circulation magazines and four controlled-
circulation weeklies or bi-weeklies. Each publication produces authoritative,
independent guidance that ZD believes is generally considered to be the primary
product resource in its market segment. Two of these titles, Macworld and
eMediaweekly, are published by Mac Publishing L.L.C., a ZD joint venture with
IDG.

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PC Magazine provides corporate buyers of computer technology with
comprehensive laboratory-based comparative reviews of PC hardware, software and
networking products, with a focus on technical specifications. With a paid
circulation of more than 1.17 million, PC Magazine is the largest circulation
computer magazine in the world, accounting for 35.6% and 35.9% of all computer
advertising revenue in directly competitive U.S. publications in 1997 and the
first nine months of 1998, respectively. PC Magazine also produces two
newsstand-only specials: Your New PC (buying advice for less sophisticated
computer buyers) and InternetUser (reviews of Internet products).

PC/Computing offers reviews of computer products, focusing on productivity
and usability. A monthly publication, it is one of only three computer
magazines to have reached a circulation of over one million readers.

Computer Shopper provides buying advice, product evaluations and technology
coverage, including availability, pricing, specifications and configurations of
thousands of computer products. Computer Shopper has a newsstand circulation of
over 275,000 (the largest newsstand sales of any computer publication).

PC Week provides enterprise product buyers and information technology
professionals at large corporate computing sites with timely information on
products, companies and general industry news. PC Week has a controlled
circulation of over 340,000 distributed to over 180,000 sites.

Inter@ctive Week provides Internet and telecommunications professionals with
information on products, events, services, strategies, alliances and key
players. With a controlled circulation of over 150,000, Inter@ctive Week became
one of the leading publications for the digital communications technology
industry in less than three years.

Sm@rt Reseller, a bi-weekly publication, provides value-added resellers,
system integrators, distributors, Web developers and Internet service providers
with in-depth news and analysis on business and technology. Sm@rt Reseller
currently has a controlled circulation of 80,000.

Macworld provides Macintosh buyers with comparative, laboratory-based product
evaluations, reviews and information about Macintosh products, supported by a
product testing facility which ZD believes is the most advanced in the
Macintosh industry. Macworld has a qualified circulation of over 650,000.

eMediaweekly (formerly MacWeek) is targeted at digital media managers. It
delivers information on technology trends and products in the field of digital
content creation. eMediaweekly has a controlled circulation of approximately
85,000 recipients at nearly 59,000 work locations.

Consumer Magazines

ZD publishes six magazines that serve the rapidly growing consumer market in
order to meet the varying needs of computer enthusiasts, net surfers, family
buyers and gamers.

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Electronic Gaming Monthly targets video game enthusiasts and offers news,
information and product reviews about the latest games on ten different game
systems. This monthly publication has a paid circulation of more than 370,000.
Expert Gamer (formerly known as EGM/2/), a companion publication to Electronic
Gaming Monthly with a paid circulation of more than 150,000, offers in-depth
strategies, exclusive tips and tricks and comprehensive maps and walk-throughs
of the latest games.

Yahoo! Internet Life is a leading Internet consumer magazine. Yahoo! Internet
Life has a paid circulation of more than 400,000 readers. It is designed to be
an entertaining and authoritative guide to the Internet, targeting an
influential, affluent and early-adopting group of readers. ZD has an exclusive
license from Yahoo! Inc. to use Yahoo! in the title of a print magazine.

Computer Gaming World provides computer game enthusiasts with results-
oriented gaming information. Computer Gaming World serves more than 240,000
game enthusiasts and is the oldest and one of the largest computer game
publications.

Official U.S. PlayStation Magazine assists Sony PlayStation users in getting
the most out of their game consoles by providing up-to-date news, interviews
and insights. This publication has a paid circulation of over 100,000
PlayStation game fans.

FamilyPC is specifically targeted to households with children and has a paid
circulation of over 380,000. Written by parents for parents in easy to
understand language, its purpose is to assist families in selecting computers
and software and thereafter ensure that they get a rewarding, productive and
educational experience from them.

INTERNATIONAL PUBLICATIONS

ZD publishes in the United Kingdom PC Magazine, PC Direct, PC Gaming World
and IT Week; in Germany PC Professionell, PC Direkt and Internet Professionell;
in France PC Expert and PC Direct; and in the People's Republic of China PC
Week, PC Computing, PC Magazine and Sm@rt Reseller through a venture with
Richina Media Holdings and local agencies in China.

PC Magazine (U.K.), PC Expert, PC Professionell, and PC Magazine (China) are
equivalents of PC Magazine (U.S.) adapted to their individual markets.
Similarly, PC Direct (U.K.), PC Direct (France) and PC Direkt are intended to
be equivalents of ZD's U.S. publication, Computer Shopper. IT Week includes
material from Inter@ctive Week and ZDNet News in addition to local content.

PAPER AND PRINTING

ZD maintains strong relationships with its paper suppliers and printing
companies. ZD's main paper suppliers for its U.S. publications are Bowater,
Champion, Consolidated, Fraser and UPM, which provided 12%, 33%, 15%, 12% and
12%, respectively, of ZD's paper supply in 1997 as measured by tonnage. Its
paper supply contracts are generally two to three year agreements, with
quarterly pricing adjustments, and are renewable on a

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staggered basis. Most agreements contain pricing clauses that seek to ensure
the most competitive pricing on a quarter to quarter basis. ZD has
relationships with a number of printing companies, including R.R. Donnelley,
Brown, Quadgraphics and Quebecor. Approximately 50% of ZD's total printing
expenditures for its U.S. publications are with R.R. Donnelley, which has a
number of alternative printing sites. Printing contracts are generally two to
three year agreements.

TRADE SHOWS AND CONFERENCES

ZD is a leading producer of trade shows, conferences and customized marketing
and educational programs for the computer industry in the U.S. Approximately
26% and 18% of ZD's total revenue in 1997 and the first nine months of 1998,
respectively, was attributable to its trade show and conference business. ZD
produces the industry-wide COMDEX events, other segment-focused trade shows and
conferences and customized events for specific clients. ZD produced over 50
trade shows and conferences in 1997 and over 40 in the first nine months of
1998.

The COMDEX/Fall event, held in the fourth quarter of each year, has been held
for 19 years and is the number one ranked trade show for all industries in the
U.S. as measured by total revenue, total exhibit space and number of attendees.
In 1997, ZD estimates that over two million people attended its trade shows and
conferences worldwide. In addition to COMDEX/Fall, held annually in Las Vegas,
ZD produces 18 other COMDEX events in 13 countries.

In 1997, ZD produced nine segment-focused "NetWorld+Interop" and "Seybold
Seminars" trade shows in six countries. The NetWorld+Interop trade shows focus
on the networking/interconnectivity segment of the computer industry and the
Seybold Seminars focus on technologies for publishing and graphic
communications. ZD also produces the following segment-focused trade shows: (1)
WINDOWS WORLD in conjunction with Microsoft Corporation, (2) EXPO COMM,
servicing the worldwide telecommunications industry, (3) CommUnity, for the
emerging corporate integrated data, voice and video segments, (4)
COMDEX/Enterprise, focusing on solutions for the large corporate information
technology infrastructures, (5) Java SM Business Expo SM, sponsored by Sun
Microsystems, Inc. and focusing on the full range of Java(TM) technology for
information technology professionals, and (6) Support Services Conference &
Expo, focusing on technology for help desk and information technology support
services. ZD also produces customized conferences that are designed to meet the
marketing needs of specific clients. For example, ZD produced the JavaOne
series of conferences for Sun Microsystems, Inc., which were designed to
introduce Java technology software to the developer community.

Attendees at ZD's trade shows and conferences cover a wide range of
participants from the computer industry, including manufacturers, distributors,
dealers, retailers, as well as value-added and other resellers and large
corporate end-users. Each event includes an extensive conference program,
providing a forum to exchange information germane to the particular event's
focus. In addition, each event has one or more "keynote" sessions with

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<PAGE>

speakers drawn from computer industry leaders. ZD estimates that in 1997 over
5,000 companies participated as exhibitors in its trade shows and conferences
(over 4,500 in the first nine months of 1998).

The following table sets forth information relating to ZD's principal trade
shows and conferences, including joint ventures, for 1998. Substantially all of
ZD's international COMDEX events are joint ventures and substantially all
NetWorld+Interop events are owned by ZD.

<TABLE>
<CAPTION>
1998 ACTUAL
-------------------------------------
TOTAL NET ESTIMATED
LAUNCH SQUARE TOTAL TOTAL
YEAR FOOTAGE EXHIBITORS ATTENDEES
------ --------- ---------- ---------
<S> <C> <C> <C> <C>
EVENT
NORTH AMERICA
COMDEX/Fall............................. 1979 1,229,900 1,558 220,000
COMDEX/Spring, WINDOWS WORLD & EXPO COMM
USA.................................... 1981 180,270 589 82,061
COMDEX/Canada incl. WINDOWS WORLD and
Connected Computing.................... 1992 140,663 335 54,000
COMDEX/PacRim........................... 1995 65,762 211 30,500
COMDEX/Quebec........................... 1996 36,420 134 23,000
COMDEX/Miami & EXPO COMM Miami.......... 1996 65,600 261 20,000
NetWorld+Interop & CommUnity Las Vegas.. 1986 475,484 705 55,000
NetWorld+Interop & CommUnity Atlanta.... 1992 383,048 576 44,000
Seybold San Francisco Publishing........ 1986 149,374 356 20,912
Seybold Seminars New York............... 1982 129,700 293 23,000
INTERNATIONAL
COMDEX/SUCESU-SP Brazil................. 1992 235,000 410 132,000
COMDEX/Rio.............................. 1994 30,780 . .
COMDEX & WINDOWS WORLD Mexico(1)........ 1993 44,000 250 38,000
COMDEX/INFOCOM & WINDOWS WORLD
Argentina.............................. 1997 53,000 250 35,000
COMDEX IT France........................ 1997 118,116 560 60,000
COMDEX & Object World UK(1)............. 1996 . . .
COMDEX/Japan & Object World Tokyo(2).... 1996 96,700 300 .
COMDEX/China............................ 1996 42,000 144 91,000
COMDEX/Korea............................ 1997 . . .
COMDEX/Asia at Singapore Informatics.... 1995 . . .
COMDEX/IT INDIA......................... 1996 . . .
NetWorld+Interop Paris.................. 1992 191,545 293 48,772
NetWorld+Interop Tokyo(2)............... 1993 169,800 258 99,000
Seybold Seminars Tokyo(2)............... 1996 9,800 23 20,000
Windows NT Intranet Solutions Japan(2).. 1994 49,000 130 50,000
</TABLE>
- --------
(1) These international COMDEX events are wholly owned by ZD.
(2) Trade shows in Japan are owned by Softbank and managed by ZD.

SOURCES OF TRADE SHOW AND CONFERENCE REVENUE

Exhibitor space fees accounted for 64.8% and 58.7% of ZD's total trade show
and conference revenue for 1997 and the first nine months of 1998,
respectively. ZD believes most trade show producers receive virtually all of
their revenue from the sale of exhibitor

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<PAGE>

space fees. ZD has actively sought to increase its revenue from other sources,
including attendee fees, which accounted for 35.2% and 41.3% of all trade show
and conference revenue in 1997 and the first nine months of 1998, respectively.

All exhibitors pay the same price per square foot of booth space, regardless
of the exhibit hall selected or the location or size of the booth. Typically, a
majority of exhibitors at each trade show commit to booth space for the next
year's show. ZD encourages this commitment through a prioritized booth
selection procedure based upon seniority. Annual renewal is required for
exhibitors to maintain their seniority. Exhibitors pay for space in two or
three installments, the last of which is usually due six months prior to the
upcoming event.

Attendee fees accounted for 14.9% and 23.0% of ZD's trade show and conference
revenue for 1997 and the first nine months of 1998, respectively, primarily
from NetWorld+Interop and Seybold Seminars events. Most COMDEX attendees are
invited guests of exhibitors who receive complimentary admission tickets from
ZD for their customers and key prospects. This helps exhibitors ensure that
their best customers and prospects will attend.

Advertising revenue from ZD's trade shows and conferences is derived
principally from five products: (1) a daily newspaper distributed during the
show, (2) the Program Exhibits Guide, (3) the Preview, a newspaper distributed
to pre-registrants and certain prior year attendees before the show, (4)
advertising billboards and banners and (5) exhibitor logo products that are
sold to exhibitors to increase booth traffic and name recognition.

ZD also maintains a continuously updated database containing the names and
certain demographic information on its attendees. This database is rented to
direct mail users on a fee-per-use basis.

COMDEX

COMDEX trade shows cover a broad range of new technologies at every stage
from their development and introduction to commercial maturity. Many of the
most significant computer product launches over the past 19 years occurred at
COMDEX, including the launch of the IBM PC, Lotus 1-2-3, Windows 3.1 and DVD.

COMDEX/Fall is a five-day trade show held annually in November in Las Vegas.
In 1998, COMDEX/Fall had approximately 1,500 exhibiting companies occupying 1.2
million net square feet of exhibit space and 220,000 attendees. COMDEX/Spring,
which was launched in 1981, is a smaller version of the fall event. In 1998, it
was held in Chicago and had approximately 580 exhibiting companies and over
82,000 attendees. For the last eight years, ZD, in cooperation with Microsoft
Corporation, has produced a WINDOWS WORLD trade show concurrently with
COMDEX/Spring.

In 1993, ZD began launching additional COMDEX events in order to capitalize
on the international recognition of the COMDEX brand name. In 1998, other
COMDEX events were held in Miami, Toronto, Vancouver, Montreal, Mexico City,
Monterrey (Mexico), Buenos Aires, Sao Paulo, Rio de Janeiro, London, Paris,
Tokyo, Seoul, New Delhi, Beijing, Singapore and Cairo.

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<PAGE>

NETWORLD+INTEROP

NetWorld+Interop is the largest of ZD's segment-focused trade shows and is
the leading show for professionals in the rapidly growing field of computer
networking. NetWorld+Interop places strong emphasis on the quality of its
conference programs and has become a leading educational forum for the Internet
and enterprise computing communities. The largest NetWorld+Interop event is
held annually in May in Las Vegas. Each NetWorld+Interop trade show features
InteropNet, a live, multi-platform network that interconnects exhibitors to one
another and to the Internet. In 1998, the NetWorld+Interop Las Vegas event had
approximately 700 exhibiting companies occupying 475,000 net square feet of
exhibit space and 55,000 attendees. The NetWorld+Interop Atlanta event, held in
October each year, is only slightly smaller in all categories. In 1998,
NetWorld+Interop events were held in Las Vegas, Atlanta, Singapore, Tokyo,
London, Sao Paulo, Paris and Sydney.

SEYBOLD SEMINARS

ZD's Seybold Seminars are also segment-focused trade shows, providing
information and education for traditional and new media publishing industries.
These shows focus on the latest technologies and products, design tools and
desktop applications. The largest of the Seybold Seminars series is held
annually each September in San Francisco. In 1998, this Seybold Seminars show
had approximately 350 exhibiting companies occupying 140,000 net square feet of
exhibit space and 20,000 attendees. Other Seybold Seminars events are held in
New York and Tokyo.

TELEVISION

In order to expand its media platforms, the Company has a license and
services agreement to manage ZDTV, which was launched in May 1998. ZDTV is the
first 24-hour cable television channel and integrated Web site focused
exclusively on computers, technology and the Internet. ZDTV targets a wide
range of viewers, including computer and technology enthusiasts, computer
gaming enthusiasts, business people, teens, families and other viewers with a
sustained interest in computers, technology and the Internet. ZDTV's
programming includes educational features, product evaluations, gaming tips and
strategies, current events and other entertainment. ZDTV also features live
interactive programming, allowing viewers to participate through simultaneous
Web programming on ZDTV.com. ZDTV reached 8.2 million homes at September 30,
1998 according to ZDTV estimates. In addition, ZDTV creates customized
programming for ZDTV and third parties. Its productions have included the
regional Emmy award-winning "The Site" with MSNBC and "21st Century Home" with
Home & Garden Television.

As part of the license and services agreement, ZD has an option (which,
unless extended, expires December 31, 1998) from MHA to purchase ZDTV. MHA is
wholly owned by Mr. Masayoshi Son, a director of the Company. The option price
is equal to the amount of MHA's investment plus 10.0% per year for the period
of its investment. Also, pursuant thereto, ZD is currently funding ZDTV's
operations on behalf of MHA through unsecured

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<PAGE>

advances which, for approved levels of spending, are to be reimbursed by MHA.
Such advances bear interest at the 30-day LIBOR rate plus .50%. ZDTV's cash
requirements are
expected to be approximately $53 million in 1998, of which approximately $40
million had been spent through September 30, 1998. ZD announced its intention
to exercise its option for a purchase price expected to be approximately $85
million. Of this amount, it is expected that ZD will make a cash payment of
approximately $32 million and convert the advances previously paid to MHA
estimated at $53 million. ZDTV has entered into a non-binding letter of intent
with Vulcan whereby Vulcan would invest approximately $54 million in ZDTV, in
exchange for a one-third interest.

EDUCATION

ZD publishes computer training products and services for end-users and
advanced technology professionals. Its products and services include Internet-
based training, computer-based training, instructor-led courseware and
customization tools. ZD believes its education offerings extend ZD's reach and
brand reputation while permitting it to attract and retain customers.

ZD produces software-specific newsletters and technology information, with
approximately 40 titles. Generally published monthly, the titles include time-
saving tips and techniques on products such as Windows 95, Novel NetWare,
Visual Basic, Word, Excel, Microsoft Office, PhotoShop and Windows NT, in
addition to several programming and operating systems journals.

ZDU is an Internet-based technology educational service through which ZD
provides interactive instructor-led training to subscribers. The ZDU service is
part of ZD but is closely integrated with ZDNet.

MARKET RESEARCH

ZD's market research division develops, analyzes and compiles a wide variety
of information on computer technology issues ranging from current technical
aspects to decision making trends. The ZD Market Intelligence ("ZDMI") unit
focuses on installed and planned technology hardware and software purchases. It
is a leading source in North America and Europe of fact-based information for
the computer and communications industries. ZDMI is an important part of ZD's
effort to be a single source marketing solution, as it provides marketing
customers with important targeting information. ZDMI's databases are built from
more than 45,000 telephone interviews per month and contain data on installed
and planned computer and communications products and services at over 350,000
business sites in the U.S., Canada and eight European countries, according to
ZD estimates. ZDMI identifies and targets customers by tracking current
activity and market share in the business, home and reseller channels.
Customers use ZDMI's services to make important marketing decisions.

ZD also identifies and analyzes trends in the decision making process for
computer technology consumers. This information indicates the criteria people
focus on to select

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<PAGE>

products beyond technical product specifications. ZD's market research division
also consolidates information obtained in each of the databases maintained by
other operating divisions within ZD and ZDNet, so that each division can offer
the Company's clients a wide range of information to meet their marketing needs
across multiple platforms.

COMPETITION

ZD competes with a wide range of companies for each of its products and
services. The magazine publishing business is highly competitive. ZD faces
broad competition from other technology publishers and from other media
companies such as business, news and general interest magazines. Computer and
technology publishers that directly compete with ZD in the U.S. include IDG,
CMP and Imagine Media. ZD also competes with various computer and technology
publishers in the international markets where it conducts business. A
publishing company's success depends upon a number of factors, such as
editorial quality, product positioning and price. Competitive factors for
advertising sales include quality of readership, circulation, reader response
and advertising rates.

ZD also faces competition in its trade show and conference business,
primarily from several significant trade show management companies. These
include Miller Freeman, Mecklermedia and International Data Corporation.
Competitive factors in this business include quality of conference content,
organizational efficiency and quality and number of exhibitors and attendees.

ZD's market research division faces competition from numerous market research
companies, including IDG, Gartner Group's Dataquest and IntelliQuest. Database
providers such as Information Resource Group and Dun & Bradstreet provide
additional competition.

ZD's education division competes with a variety of education providers,
including vendor-supplied training materials and traditional classroom-based
computer training.

ZDTV is the first 24-hour cable television channel and integrated Web site
focused exclusively on computers, technology and the Internet, and as such, it
is not expected to face direct competition in the near future. However, ZDTV
does compete with a variety of general and special interest television
programs. In addition, the market for television programming in general is
highly competitive, with many programming producers competing for channel
carriage, advertisers and audiences.

TRADEMARKS

ZD has developed strong brand awareness for its principal publications, trade
shows and other products and services. Accordingly, ZD considers its
trademarks, copyrights, trade secrets and similar intellectual property as
critical to its success and relies on trademark, copyright and trade secrets
laws, as well as licensing and confidentiality agreements, to protect its
intellectual property rights. ZD generally registers its material trademarks in
the U.S. and in certain other key countries in which these trademarks are used.
Effective trademark, copyright and trade secret protection may not be available
in every country where ZD's publications and services are available.

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<PAGE>

ZD may be subject to claims of alleged infringement by it or its licensees of
trademarks and other intellectual property rights of third parties from time to
time in the ordinary course of business. ZD does not believe there are any such
legal proceedings or claims that are likely to have, individually or in the
aggregate, a material adverse effect on its business, financial condition or
results of operations.

EMPLOYEES

As of September 30, 1998, ZD had a total of 3,218 employees. Of these
employees, 809 were engaged in U.S. magazine publishing activities, 403 in
international publishing activities, 565 in trade shows and conferences, 422 in
education activities, 496 in market research and 523 in central services. None
of ZD's U.S. employees is represented by a labor union. ZD considers its
relationships with its employees to be satisfactory.

FACILITIES

ZD's world headquarters are located in New York and ZD has over 50 editorial,
production and sales offices and computer labs in many other cities in the U.S.
and around the world. ZD's other principal offices are located in the Boston
and San Francisco metropolitan areas. ZD and the Company do not own real
property that is material to its business and the Company leases all but one of
its offices from third parties. ZD believes that its properties, taken as a
whole, are in good operating condition and are suitable and adequate for its
current operations, and that suitable additional or alternative space,
including space available under lease options, will be available at
commercially reasonable terms for future expansion.

LEGAL PROCEEDINGS

For information concerning certain legal proceedings to which the Company is
a party, see "ZDNet Description of Business".

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<PAGE>

COMPANY
SELECTED HISTORICAL COMBINED FINANCIAL AND OTHER DATA

The following table presents Selected Historical Combined Financial and Other
Data for the Company as of and for the years ended December 31, 1995, 1996 and
1997, for the nine month periods ended September 30, 1997 and 1998 and as of
September 30, 1998. This data was derived from the Combined Financial
Statements of the Company included elsewhere in this prospectus. An affiliate
of the Company acquired an events business ("COMDEX") on April 1, 1995 and a
print publishing business ("ZDI") on February 29, 1996; the data does not
include results from the acquired businesses for periods before the respective
dates of acquisition. However, because ZDI represents the Company's principal
operations, the following table also presents Selected Historical Combined
Financial and Other Data for ZDI as of and for the years ended December 31,
1993, 1994 and 1995 and as of and for the two month period ended February 28,
1996. ZDI data as of for the years ended December 31, 1993 and 1994, and
Company data as of and for the periods ended September 30, 1997 and 1998, are
derived from the Company's unaudited financial statements. On May 4, 1998, the
Company completed a reorganization described in Note 2 to the Combined
Financial Statements of the Company; results for periods before the
reorganization are not directly comparable to results for periods after the
reorganization. This table should be read in conjunction with the Selected
Historical Combined Financial and Other Data, Management's Discussion and
Analysis of Financial Condition and Results of Operations and Combined
Financial Statements for each of the Company, ZD and ZDNet, and the
Consolidated Financial Statements for ZDI, included in this prospectus.

<TABLE>
<CAPTION>
ZDI(1) THE COMPANY
---------------------------------------------- --------------------------------------------------------
NINE MONTH
TWO MONTH PERIOD ENDED
YEAR ENDED DECEMBER 31, PERIOD ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------- FEBRUARY 28, --------------------------------- ---------------------
1993 1994 1995 1996 1995(2) 1996(2) 1997 1997 1998
--------- ---------- ---------- ------------ ---------- ---------- ---------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Revenue, net....... $ 649,452 $ 711,379 $ 768,995 $ 125,465 $ 202,729 $ 955,139 $1,153,761 $ 750,187 $ 730,547
Depreciation and
amortization...... 38,228 34,208 91,546 15,137 24,305 139,736 154,940 117,697 114,594
Income (loss) from
operations........ 29,481 80,723 55,750 7,270 62,675 87,181 109,232 (11,094) (17,395)
Interest expense,
net............... 14,035 17,887 92,609 14,030 44,005 120,646 190,445 141,333 111,185
Income (loss)
before income
taxes............. 13,700 77,650 (40,250) (6,995) 22,869 (27,124) (72,491) (144,794) (119,768)
Net income
(loss)(3)(4)...... 13,700 77,650 (26,002) (4,547) 10,945 (52,081) (71,179) (143,810) (86,179)
OTHER DATA:
Capital
expenditures...... $ 16,141 $ 15,119 $ 14,163 $ 552 $ 3,367 $ 22,365 $ 30,196 $ 18,636 $ 27,399
Investments and
acquisitions, net
of cash acquired.. -- -- -- -- 814,520 2,124,823 14,000 3,058 13,192
BALANCE SHEET DATA
(AT PERIOD END):
Cash and cash
equivalents....... $ 36,300 $1,066,606 $ 10,083 $ 13,669 $ 27,908 $ 29,915 $ 30,301 $ 27,153
Total assets....... 308,267 2,751,525 1,623,906 1,619,905 1,090,981 3,584,173 3,546,646 3,412,701
Total long-term
debt.............. 353,507 1,034,000 964,153 964,153 575,450 2,522,252 2,408,240 1,526,047
Stockholders'
equity (deficit).. (214,355) 391,275 365,150 360,717 397,881 447,756 126,130 1,344,048
</TABLE>
- --------
(1) An affiliate of the Company acquired ZDI on February 29, 1996. Because ZDI
represents the Company's principal operations, ZDI data has been presented
for periods before that date.
(2) An affiliate of the Company acquired COMDEX on April 1, 1995 and ZDI on
February 29, 1996; Company data does not include results from the acquired
businesses for periods before the respective dates of acquisition.
(3) During 1993 and 1994, ZDI conducted its operations through various
partnerships. Accordingly, there were no income tax provisions for those
years.
(4) No historical earnings per share or share data are presented as the Company
does not consider such data meaningful. See Note 2 to the Combined
Financial Statements of the Company for certain pro forma earnings per
share information concerning the Company. After issuance of ZDNet Stock,
the Company will report earnings per share data for ZD and ZDNet but not
for the Company.

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<PAGE>

COMPANY

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The Company is a leading integrated media and marketing company focused on
computing and Internet-related technology, with principal platforms in print
publishing, trade shows and conferences, online content, market research and
education. The Company operates in two business segments: (1) publishing and
(2) events. The Company's 27 primary U.S. and international titles, including
its joint ventures, and over 50 licensed publications, total more than 75
publications distributed worldwide, with a combined circulation of
approximately seven million primary readers. The Company also produces some of
the world's most important trade shows related to computer technology, with
over two million estimated attendees at over 50 trade shows and conferences
worldwide in 1997. The Company's COMDEX/Fall event is the number one ranked
trade show for all industries in the U.S. as measured by total revenue, total
exhibit space and number of attendees. According to Media Metrix, in October
1998 the Company's zdnet.com web site ranked first among all Web sites in the
category of news, information and entertainment, ahead of such sites as
cnet.com, cnn.com, msnbc.com, Disney Online and espn.com. The Company's other
media and marketing platforms include market research and education.

REVENUE

The Company had net revenue of $1.154 billion for 1997. A substantial portion
of the Company's revenue is derived from the sale of advertising, which in 1997
accounted for 51.9% of total revenue. No single advertiser has comprised more
than 3% of the Company's advertising revenue during any of the last three
years. However, the Company's top 20 advertisers accounted for 32.1% of total
advertising revenue for 1997.

In the publishing segment, the Company's principal sources of revenue are
advertising (67.3% of 1997 total publishing revenue), circulation (17.4%) and
other (15.3%). Circulation comprises both paid subscriptions (10.8%) and
newsstand sales (6.6%) while other includes educational and training materials
(5.4%) and market research studies (6.2%) with the balance primarily consisting
of royalties, reprints and other miscellaneous sales. In the events segment,
revenue is derived from two principal sources: sale of exhibit space (64.8% of
1997 total segment revenue) and attendee conference and seminar fees (14.9%).
Unlike many trade show producers, the Company derives a significant portion of
its trade show revenue from the other sources (20.3%), including advertising in
show-related publications, billboards, banners, fees from managing customer-
sponsored events and other show-related activities. The Company believes these
other sources will continue to be an important growth area, particularly for
its content-focused events.

COST OF OPERATIONS

In the publishing business, the principal components of the Company's
production costs are raw materials, printing and distribution, which
represented 34.6%, 37.5% and 26.7%,

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respectively, of total 1997 publishing production expenses. The Company's
principal raw material is paper. Paper supply and prices are subject to
volatility and may be significantly affected by many factors, including market
and economic conditions. See also "Risk Factors--Other Company Risks--Risks
Associated with Fluctuations in Paper and Postage Costs" and "--Inflation and
Fluctuations in Paper Prices and Postage Costs". The principal components of
production costs within the events business are the costs of renting and
preparing the facilities to hold the events (33.6%), direct mail and the
related costs for promotion of the events (33.2%) and program development and
presentation costs (11.3%).

The other principal operating costs for the Company are selling, general and
administrative expenses, including editorial costs. Included in these costs are
salaries, sales commissions and benefits (49.8%) along with marketing and
promotion expenses related to advertising and circulation (18.8%).

FACTORS AFFECTING FUTURE PERIODS

The Company's revenue and profitability are influenced by a number of
external factors, including the volume of new technology product introductions,
the amount and allocation of marketing expenditure by the Company's clients,
the extent to which sellers elect to advertise using print and online media or
participate in trade shows and conferences, changes in paper prices,
availability of appropriate venues for its largest trade shows and conferences
and competition among computer technology marketers (including print
publishers, producers of trade shows and conferences and providers of other
technology information services). Accordingly, the Company may experience
fluctuations in revenue from period to period. Many of the Company's large
customers concentrate their advertising expenditures around major new product
launches. Marketing expenditures by technology companies can also be affected
by factors affecting the computer industry generally, including pricing
pressures and temporary surpluses of inventory. Revenue and profitability are
also influenced by product mix and the timing and frequency of the Company's
new product launches and launches in new markets, as well as by acquisitions.
New publications generally require several years to achieve profitability and
upon achieving initial profitability, often have lower margins than more
established publications. The launch of new publications, trade shows and
services are funded with cash flow from operations and are expensed as
incurred. Accordingly, the Company's revenue from year to year may be affected
by the number and timing of new product launches. If the Company concludes that
a new publication, trade show or service will not achieve certain milestones
with regard to revenues, profitability and cash flow within a reasonable period
of time, management may discontinue such publication, trade show or service or
merge it into another existing publication, trade show or service. See "Risk
Factors--Other Company Risks--New Product Risks".

REDUCED DEMAND FOR ADVERTISING; RESTRUCTURING

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<PAGE>

PC/Computing, Computer Shopper and PC Week). The Company believes these factors
will continue, and as announced on October 8, 1998, expects that EBITDA for the
fourth quarter of 1998 will be significantly lower than EBITDA for the fourth
quarter of 1997.

As a result of this reduced demand, the Company also announced on October 8,
1998 a company-wide restructuring in which it discontinued three publications
(Internet Business, Equip and Windows Pro), and will streamline operating
support services, consolidate certain facilities and reduce its workforce by
approximately 10%. The Company expects to take a one time pre-tax charge of
$50-60 million in the fourth quarter as part of this restructuring.

See "--Liquidity and Capital Resources--Credit Facility" below.

PRESENTATION OF FINANCIAL INFORMATION

The Company is comprised of certain operations which were acquired at various
times and completed a reorganization and initial public offering in May 1998.
See Notes 1 and 2 to the Combined Financial Statements in this prospectus.

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<PAGE>

RESULTS OF OPERATIONS

The table below presents the results of the Company as if the assets and
operations acquired by affiliates of the Company on February 29, 1996 (as
described in Note 1 to the Combined Financial Statement in this prospectus) had
been acquired on January 1, 1995. Purchase accounting adjustments relating to
that acquisition have been reflected through pro forma amortization, interest
and income tax adjustments, as described in note (a) to the table. Although the
table presents numbers that are not in accordance with generally accepted
accounting principles, management believes they present the most meaningful
basis of comparison. The financial information presented below may not
necessarily reflect the results of operating which would have occurred had the
February 29, 1996 acquisition been completed on January 1, 1995.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER NINE MONTHS ENDED
31, PRO FORMA(A) ACTUAL SEPTEMBER 30,
----------------------- ---------- --------------------
1995 1996 1997 1997 1998
----------- ---------- ---------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenue, net:
Publishing............ $ 768,995 $ 815,720 $ 866,233 $ 628,504 $ 607,857
Events................ 202,729 264,884 287,528 121,683 122,690
----------- ---------- ---------- --------- ---------
971,724 1,080,604 1,153,761 750,187 730,547
----------- ---------- ---------- --------- ---------
Cost of production:
Publishing............ 193,646 215,271 225,712 165,264 162,528
Events................ 68,810 87,373 99,533 51,964 47,002
----------- ---------- ---------- --------- ---------
262,456 302,644 325,245 217,228 209,530
Selling, general and
administrative
expenses............... 474,992 528,636 564,344 426,356 423,818
Depreciation and
amortization(a)........ 154,163 161,259 154,940 117,697 114,594
----------- ---------- ---------- --------- ---------
Income/(loss) from
operations............. 80,113 88,065 109,232 (11,094) (17,395)
Interest expense,
net(a)................. (133,130) (135,500) (190,445) (141,333) (111,185)
Other non-operating
income................. 808 6,106 8,722 7,633 8,812
----------- ---------- ---------- --------- ---------
Loss before income
taxes.................. (52,209) (41,329) (72,491) (144,794) (119,768)
Provision (benefit) for
income taxes........... 9,607 25,682 (1,312) (984) (33,589)
----------- ---------- ---------- --------- ---------
Net loss(a)............. $ (61,816) $ (67,011) $ (71,179) $(143,810) $ (86,179)
=========== ========== ========== ========= =========
OTHER DATA:
EBITDA(b)............... $ 235,084 $ 255,430 $ 272,894 $ 114,236 $ 106,011
Cash and cash
equivalents, end of
period................. 37,991 29,915 30,301 37,775 27,153
Net cash provided (used)
by operating
activities............. 63,231 65,681 (3,364) (20,650) 82,791
Net cash used by
investing activities... (2,889,426) (66,856) (44,196) (21,694) (40,591)
Net cash provided (used)
by financing
activities............. 1,793,361 6,768 47,946 50,204 (45,348)
</TABLE>
- -------
(a) The February 29, 1996 acquisition gave rise to different bases of
accounting for the period after the acquisition as compared to the period
prior to the acquisition. This is primarily due to a purchase price which
exceeded the book value of the assets acquired, financed by a higher level
of both debt and equity as compared to the pre-acquisition capital
structure. The above numbers assume that the acquisition took place on
January 1, 1995; therefore, depreciation and amortization, interest expense
and net loss have been increased (decreased) by approximately $6,386, $824
and $10,383, respectively, for 1996 and $38,312, $(3,484) and $46,759,
respectively, for 1995.
(b) "EBITDA" is defined as income before provision for income taxes, interest
expense, depreciation and amortization. EBITDA is not intended to represent
cash flows from operations and should not be considered as an alternative
to net income as an indicator of the Company's operating performance or to
cash flows as a measure of liquidity. The Company believes that EBITDA is a
standard measure commonly reported and widely used by analysts, investors
and other interested parties in the publishing and media industries.

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<PAGE>

NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1997

REVENUE

Net revenue for the nine months ended September 30, 1998 was $730.5 million
compared to $750.2 million for the nine months ended September 30, 1997, a
decrease of $19.7 million or 2.6%. The comparability of 1998 and 1997 nine
month results was affected by the accounting treatment for certain publications
transferred to or from joint ventures as well as the shift in timing of an
event. Excluding these factors, revenue for the nine months ended September 30,
1998 decreased by $2.4 million, or 0.3% compared to the same period in 1997.

Publishing--The decline in the publishing segment's net revenue relates to
transferring certain publications to or from joint ventures. Excluding such
transfers, publishing segment net revenue improved $6.5 million or 1.0%. The
increase was due to growth in advertising in consumer publications partly
offset by lower advertising in business publications. Advertising revenue was
lower in the business publications principally due to factors affecting the
computer technology industry during the period (as described in "Reduced Demand
for Advertising; Restructuring" above.)

Net revenue for the Macuser and MacWeek magazines contributed to Mac
Publishing LLC were $31.9 million for the first nine months ended September 30,
1997 but, are no longer consolidated into the Company's results for 1998. On
May 1, 1998, the Company acquired its joint venture partner's 50% interest in
FamilyPC magazine. The Company now owns 100% of the magazine and its results
are included in the consolidated results from the acquisition date. Revenue
from FamilyPC included in the 1998 nine months results is $4.8 million.

Events--Revenue from the events segment increased $1.0 million or 0.8%,
primarily resulting from the shift in timing of Seybold San
Francisco/Publishing 98 offset by revenue declines on smaller events.

COST OF PRODUCTION

Cost of production decreased $7.7 million or 3.5% from the 1997 period.
Publishing cost of production declined $2.8 million due to lower advertising
pages produced. The events segment accounted for $4.9 million of this decrease,
primarily attributable to the shift in timing of Seybold San
Francisco/Publishing 98.

SELLING, GENERAL AND ADMINISTRATIVE

Selling, general and administrative expenses were $423.8 million for the nine
months ended September 30, 1998 compared to $426.4 million for the nine months
ended September 30, 1997, a decrease of $2.6 million or 0.6%. Included in the
1998 period were $3.2 million of one-time costs for office relocations along
with $9.9 million of costs related to launches of new publications. Excluding
the one-time costs, recurring expenses decreased

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<PAGE>

1.4% principally related to efficiencies realized in combining the publishing
and events business through the Reorganization and in particular, the
consolidation of the two former events entities into one business unit.

DEPRECIATION AND AMORTIZATION

Total depreciation and amortization expense was $114.6 million for the 1998
period compared to $117.7 million in the 1997 period, a decrease of $3.1
million or 2.6%. The decline was the result of certain assets being fully
depreciated or amortized in 1997.

INTEREST EXPENSE, NET

OTHER NON-OPERATING INCOME, NET

Other non-operating income, net primarily reflects the Company's equity share
of earnings and losses from joint ventures and fees earned from management of
events not produced by the Company. Income of $8.8 million for the 1998 period
increased $1.2 million from the $7.6 million earned in 1997. The increase was
due to the Company's share of increased earnings from Mac Publishing, LLC
partly offset by the revised royalty and fee arrangement for the events
business in Japan.

INCOME TAXES

The combined income tax benefit was $33.6 million and $1.0 million for the
nine months ended September 30, 1998 and 1997, respectively. The increase was
due primarily to the losses with respect to the MAC Assets, which were not
deductible until the MAC Assets were purchased by the Company from an affiliate
on May 4, 1998. The income tax benefit for the period results from applying the
Company's estimated annual effective tax rate to the pretax loss of nine months
ended September 30, 1998.

NET LOSS

EBITDA

EBITDA for the nine months ended September 30, 1998 was $106.0 million
compared to $114.2 million for the period in 1997. Results were unfavorable as
compared to last year primarily due to a lower level of advertising in the
higher margin business publications as well as a decline in the earnings from
the COMDEX/Spring event partly offset by the shift in timing of Seybold San
Francisco/Publishing 98. In addition, during the nine months ended September
30, 1998, the Company recorded $3.2 million of one-time costs for office
relocations and incurred $6.4 million of losses from launching new
publications.

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<PAGE>

YEAR ENDED DECEMBER 31, 1997 COMPARED WITH PRO FORMA YEAR ENDED DECEMBER 31,
1996

REVENUE, NET

Net revenue increased by $73.2 million or 6.8% from $1,080.6 million in 1996
to $1,153.8 million in 1997.

Publishing--Net revenue from publishing grew by $50.5 million or 6.2% from
$815.7 million to $866.2 million. Approximately $22 million was due to
inclusion of a full year of results for the electronic gaming publications
acquired in mid-1996 and two publications launched in late 1996. Revenue from
Internet services increased $13.5 million or 71.9% due to higher advertising
volume attributable to the Company's growing presence on the Internet.
Increases in advertising rates, generally ranging between 3% and 10%, and a
5.1% increase in advertising pages contributed $11.5 million. Revenue from
international operations, which generated 10.2% of the segment's revenue,
decreased by $6.6 million due to the strengthening of the U.S. dollar relative
to the major European currencies. Continued growth from new educational product
launches and sales of market research studies accounted for the balance of the
revenue growth.

COST OF PRODUCTION

Production costs increased $22.6 million or 7.5% from $302.6 million to
$325.2 million.

Publishing production costs increased $10.4 million or 4.8% from $215.3
million in 1996 to $225.7 million. Costs related to new launches and volume-
related growth increased approximately $20 million but were partly offset by
approximately $10 million of lower paper costs.

The costs of producing events increased $12.2 million or 14% from $87.3
million to $99.5 million primarily as a result of costs related to new events
launched in 1997.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses increased $35.7 million or 6.8%
from $528.6 million to $564.3 million. The increase was due to the addition of
employees to support base business volume growth and launches of new products
and services. Results included a one-time $6.0 million charge for the
consolidation and restructuring of events business which was announced in the
fourth quarter of 1997. Costs for the publishing segment rose 4.2% while those
for the events segment rose 22.1% due to the number of new launches and the
one-time restructuring charge.

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<PAGE>

DEPRECIATION AND AMORTIZATION

Total depreciation and amortization decreased $6.3 million to $154.9 million
in 1997. The reduction in depreciation and amortization expense was a result of
certain assets being fully depreciated in 1996.

INTEREST EXPENSE, NET

OTHER NON-OPERATING INCOME, NET

Other non-operating income, net primarily reflects the Company's equity share
of earnings and losses from joint ventures and fees earned from management of
events not produced by the Company. Income increased $2.6 million from $6.1
million in 1996 to $8.7 million or 42.6% reflecting growth in fees from managed
events and reduced losses from joint ventures.

INCOME TAXES

The 1997 combined income tax benefit of $1.3 million compares to a pro forma
income tax provision of $25.7 million in 1996. The improvement in the tax
provision is due to a higher pre-tax loss giving rise to a tax benefit. The
difference between the 1997 and 1996 effective tax rates and the federal
statutory tax rate of 35.0% is primarily due to non-recognition of tax losses
generated by the MAC Assets ($56.9 million and $77.2 million in 1997 and 1996,
respectively), non-deductible goodwill amortization ($10.2 million and $8.6
million, respectively) and state and local income taxes. In addition, the 1996
tax provision increased approximately $3.2 million as a result of pro forma
adjustments related to the ZDI acquisition.

NET LOSS

As a result of the changes described above, net loss for the period increased
$4.2 million or 6.2% from $67.0 million to $71.2 million.

EBITDA

EBITDA for 1997 was $272.9 million, an increase of $17.5 million or 6.8% from
the $255.4 million generated in 1996. The increase was due to higher revenue
and management fee income, net of higher production costs and selling, general
and administrative expenses. The ratio of EBITDA to revenue remained relatively
constant at 23.7% for 1997 compared to the 1996 margin of 23.6%. Excluding the
one-time charge related to the consolidation and restructuring of the trade
shows and conferences business, the 1997 ratio would have been 24.2%.

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<PAGE>

PRO FORMA YEAR ENDED DECEMBER 31, 1996 COMPARED WITH PRO FORMA YEAR ENDED
DECEMBER 31, 1995

REVENUE, NET

Net revenue increased by $108.9 million or 11.2% from $971.7 million in 1995
to $1,080.6 million in 1996.

Publishing--Net revenue from publishing grew by $46.7 million or 6.1% from
$769.0 million to $815.7 million. Higher overall advertising rates combined
with a 12.4% growth in advertising pages contributed 47.5% of the net revenue
increase while the mid-1996 acquisition of several electronic gaming
publications accounted for 28.5% of the increase. New educational product
launches and growth in sales of market research studies accounted for the
balance of revenue growth. Internet revenue was slightly below the prior year
due to the transition from a business based on membership and subscription fees
to one which is supported primarily by advertising.

Events--Net revenue from events increased $62.2 million or 30.7% from $202.7
million to $264.9 million. The launch of new international trade shows
accounted for 36.7% of the growth while the introduction of customized events
contributed 19.8%. The balance of the increase was due to growth in exhibitor
square footage and rates at the Company's major U.S. shows.

COST OF PRODUCTION

Production costs increased $40.2 million or 15.3% from $262.4 million to
$302.6 million.

Publishing production costs increased $21.6 million or 11.2% from $193.7
million to $215.3 million, primarily due to volume-related growth and higher
paper costs. Approximately 31.5% of the increase was attributed to costs for
the magazines acquired mid-year while increased frequencies on certain
publications and a full year of costs for publications launched in late 1995
accounted for 18.1% of the increase.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses rose $53.6 million or 11.3% from
$475.0 million to $528.6 million. This increase reflects the addition of
employees to support growth in the base business along with the launches of new
products and services. Costs for the publishing segment rose 5.8% while those
for the events segment rose 61.6%, reflecting a higher level of new launches
and the absence of COMDEX related expenses for the first three months of 1995
(COMDEX was acquired April 1, 1995).

DEPRECIATION AND AMORTIZATION

Total depreciation and amortization of $161.3 million increased $7.1 million
from $154.2 million in 1995 primarily due to the inclusion of a full year's
depreciation and amortization relating to COMDEX, which was acquired April 1,
1995.

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<PAGE>

INTEREST EXPENSE, NET

Net interest expense increased $2.4 million or 1.8% on a pro forma basis due
to higher average debt levels in 1996.

OTHER NON-OPERATING INCOME, NET

Other non-operating income, net increased to $6.1 million compared to $0.8
million in 1995 due to the growth in fees from managed events along with
reduced losses from joint ventures.

INCOME TAXES

The combined income tax provison of $25.7 million compares to an income tax
provision of $9.6 million in 1995. The unfavorable variance in income taxes and
the difference in the 1996 and 1995 effective tax rates from the federal
statutory tax rate of 35% is primarily attributable to non-recognition of tax
losses generated by the MAC Assets ($77.2 million in 1996) and non-deductible
goodwill amortization ($8.6 million in 1996). In addition, the tax effects of
the 1996 and 1995 pro forma adjustments relating to the ZDI acquisition were a
$3.2 million and $11.9 million increase in tax provision, respectively.

NET LOSS

As a result of the changes described above, net loss for the period increased
$5.2 million or 8.4% from $61.8 million to $67.0 million.

EBITDA

EBITDA for 1996 was $255.4 million, an increase of $20.3 million or 8.7% from
the $235.1 million generated in 1995. The increase was due to higher revenue
and management fee income, net of higher production costs and selling, general
and administrative expenses. The cost of new product launches caused the growth
rate of expenses to exceed the revenue growth rate and, as a result, the ratio
of EBITDA to revenue of 23.6% decreased slightly from 24.2% for 1995.

LIQUIDITY AND CAPITAL RESOURCES

As a result of the May 4, 1998 reorganization, the Company's intercompany
debt owned to Softbank was reduced to $83.1 million. Such indebtedness bears
interest at 9.9% and matures in February 2009. Concurrently with the Company's
initial public offering, the Company issued and sold $250 million aggregate
principal amount of notes. In addition, the Company entered into a $1.35
billion credit facility, and borrowed $1.25 billion thereunder, to provide
additional funds for the repayment of intercompany debt to Softbank and to
provide for the Company's working capital requirements. (See Note 2 to the
Combined Financial Statements included in this prospectus).

The credit facility, as amended, consists of a seven year $400 million
reducing revolving credit facility, a seven year $450 million term loan and an
eight year $500 million

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<PAGE>

term loan. There are no scheduled reductions in the revolving credit commitment
or amortization under the term loan under September 2000.

At September 30, 1998, the Company's outstanding total debt was $1,534.6
million (excluding unamortized discount) which consisted of $79.6 million due
to Softbank, $250 million in Notes and $1,205 million under the credit
facility.

Cash and equivalents were $27.2 million at September 30, 1998, a decrease of
$3.1 million from $30.3 million at December 31, 1997. The decrease was due to
factors described below:

Cash provided by operations was $82.8 million for the nine months ended
September 30, 1998 compared to a use of $20.7 million for the same period of
1997. The increase was attributed to the Company's lower losses and a decrease
in funding to affiliates for the 1998 period.

Cash used by investing activities for the nine months ended September 30,
1998 totaled $40.6 million compared to $21.7 million for the 1997 comparable
period. For both periods, the majority of these expenditures were for computer
equipment and leasehold improvements. Other investments represents the
Company's investment in Deja News. Acquisitions in the 1998 period relate to
the Company's acquisition of a tradeshow in Canada, an additional 50% of Family
PC magazine and a European marketing database company. Acquisitions for the
1997 period reflect the purchase of a 70% interest in GameSpot, Inc.

Cash used in financing activities totaled $45.3 million for the nine months
ended September 30, 1998, representing proceeds from the reorganization and
initial public offering of $1,863.3 million, net of transaction costs, and
funding from the parent company of $20.4 million offset by the repayment of
debt and amounts due to affiliates of $1,929.3 million. Cash provided by
financing activities in the same period in 1997 amounted to $50.2 million
representing capital contributions partly offset by repayments of intercompany
debt.

The Company believes, based on its current level of operations and
anticipated growth, that the Company's ability to generate cash, together with
cash on hand and available lines of credit, will be sufficient to make required
payments of principal and interest on the Company's indebtedness and fund
anticipated capital expenditures and future working capital requirements over
the next 12 months. However, actual capital expenditures may change,
particularly as a result of any acquisitions the Company may pursue. The
ability of the Company to meet its debt service obligations and reduce its
total debt will depend upon the future performance of the Company.

CREDIT FACILITY

For the reasons described under "--Reduced Demand for Advertising;
Restructuring" above, the Company expects its debt to EBITDA ratios at December
31, 1998 to be above the levels that had been required by its credit facility.
On December 16, 1998, the lenders on the $1.35 billion credit facility agreed
to amend certain provisions of that facility. The

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<PAGE>

amended provisions include an increase to the allowed leverage ratios. In
return, the Company agreed to pay a one-time fee and increase the interest
rates on amounts borrowed under the facility. Had the increased interest rates
been in effect for the period from the May 4, 1998 initial public offering to
September 30, 1998, interest expense would have increased by approximately $7.3
million.

INTEREST RATE SWAPS

On June 10, 1998, the Company entered into interest rate swap agreements,
with an aggregate notional amount of $550 million. Under these swap agreements,
which commenced on August 10, 1998, the Company will receive a floating rate of
interest based on three-month LIBOR, which resets quarterly, and the Company
will pay a fixed rate of interest each quarter for the terms of the respective
agreements. The weighted average fixed rate the Company will pay under these
agreements is 5.85%. The Company has entered into these agreements solely to
hedge its interest rate risk.

ZDTV

The Company has a license and services agreement to develop ZDTV. ZDTV is
owned by MHA, but as part of the license and services agreement, MHA has
granted the Company an option (which expires December 31, 1998, unless
otherwise extended) to purchase all of MHA's interest in ZDTV for an amount
equal to MHA's investment plus 10% per annum for the period of its investment.
MHA is wholly owned by Mr. Masayoshi Son, a director of the Company. Pursuant
to the license and services agreement, the Company has agreed to fund ZDTV's
operations on behalf of MHA through unsecured advances, which for approved
levels of expenditures are to be reimbursed by MHA. Such advances bear interest
at the 30-day LIBOR rate plus 0.50%. ZDTV's cash requirements for 1998 are
currently expected to be approximately $53 million, of which $40 million had
been spent through September 30, 1998. On November 17, 1998 the Company
announced its intention to exercise its option to purchase ZDTV for a purchase
expected to be approximately $85 million. Of this amount, it is expected that
the Company will make a cash payment of approximately $32 million and convert
the advances previously paid to MHA estimated at $53 million. In addition, ZD
announced a letter of intent had been entered into with Vulcan, whereby Vulcan
would purchase 33% of ZDTV for approximately $54 million. Other than advances
to ZDTV which are reported on the Company's balance sheet, the results of
operations of ZDTV are not included in the Company's results.

SEASONALITY

Historically, the Company's business has been seasonal as a significant
portion of the revenue has occurred in the second and fourth quarters. The
following table sets forth certain unaudited quarterly combined statements of
operations data for each of the eight quarters in the period ended September
30, 1998. In the opinion of the Company's management, this unaudited
information has been prepared on a basis consistent with the audited Combined
Financial Statements appearing elsewhere in this prospectus and

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<PAGE>

includes all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the information set forth therein when read in
conjunction with the Combined Financial Statements and related notes thereto.
The operating results for any quarter are not necessarily indicative of results
for any future period.

<TABLE>
<CAPTION>
QUARTERS ENDED
-----------------------------------------------------------------------------------------------
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1996 1997 1997 1997 1997 1998 1998 1998
------------ --------- -------- ------------- ------------ --------- -------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue, net:
Publishing............. $232,884 $209,564 $219,195 $199,745 $237,729 $200,933 $210,693 $196,231
Events................. 122,545 15,321 82,135 24,227 165,845 27,121 65,782 29,787
-------- -------- -------- -------- -------- -------- -------- --------
Total revenue........... $355,429 $224,885 $301,330 $223,972 $403,574 $228,054 $276,475 $226,018
Percentage of total
year.................. 32.9% 19.5% 26.1% 19.4% 35.0% n/a n/a n/a
Cost of production...... 96,802 61,526 92,986 62,716 108,017 70,310 75,749 63,471
Selling, general and
administrative
expenses............... 150,025 139,980 143,243 143,131 137,990 144,239 140,063 139,516
Depreciation and
amortization........... 42,490 38,966 39,032 39,699 37,243 37,475 39,276 37,843
Income (loss) from
operations............. 66,112 (15,587) 26,069 (21,574) 120,324 (23,970) 21,387 (14,812)
Income (loss) before
taxes.................. 31,626 (60,145) (17,715) (66,937) 72,306 (68,287) (12,032) (39,449)
Net income (loss)....... 25,205 (59,817) (17,387) (66,609) 72,634 (5,121) (76,560) (4,498)
EBITDA.................. 111,027 25,534 68,216 20,486 158,658 15,127 63,397 27,487
Percentage of total
year.................. 43.5% 9.4% 25.0% 7.5% 58.1% n/a n/a n/a
</TABLE>

INFLATION AND FLUCTUATIONS IN PAPER PRICES AND POSTAGE COSTS

The Company continually assesses the impact of inflation and changes in paper
prices. The Company generally enters into contracts for the purchase of paper
which adjust the price on a quarterly basis. Paper prices began to rise in
1994, rose significantly in 1995 and 1996 and then decreased in 1997. During
1998, paper prices were relatively flat. Management anticipates that paper
prices will remain relatively stable in 1999. The Company will continue to
monitor the impact of inflation and paper prices and will consider these
matters in setting its pricing policies. The Company frequently reviews its
purchasing and manufacturing processes for opportunities to reduce costs and
mitigate the impact of paper price and postage rate increases (such as
purchasing lighter-grade paper stock or, when paper prices are at cyclical
lows, increasing paper inventory or entering into longer term contracts with
suppliers). However, the Company had not entered, and does not currently plan
to enter, into long-term forward price or option contracts for paper.
Management estimates postage costs will increase approximately 3.5% in 1999.
See "Risk Factors--Other Company Risks--Risks Associated with Fluctuations in
Paper and Postage Costs" and "ZD Description of Business--Print Publishing--
Paper and Printing".

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<PAGE>

YEAR 2000 ISSUES

During 1997, the Company began a review of its computer systems and related
software which might malfunction due to misidentification of the Year 2000. The
Company is using both internal and external resources to identify, correct or
reprogram, and test systems for Year 2000 readiness. Some of the Company's
computer systems and databases, including its subscription fulfillment and
payroll systems, are managed by third parties under contractual arrangements.
The Company has requested those third parties to advise the Company as to
whether they anticipate difficulties in addressing year 2000 problems and, if
so, the nature of such difficulties. Management of the Company has not finally
determined the cost associated with Year 2000 readiness efforts and the related
potential impact on the Company's results of operations. Amounts expended to
date have not been material. There can be no assurances the Company's systems
or systems of other companies on which the Company relies will be converted in
time or that any such failure to convert by the Company or another company will
not have an adverse effect on the Company's financial condition or results of
operations. After evaluating its internal compliance efforts as well as the
compliance of third parties as described above, by the end of the calendar year
1998, the Company will develop during 1999 contingency plans to address
situations in which various systems of the Company or third parties with which
the Company does business, are not Year 2000 compliant. Any year 2000
compliance problem could have a material adverse effect on the Company's
business, results of operations and financial condition. Management believes a
likely "worst case scenario" is that some customers and vendors will be unable
to complete transactions on a timely basis which may have an adverse impact on
the timing of the Company's cash flows and potentially the Company's ability to
deliver products or services.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

118
<PAGE>

The Company aspects to adopt the above statements beginning with its 1998
financial statements.

119
<PAGE>

COMPANY
DESCRIPTION OF BUSINESS

GENERAL

Ziff-Davis Inc. is a leading integrated media and marketing company focused
on computing and Internet-related technology. We provide global technology
companies with marketing strategies for reaching key decision-makers. From an
accounting standpoint, we have separated our online business division from the
rest of our businesses, and we have allocated all of our consolidated assets,
liabilities, revenue, expenses and cash flow between those two Groups. See the
Selected Combined Financial and Other Data, Management's Discussion and
Analysis of Financial Condition and Results of Operations, Description of
Business and Combined Financial Statements for each of ZD and ZDNet,
respectively.

RELATIONSHIP WITH SOFTBANK

For information concerning the formation of the Company and its relationship
with SOFTBANK see Note 1 to the Combined Financial Statements of the Company
included in this prospectus and "Risk Factors--Other Company Risks--Control by
Principal Stockholders and Potential Conflicts of Interest".

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MANAGEMENT OF THE COMPANY

DIRECTORS AND EXECUTIVE OFFICERS

Our directors and executive officers are set forth in the table below:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Eric Hippeau............ 47 Chairman, Chief Executive Officer, Director
Jason E. Chudnofsky..... 55 President and Chief Executive Officer, ZD Events, Director
Timothy C. O'Brien...... 50 Chief Financial Officer, Director
Claude P. Sheer......... 47 Chief Internet Strategist, Director
Robert G. Brown......... 52 President, ZD Market Intelligence
Terri S. Holbrooke...... 42 President, ZD Brand and Marketing
J. Malcolm Morris....... 55 Senior Vice President, General Counsel
Daryl R. Otte........... 37 Senior Vice President, Development and Planning
Michael S. Perlis....... 45 President, ZD Publishing
Daniel L. Rosensweig.... 37 President, ZDNet
William A. Rosenthal.... 37 President, ZD Education
Thomas L. Wright........ 39 Vice President, Treasurer
Masayoshi Son........... 40 Director
Yoshitaka Kitao......... 47 Director
Ronald D. Fisher........ 51 Director
Jonathan D. Lazarus..... 47 Director
Jerry Yang.............. 30 Director
</TABLE>

The Company intends to nominate for election an additional independent
director. See "--Board Composition".

BIOGRAPHIES OF DIRECTORS AND EXECUTIVE OFFICERS

Set forth below is the biography of each of our current directors and
executive officers, all of whom have been a director or executive officer since
our initial public offering in April 1998.

Eric Hippeau. Eric Hippeau has been Chairman and Chief Executive Officer of
the Company since 1998 and of ZD Inc. since 1993. Mr. Hippeau has been a
director of the Company since 1998 and his current term will expire in 2001. He
joined ZD Inc. in 1989 as Publisher of PC Magazine, was named Executive Vice
President of ZD Inc. in 1990, and President and Chief Operating Officer in
February 1991. Prior to joining ZD Inc., Mr. Hippeau held a number of positions
with IDG, including Vice President of computer publications in Latin America
and Publisher of IDG's InfoWorld magazine. Mr. Hippeau is currently a Director
of GeoCities, Frontier Corporation, SOFTBANK Corp. and Yahoo! Inc.

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<PAGE>

Jason E. Chudnofsky. Jason E. Chudnofsky has been President of ZD Events
since October 1997, has been a director of the Company since 1998 and his
current term will expire in 1999. From 1988 to 1997, Mr. Chudnofsky was
President of the Trade Show Division of The Interface Group which was renamed
SOFTBANK COMDEX when that division was acquired by Softbank in 1995. In
addition, Mr. Chudnofsky served as President and Chief Executive Officer of the
Sands Expo and Convention Center Division from 1990 to 1995. Mr. Chudnofsky has
over 15 years of experience in the exposition, trade show and conference
industry.

Timothy C. O'Brien. Timothy C. O'Brien has been Vice President and Chief
Financial Officer of the Company since 1998 and of ZD Inc. since 1995. Mr.
O'Brien has been a director of the Company since 1998 and his current term will
expire in 2000. From 1985 to 1994, Mr. O'Brien was Chief Financial Officer of
Reed Elsevier Inc. and Reed Publishing USA. From 1992 to 1994, he was also
Executive Vice President of Cahners Publishing Company which he joined in 1980.
From 1970 to 1980, Mr. O'Brien was employed by Price Waterhouse LLP.

Claude P. Sheer. Claude P. Sheer has been Chief Internet Strategist of ZD
Inc. since November 1998 and was President of ZD Publishing from December 1997
to November 1998. Mr. Sheer has been a director of the Company since 1998 and
his current term will expire in 2000. Mr. Sheer served in 1997 as President of
U.S. Publications of ZD Inc. and in 1996 as President of the Business Media
Group. Since joining ZD Inc. in 1980, Mr. Sheer has served in a number of
positions including Publisher of PC Week and Group Vice President of Controlled
Circulation Publications.

Robert G. Brown. Robert G. Brown has been President of ZD Market Intelligence
since 1993. He joined ZD Inc. in 1992 as Vice President of Market Development.
Prior to that time, from March 1988 to July 1992, Mr. Brown was founder and
President of R.G. Brown & Associates, a direct marketing and management
consulting company working with computer hardware and software companies. Mr.
Brown was previously President of Quadram, a unit of Intelligent Systems, L.P.,
which manufactured and sold peripheral products to PC users.

Terri S. Holbrooke. Terri S. Holbrooke has been President of ZD Brand &
Market Services since July 1997. From October 1996 to July 1997, Ms. Holbrooke
was Senior Vice President of Marketing for ZD Inc. From January 1996 to October
1996, Ms. Holbrooke was Vice President of SOFTBANK Exposition and Conference
Company. From 1986 to 1995, Ms. Holbrooke held several executive marketing
positions at Novell Inc., including head of Worldwide Marketing Communications
and Vice President of Strategic Planning.

J. Malcolm Morris. J. Malcolm Morris has been Senior Vice President, General
Counsel of the Company since 1998, having previously served as Vice President,
General Counsel of ZD Inc. since 1990. Mr. Morris joined ZD Inc. in 1980 as
Assistant General Counsel. Prior to joining ZD Inc., Mr. Morris was engaged in
the practice of law at the New York firm of Cleary, Gottlieb, Steen & Hamilton.

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<PAGE>

Daryl R. Otte. Daryl R. Otte has been Senior Vice President of Development
and Planning for the Company since 1998 and for ZD Inc. since 1997. From 1995
to 1997, Mr. Otte was Vice President of Planning. From 1989 to 1995, Mr. Otte
held various corporate finance and planning positions at Reed Elsevier Inc.,
and its predecessors, including Vice President of Planning, Cahners Publishing
Company, and Assistant to the Chief Financial Officer of Reed Publishing USA.

Michael S. Perlis. Michael S. Perlis has been President of ZD Publishing
since November 1998. From June 1996 to September 1998, Mr. Perlis was President
and Chief Operating Officer of TVSM, the largest publisher of cable television
listing and guidance publications. From 1994 to 1996, Mr. Perlis was Publisher
of Gentleman's Quarterly. In previous posts, Mr. Perlis has served as Publisher
and President of the Playboy Publishing Group, President and Chief Executive,
International Data Group--Peterborough and Group Publisher, Rodale Press.

Daniel L. Rosensweig. Daniel L. Rosensweig has been President of ZDNet since
1997, having served in 1996 and 1997 as Executive Vice President of ZD Inc.'s
Internet Publishing Group. From 1995 to 1996, Mr. Rosensweig was Vice President
and Publisher of PC Magazine, and, from 1994 to 1995, was Publisher of PC
Magazine. Since joining ZD Inc. in 1983, Mr. Rosensweig has also held a number
of positions, including Associate Publisher positions at PC Magazine, Computer
Shopper and PC Sources.

William A. Rosenthal. William A. Rosenthal has been President of ZD Education
since 1997 having served as President of ZD Inc.'s Logical Operations division
in 1996 and 1997. From 1993 to 1996, Mr. Rosenthal was the General Manager for
ZD Inc.'s Logical Operations division and from 1987 to 1993 was Vice President
of Sales and Marketing for that division.

Thomas L. Wright. Thomas L. Wright has been Treasurer of the Company since
1998 and of ZD Inc. since 1995. Mr. Wright has been Vice President and
Treasurer of SOFTBANK Holdings Inc. since 1996. Prior to joining ZD Inc.,
Mr. Wright held various positions from 1986 to 1995 at Reliance Group Holdings,
Inc., most recently as Vice President and Assistant Treasurer.

Masayoshi Son. Masayoshi Son has been President and Chief Executive Officer
of SOFTBANK Corp. since 1981. Mr. Son has been a director of the Company since
1998 and his current term will expire in 2001. Mr. Son has been President and
Chief Executive Officer of Mediabank Corporation since 1994 and GeoCities Japan
Corporation since 1997 and was President and Chief Executive Officer of Japan
Sky Broadcasting Co. Ltd., from 1996 to 1998 and SOFTBANK Networks Corporation
from 1997 to 1998. In addition, Mr. Son currently serves as a Director of
PASONABANK Inc. and Yahoo! Japan Corporation and as a Representative Director
of Cisco Systems Inc. and Son Kosan Ltd.

Yoshitaka Kitao. Yoshitaka Kitao has been Executive Vice President and Chief
Financial Officer of SOFTBANK Corp. since 1995. Mr. Kitao has been a director
of the Company since 1998 and his current term will expire in 2000. Mr. Kitao
has been President

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and Chief Executive Officer of SoftVenture Capital Inc. since 1996, SOFTBANK
Ventures Inc. since 1996 and SOFTBANK Contents Partners Corporation since 1997.
Since 1997, Mr. Kitao has been President of Cybercash KK and a Director of
Trendmicro Inc. Previously, Mr. Kitao served as Director of Nomura Wasserstein
Perella Co., Ltd. from 1992 to 1993, Managing Director of Wasserstein Perella &
Co., Inc. from 1989 to 1992 and was the General Manager for the Nomura
Securities Co., Ltd.'s Corporate Finance and Services Dept. from 1992 to 1995.

Ronald D. Fisher. Ronald D. Fisher has been the Vice Chairman of SOFTBANK
Holdings Inc. since 1995. Mr. Fisher has been a director of the Company since
1998 and his current term will expire in 1999. From 1990 to 1995, Mr. Fisher
was the Chief Executive Officer of Phoenix Technologies Ltd., a leading
developer and marketer of system software products for personal computers. From
1984 through 1989, Mr. Fisher was the President of Interactive Systems
Corporation. His prior experience also includes senior management positions at
Visicorp, TRW and ICL (USA). In addition to being a Board member of SOFTBANK
Corp., Mr. Fisher serves on the Board of Phoenix Technologies Ltd.

Jonathan D. Lazarus. Jonathan D. Lazarus has been a director of the Company
since 1998 and his current term expires in 1999. Mr. Lazarus was with Microsoft
Corporation from 1985 through 1996, serving most recently as Vice President,
Strategic Relations. Mr. Lazarus serves on the Boards of HomeGrocer.com, Liquid
Audio, NetGravity and Vision Solutions. Mr. Lazarus is also an advisor to
Microsoft Corporation, the Universal Studios New Media Group and ZDTV.

Jerry Yang. Jerry Yang has been a director of the Company since 1998 and his
current term expires in 2000. Mr. Yang co-founded Yahoo! Inc. in 1995 and has
served as an officer and a member of the Board of Directors of Yahoo! Inc.
since March 1995. Mr. Yang co-developed Yahoo! Inc. in 1994 while he was
working towards his Ph.D. in electrical engineering at Stanford University.

BOARD COMPOSITION

The Board currently consists of nine members and the Board will nominate for
election one additional "independent director" (within the meaning of the
regulations of the New York Stock Exchange (the "NYSE")). It is expected that
the new director will be elected by the Board as soon as practicable. Our
directors are currently elected annually by the stockholders to serve during
the ensuing year or until their respective successors are duly elected and
qualified. The Board is divided into three classes each of whose members serves
for a staggered three-year term. Upon the expiration of the term of a class of
directors, directors in such class are elected for three-year terms at the
annual meeting of stockholders in the year in which such term expires. See
"Description of Capital Stock--Certain Other Provisions of the Restated
Certificate of Incorporation and By-laws".

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COMMITTEES OF THE BOARD OF DIRECTORS

The Board currently has two committees: an audit committee and a compensation
committee.

AUDIT COMMITTEE

Our audit committee is comprised of the independent directors. Our audit
committee reviews and recommends to the Board, as it deems necessary, our
internal accounting and financial controls and the accounting principles and
auditing practices and procedures to be employed in preparation and review of
our financial statements. Our audit committee makes recommendations to the
Board concerning the engagement of independent public accountants and the scope
of the audit to be undertaken by such accountants. PricewaterhouseCoopers LLP
presently serves as our independent accountants.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee (the "COMMITTEE") is currently comprised of Ronald
D. Fisher, Jonathan D. Lazarus and Jerry Yang. The Committee reviews and, as it
deems appropriate, recommends to the Board policies, practices and procedures
relating to the compensation of the officers and other managerial employees and
the establishment and administration of employee benefit plans. The Committee
exercises all authority under any employee stock option plans of the Company as
the Committee therein specifies (unless the Board resolution appoints any other
committee to exercise such authority), and advises and consults with the
officers of the Company as may be requested regarding managerial personnel
policies. The Committee will have such additional powers and be granted
additional authority as may be conferred upon it from time to time by the
Board.

Mr. Fisher is the Vice Chairman of SOFTBANK Holdings Inc. ("SBH"), our
majority stockholder and Mr. Yang is a co-founder and Chief Yahoo, and Mr.
Hippeau is a director of, Yahoo! Inc. During 1996, 1997 and 1998, the Company
incurred $2 million, approximately $1.6 million and $. in advertising expenses
with Yahoo! Inc., respectively.

COMPENSATION OF DIRECTORS

Directors who are not executive officers or employees of the Company or
Softbank will receive an annual retainer of $25,000 for Board service and a fee
of $2,000 for each meeting of the Board or any committee thereof attended.

The Company has adopted the Non-Employee Directors' Plan, the principal terms
and conditions of which are set forth below.

Directors of the Company who are not employees of the Company, SOFTBANK Corp.
or SBH ("NON-EMPLOYEE DIRECTORS") will automatically participate in the Non-
Employee Directors' Plan. The Non-Employee Directors' Plan is administered by
the Committee.

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EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The table below sets forth the compensation paid to, deferred or accrued for
the benefit of, our Chief Executive Officer and each of the four other most
highly compensated executive officers for services rendered in all capacities
to the Company during the last two fiscal years.

<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
----------------------- ---------------------
NAME AND PRINCIPAL SECURITIES UNDERLYING ALL OTHER
POSITION YEAR SALARY($) BONUS($) OPTIONS (#)(1) COMPENSATION($)(2)
------------------ ---- --------- -------- --------------------- ------------------
<S> <C> <C> <C> <C> <C>
Eric Hippeau............ 1998 900,000 . 1,105,000(3) .
Chairman and Chief
Executive Officer 1997 1,350,000 14,063 31,000 17,566
Jason E. Chudnofsky..... 1998 800,000 . 325,895(4) .
President and Chief
Executive Officer, ZD
Events 1997 800,000 --(5) 10,000 28,269
Claude P. Sheer......... 1998 550,000 . 225,298(6) .
Chief Internet 1997 457,500 342,656 9,500 17,566
Strategist
Timothy C. O'Brien...... 1998 490,000 . 172,988(7) .
Chief Financial Officer 1997 462,500 305,850 7,700 36,806
Robert G. Brown......... 1998 400,000 . 105,844(8) .
President, ZD Market 1997 382,500 253,151 3,200 21,949
Intelligence
</TABLE>
- --------
(1) The options granted in 1997 are options to purchase common stock of
SOFTBANK Corp. under the SOFTBANK Group Executive Stock Option Plans (the
"SOFTBANK OPTIONS"). The options listed for 1998 include the Softbank
Options granted in 1996 and 1997 which were repriced in 1998 to (Yen)4,000
(the "REPRICED SOFTBANK OPTIONS"). No additional Softbank Options were
granted in 1998.
(2) All Other Compensation for 1997 does not include certain payments in 1997
for services rendered in 1994. See Note 9 to the Company's Combined
Financial Statements included elsewhere in this prospectus.
(3) Includes options to purchase 860,000 shares of Common Stock of the Company
and 245,032 Repriced Softbank Options (including the 31,000 granted in
1997).
(4) Includes options to purchase 300,000 shares of Common Stock of the Company
and 25,895 Repriced Softbank Options (including the 10,000 granted in
1997).
(5) Does not include bonus of $300,000 paid in 1997 for services rendered in
1996.
(6) Includes options to purchase 200,000 shares of Common Stock of the Company
and 25,298 Repriced Softbank Options (including the 9,500 granted in 1997).
(7) Includes options to purchase 150,000 shares of Common Stock of the Company
and 22,988 Repriced Softbank Options (including the 7,700 granted in 1997).
(8) Includes options to purchase 95,000 shares of Common Stock of the Company
and 10,844 Repriced Softbank Options (including the 3,200 granted in 1997).

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OPTION GRANTS AND EXERCISES IN 1998

The following two tables summarize stock option grants to, and exercises by,
each of the executive officers named in the Summary Compensation Table during
1998 and the value of the options held by them as of December 31, 1998.

OPTION GRANTS IN 1998

<TABLE>
<CAPTION>
PERCENT OF POTENTIAL REALIZED
TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO EXERCISE PRICE APPRECIATION
UNDERLYING EMPLOYEES OR BASE FOR OPTION TERM
NAME AND PRINCIPAL OPTION IN FISCAL PRICE ----------------------
POSITION GRANTED(#) YEAR ($/SH) EXPIRATION DATE 5%($) 10%($)
------------------ ---------- ---------- -------- ---------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Eric Hippeau............ 860,000(1) . $6.00(2) June 24, 2008 $3,245,096 $ 8,223,711
245,032(3) . $34.48(4) January 31, 2007 $5,313,344 $13,465,057
Jason E. Chudnofsky..... 300,000(1) . $6.00(2) June 24, 2008 $1,132,010 $ 2,868,736
25,895(3) . $34.48(4) January 31, 2007 $ 561,515 $ 1,422,988
Claude P. Sheer......... 200,000(1) . $6.00(2) June 24, 2008 $ 754,674 $ 1,912,491
25,298(3) . $34.48(4) January 31, 2007 $ 548,569 $ 1,390,182
Timothy C. O'Brien...... 150,000(1) . $6.00(2) June 24, 2008 $ 566,005 $ 1,434,368
22,988(3) $34.48(4) January 31, 2007 $ 498,478 $ 1,263,242
Robert G. Brown......... 95,000(1) . $6.00(2) June 24, 2008 $ 358,470 $ 908,433
10,844(3) . $34.48(4) January 31, 2007 $ 235,144 $ 595,902
</TABLE>
- --------
(1) Represents options to purchase Common Stock of the Company.
(2) Company stock options were repriced from $16.00 to $6.00 in 1998.
(3) Represents Repriced Softbank Options.
(4) Repriced Softbank Options were repriced from . to (Yen) . (Yen)4,000 in
1998; the exercise price per share is based on an assumed exchange rate of
116 (Yen)/USD, the exchange rate as of December 17, 1998.

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<PAGE>

AGGREGATED OPTION EXERCISES IN 1998 AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING . VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR-END (#) FISCAL YEAR-END($)
SHARES ----------------------------------- -------------------------
NAME AND PRINCIPAL ACQUIRED ON VALUE
POSITION EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------ ------------ ------------ -------------- ----------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Eric Hippeau............ 0(1) 0 0 860,000 . .
0(2) 0 . . . .
Jason E. Chudnofsky..... 0(1) 0 0 300,000 . .
0(2) 0 . . . .
Claude P. Sheer......... 0(1) 0 0 200,000 . .
7,548(2) . . . . .
Timothy C. O'Brien...... 0(1) 0 0 150,000 . .
0(2) 0 . . . .
Robert G. Brown......... 0(1) 0 0 95,000 . .
0(2) 0 . . . .
</TABLE>
- --------
(1) Represents shares acquired on exercise of options to purchase Common Stock
of the Company.
(2) Represents shares acquired on exercise of Repriced Softbank Options.

SHARES RESERVED FOR ISSUANCE

The aggregate number of shares reserved for issuance under the Non-Employee
Directors' Plan is 200,000 shares, subject to adjustment by the Committee in
the event of any change in the outstanding shares of Common Stock by reason of
any stock dividend or split, recapitalization, merger, consolidation, spinoff,
combination or exchange of shares or other corporate change, or any
distributions to common stockholders other than regular cash dividends. Shares
subject to or underlying an option that expires unexercised, or is forfeited,
terminated or canceled, or is paid in cash in lieu of Common Stock and shares
that are tendered to pay for the exercise of an option will thereafter be
available for grant under the 1998 Non-Employee Directors' Stock Option Plan
(the "NON-EMPLOYEE DIRECTORS' PLAN").

Pursuant to the Non-Employee Directors' Plan, each Non-Employee Director will
receive upon election as a member of the Board an initial grant of stock
options to purchase 15,000 shares of Common Stock; provided, that each Non-
Employee Director who was on the Board on the date of the Company's initial
public offering in May 1998 received such initial grant of stock options on the
date of that offering. Each Non-Employee Director will automatically receive on
each annual meeting thereafter an annual grant of stock options to purchase
7,500 additional shares of Common Stock. The terms of each stock option granted
to a Non-Employee Director will provide that (1) the option price will be equal
to 100% of the fair market value (as defined in the 1998 Incentive Compensation
Plan) of the Common Stock on the date of grant, (2) such option will be
exercisable for a period of ten years following the date of grant and (3) such
option will vest and become exercisable in five equal installments beginning on
the first anniversary of the date of grant. Upon ceasing to be a Non-Employee
Director, such option will terminate except with respect to any portion of such
option then exercisable, which portion will remain exercisable for a period of

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<PAGE>

(x) 90 days, if the termination as Director resulted from any reason other than
death, disability or cause or (y) one year, if the termination resulted from
death or disability; provided, that in the event the termination resulted from
a removal for cause, such option will immediately terminate and no longer be
exercisable to any extent; provided, further, that in no event will any such
option remain exercisable past the remainder of its scheduled ten-year term.

Upon a "change in control" of the Company (as defined in the Non-Employee
Directors' Plan), each outstanding option will fully vest and become
immediately exercisable in full. In addition, the Committee may provide in its
sole discretion that upon a change in control of the Company, each Non-Employee
Director will be entitled to receive in cancellation of such Non-Employee
Director's outstanding and unexercised stock options, a cash payment in an
amount equal to the difference between the option price of such stock options
and (1) in the event the change of control is the result of a tender offer or
exchange offer for the Common Stock, the final offer price per share paid for
the Common Stock, multiplied by the number of shares of Common Stock covered by
such stock options or (2) in the event the change of control is the result of
any other occurrence, the aggregate value of the Common Stock covered by such
stock options, as determined by the Committee at such time.

The Board may amend, suspend or terminate the Non-Employee Directors' Plan or
any portion thereof at any time; provided, that no amendment shall be made (1)
without stockholder approval if such approval is necessary in order for the
Non-Employee Directors' Plan to comply with any applicable law, regulations or
stock exchange rule and (2) except in the case of a change in control of the
Company, that would adversely affect the rights of any Non-Employee Director
under any outstanding option without such Non-Employee Director's written
consent.

STOCK PLANS

INCENTIVE COMPENSATION PLAN

General

The Company has adopted the Incentive Plan to provide long-term incentives
for its key employees and enhance stockholder value, the principal terms and
conditions of which are set forth below.

The 1998 Incentive Compensation Plan (the "INCENTIVE PLAN") will be
administered by the Board or the Committee which (1) selects the participants
and determines the type of awards and the number of shares or share units
subject to awards and (2) interprets the Incentive Plan and makes all other
determinations necessary or advisable for its administration.

All employees and consultants of the Company and our affiliates who have
demonstrated significant management potential or the capacity for contributing
substantially to the successful performance of the Company and our affiliates,
are eligible to be participants in the Incentive Plan. Awards may consist of
stock awards, stock options (either

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<PAGE>

incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "CODE") or nonstatutory stock options),
stock appreciation rights, performance shares (which may be granted as
performance share units) and restricted stock (which may be granted as
restricted stock units).

The Common Stock available for awards under the Incentive Plan will not
exceed 8,500,000 shares. In the event of any change in the outstanding shares
by reason of any stock dividend or split, recapitalization, merger or other
corporate change, or any distributions to common stockholders other than
regular cash dividends, the Committee may make such substitution or adjustment,
if any, as it deems to be equitable, as to the number or kind of shares of
Common Stock or other securities issued pursuant to the Incentive Plan and to
outstanding awards. Shares subject to an award that expires unexercised or is
forfeited, terminated or settled in cash in lieu of Common Stock, and shares
tendered to pay for the exercise of a stock option, will thereafter again be
available for grant under the Incentive Plan.

Each award under the Incentive Plan will be evidenced by an agreement setting
forth the terms and conditions, as determined by the Committee, which apply to
such award. In the sole discretion of the Committee, a participant may be
permitted to defer the receipt of cash or Common Stock otherwise deliverable
under any award.

Stock Options

The Committee will establish the option price at the time each stock option
is granted, which price will not be less than 100% of the fair market value of
the Common Stock on the date of grant. Stock options will vest and become
exercisable at a rate determined by the Committee, and will remain exercisable
for such period as specified by the Committee. The award agreements in respect
of options that are intended to qualify as incentive stock options will contain
any additional provisions necessary to comply with the requirements of Section
422 of the Code. In no event may any employee receive in any calendar year
grants of stock options with respect to more than 1,000,000 shares of Common
Stock.

The option price of each share as to which a stock option is exercised will
be paid in full at the time of such exercise in cash, by tender of shares of
Common Stock owned by the participant valued at fair market value, by a "sale
to cover" broker transaction or other cashless exercise method permitted under
Regulation T of the Federal Reserve Board, or by a combination of cash, shares
of Common Stock and other consideration as the Committee deems appropriate.

Stock Appreciation Rights

Stock appreciation right (a "SAR") may be granted in tandem with a stock
option or unrelated to a stock option. SARs will vest and become exercisable at
a rate determined by the Committee, and will remain exercisable for such period
as specified by the Committee. SARs entitle holders to receive from the Company
an amount equal to the excess of the fair market value of a share of Common
Stock on the exercise of the SAR over the fair market

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<PAGE>

value on the date of grant. The Committee may determine in its sole discretion
whether a SAR will be settled in cash, Common Stock or a combination thereof.
In no event may any employee receive in any calendar year grants of SARs with
respect to more than 500,000 shares of Common Stock.

Performance Shares

Performance shares may be granted in the form of actual shares of Common
Stock or share units having a value equal to an identical number of shares of
Common Stock. The performance conditions and the length of the performance
period will be determined by the Committee but in no event may a performance
period be less than one year. The Committee may determine in its sole
discretion whether performance shares granted in the form of share units shall
be paid in cash, Common Stock or a combination thereof.

Unless the Committee determines otherwise, awards of performance shares to a
Covered Employee will be subject to performance conditions based on the
achievement by the Company of target levels of items such as consolidated net
income, return on stockholders' equity, return on net assets or share price
performance. For purposes of the Incentive Plan, a "COVERED EMPLOYEE" generally
includes any employee that would be a covered employee within the meaning of
Section 162(m) of the Code and any other employee of the Company or its
subsidiaries designated by the Committee in its discretion. The maximum number
of performance shares subject to any award to a Covered Employee is 500,000 for
the first 12 months during the performance period and each 12-month period
thereafter.

Restricted Stock

Restricted stock may be granted in the form of actual shares of Common Stock
or share units having a value equal to an identical number of shares of Common
Stock. The employment conditions and the length of the period for vesting of
restricted stock will be established by the Committee at time of grant, except
that each restriction period will not be less than 12 months. During the
restricted period, shares of restricted stock may not be sold, assigned,
transferred or otherwise disposed of, or pledged or hypothecated as collateral
for a loan or as security for the performance of any obligation or for any
other purpose as the Committee determines. The Committee may determine in its
sole discretion whether restricted stock granted in the form of share units
will be paid in cash, Common Stock or a combination thereof.

Stock Awards

In addition to awards of performance shares and restricted stock, awards of
Common Stock may be granted under the Incentive Plan in the form of actual
shares of Common Stock. Full ownership of such shares, whether issued in the
form of a certificate or in book entry, including the right to vote and receive
dividends, will immediately vest in such participant.

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<PAGE>

Change in Control

In the event of a Change in Control (as defined below): (1) all stock options
will be fully vested and exercisable in full, (2) all SARs which have not been
granted in tandem with stock options will become exercisable in full, (3) the
restrictions applicable to all shares of restricted stock will lapse and such
shares will be deemed fully vested and all restricted stock granted in the form
of share units will be paid in cash, (4) all performance shares will be deemed
to be earned at target level and (5) all performance shares granted in the form
of share units will be paid in cash.

For purposes of the Incentive Plan, "CHANGE IN CONTROL" is generally defined
as (1) a change in the majority of the Board except upon consent of the
previous Board, (2) certain mergers, consolidations or similar corporate
transactions in which the Company is not the surviving corporation or entity or
(3) the stockholders of the Company approve a plan of complete liquidation or
dissolution of the Company or a sale of all or substantially all of the
Company's assets; provided, that a Change in Control will not be deemed to
occur under clause (2) if SOFTBANK Corp., directly or indirectly, is the
beneficial owner of more than 25% of the Company's voting securities or of the
voting securities of any surviving corporation, respectively.

Amendment and Termination

The Board may amend, suspend or terminate the Incentive Plan or any portion
thereof at any time, provided; that, (1) no amendment will be made without
stockholder approval (including an increase in the number of shares reserved
for issuance under the Incentive Plan) if such approval is necessary to comply
with any applicable law, regulations or stock exchange rule and (2) except as
otherwise provided under the cashout provisions in the event of a Change in
Control, no amendment will be made that would adversely affect the rights of a
participant under any award previously granted, without such participant's
written consent.

Effective Date

The Incentive Plan has a term of ten years from February 13, 1998, subject to
earlier termination.

Repricing

On September 23, 1998, the Committee authorized the amendment of options
granted under the Incentive Plan on June 24, 1998. Pursuant to such amendment,
the exercise price of such options will be reduced from $16.00 to $6.00 (the
closing price of our Common Stock on September 23, 1998), but the options will
not vest until three months after the dates on which the options were
originally to become vested.

EMPLOYEE STOCK PURCHASE PLAN

General

The Company has adopted the 1998 Employee Stock Purchase Plan (the "STOCK
PURCHASE PLAN"), the principal terms and conditions of which are set forth
below.

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<PAGE>

The Stock Purchase Plan is intended to meet the applicable requirements of
Section 423 of the Code and will be administered by the Committee.

Shares Subject to Plan

The aggregate maximum number of shares of Common Stock purchasable under the
Stock Purchase Plan is 1,500,000, subject to adjustment by the Committee in its
sole discretion in the event of any change in the outstanding shares of Common
Stock by reason of any stock dividend or split, recapitalization, merger,
consolidation, spin-off, combination or exchange of shares or other corporate
change or any distribution to common stockholders other than cash dividends.
Upon the dissolution or liquidation of the Company, or upon a reorganization,
merger or consolidation of the Company as a result of which the Company is not
the surviving corporation, or upon a sale of substantially all of the Company's
assets or a sale or distribution of a subsidiary of the Company, any affected
participant will thereafter be entitled to receive, for each share of Common
Stock subject to such participant's option, the cash, securities and/or
property which a holder of one share of Common Stock was entitled to receive
upon and at the time of such transaction.

Option to Purchase

Under the Stock Purchase Plan, all full-time and certain part-time employees
of the Company who meet certain minimum service requirements will be eligible
to purchase shares of Common Stock by means of payroll deductions. Eligible
employees may elect to participate in offering periods by authorizing after-tax
payroll deductions of between 1% and 10% (in whole percentages) of their base
pay for the purchase of shares of Common Stock.

The price at which shares of Common Stock will be purchased at the end of
each purchase period will be the lesser of (1) 85% of the fair market value of
a share of Common Stock on the first business day of such purchase period or
(2) 85% of the fair market value on the last business day of such purchase
period. No participating employee will be entitled in any calendar year to
purchase Common Stock having an aggregate fair market value as of the first
business day in any purchase period in excess of $25,000.

Amendment and Termination

The Board may at any time terminate or amend the Stock Purchase Plan. No such
termination will adversely affect options previously granted and no amendment
may make any change in any option theretofore granted which adversely affects
the rights of any participant. No amendment will be effective unless approved
by the stockholders of the Company if such stockholder approval of such
amendment is required to comply with any law, regulation or stock exchange
rule.

SOFTBANK EXECUTIVE STOCK OPTION PLANS

The SOFTBANK Group Executive Stock Option Plans (the "SOFTBANK PLANS")
authorize the grant of options to those officers, directors and key employees
of Softbank as

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selected by a committee appointed by the Board of Directors of SBH. The
Softbank Plans authorize the granting of options to purchase SOFTBANK Corp.
common stock at not less than 100% of the closing market price on the date the
option is granted. As of December 31, 1997, substantially all options granted
become exercisable in various installments over the first six anniversaries of
the date of grant and expire ten years after the date of grant.

As of December 31, 1997, 966,986 options had been granted under the Softbank
Plans. On January 19, 1998, the exercise price of all options was reset at
4,000 Japanese yen per share, the market price of SOFTBANK Corp.'s common stock
on that date.

EMPLOYMENT AGREEMENTS

ERIC HIPPEAU

The Company has entered into an employment agreement with Mr. Hippeau, dated
as of April 1, 1998, pursuant to which Mr. Hippeau will serve as our Chairman
and Chief Executive Officer through March 31, 2004. Pursuant to this agreement,
Mr. Hippeau will receive an annual base salary of not less than $900,000 and an
annual incentive bonus of not less than $600,000, as determined by a
compensation committee assuming the achievement of performance targets. We have
granted Mr. Hippeau options to acquire up to 860,000 shares of Common Stock
pursuant to the Incentive Plan, of which 430,000 shares are based upon the
achievement of certain performance targets.

Upon certain terminations of employment, we will pay Mr. Hippeau his base
salary plus his average incentive bonus for the preceding two years for a
period ending on the later of the date that is two years after the date of
termination or March 31, 2001. In the event that Mr. Hippeau's employment is
terminated in connection with a Change of Control, the Company will pay Mr.
Hippeau an amount which, on an after-tax basis, will equal any excise tax
imposed by Section 4999 of the Code as a result of payments made under the
agreement.

JASON CHUDNOFSKY

We have entered into an employment agreement with Mr. Chudnofsky, dated as of
April 1, 1998, pursuant to which Mr. Chudnofsky will serve as the President and
Chief Executive Officer of ZD Events, Inc. through March 31, 2001. Pursuant to
this agreement, Mr. Chudnofsky will receive an annual base salary of not less
than $800,000 and an annual incentive bonus of $300,000, subject to adjustment
and assuming the achievement of earnings and other performance targets, as
determined by the Board of Directors of ZD Events, Inc. We have granted Mr.
Chudnofsky options to acquire up to 300,000 shares of Common Stock pursuant to
the Incentive Plan.

Upon certain terminations of employment, we will pay Mr. Chudnofsky his base
salary plus his average incentive bonus for the year of termination and the
preceding two years for a period ending on the later of the date that is two
years after the date of termination or March 31, 2001.

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CERTAIN TRANSACTIONS

ARRANGEMENTS BETWEEN MAJORITY STOCKHOLDERS AND THE COMPANY

We have entered into certain agreements with Softbank governing ongoing
business relationships.

In April 1998, we entered into a master license agreement with SOFTBANK Corp.
for Softbank to produce and distribute ZD publications in Japan. Pursuant to
the agreement, SOFTBANK Corp. has incurred royalties equal to approximately $.
in 1998.

In July 1997, we entered into a license agreement with SOFTBANK Corp. for
Softbank to operate a localized edition of ZDNet in Japan. Pursuant to the
agreement, we paid SOFTBANK Corp. $. (based on an assumed exchange rate of
.(Yen)/$) on July 9, 1998, in connection with the 1997 launch of the localized
edition of ZDNet. In addition, SOFTBANK Corp. pays ZDNet royalties equal to 30%
of the operating income of the localized edition, which were approximately $.
in 1997 and $. in 1998.

In April 1998, we entered into a series of agreements with Softbank,
including a trademark license agreement, technical assistance agreement and
accounting and administrative agreement, pursuant to which Softbank produces ZD
Events trade shows and conferences in Japan and we provide management and other
services for those trade shows and conferences. Total revenue earned by us from
such trade shows and conferences agreements was approximately 50% of the pre-
tax income generated by such trade shows and conferences, which was $. in 1998.

In May 1998, we entered into an undertaking with SOFTBANK Corp. whereby
SOFTBANK Corp., on behalf of it and its affiliates that as long as it owns 40%
of the voting power in our stock and can elect a majority of the Board, it will
not expand its operations outside Japan in competition with us without our
prior approval which involve (1) publishing information on computing and
Internet-related technology through the media of print, CD-Rom/DVD, Internet
and television or (2) producing trade shows, conferences, exhibitions and
similar events primarily related to computing and Internet-related technology.
This undertaking does not preclude investments by venture capital funds managed
by Softbank. Softbank manages certain venture capital funds which invest in,
among other things, computer and Internet-related companies. These funds may be
able to co-invest with or compete with us with respect to new investments. In
addition, Softbank may also develop new funds in the future which may compete
with us for investment opportunities. We have agreed not to compete with
Softbank in Japan without the prior approval of SOFTBANK Corp.'s Board of
Directors and have given Softbank the continuing right to license all of our
products and services in Japan. See "Risk Factors--Other Company Risks--Control
by Principal Stockholders and Potential Conflicts of Interest".

We entered into a Registration Rights Agreement, dated as of April 1, 1998,
in connection with the initial public offering of our existing Common Stock.
The agreement gives Softbank the right to require us to register any or all of
our existing Common Stock held by it in a public offering pursuant to the
Securities Act, and to "piggyback" or include

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its shares of our existing Common Stock in any registration of our existing
Common Stock made by us.

THE REORGANIZATION

Prior to our initial public offering in April 1998, our businesses were
conducted through various indirect subsidiaries of SOFTBANK Corp. and were
acquired through a series of acquisitions and internal reorganizations
undertaken by Softbank as follows:

(1) Softbank acquired the computer technology publishing operations of ZD
Pubco in February 1996 for $1.8 billion in cash,

(2) Softbank acquired the SB COMDEX computer-related trade show
operations ("COMDEX") in April 1995 for $803 million in cash and

(3) Softbank acquired the computer and network-related trade show
operations of SB Forums in December 1994 for $127 million in cash.

Concurrently with the ZD Pubco and ZD Expos acquisitions described above, MAC
purchased certain operations and assets of these companies for $302 million and
$75 million, respectively (the "MAC ASSETS"). The MAC Assets consisted of
certain publications, international trade shows and the ZDNet business, most of
which were still under development. The MAC Assets and related operations were
managed by ZD Inc. and ZD Events after their acquisition by MAC and were
acquired by us for approximately $370 million in May 1998.

In October 1997, Softbank combined the businesses of ZD Inc., SB COMDEX and
SB Forums. SB Forums and SB COMDEX were merged as of December 31, 1997, with
the surviving corporation named ZD COMDEX and Forums Inc. (now ZD Events Inc.
("ZD EVENTS")). At the time of our initial public offering, ZD Inc. and ZD
Events were contributed to us in exchange for approximately 72% of our existing
Common Stock. At the same time approximately $909 million of our obligations to
Softbank were converted to equity at the initial public offering price. The
amount of intercompany indebtedness converted to equity was comprised of the
obligations due to Softbank as of December 31, 1997 (except those repaid with
borrowings under our credit facility and the proceeds of our offering of senior
subordinated notes) and a $94.2 million note which matures on February 28,
2009. At an initial public offering price of $15.50 per share, the value of the
capitalized intercompany indebtedness was equivalent to 59.9 million shares of
our existing Common Stock. In addition, we received approximately $9.1 million
of fixed assets from Kingston Technology Company ("KINGSTON TECHNOLOGY") in
exchange for 580,645 shares of our existing Common Stock (valued at the initial
public offering price) and $100,000. These assets were subsequently leased back
to Kingston Technology.

Concurrently with the initial public offering of our existing Common Stock
and senior subordinated notes in May 1998, we reorganized our structure so
that:

. All of the stock of the corporations owning our publishing and events
businesses, ZD Inc. and ZD Events, was contributed to the Company in
exchange for approximately 72% of our existing Common Stock.

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<PAGE>

. We purchased certain operations owned by MAC but managed by our
publishing business, including certain publications, international trade
shows and ZDNet.

. We entered into a credit facility with a group of financial institutions
and borrowed $1.25 billion under that facility.

. Approximately $909 million of our obligations to SOFTBANK Corp. were
converted to equity.

. We repaid approximately $1.6 billion of our obligations to Softbank.

See "--Arrangements Between Majority Stockholders and the Company", "Risk
Factors--Other Company Risks--Limited History as a Stand-Alone Company; Limited
Relevance of Historical Financial Information".

CERTAIN RELATED PARTY TRANSACTIONS

We are a member of a group of companies affiliated through common ownership
under SOFTBANK Corp. Accordingly, we have had various transactions and have
various relationships with members of the group, including SOFTBANK Corp.'s
wholly owned U.S. subsidiary, SBH. It is possible that the terms of the various
transactions are not those that would result from an arm's-length dealing among
unrelated parties.

In December 1994, as part of the acquisition of ZD Expos, MAC purchased a
portion of the trade show assets for $45 million and its parent company, Son
Kosan Ltd., purchased an additional portion for $30 million. At that time, SB
Forums and Son Kosan Inc. entered into a management agreement pursuant to which
SB Forums agreed to provide management services with respect to certain Son
Kosan operations in Japan, France and Germany. SB Forums earned approximately
$0.8 million, $1.7 million and $2.6 million for such services for the years
ended December 31, 1995, 1996 and 1997 respectively. Son Kosan's trade show
assets were sold to SB Forums for $10 million in January 1997 and certain of
MAC's trade show assets were contributed to ZD Events as part of the
Reorganization. See "--The Reorganization".

In February 1996, as part of the acquisition of ZD Pubco, MAC purchased
certain publishing assets for $302 million in cash. At that time, we entered
into a management agreement with MAC pursuant to which we agreed to provide
management services with respect to the purchased assets. We earned
approximately $2 million for such services for each of the years ended
December 31, 1996 and 1997 and $ . million in 1998, respectively. Of these
assets, a portion was transferred to us for $100 million as of October 31, 1997
and the balance was sold to us for $270 million concurrently with our initial
public offering in May 1998. The purchase price for the assets sold to ZD Inc.
was not more than fair market value as determined by an independent appraiser.

We entered into a series of license and syndication agreements with Softbank
pursuant to which Softbank was granted the license to publish, or use in Japan
certain materials from certain publications, including PC Week, Computer
Shopper, PC/Computing, Computer Gaming World and PC Magazine. We earned
approximately $963,948 and $1,817,986 in

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<PAGE>

connection therewith for the years ended December 31, 1996 and 1997,
respectively. Such agreements were combined into the master license agreement
described above.

We have advanced funds for the account of MAC in managing the MAC Assets and
ZDTV, bearing interest at the 30-day LIBOR rate plus .50%; subject to periodic
reimbursement by MAC. Such advances totaled $8.1 million, $68.2 million, $71.6
million and $ . million in 1995, 1996, 1997 and 1998, respectively. The
remaining outstanding amount as of December 31, 1997 of $42.6 million was
reimbursed in May 1998, in connection with our reorganization.

In 1997, we entered into a license and services agreement with MAC to develop
ZDTV. In 1998, MAC transferred its interest in ZDTV to MHA. MHA is wholly owned
by Mr. Masayoshi Son, a director of the Company. As part of the license and
services agreement, the Company has an option (which, unless extended, expires
December 31, 1998) to purchase ZDTV. The option price is equal to the amount of
MHA's investment plus 10% per year for the period of its investment. Also,
pursuant thereto ZD is currently funding ZDTV's operations on behalf of MHA
through unsecured advances which, for approved levels of spending, are to be
reimbursed by MHA. Such advances bear interest at the 30-day LIBOR rate plus
.50%. ZDTV's cash requirements are expected to be approximately $53 million in
1998, of which approximately $40 million had been spent through September 30,
1998. We have announced our intention to exercise our option to purchase ZDTV
from MHA for a purchase price expected to be approximately 85 million. Of this
amount, it is expected that ZD will make a cash payment of approximately $32
million and convert the advances previously paid on behalf of MHA estimated at
$53 million. ZDTV has entered into a non-binding letter of intent with Vulcan
whereby Vulcan would invest approximately $54 million in ZDTV, in exchange for
a one-third interest.

During 1997 and 1998, we entered into an operating lease with GE Capital
Corp. for certain television production equipment that we subleased to ZDTV on
similar terms. The total amount of leased equipment does not exceed $10
million.

During 1996, 1997 and 1998, we recorded revenue of approximately $.9 million,
$2.7 million and . , respectively, from sales of advertising space and trade
show services to Kingston Technology, an 80%-owned Softbank partnership. These
services were provided under terms consistent with those provided to
unaffiliated customers. See Note 10 to the Notes to the Combined Financial
Statements of the Company. Concurrently with the initial public offering of our
existing Common Stock, we entered into a sale-leaseback transaction with
Kingston Technology.

In 1997 we had an arrangement with SIM, a 65.3%-owned Softbank subsidiary,
for it to be ZDNet's advertising sales representative. We paid SIM
approximately $.6 million and $1.8 million in commissions for the years ended
December 31, 1996 and 1997, respectively. Effective December 31, 1997, SIM was
acquired by an unrelated third party and we terminated our representation
agreement with SIM. See Note 10 to the Notes to the Combined Financial
Statements of the Company.

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<PAGE>

During 1995, 1996, 1997 and 1998, we were party to a joint venture agreement
with Softbank pursuant to which we managed all ZD Events trade shows and
conferences conducted outside the U.S. We earned approximately $2.0 million,
$3.4 million, $4.0 million and $ . million for such services for the years
ended December 31, 1995, 1996, 1997 and 1998, respectively.

During 1996, 1997 and 1998, we incurred $2 million, approximately $1.6
million and . , respectively, in advertising expenses with Yahoo! Inc., which
is approximately 30.1% owned by Softbank. Mr. Yang, one of our directors, is a
co-founder and Chief Yahoo, and Mr. Hippeau is a director of, Yahoo! Inc.

During 1995 to 1997, we issued notes payable to Softbank in an aggregate
principal amount of $2.5 billion as of December 31, 1997, principally for
indebtedness incurred in the acquisition of ZD Expos, COMDEX and ZD Pubco.
Through our reorganization and initial public offering, all but $83.1 million
of these notes were either repaid or converted into equity. See Notes 2 and 10
to the Notes to the Combined Financial Statements of the Company.

As part of the acquisition by our former owner in 1994, we agreed to assume
certain obligations to management arising out of prior employment arrangements
with Ziff Communications Company. In 1995 and immediately after the end of the
1996 calendar year, under such arrangements we paid approximately $29.7 million
to Mr. Hippeau, our Chairman and CEO and one of our directors, and
approximately $1.0 million to Mr. Sheer, Chief Internet Strategist and one of
our directors. See Note 10 to the Notes to the Combined Financial Statements of
the Company.

Prior to the initial public offering of our existing Common Stock, we
participated in the Softbank cash management program for its U.S. operations,
periodically transferring excess cash to SBH and in turn receiving cash
advances from SBH to fund our short-term working capital requirements. Under
the program, interest was accrued based on the net balance outstanding at the
end of each month. Interest income was earned at the 30-day LIBOR rate.
Interest expense was incurred at such rate plus .50%. As of December 31, 1996
and 1997, such net cash transfers from us to SBH amounted to $41.3 million and
$76.5 million, respectively. Subsequent to the IPO, we no longer participate in
this program. See Note 10 to the Notes to the Combined Financial Statements of
the Company.

During 1997, we were a guarantor under SBH's $150 million loan agreement with
The Bank of New York, under which $102.5 million was outstanding as of December
31, 1997, bearing interest at a weighted average rate of 6.5% per year. In
March, 1998 this agreement was amended and restated to increase the loan amount
to $450 million. Under the amended agreement, we were a guarantor under SBH's
$450 million credit facility with The Bank of New York, as agent, The Bank of
New York and Morgan Stanley Senior Funding, Inc., as lenders, and certain
affiliate guarantors. Concurrently with the initial public offering of our
existing Common Stock, we repaid obligations due to SBH and SBH used a portion
of such proceeds to prepay the loans under the credit facility and the
guarantees were terminated.

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<PAGE>

Our subsidiaries, ZD Inc. and ZD Events are guarantors under our $1.35
billion secured guaranteed credit facility with The Bank of New York, Morgan
Stanley Senior Funding, Inc., DLJ Capital Funding Inc. and The Chase Manhattan
Bank, dated as of May 4, 1998, as amended. The Credit Facility consists of a
seven year $400 million reducing revolving credit facility (with $255 million
drawn as of September 30, 1998), a seven year $450 million term loan and an
eight year $500 million term loan. The revolving credit commitments will be
reduced and the $450 million term loan will be amortized, beginning in
September 2000, by (x) 10% in 2000, in two equal quarterly installments, (y)
20% in each of 2001, 2002, 2003 and 2004 in four equal quarterly installments
and (z) 10% at final maturity in March 2005. The $500 million term loan will be
amortized, beginning in September 2000, by (x) $2 million in 2000, in two equal
quarterly installments, (y) $4 million in each of 2001, 2002, 2003, 2004 and
2005 in four equal quarterly installments and (z) $478 million at final
maturity in March 2006. The credit facility is secured, in part, by a first
priority security interest in capital stock of certain of our subsidiaries
(including ZD Inc. and ZD Events).

SBH and its subsidiary SBH Delaware agreed to act as guarantors for payments
under our lease for our new headquarters located at 28 East 28th Street, New
York, New York. In addition, the various intercompany loans from SBH Delaware
to us were subordinated to the lease agreement. In accordance with the terms of
these agreements, those arrangements were terminated at the time of our
reorganization.

From 1997 to date, we have participated in a global insurance program
implemented by SBH. The total amount of insurance expenses allocated to us for
the period from August 1, 1997 to July 30, 1999 does not exceed $1.4 million.

On May 14, 1998, an Kingston Technology, an affiliate of Softbank sold 50,000
shares of our existing common stock to an unrelated third party. On May 28,
1998, the U.S. underwriters for our initial public offering exercised their
option to purchase two million additional shares of our existing common stock
to cover over-allotments. We purchased the additional shares from SBH resulting
in no change to the total number of shares outstanding.

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SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

CERTAIN BENEFICIAL OWNERS

The following table sets forth, as of December 18, 1998, certain information
with respect to the beneficial ownership of (1) our existing Common Stock prior
to the Offering, (2) ZD Stock assuming completion of the Offering and (3) ZDNet
Stock assuming completion of the Offering by each person or entity which
beneficially owns more than five percent of the outstanding shares of the
Common Stock of the Company.

<TABLE>
<CAPTION>
PRIOR TO THE OFFERING AFTER THE OFFERING
--------------------- ----------------------------------------------
NUMBER OF
SHARES OF NUMBER OF
COMMON STOCK SHARES OF ZD NUMBER OF
OF THE PERCENT COMMON PERCENT SHARES OF ZDNET PERCENT
BENEFICIAL OWNER COMPANY OF CLASS STOCK(1) OF CLASS COMMON STOCK(1) OF CLASS
- ---------------- ------------ -------- ------------ -------- --------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
SBH(2).................. 72,150,000 72.1% 72,150,000 72.1% . .
SOFTBANK Corp.(3)....... 72,150,000 72.1 72,150,000 72.1 . .
Masayoshi Son(4)........ . . . . . .
</TABLE>
- --------
(1) Assumes no exercise of the U.S. underwriters' over-allotment option in the
Offering and does not include . shares of ZD Stock or . shares of ZDNet
Stock reserved for issuance under the Company's Incentive Compensation,
Non-Employee Directors' and Employee Stock Purchase Plans. See "Management
of the Company--Stock Plans".
(2) Includes 530,645 shares of existing Common Stock and redesignated ZD Stock
owned by SOFTBANK Kingston Inc. which may be deemed to be beneficially
owned by SBH. Such entity's address is 10 Langley Road, Suite 403, Newton
Center, MA 02159.
(3) Reflecting shares owned by SBH and indirectly by SOFTBANK Corp., which is
.% directly and indirectly owned by Mr. Son, SOFTBANK Corp.'s President.
Such person's address is c/o SOFTBANK Corp., 24-1 Nihonbashi-Hakozakicho,
Chuo-ku, Tokyo 103, Japan.
(4) Such person's address is c/o SOFTBANK Corp., 24-1 Nihonbashi-Hakozakicho,
Chuo-ku, Tokyo 103, Japan.

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<PAGE>

MANAGEMENT

The following table sets forth, as of December 18, 1998, certain information
with respect to the beneficial ownership of (1) our existing Common Stock prior
to the Offering, (2) ZD Stock assuming completion of the Offering, (3) ZDNet
Stock assuming completion of the Offering and (4) the common stock of SOFTBANK
Corp. by (a) each executive officer named in the Summary Compensation Table,
(b) each director of the Company and (c) all executive officers and directors
of the Company as a group.

<TABLE>
<CAPTION>
PRIOR TO THE OFFERING AFTER THE OFFERING
--------------------- ----------------------------------------------
NUMBER OF
NUMBER OF SHARES OF
SHARES OF NUMBER OF COMMON
COMMON STOCK SHARES OF ZD NUMBER OF STOCK OF
OF THE PERCENT COMMON PERCENT SHARES OF ZDNET PERCENT SOFTBANK PERCENT
BENEFICIAL OWNER COMPANY OF CLASS STOCK(1) OF CLASS COMMON STOCK(1) OF CLASS CORP.(2) OF CLASS
- ---------------- ------------ -------- ------------ -------- --------------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Masayoshi Son........... . .% . .%
Yoshitaka Kitao......... . * . *
Ronald D. Fisher........ 5,000 * . *
Eric Hippeau(3)......... . * . *
Jason E. Chudnofsky(3).. . * . *
Timothy C. O'Brien(3)... . * . *
Claude P. Sheer(3)...... . * . *
Robert G. Brown(3)...... . * . *
Jonathan D. Lazarus..... . * 0 0
Jerry Yang.............. . * 0 0
Officers and directors
as a group............. . . . .
</TABLE>
- --------
* Less than one percent.
(1) Assumes no exercise of the U.S. Underwriters' over-allotment option in the
Offering and does not include . shares of ZD Stock or . shares of ZDNet
Stock reserved for issuance under the Company's Incentive Compensation,
Non-Employee Directors' and Employee Stock Purchase Plans. See "Management
of the Company--Stock Plans".
(2) Reflecting options granted in 1996 and 1997 to purchase common stock of
SOFTBANK Corp. under the SOFTBANK Group Executive Stock Option Plans.
(3) Both a director and an executive officer named in the Summary Compensation
Table.

As a result of its beneficial ownership of both series of Common Stock,
Softbank is able to influence significantly matters affecting the Company.
Softbank is able to elect all members of the Board and to control those actions
that require the approval of two-thirds or more of the voting share capital of
the Company, including amendments to the Company's Restated Certificate of
Incorporation and approval of any business combinations. See "Risk Factors--
Other Company Risks--Control by Principal Stockholders and Potential Conflicts
of Interest" and "Description of Capital Stock--Certain Other Provisions of the
Restated Certificate of Incorporation and By-laws".

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<PAGE>

CERTAIN CASH MANAGEMENT AND ALLOCATION POLICIES

In order to prepare separate financial statements for ZD and ZDNet, the
Company has allocated all of its consolidated assets, liabilities, revenue,
expenses and cash flow between ZD and ZDNet. Thus, the financial statements of
ZD and ZDNet, taken together, comprise all of the accounts included in the
corresponding consolidated financial statements of the Company.

The financial statements of ZD and ZDNet reflect the application of certain
cash management and allocation policies adopted by the Board. These policies
are summarized below.

The Board may, in its sole discretion, modify, rescind or add to any of these
policies (although it has no present intention to do so). The decision of the
Board to modify, rescind or add to any of these policies would, however, be
subject to the Board's general fiduciary duties.

Even though the Company has allocated all of its consolidated assets,
liabilities, revenue, expenses and cash flow between ZD and ZDNet, holders of
ZDNet Stock will continue to be common stockholders of the Company and, as
such, will be subject to all risks associated with an investment in the entire
Company and all of its businesses, assets and liabilities. See "Risk Factors--
Risk Factors Related to the ZDNet Stock--Stockholders of One Company; Financial
Effects on One Group Could Affect the Other Group".

TREASURY ACTIVITIES

The Company manages most treasury activities on a centralized, consolidated
basis. These activities include the investment of surplus cash, the issuance,
repayment and repurchase of short-term and long-term debt, and the issuance and
repurchase of common stock and preferred stock. Each Group generally remits its
cash receipts (other than receipts of foreign operations or subsidiaries that
are not wholly owned) to the Company, and the Company generally funds each
Group's cash disbursements (other than disbursements of foreign operations or
subsidiaries that are not wholly owned), on a daily basis.

In the historical financial statements of ZD and ZDNet, (1) all external debt
and equity transactions (and the proceeds thereof) were attributed to ZD, (2)
whenever ZDNet held cash (other than cash of ZDNet's foreign operations or of
ZDNet's subsidiaries that are not wholly owned), that cash was transferred to
ZD and accounted for as a return of capital (i.e., as a reduction in ZDNet's
division equity and ZD's Retained Interest in ZDNet) and (3) whenever ZDNet had
a cash need (other than cash needs of ZDNet's foreign operations or of ZDNet's
subsidiaries that are not wholly owned), that cash need was funded by ZD and
accounted for as a capital contribution (i.e., as an increase in ZDNet's
division equity and ZD's Retained Interest in ZDNet). The Company intends to
continue these practices until ZDNet Stock is first issued. Accordingly, no
interest expense has been or will be reflected in

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the financial statements of ZDNet (and no interest income from ZDNet has been
or will be reflected in the financial statements of ZD) for any period prior to
the date on which ZDNet Stock is first issued.

After the date on which ZDNet Stock is first issued:

(1) The Company will attribute each future incurrence or issuance of
external debt or preferred stock (and the proceeds thereof) to ZD, except
in cases where the Board determines otherwise. The Board may determine from
time to time to attribute an incurrence or issuance of debt or preferred
stock (and the proceeds thereof) to ZDNet to the extent that the Company
incurs or issues the debt or preferred stock for the benefit of ZDNet, but
the Board will not be required to do so.

(2) The Company will attribute each future issuance of ZD Stock (and the
proceeds thereof) to ZD. The Company may attribute any future issuance of
ZDNet Stock (and the proceeds thereof) to ZD in respect of its Retained
Interest in ZDNet (in a manner analogous to a secondary offering of common
stock of a subsidiary owned by a corporate parent) or to ZDNet (in a manner
analogous to a primary offering of common stock). Dividends on and
repurchases of ZD Stock will be charged against ZD, and dividends on and
repurchases of ZDNet Stock will be charged against ZDNet. In addition, at
the time of any dividend on ZDNet Stock, the Company will credit to ZD, and
charge against ZDNet, a corresponding amount in respect of ZD's Retained
Interest in ZDNet. See "--Description of Capital Stock--ZD's Retained
Interest in ZDNet; Number of Shares Issuable with Respect to ZD's Retained
Interest in ZDNet".

(3) Whenever ZDNet holds cash (other than cash of ZDNet's foreign
operations or cash of ZDNet's subsidiaries that are not wholly owned),
ZDNet will normally transfer that cash to ZD. Conversely, whenever ZDNet
has a cash need (other than cash needs of ZDNet's foreign operations or
cash needs of ZDNet's subsidiaries that are not wholly owned), ZD will
normally fund that cash need. However, the Board will determine, in its
sole discretion, whether to provide any particular funds to either Group
and will not be obligated to do so.

(4) The Company will account for all cash transfers from one Group to or
for the account of the other Group (other than transfers in return for
assets or services rendered or transfers in respect of ZD's Retained
Interest that correspond to dividends paid on ZDNet Stock) as inter-Group
revolving credit advances unless:

. the Board determines that a given transfer (or type of transfer)
should be accounted for as a long-term loan,

. the Board determines that a given transfer (or type of transfer)
should be accounted for as a capital contribution increasing ZD's
Retained Interest in ZDNet or

. the Board determines that a given transfer (or type of transfer)
should be accounted for as a return of capital reducing ZD's Retained
Interest in ZDNet.

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There are no specific criteria to determine when the Company will account
for a cash transfer as a long-term loan, a capital contribution or a return
of capital rather than an inter-Group revolving credit advance. The Board
would make such a determination in the exercise of its business judgment at
the time of such transfer (or the first of such type of transfer) based
upon all relevant circumstances. Factors the Board would consider include:

. the current and projected capital structure of each Group,

. the relative levels of internally generated funds of each Group,

. the financing needs and objectives of the recipient Group,

. the investment objectives of the transferring Group,

. the availability, cost and time associated with alternative financing
sources and

. prevailing interest rates and general economic conditions.

(5) Any cash transfer accounted for as an inter-Group revolving credit
advance will bear interest at the rate at which the Company could borrow
such funds on a revolving credit basis (as the Board determines in its sole
discretion). Any cash transfer accounted for as a long-term loan will have
interest rate, amortization, maturity, redemption and other terms that
generally reflect the then prevailing terms on which the Company could
borrow such funds (as the Board determines in its sole discretion).

(6) Any cash transfer from ZD to ZDNet (or for its account) accounted for
as a capital contribution will correspondingly increase ZDNet's division
equity and ZD's Retained Interest in ZDNet. As a result, the number of
shares of ZDNet Stock that the Company may issue for the account of ZD in
respect of its Retained Interest (which we call the "NUMBER OF SHARES
ISSUABLE WITH RESPECT TO ZD'S RETAINED INTEREST IN ZDNET") will increase by
(a) the amount of such capital contribution divided by (b) the Market Value
of ZDNet Stock on the date of transfer.

(7) Any cash transfer from ZDNet to ZD (or for its account) accounted for
as a return of capital will correspondingly reduce ZDNet's division equity
and ZD's Retained Interest in ZDNet. As a result, the Number of Shares
Issuable with Respect to ZD's Retained Interest in ZDNet will decrease by
(a) the amount of such return of capital divided by (b) the Market Value of
ZDNet Stock on the date of transfer.

CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES

The Company allocates the cost of certain corporate general and
administrative services and shared services (including certain legal,
accounting (tax and financial), information systems, telecommunications,
purchasing, marketing, intellectual property, public relations, corporate
office and travel expenses) to the Groups generally based on utilization. Where
determinations based on utilization alone are impracticable, the Company uses
other methods and criteria that management believes to be equitable and to
provide a reasonable estimate of the cost attributable to each Group.

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TAXES

Federal income taxes, which are determined on a consolidated basis, are
allocated to each Group (and reflected in their respective financial
statements) in accordance with the Company's tax allocation policy. In general,
this policy provides that the consolidated tax provision (and related tax
payments or refunds) are allocated between the Groups based principally upon
the financial income, taxable income, credits and other amounts directly
related to the respective Groups. Tax benefits that cannot be used by the Group
generating such attributes, but can be utilized on a consolidated basis, are
allocated to the Group that generated such benefits. As a result, the allocated
Group amounts of taxes payable or refundable are not necessarily comparable to
those that would have resulted if the Groups had filed separate tax returns.
State income taxes generally are computed on a separate company basis.

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DESCRIPTION OF CAPITAL STOCK

THE FOLLOWING DESCRIPTION IS NOT COMPLETE AND SHOULD BE READ WITH THE
RESTATED CERTIFICATE OF INCORPORATION, WHICH WE HAVE FILED AS AN EXHIBIT TO THE
REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART.

GENERAL

Our current amended and restated certificate of incorporation (which we call
the "CURRENT CERTIFICATE OF INCORPORATION") authorizes us to issue 130 million
shares, consisting of 120 million shares of Common Stock, par value $.01 per
share, and 10 million shares of preferred stock, par value $.01 per share
("PREFERRED STOCK"). Only the Preferred Stock is currently issuable in series
by the Board. As of December 18, 1998, we had 100 million shares of Common
Stock and no shares of Preferred Stock issued and outstanding.

Prior to completion of the Offering, we will file an amended and restated
certificate of incorporation (the "RESTATED CERTIFICATE OF INCORPORATION")
which would amend and restate our Current Certificate of Incorporation. The
Restated Certificate of Incorporation will:

. Increase the number of authorized shares of Common Stock from 120 million
to 180 million.

. Authorize the Board to issue Common Stock in two series--Ziff-Davis
Inc.--ZD Group Common Stock ("ZD STOCK") and Ziff-Davis Inc.--ZDNet Group
Common Stock ("ZDNET STOCK"). Initially, we will designate 120 million
shares as ZD Stock and 60 million shares as ZDNet Stock.

. We intend ZDNet Stock to reflect the performance of ZDNet.

. We intend ZD Stock to reflect the performance of ZD.

. We have allocated all of the Company's consolidated assets, liabilities,
revenue, expenses and cash flow between ZD and ZDNet. In the future, we
will publish combined financial statements of ZD and combined financial
statements of ZDNet together with consolidated financial statements of
the Company.

. Re-classify each outstanding share of Common Stock into a share of ZD
Stock. (The filing would not change the authorized Preferred Stock.)

The full definitions of the terms "ZD" and "ZDNet" are set forth in the
Restated Certificate of Incorporation, which we have filed as an exhibit to the
Registration Statement of which this prospectus is a part. In this prospectus
each of ZD and ZDNet is sometimes called a "GROUP".

At the time of the Offering, the Board will designate the initial Number of
Shares Issuable with Respect to ZD's Retained Interest in ZDNet. See "--ZD's
Retained Interest in ZDNet; Number of Shares Issuable with Respect to ZD's
Retained Interest in ZDNet" and Annex I for additional information about ZD's
Retained Interest in ZDNet and the Number of Shares Issuable with Respect to
ZD's Retained Interest in ZDNet.

The Board will have the authority to increase or decrease from time to time
the total number of authorized shares comprising either series of Common Stock,
but not above a

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number which, when added to the aggregate number of authorized shares of the
other series of Common Stock, would exceed the total authorized number of
shares of Common Stock, and not below the number of shares of such series then
outstanding.

The Board will have the authority in its sole discretion to issue authorized
but unissued shares of Common Stock from time to time for any proper corporate
purpose. The Board will have the authority to do so without stockholders
approval (except as provided by Delaware law or the rules and regulations of
any securities exchange on which any series of outstanding Common Stock may
then be listed).

DIVIDENDS

We currently intend to retain all of our earnings to finance operations,
repay our indebtedness and fund future growth. We do not expect to pay
dividends on ZD Stock or ZDNet Stock for the foreseeable future.

Although our various debt instruments currently prohibit the payment of
dividends, and in any event, as stated above, we do not expect to pay any
dividends for the foreseeable future on any series of Common Stock,

. we will otherwise be permitted to pay dividends on ZD Stock out of assets
of the Company legally available for the payment of dividends under
Delaware law, but the total amounts paid as dividends on ZD Stock cannot
exceed the Available Dividend Amount for ZD and

. we will otherwise be permitted to pay dividends on ZDNet Stock out of the
assets of the Company legally available for the payment of dividends
under Delaware law (and transfer corresponding amounts to ZD in respect
of its Retained Interest in ZDNet), but the total amounts paid as
dividends on ZDNet Stock and the corresponding amounts transferred to ZD
in respect of its Retained Interest in ZDNet cannot exceed the Available
Dividend Amount for ZDNet.

The "AVAILABLE DIVIDEND AMOUNT" for ZD at any time is the amount that would
then be legally available for the payment of dividends on ZD's common stock
under Delaware law if (1) ZD and ZDNet were each a separate Delaware
corporation, (2) ZD had outstanding (a) a number of shares of common stock, par
value $0.01 per share, equal to the number of shares of ZD Stock that are then
outstanding and (b) a number of shares of preferred stock, par value $0.01 per
share, equal to the number of shares of Preferred Stock of the Company that
have been attributed to ZD and are then outstanding, (3) the assumptions about
ZDNet set forth in the next sentence were true and (4) ZD owned a number of
shares of ZDNet common stock equal to the Number of Shares Issuable with
Respect to ZD's Retained Interest in ZDNet. Similarly, the "AVAILABLE DIVIDEND
AMOUNT" for ZDNet at any time is the amount that would then be legally
available for the payment of dividends on ZDNet's common stock under Delaware
law if ZDNet were a separate Delaware corporation having outstanding (1) a
number of shares of common stock, par value $0.01 per share, equal to the
number of shares of ZDNet Stock that are then outstanding plus the Number of
Shares Issuable with Respect to ZD's Retained Interest in

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ZDNet and (2) a number of shares of preferred stock, par value $0.01 per share,
equal to the number of shares of Preferred Stock of the Company that have been
attributed to ZDNet and are then outstanding.

The amount legally available for the payment of dividends on common stock of
a corporation under Delaware law is generally limited to (1) the total assets
of the corporation less its total liabilities less (2) the aggregate par value
of the outstanding shares of its common and preferred stock. However, if that
amount is not greater than zero, the corporation may also pay dividends out of
the net profits for the corporation for the fiscal year in which the dividend
is declared and/or the preceding fiscal year. As mentioned above, these
restrictions will form the basis for calculating the Available Dividend Amounts
for ZD and ZDNet. These restrictions will also form the basis for calculating
the aggregate amount of dividends that the Company as a whole can pay on its
Common Stock (regardless of series). Thus, net losses of either Group, and any
dividends and distributions on, or repurchases of, either series of Common
Stock, will reduce the assets legally available for dividends on both series of
Common Stock.

Subject to the foregoing limitations (and to any other limitations set forth
in any future series of Preferred Stock or in any agreements binding on the
Company from time to time), we have the right to pay dividends on both, one or
neither series of Common Stock in equal or unequal amounts, notwithstanding the
performance of either Group, the amount of assets available for dividends on
each series, the amount of prior dividends declared on either series or any
other factor.

At the time of any dividend on the outstanding shares of ZDNet Stock
(including any dividend required as a result of a disposition of All or
Substantially All of the Assets of ZDNet), we will credit to ZD, and charge
against ZDNet, a corresponding amount in respect of ZD's Retained Interest in
ZDNet. Specifically, the corresponding amount will equal (1) the aggregate
amount of such dividend times (2) a fraction, the numerator of which is the
Number of Shares Issuable with Respect to ZD's Retained Interest in ZDNet and
the denominator of which is the number of shares of ZDNet Stock then
outstanding.

MANDATORY DIVIDEND, REDEMPTION OR EXCHANGE ON DISPOSITION OF A GROUP'S ASSETS;
EXCHANGE OF ONE SERIES OF COMMON STOCK FOR THE OTHER SERIES OR FOR STOCK OF A
SUBSIDIARY AT THE COMPANY'S OPTION

We will be required to pay a dividend on, or redeem or exchange, a series of
Common Stock in connection with certain dispositions of assets of the relevant
Group, and we will have the right (without your consent) to exchange one series
of Common Stock at our option for the other series of Common Stock or for the
stock of a successor to the assets and liabilities of the relevant Group, on
the terms described below.

Mandatory Dividend, Redemption or Exchange

If we dispose of All or Substantially All of the Assets of a Group to one or
more persons or entities, in one transaction or a series of related
transactions (collectively, a

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"DISPOSITION"), and the Disposition is not an Exempt Disposition, we would be
required, not more than 85 Trading Days after the consummation of such
Disposition, to either:

. declare and pay a dividend to holders of the series of Common Stock that
relates to that Group (in cash, securities or other property, or a
combination thereof), in an amount having a Fair Value equal to their
Proportionate Interest in the Net Proceeds of such Disposition,

. redeem from holders of the series of Common Stock that relates to that
Group, for cash, securities (other than Common Stock of the Company) or
other property (or a combination thereof) in an amount having a Fair
Value equal to their Proportionate Interest in the Net Proceeds of such
Disposition, outstanding shares of the relevant series of Common Stock
(or, if such Group continues after such Disposition to own any material
assets other than the proceeds of such Disposition, a number of shares of
such Common Stock having an aggregate average Market Value, during the 20
consecutive Trading Day period beginning on the 16th Trading Day
immediately following the date on which the Disposition is consummated,
equal to such Fair Value) or

. issue shares of the series of Common Stock that does not relate to that
Group in exchange for outstanding shares of the series of Common Stock
that relates to that Group at a 10% premium (based on the average Market
Value of the relevant series of Common Stock as compared to the average
Market Value of the other series of Common Stock during the 20
consecutive Trading Day period beginning on the 16th Trading Day
immediately following the date on which the Disposition is consummated).

In connection with any special dividend on, or redemption of, ZDNet Stock as
described above, we will credit to ZD, and charge against ZDNet, a
corresponding amount in respect of ZD's Retained Interest in ZDNet.
Specifically, the corresponding amount will equal (1) the aggregate Fair Value
of such dividend or redemption times (2) a fraction, the numerator of which is
the Number of Shares Issuable with Respect to ZD's Retained Interest in ZDNet
and the denominator of which is the number of shares of ZDNet Stock then
outstanding. In addition, in connection with any redemption of ZDNet Stock as
described above, we will decrease the Number of Shares Issuable with Respect to
ZD's Retained Interest in ZDNet by the same proportion as the proportionate
decrease in outstanding shares of ZDNet caused by such redemption.

At any time within one year after completing any dividend or partial
redemption of the sort referred to above, we will have the right to issue
shares of the series of Common Stock that does not relate to the Group in
question in exchange for outstanding shares of the series of Common Stock that
relates to that Group at a 10% premium (based on the average Market Value of
the relevant series of Common Stock as compared to the average Market Value of
the other series of Common Stock during the 20 consecutive Trading Day period
ending on (and including) the 5th Trading Day immediately preceding the date on
which the notice of exchange is mailed to holders of the relevant series). In
determining whether to effect any such exchange following such a dividend or
partial redemption, we

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would, in addition to other matters, consider whether the remaining assets of
such Group continue to constitute a viable business, the number of shares of
such Common Stock remaining issued and outstanding, the per share market price
of such Common Stock and the ongoing cost of continuing to have a separate
series of such Common Stock outstanding.

The following terms used in this document have the meanings specified below:

"ALL OR SUBSTANTIALLY ALL OF THE ASSETS" of either Group means a portion of
such assets that represents at least 80% of the then-current Fair Value of the
assets of such Group.

"EXEMPT DISPOSITION" means any of the following:

. a Disposition in connection with the liquidation, dissolution or winding-
up of the Company and the distribution of assets to stockholders,

. a Disposition to any person or entity controlled by the Company (as
determined by the Board in its sole discretion),

. a Disposition for which the Company receives consideration primarily
consisting of equity securities (including, without limitation, capital
stock of any kind, interests in a general or limited partnership,
interests in a limited liability company or debt securities convertible
into or exchangeable for, or options or warrants to acquire, any of the
foregoing, in each case without regard to the voting power or other
management or governance rights associated therewith) of an entity which
is primarily engaged or proposes to engage primarily in one or more
businesses similar or complementary to businesses conducted by such Group
prior to the Disposition, as determined by the Board in its sole
discretion,

. a dividend, out of ZDNet's assets, to holders of ZDNet Stock (and a
transfer of a corresponding amount to ZD in respect of its Retained
Interest in ZDNet),

. a dividend, out of ZD's assets, to holders of ZD Stock and

. any other Disposition, if (1) at the time of the Disposition there are no
shares of ZD Stock outstanding, (2) at the time of the Disposition there
are no shares of ZDNet Stock outstanding or (3) before the 30th Trading
Day following the Disposition we have mailed a notice stating that we are
exercising our right to exchange all of the outstanding shares of ZD
Stock or ZDNet Stock for newly issued shares of the other series of
Common Stock as contemplated under "--Optional Exchange of One Series of
Common Stock for the Other Series" below.

"FAIR VALUE" means (1) in the case of cash, the amount thereof, (2) in the
case of capital stock that has been Publicly Traded for a period of at least 15
months, the Market Value thereof and (3) in the case of other assets or
securities, the fair market value thereof as the Board shall determine in good
faith. (Any good faith Board determination of Fair Value shall be conclusive
and binding on all stockholders.)

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"MARKET CAPITALIZATION" of either series of Common Stock on any date means
the Market Value of such series on such date times the number of shares of such
series outstanding on such date. Shares issuable with respect to ZD's Retained
Interest in ZDNet Stock are not considered to be outstanding unless and until
they are in fact issued to third parties.

"MARKET VALUE" of a share of any class or series of capital stock on any
Trading Day means the average of the high and low reported sales prices regular
way of a share of such class or series on such Trading Day or, in case no such
reported sale takes place on such Trading Day, the average of the reported
closing bid and asked prices regular way of a share of such class or series on
such Trading Day, in either case as reported on the NYSE Composite Tape or, if
the shares of such class or series are not listed or admitted to trading on the
NYSE on such Trading Day, on the principal national securities exchange on
which the shares of such class or series are listed or admitted to trading or,
if not listed or admitted to trading on any national securities exchange on
such Trading Day, The Nasdaq National Market System of the Nasdaq Stock Market
("NASDAQ NMS") or, if the shares of such class or series are not listed or
admitted to trading on any national securities exchange or quoted on Nasdaq NMS
on such Trading Day, the average of the closing bid and asked prices of a share
of such class or series in the over-the-counter market on such Trading Day as
furnished by any NYSE member firm selected from time to time by the Company or,
if such closing bid and asked prices are not made available by any such NYSE
member firm on such Trading Day, the fair market value of a share of such class
or series as the Board shall determine in good faith (which determination will
be conclusive and binding on all stockholders); provided, that, for purposes of
determining the average Market Value of a share of any class or series of
capital stock for any period, (1) the "Market Value" of a share of any class or
series of capital stock on any day prior to any "ex-dividend" date or any
similar date occurring during such period for any dividend or distribution
(other than any dividend or distribution contemplated by clause (2)(b) of this
sentence) paid or to be paid with respect to such capital stock shall be
reduced by the Fair Value of the per share amount of such dividend or
distribution and (2) the "Market Value" of any share of any class or series of
capital stock on any day prior to (a) the effective date of any subdivision (by
stock split or otherwise) or combination (by reverse stock split or otherwise)
of outstanding shares of such class or series of capital stock occurring during
such period or (b) any "ex-dividend" date or any similar date occurring during
such period for any dividend or distribution with respect to such capital stock
to be made in shares of such class or series of capital stock shall be
appropriately adjusted, as determined by the Board, to reflect such
subdivision, combination, dividend or distribution; and provided further, if
the Board is determining the Market Value of a share of ZDNet Stock in
connection with a repurchase of outstanding shares of ZDNet Stock (and a
corresponding reduction in the Number of Shares Issuable with Respect to ZD's
Retained Interest in ZDNet), the Board may select as the Market Value the per
share price being paid in such repurchase.

The "NET PROCEEDS" of a Disposition of any of the assets of a Group means the
positive amount, if any, remaining from the gross proceeds of such Disposition
after any

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payment of, or reasonable provision (as determined in good faith by the Board,
which determination will be conclusive and binding on all stockholders) for,
(1) any taxes payable by the Company in respect of such Disposition, (2) any
taxes payable by the Company in respect of any resulting dividend or
redemption, (3) any transaction costs, including, without limitation, any
legal, investment banking and accounting fees and expenses and (4) any
liabilities (contingent or otherwise) of, attributed to or related to, such
Group, including, without limitation, any liabilities for deferred taxes, any
indemnity or guarantee obligations which are outstanding or incurred in
connection with the Disposition or otherwise, any liabilities for future
purchase price adjustments and any obligations with respect to outstanding
securities (other than ZDNet Stock) attributed to such Group.

"PROPORTIONATE INTEREST" of holders of ZDNet Stock in the Net Proceeds of a
ZDNet Disposition (or in the outstanding shares of common stock of any
subsidiaries holding ZDNet's assets and liabilities) means the amount of such
Net Proceeds (or the number of such shares) times the number of shares of ZDNet
Stock outstanding divided by the Total Number of Notional ZDNet Shares Deemed
Outstanding. "PROPORTIONATE INTEREST" of holders of ZD Stock in the Net
Proceeds of a ZD Disposition (or in the outstanding shares of common stock of
any subsidiaries holding ZD's assets and liabilities) means the amount of such
Net Proceeds (or the number of such shares).

"PUBLICLY TRADED" with respect to any security means (1) registered under
Section 12 of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT") (or any successor provision of law) and (2) listed for trading on the
NYSE (or any other national securities exchange registered under Section 7 of
the Exchange Act (or any successor provision of law)) or listed on the Nasdaq
NMS (or any successor market system).

"TOTAL NUMBER OF NOTIONAL ZDNET SHARES DEEMED OUTSTANDING" means the number
of shares of ZDNet Stock outstanding plus the Number of Shares Issuable with
Respect to ZD's Retained Interest in ZDNet.

"TRADING DAY" means each day on which the relevant security is traded on the
principal exchange on which it is listed, or if such security is not listed on
an exchange, the principal over-the-counter market in which it trades.

Optional Exchange of One Series of Common Stock for the Other Series

We will have the right, at any time before ZDNet Stock exceeds the 65% of
Total Market Capitalization Trigger, to issue shares of ZD Stock in exchange
for outstanding shares of ZDNet Stock at a premium (based on the average Market
Value of ZDNet Stock as compared to the average Market Value of ZD Stock during
the 20 consecutive Trading Day period ending on (and including) the 5th Trading
Day immediately preceding the date on which we mail the notice of exchange to
holders of ZDNet Stock). The premium will initially be 25% (for exchanges
occurring in the first quarter after issuance) and will decline quarterly over
a period of 3 years to 15%.

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We will have the right, at any time after ZDNet Stock exceeds the 65% of
Total Market Capitalization Trigger but before ZDNet Stock falls below the 50%
of Total Market Capitalization Threshold, to issue shares of ZDNet Stock in
exchange for outstanding shares of ZD Stock at a 15% premium (based on the
average Market Value of ZD Stock as compared to the average Market Value of
ZDNet Stock during the 20 consecutive Trading Day period ending on (and
including) the 5th Trading Day immediately preceding the date on which we mail
the notice of exchange to holders of ZD Stock).

In addition, we will have the right, if ZDNet Stock exceeds the 65% of Total
Market Capitalization Trigger and thereafter falls below the 50% of Total
Market Capitalization Threshold, to issue shares of either series of Common
Stock in exchange for outstanding shares of the other series of Common Stock on
a value for value basis (based on the average Market Value of the series of the
Common Stock being exchanged as compared to the average Market Value of the
other series of Common Stock during the 20 consecutive Trading Day period
ending on (and including) the 5th Trading Day immediately preceding the date on
which we mail the notice of exchange to holders of the outstanding shares being
exchanged).

ZDNet Stock will exceed the "65% OF TOTAL MARKET CAPITALIZATION TRIGGER" if
the Market Capitalization of the outstanding ZDNet Stock exceeds 65% of the
total Market Capitalization of both series of Common Stock for 30 Trading Days
during any 60 consecutive Trading Day period. Thereafter, ZDNet Stock will fall
below the "50% OF TOTAL MARKET CAPITALIZATION THRESHOLD" if, after exceeding
the 65% of Total Market Capitalization Trigger, the Market Capitalization of
the outstanding ZDNet Stock falls below 50% of the total Market Capitalization
of both series of Common Stock for 30 Trading Days during any 60 consecutive
Trading Day period.

If we have the right, on the date on which we mail a notice of exchange as
contemplated above, to exchange outstanding shares of ZD Stock or ZDNet Stock
for newly issued shares of the other series of Common Stock as described above,
we will not lose that right even if ZDNet Stock subsequently exceeds the 50% of
Total Market Capitalization Threshold or the 65% of Total Market Capitalization
Trigger.

Optional Exchange for Stock of a Subsidiary

At any time at which all of the assets and liabilities of a Group (and no
other assets or liabilities of the Company or any subsidiary thereof) are held
directly or indirectly by one or more wholly owned subsidiaries of the Company
(the "GROUP SUBSIDIARIES"), we will have the right to deliver to holders of the
relevant series of Common Stock their Proportionate Interest in all of the
outstanding shares of the common stock of the Group Subsidiaries in exchange
for all of the outstanding shares of such series of Common Stock. In connection
with any such exchange, we could retain the remaining shares of common stock of
the Group Subsidiaries or distribute those shares as a dividend on the series
of Common Stock related to the other Group.

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GENERAL EXCHANGE AND REDEMPTION PROVISIONS

If we complete a Disposition of All or Substantially All of the Assets of a
Group (other than an Exempted Disposition), we would be required, not more than
the 10 Trading Days after the consummation of such Disposition, to issue a
press release publicly announcing (1) the Net Proceeds of such Disposition, (2)
the number of shares of the series of Common Stock related to such Group then
outstanding, (3) the number of shares of such series of Common Stock issuable
upon conversion, exchange or exercise of any convertible or exchangeable
securities, options or warrants and the conversion, exchange or exercise prices
thereof and (4) if the Group is ZDNet, the Number of Shares Issuable with
Respect to ZD's Retained Interest in ZDNet. Not more than 30 Trading Days after
such consummation, we would be required to announce by press release which of
the actions specified in the first paragraph under "--Mandatory Dividend,
Redemption or Exchange" we had determined to take, and upon making that
announcement, that determination would become irrevocable.

. If we determined to pay a special dividend, we would be required to give
notice to each holder of the relevant series of Common Stock setting
forth (1) the record date for such dividend, (2) the payment date of such
dividend (which cannot be more than 85 Trading Days after such
consummation) and (3) the aggregate amount and type of property to be
paid in such dividend (and the approximate per share amount thereof).

. If we determined to undertake a redemption, we would be required to give
notice to each holder of the relevant series of Common Stock setting
forth (1) the date of redemption (which cannot be more than 85 Trading
Days after such consummation), (2) the aggregate amount and type of
property to be paid as a redemption price (and the approximate per share
amount thereof), (3) if less than all shares of the relevant series of
Common Stock are to be redeemed, the number of shares to be redeemed and
(4) the place or places where certificates for shares of such series of
Common Stock, properly endorsed or assigned for transfer (unless we waive
such requirement), should be surrendered in return for delivery of the
cash, securities or other property to be paid by the Company in such
redemption.

. If we determined to undertake an exchange, we would be required to give
notice to each holder of the relevant series of Common Stock setting
forth (1) the date of exchange (which cannot be more than 85 Trading Days
after such consummation), (2) the number of shares of the other series of
Common Stock to be issued in exchange for each outstanding share of such
series of Common Stock and (3) the place or places where certificates for
shares of such series of Common Stock, properly endorsed or assigned for
transfer (unless we waive such requirement), should be surrendered in
return for delivery of the other series of Common Stock to be issued by
the Company in such exchange.

We would be required, not more than 30 Trading Days after the consummation of
such Disposition and not less than 10 Trading Days before the applicable
payment date, redemption date or exchange date, to send any such notice by
first-class mail, postage

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prepaid, to holders of the relevant series of Common Stock at their addresses
as they appear on our transfer books. Neither the failure to mail such notice
to any particular holder nor any defect therein would affect the sufficiency
thereof. If less than all of the outstanding shares of such series of Common
Stock are being redeemed as described above, we would redeem such shares pro
rata or by lot or by such other method as the Board determines to be equitable.

If we complete any exchange described under "--Optional Exchange of One
Series of Common Stock for the Other Series" or "Optional Exchange for Stock of
a Subsidiary", we would be required to give notice to each holder of record of
the relevant series of Common Stock to be so exchanged or redeemed setting
forth (1) a statement that such series of Common Stock will be exchanged,
specifying the exchange date and the other terms of the exchange and (2) the
place or places where certificates for shares of such series of Common Stock,
properly endorsed or assigned for transfer (unless we waive such requirement),
should be surrendered for delivery of the stock to be issued or delivered by
the Company in such exchange. We would be required, not less than 10 Trading
Days and not more than 30 Trading Days before the exchange date, to send such
notice by first-class mail, postage prepaid, to holders of the relevant series
of Common Stock at their addresses as they appear on our transfer books.
Neither the failure to mail such notice to any particular holder nor any defect
therein would affect the sufficiency thereof.

Before any holder of Common Stock would be entitled to receive any cash,
securities or other property to be distributed with respect to any exchange or
redemption, such holder would be required to surrender at such place as we
specified certificates for shares of such Common Stock, properly endorsed or
assigned for transfer (unless we waive such requirement). As soon as
practicable after our receipt of certificates for such shares, we would deliver
to the person for whose account such shares were so surrendered, or to the
nominee or nominees of such person, the cash, securities or other property to
which such person is entitled, together with any fractional payment referred to
below, in each case without interest. If less than all of the shares of Common
Stock represented by any one certificate were to be exchanged or redeemed, we
would also issue and deliver a new certificate for the shares of such Common
Stock not exchanged or redeemed.

We would not be required to issue or deliver fractional shares of any capital
stock or any other fractional securities to any holder of Common Stock upon any
exchange, redemption, dividend or other distribution described above. If more
than one share of Common Stock were held at the same time by the same holder,
we may aggregate the number of shares of any capital stock that would be
issuable or any other securities that would be distributable to such holder
upon any such exchange, redemption, dividend or other distribution (including
any fractional shares). If there are fractional shares of any capital stock or
any other fractional securities remaining to be issued or distributed to any
holder, we would, if such fractional shares or securities were not issued or
distributed to such holder, pay cash in respect of such fractional shares or
securities in an amount equal to the Fair Value thereof (without interest).

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From and after the date set for any exchange or redemption, all rights of a
holder of shares of Common Stock that were exchanged or redeemed would cease
except for the right, upon surrender of the certificates representing such
shares, to receive the cash, securities or other property for which such shares
were exchanged or redeemed, together with any fractional payment as provided
above, in each case without interest (and, if such holder was a holder of
record as of the close of business on the record date for a dividend not yet
paid, the right to receive such dividend). A holder of shares of Common Stock
being exchanged would not be entitled to receive any dividend or other
distribution with respect to shares of the other series of Common Stock until
after the shares being exchanged are surrendered as contemplated above. Upon
such surrender, we would pay to the holder the amount of any dividends or other
distributions (without interest) which theretofore became payable with respect
to a record date occurring after the exchange, but which were not paid by
reason of the foregoing, with respect to the number of whole shares of the
other series of Common Stock represented by the certificate or certificates
issued upon such surrender. From and after the date set for any exchange, we
would, however, be entitled to treat the certificates for shares of Common
Stock being exchanged that were not yet surrendered for exchange as evidencing
the ownership of the number of whole shares of the other series of Common Stock
for which the shares of such Common Stock should have been exchanged,
notwithstanding the failure to surrender such certificates.

We would pay any and all documentary, stamp or similar issue or transfer
taxes that might be payable in respect of the issue or delivery of any shares
of capital stock and/or other securities on any exchange or redemption
described herein. We would not, however, be required to pay any tax that might
be payable in respect of any transfer involved in the issue and delivery of any
shares of capital stock and/or other securities in a name other than that in
which the shares so exchanged or redeemed were registered, and no such issue or
delivery would be made unless and until the person requesting such issue paid
to the Company the amount of any such tax or established to our satisfaction
that such tax had been paid.

VOTING RIGHTS

The holders of ZD Stock and ZDNet Stock will vote together as one class on
all matters as to which common stockholders generally are entitled to vote,
unless a separate class vote is required by the Delaware General Corporation
Law (the "DGCL"). On all such matters for which no separate vote is required,

. each outstanding share of ZD Stock entitles the holder to one vote and

. each outstanding share of ZDNet Stock entitles the holder to a number of
votes (calculated to the nearest five decimal places) equal to the
average Market Value of a share of ZDNet Stock divided by the average
Market Value of a share of ZD Stock during the 20 consecutive Trading Day
period ending on (and including) the 5th Trading Day before the
applicable record date.

The voting formula is intended to equate the proportionate voting rights of
each series of Common Stock to its respective Market Values at the time of any
vote. On matters where

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holders of either series of Common Stock are entitled to vote as a separate
class, each share of that series would be entitled to one vote in the separate
vote on such matter.

The relative voting rights of ZD Stock and ZDNet Stock will fluctuate from
time to time based on the respective Market Values of the two series of Common
Stock. Fluctuations in the relative voting rights of ZD Stock and ZDNet Stock
could influence an investor interested in acquiring and maintaining a fixed
percentage of the voting power in the Company to acquire such percentage of all
series of Common Stock, and would limit the ability of investors in one series
to acquire for the same consideration relatively more or less votes per share
than investors in the other series.

When holders of ZD Stock and ZDNet Stock vote together as a single class, the
holders of the series of Common Stock entitled to a majority of the votes will
be in a position to control the outcome of the vote even if the matter involves
a conflict of interest between the holders of ZD Stock and holders of ZDNet
Stock.

The DGCL requires a separate vote of holders of shares of Common Stock of any
series on any amendment if the amendment would increase or decrease the par
value of the shares of such series or alter or change the powers, preferences
or special rights of the shares of such series so as to affect them adversely.

After ZDNet Stock is issued, we will set forth the number of outstanding
shares of ZD Stock and ZDNet Stock in our Annual and Quarterly Reports filed
pursuant to the Exchange Act, and disclose in any proxy statement for a
stockholder meeting the number of outstanding shares and per share voting
rights of ZD Stock and ZDNet Stock.

LIQUIDATION

The holders of ZD Stock and ZDNet Stock will be entitled, upon voluntary or
involuntary liquidation, dissolution or winding-up of the Company, to receive
in respect of shares of ZD Stock and shares of ZDNet Stock their proportionate
interest in the net assets of the Company, if any, remaining for distribution
to stockholders (after payment of or provision for all liabilities, including
contingent liabilities, of the Company and payment of the liquidation
preference payable to any holders of our Preferred Stock), pro rata in
accordance with the average Market Value of the outstanding ZD Stock and the
average Market Value of ZDNet Stock during the 20 consecutive Trading Day
period ending on (and including) the 5th Trading Day before the date of the
first public announcement of (1) a voluntary liquidation, dissolution or
winding-up by the Company or (2) the institution of any proceeding for the
involuntary liquidation, dissolution or winding-up of the Company.

Neither the merger nor consolidation of the Company with any other entity,
nor a sale, transfer or lease of all or any part of the assets of the Company,
would alone be deemed a liquidation, dissolution or winding-up for these
purposes.

DETERMINATIONS BY THE BOARD

The Restated Certificate of Incorporation will provide that any
determinations made by the Board in good faith under the Restated Certificate
of Incorporation or in any certificate

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of designation filed pursuant thereto would be final and binding on all
stockholders of the Company, subject to rights under applicable Delaware law
and under the federal securities laws.

PREEMPTIVE RIGHTS

Holders of ZD Stock and ZDNet Stock will not have any preemptive rights to
subscribe for any additional shares of capital stock or securities that we may
issue in the future.

ZD'S RETAINED INTEREST IN ZDNET; NUMBER OF SHARES ISSUABLE WITH RESPECT TO ZD'S
RETAINED INTEREST IN ZDNET

In this document, we call the percentage interest in ZDNet intended to be
represented at any time by the outstanding shares of ZDNet Stock the
"OUTSTANDING INTEREST PERCENTAGE", and we call the remaining percentage
interest in ZDNet intended to be represented at any time by ZD's Retained
Interest in ZDNet the "RETAINED INTEREST PERCENTAGE". At any time, the
Outstanding Interest Percentage equals the number of shares of ZDNet Stock
outstanding divided by the Total Number of Notional ZDNet Shares Deemed
Outstanding (expressed as a percentage) and the Retained Interest Percentage
equals the Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet divided by the Total Number of Notional ZDNet Shares Deemed Outstanding
(expressed as a percentage). The sum of the Outstanding Interest Percentage and
the Retained Interest Percentage always equals 100%.

At the time that we file the Restated Certificate of Incorporation, the
Retained Interest Percentage will be 100% and the Outstanding Interest
Percentage will be 0%.

The Board has determined that the initial Number of Shares Issuable with
Respect to ZD's Retained Interest in ZDNet will be .. In the Offering, we will
attribute the net proceeds of . shares (the "PRIMARY SHARES") to the equity of
ZDNet and will attribute the net proceeds of the remaining shares (the
"SECONDARY SHARES") to ZD in respect of its Retained Interest. The issuance of
the Primary Shares will have no effect on the Number of Shares Issuable with
Respect to ZD's Retained Interest in ZDNet, but the issuance of the Secondary
Shares will correspondingly reduce that number. Thus, after giving effect to
the Offering,

. the division equity of ZDNet will increase by approximately $.,

. there will be . shares of ZDNet Stock outstanding (or . shares if the
Underwriters' option to purchase additional shares is exercised in full),

. the Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet will decline to . (or . if the Underwriters' option to purchase
additional shares is exercised in full),

. the Total Number of Notional ZDNet Shares Deemed Outstanding will be . (or
. if the Underwriters' option to purchase additional shares is exercised
in full),

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. the Outstanding Interest Fraction will be .% (or .% if the Underwriters'
option to purchase additional shares is exercised in full) and

. the Retained Interest Fraction will be .% (or .% if the Underwriters'
option to purchase additional shares is exercised in full).

After the Offering, whenever we decide to issue shares of ZDNet Stock, we
would determine, in our sole discretion, whether to attribute that issuance
(and the proceeds thereof) to ZD in respect of its Retained Interest in ZDNet
(in a manner analogous to a secondary offering of common stock of a subsidiary
owned by a corporate parent) or to ZDNet (in a manner analogous to a primary
offering of common stock). If we issue any shares of ZDNet Stock and attribute
that issuance (and the proceeds thereof) to ZD in respect of its Retained
Interest in ZDNet, the Number of Shares Issuable with Respect to ZD's Retained
Interest in ZDNet would be reduced by the number of shares so issued, the
number of outstanding shares of ZDNet Stock would be increased by the same
amount, the Total Number of Notional ZDNet Shares Deemed Outstanding would
remain unchanged, the Retained Interest Percentage would be reduced and the
Outstanding Interest Percentage would be correspondingly increased. If we
instead attribute that issuance (and the proceeds thereof) to ZDNet, the Number
of Shares Issuable with Respect to ZD's Retained Interest in ZDNet would remain
unchanged, the number of outstanding shares of ZDNet Stock and the Total Number
of Notional ZDNet Shares Deemed Outstanding would be increased by the number of
shares so issued, the Retained Interest Percentage would be reduced and the
Outstanding Interest Percentage would be correspondingly increased.

We reserve the right to issue shares of ZDNet Stock as a distribution on ZD
Stock, although we do not currently intend to do so. If we did so, we would
attribute that distribution to ZD in respect of its Retained Interest in ZDNet.
As a result, the Number of Shares Issuable with Respect to ZD's Retained
Interest in ZDNet would be reduced by the number of shares so distributed, the
number of outstanding shares of ZDNet Stock would be increased by the same
amount, the Total Number of Notional ZDNet Shares Deemed Outstanding would
remain unchanged, the Retained Interest Percentage would be reduced and the
Outstanding Interest Percentage would be correspondingly increased. If instead
we issued shares of ZDNet Stock as a distribution on ZDNet Stock, we would
attribute that distribution to ZDNet, in which case we would proportionately
increase the Number of Shares Issuable with Respect to ZD's Retained Interest
in ZDNet. As a result, the Number of Shares Issuable with Respect to ZD's
Retained Interest in ZDNet and the Total Number of Notional ZDNet Shares Deemed
Outstanding would each be increased by the same percentage as the number of
outstanding shares of ZDNet Stock is increased and the Retained Interest
Percentage and Outstanding Interest Percentage would remain unchanged.

At the time of any dividend on the outstanding shares of ZDNet Stock
(including any dividend required as a result of a Disposition of All or
Substantially All of the Assets of ZDNet, but excluding any dividend payable in
ZDNet Stock), we will credit to ZD, and charge against ZDNet, a corresponding
amount in respect of ZD's Retained Interest in

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ZDNet. Specifically, the corresponding amount will equal (1) the aggregate
amount of such dividend times (2) a fraction, the numerator of which is the
Number of Shares Issuable with Respect to ZD's Retained Interest in ZDNet and
the denominator of which is the number of shares of ZDNet Stock then
outstanding.

If we decide to repurchase shares of ZDNet Stock, we would determine, in our
sole discretion, whether to attribute that repurchase (and the cost thereof) to
ZD (in a manner analogous to a purchase of common stock of a subsidiary by a
corporate parent) or to ZDNet (in a manner analogous to an issuer repurchase).
If we repurchase shares of ZDNet Stock and attribute that repurchase (and the
cost thereof) to ZD, the Number of Shares Issuable with Respect to ZD's
Retained Interest in ZDNet would be increased by the number of shares so
purchased, the number of outstanding shares of ZDNet Stock would be decreased
by the same amount, the Total Number of Notional ZDNet Shares Deemed
Outstanding would remain unchanged, the Retained Interest Percentage would be
increased and the Outstanding Interest Percentage would be correspondingly
decreased. If we instead attribute that repurchase (and the cost thereof) to
ZDNet, the Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet would remain unchanged, the number of outstanding shares of ZDNet Stock
and the Total Number of Notional ZDNet Shares Deemed Outstanding would be
decreased by the number of shares so repurchased, the Retained Interest
Percentage would be increased and the Outstanding Interest Percentage would be
correspondingly reduced.

We may, in our sole discretion, determine to transfer cash or other property
of ZDNet to ZD in return for a decrease in ZD's Retained Interest in ZDNet (in
a manner analogous to a return of capital) or to transfer cash or other
property of ZD to ZDNet in return for an increase in ZD's Retained Interest in
ZDNet (in a manner analogous to a capital contribution). If we determine to
transfer cash or other property of ZDNet to ZD in return for a decrease in ZD's
Retained Interest in ZDNet, the Number of Shares Issuable with Respect to ZD's
Retained Interest in ZDNet and the Total Number of Notional ZDNet Shares Deemed
Outstanding would each be decreased by an amount equal to the Fair Value of
such cash or other property divided by the Market Value of a share of ZDNet
Stock on the day of transfer, the number of outstanding shares of ZDNet Stock
would remain unchanged, the Retained Interest Percentage would be decreased and
the Outstanding Interest Percentage would be correspondingly increased. If we
instead determine to transfer cash or other property of ZD to ZDNet in return
for an increase in ZD's Retained Interest in ZDNet, the Number of Shares
Issuable with Respect to ZD's Retained Interest in ZDNet and the Total Number
of Notional ZDNet Shares Deemed Outstanding would each be increased by an
amount equal to the Fair Value of such cash or other property divided by the
Market Value of a share of ZDNet Stock on the day of transfer, the number of
outstanding shares of ZDNet Stock would remain unchanged, the Retained Interest
Percentage would be increased and the Outstanding Interest Percentage would be
correspondingly decreased.

We may not attribute issuances of ZDNet Stock to ZD, transfer cash or other
property of ZDNet to ZD in return for a decrease in its Retained Interest in
ZDNet or take any other

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action to the extent that doing so would cause the Number of Shares Issuable
with Respect to ZD's Retained Interest in ZDNet to decrease below zero.

For illustrations showing how to calculate the Retained Interest Percentage,
the Outstanding Interest Percentage, the Number of Shares Issuable with Respect
to ZD's Retained Interest in ZDNet and the Total Number of Notional ZDNet
Shares Deemed Outstanding after giving effect to certain hypothetical
dividends, issuances, repurchases and transfers, see Annex I--"Illustrations of
Certain Terms".

LIMITATIONS ON POTENTIAL UNSOLICITED ACQUISITIONS; ANTI-TAKEOVER CONSIDERATIONS

The Restated Certificate of Incorporation authorizes an additional 60 million
shares of Common Stock which will be available for future issuance without
stockholder approval. One of the effects of the existence of authorized and
unissued Common Stock and Preferred Stock could be to enable the Board to issue
shares to persons friendly to current management which could render more
difficult or discourage an attempt to obtain control of the Company by means of
a merger, tender offer, proxy contest or otherwise, and thereby protect the
continuity of our management. Such additional shares also could be used to
dilute the stock ownership of persons seeking to obtain control of the Company.

For additional anti-takeover considerations, see "Risk Factors--Other Company
Risks--Control by Principal Stockholders and Potential Conflicts of Interest".

CERTAIN OTHER PROVISIONS OF THE RESTATED CERTIFICATE OF INCORPORATION AND BY-
LAWS

PREFERRED STOCK

The Restated Certificate of Incorporation, like the Current Certificate of
Incorporation, provides that the Board may issue shares of Preferred Stock in
one or more series from time to time. The Board has the authority to fix by
resolution or resolutions the designations and the powers, preferences and
rights, and the qualifications, limitations and restrictions

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thereof, of the shares of each series of Preferred Stock, including without
limitation the following:

. the distinctive serial designation of such series which shall distinguish
it from other series,

. the number of shares included in such series,

. the dividend rate (or method of determining such rate) payable to holders
of the shares of such series,

. any condition upon which such dividends shall be paid and the date or
dates upon which such dividends shall be payable,

. whether dividends on the shares of such series shall be cumulative and,
in the case of shares of any series having cumulative dividend rights,
the date or dates or method of determining the date or dates from which
dividends on the shares of such series shall be cumulative,

. the amount or amounts which shall be payable out of the assets of the
Company to holders of the shares of such series upon voluntary or
involuntary liquidation, dissolution or winding-up the Company and the
relative rights of priority, if any, of payment of the shares of such
series,

. the price or prices at which, the period or periods within which and the
terms and conditions upon which the shares of such series may be
redeemed, in whole or in part, at the option of the Company or at the
option of the holder or holders thereof or upon the happening of a
specified event or events,

. the obligation, if any, of the Company to purchase or redeem shares of
such series pursuant to a sinking fund or otherwise and the price or
prices at which, the period or periods within which and the terms and
conditions upon which the shares of such series shall be redeemed or
purchased, in whole or in part, pursuant to such obligation,

. whether or not the shares of such series shall be convertible or
exchangeable, at any time or times at the option of the holder or holders
thereof or at the option of the Company or upon the happening of a
specified event or events, into shares of any other class or classes or
any other series of the same or any other class or classes of stock of
the Company and the price or prices or rate or rates of exchange or
conversion and any adjustments applicable thereto and

. whether or not holders of the shares of such series shall have voting
rights, in addition to the voting rights provided by law, and if so the
terms of such voting rights.

Subject to the rights of holders of any series of Preferred Stock, the number
of authorized shares of any class or series of Preferred Stock may be increased
or decreased (but not below the number of shares thereof then outstanding) by
the affirmative vote of holders of a majority of the outstanding shares
entitled to vote, irrespective of the provisions of Section 242(b)(2) of the
DGCL or any corresponding provision hereafter enacted.

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STAGGERED BOARD OF DIRECTORS

The Board is divided into three classes, each of whose members serve for a
staggered three-year term. Upon the expiration of the term of a class of
directors, directors in such class are elected for three-year terms at the
annual meeting of stockholders in the year in which such term expires. The
classification of the Board has the effect of making it more difficult for
stockholders to change the composition of the Board, because only a minority of
the directors are up for election at each annual meeting, and the Board may not
be replaced by vote of the stockholders at any one time.

NUMBER OF DIRECTORS; REMOVAL; FILLING VACANCIES

The number of members of the Board will be fixed from time to time pursuant
to our By-laws. Our By-laws provide that the Board will consist of one or more
members, the number of which is determined from time to time by the Board. In
the event of any increase or decrease in the authorized number of directors,
(1) a director shall nevertheless continue as a director of the class of which
he is a member until the expiration of his current term, or his earlier death,
retirement, resignation or removal and (2) newly created or eliminated
directorships resulting from such increase or decrease shall be apportioned by
the Board among the three classes of directors so as to maintain such classes
as nearly equal in number as reasonably possible. Directors may be removed only
for cause. However, a director who is also an officer may be removed upon
ceasing to be an officer. Vacancies (whether arising through death, retirement,
resignation or removal of a director or through an increase in the authorized
number of directors of any class) may only be filled by a majority vote of the
remaining directors of the class in which such vacancy occurs, the sole
remaining director of that class if one such director remains, the majority
vote of the directors of the remaining classes if no such director remains or
stockholders at an annual meeting of stockholders of the Company.

A director elected to fill a vacancy shall serve for the remainder of his
term of office of the class to which he is elected. These provisions prevent
any stockholder from enlarging the Board and then filling the new directorships
with such stockholder's own nominees.

NO STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS

Any action required or permitted to be taken by the stockholders of the
Company must be duly effected at a duly called annual or special meeting of
such holders and may not be taken by any consent in writing by such holders.
Special meetings of stockholders of the Company may be called only by the
Chairman of the Board or the Board pursuant to a resolution stating the purpose
or purposes of the special meeting. Any power of stockholders to call a special
meeting is specifically denied. No business other than that stated in the
notice shall be transacted at any special meeting. These provisions have the
effect of delaying consideration of a stockholder proposal until the next
annual meeting unless a special meeting is called by the Chairman, Vice
Chairman, President or the Board for consideration of such proposal.

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ADVANCE NOTICE FOR STOCKHOLDER NOMINATIONS AND PROPOSALS OF NEW BUSINESS

Our By-laws establish an advance notice procedure. This procedure requires
stockholders to deliver to the Company notice of any proposal to be presented
or of a candidate to be nominated for election as a director of the Company not
less than 60 nor more than 90 days prior to the date of the meeting. However,
if the date of the meeting is first publicly announced or disclosed (in a
public filing or otherwise) is less than 70 days prior to the date of the
meeting, such advance notice shall be given not more than 10 days after such
date is first so announced or disclosed. Accordingly, failure by a stockholder
to act in compliance with the notice provisions will mean that the stockholder
will not be able to nominate directors or propose new business.

AMENDMENTS

The affirmative vote of holders of at least 80% of the stock entitled to vote
generally in the election of directors, voting together as a single class, or a
majority of the Board, is required to amend provisions of our By-laws relating
to stockholder action without a meeting, the calling of special meetings, the
number (or manner of determining the number) of the Company's directors, the
election and term of the Company's directors, the filling of vacancies and the
removal of directors.

CERTAIN PROVISIONS OF DELAWARE LAW

The Company is subject to the business combination provisions of Section 203
of the DGCL. In general, such provisions prohibit a publicly-held Delaware
corporation from engaging in various business combination transactions with any
interested stockholder for a period of three years after the date of the
transaction in which the person became an interested stockholder unless: (1)
the business combination transaction, or the transaction in which the
interested stockholder became an interested stockholder, is approved by the
Board prior to the date the interested stockholder obtained such status, (2)
upon consummation of the transaction which resulted in the stockholder becoming
an interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the number of shares
outstanding those shares owned by (a) persons who are directors and also
officers and (b) employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer or (3) on or subsequent to
such date the business combination is approved by the Board and authorized at
an annual or special meeting of stockholders by the affirmative vote of at
least 66 2/3% of the outstanding voting stock which is not owned by the
interested stockholder. A "BUSINESS COMBINATION" is defined to include mergers,
asset sales and other transactions resulting in financial benefit to a
stockholder. In general, an "INTERESTED STOCKHOLDER" is a person who, together
with affiliates and associates, owns (or, within three years, did own) 15% or
more of a corporation's voting stock. The statute could prohibit or delay
mergers or other takeover or change in control attempts with respect to the
Company and, accordingly, may discourage attempts to acquire the Company. Since
the Board approved the acquisition of Common

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Stock by SBH before SBH acquired such Common Stock, SBH is not an interested
stockholder for these purposes.

LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS

Section 102 of the DGCL authorizes a Delaware corporation to include a
provision in its certificate of incorporation limiting or eliminating the
personal liability of its directors to the corporation or its stockholders for
monetary damages for breach of the directors' fiduciary duty of care. The duty
of care requires that, when acting on behalf of the corporation, directors
exercise an informed business judgment based on all material information
reasonably available to them. Absent the limitations authorized by such
provision, directors are accountable to corporations or their stockholders for
monetary damages for conduct constituting gross negligence in the exercise of
their duty of care. Although Section 102 of the DGCL does not change a
director's duty of care, it enables corporations to limit available relief to
equitable remedies such as injunction or rescission. Our Restated Certificate
of Incorporation and By-laws include provisions which limit or eliminate the
personal liability of the Company's directors to the fullest extent permitted
by Section 102 of the DGCL. Consequently, a director will not be personally
liable to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for any breach of the directors' duty of
loyalty to the Company or its stockholders, acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, unlawful
payments of dividends or unlawful stock repurchases, redemptions or other
distributions and any transaction from which the director derived an improper
personal benefit.

Our By-laws provide that the Company will indemnify to the full extent
permitted by law any person made or threatened to be made a party to any
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person or such person's testator
or intestate is or was a director, officer or employee of the Company or serves
or served at the request of the Company any other enterprise as a director,
officer or employee. Our By-laws provide that expenses, including attorneys'
fees, incurred by any such person in defending any such action, suit or
proceeding will be paid or reimbursed by the Company promptly upon receipt by
it of an undertaking of such person to repay such expenses if it shall
ultimately be determined that such person is not entitled to be indemnified by
the Company. The inclusion of these indemnification provisions in our By-laws
is intended to enable the Company to attract qualified persons to serve as
directors and officers who might otherwise be reluctant to do so.

The directors and officers of the Company are insured under policies of
insurance maintained by the Company, subject to the limits of the policies,
against certain losses arising from any claim made against them by reason of
being or having been such officers or directors. In addition to the protection
available under our Restated Certificate of Incorporation, By-laws and
insurance policies, we have entered into agreements with our outside directors
to indemnify them to the fullest extent permitted by law against losses arising
from any claim against them by reason of being or having been a director. In

166
<PAGE>

addition, the limited liability provisions in our Restated Certificate of
Incorporation and the indemnification provisions in our By-laws may discourage
stockholders from bringing a lawsuit against directors for breach of their
fiduciary duty (including breaches resulting from grossly negligent conduct)
and may have the effect of reducing the likelihood of derivative litigation
against directors and officers, even though such an action, if successful,
might otherwise have benefitted the Company and its stockholders. Furthermore,
a stockholder's investment in the Company may be adversely affected to the
extent the Company pays the costs of settlement and damage awards against
directors and officers of the Company pursuant to the indemnification
provisions in our By-laws. The limited liability provisions in our Restated
Certificate of Incorporation will not limit the liability of directors under
federal securities laws.

Section 203 of the DGCL, and the provisions of our Restated Certificate of
Incorporation and By-laws described above, may make it more difficult for a
third party to acquire or discourage bids for the Company. Section 203 and
these provisions could have the effect of inhibiting attempts to change the
membership of the Board.

STOCK EXCHANGE LISTINGS

When we re-classify our existing Common Stock as ZD Stock, it will continue
to trade on the NYSE under the symbol "ZD". We currently intend to apply for
listing of ZDNet Stock on the NYSE under the symbol ".".

STOCK TRANSFER AGENT AND REGISTRAR

The Bank of New York is the registrar and transfer agent for ZD Stock and
ZDNet Stock.

167
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Prior to the Offering, there has been no market for ZDNet Stock. We cannot
predict the effect, if any, that sales of shares or the availability of shares
for sale will have on the market price prevailing from time to time.
Nevertheless, sales of significant amounts of ZDNet Stock in the public market,
or the perception that such sales may occur, could adversely affect the
prevailing market prices. See "Risk Factors--Risk Factors Related to ZDNet
Stock--Shares Eligible for Future Sale".

Upon completion of the Offering, the Company expects to have . shares of
ZDNet Stock outstanding ( . shares if the U.S. Underwriters' over-allotment is
exercised in full). These shares will be freely tradeable without restriction
under the Securities Act, except for any such shares which may be acquired by
an "affiliate" of the Company (an "AFFILIATE"). As defined in Rule 144, an
Affiliate of an issuer is a person that, directly or indirectly, through one or
more intermediaries, controls or is controlled by, or is under common control
with, such issuer.

Softbank has indicated it will not purchase any shares of ZDNet Stock. In
addition, the Company expects that certain directors and officers who may be
considered to be Affiliates will acquire approximately . shares of ZDNet Stock
in the Offering. These shares will be "restricted securities" (as that phrase
is defined in Rule 144) and may not be resold without registration under the
Securities Act unless exempted from such registration, including among others,
the exemption provided by Rule 144 under the Securities Act. One year after the
date of this prospectus these shares of ZDNet Stock will be eligible for sale
in the public market pursuant to Rule 144, subject to the volume limitations
and other restrictions described below.

In general, under Rule 144 as currently in effect, if a period of at least
one year has elapsed since the later of the date the "restricted shares" were
acquired from the Company and the date they were acquired from an Affiliate,
then the holder of such restricted shares (including an Affiliate) is entitled
to sell a number of shares within any three-month period that does not exceed
the greater of 1% of the then outstanding shares or the average weekly reported
volume of trading of such shares on the NYSE during the four calendar weeks
preceding such sale. The holder may only sell such shares through unsolicited
brokers' transactions. Sales under Rule 144 are also subject to certain
requirements pertaining to the manner of such sales, notices of such sales and
the availability of current public information concerning the Company.
Affiliates may sell shares not constituting restricted shares in accordance
with the foregoing volume limitations and other requirements without regard to
any holding period. Under Rule 144 (k), if a period of at least two years has
elapsed between the later of the date restricted securities were acquired from
the Company and the date they were acquired from an Affiliate, as applicable, a
holder of such restricted securities who is not an Affiliate at the time of the
sale and has not been an Affiliate for at least three months prior to the sale
would be entitled to sell the shares immediately without regard to the volume
limitations and other restrictions described above.

168
<PAGE>

In addition, after giving effect to the Offering, the Company will be able to
sell . shares of ZDNet Stock for the account of ZD in respect of its Retained
Interest in ZDNet (in a manner analogous to a secondary offering) and will be
able to sell up to . additional shares of ZDNet Stock for the account of
ZDNet.

Notwithstanding the foregoing, in connection with the Offering, the Company
and the officers and directors referred to above have agreed that without the
prior written consent of representatives of the Underwriters on behalf of the
Underwriters, during the period ending 180 days after the date of the
prospectus, it will not, directly or indirectly, (1) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any shares of ZDNet
Stock or any securities convertible into or exercisable or exchangeable for
ZDNet Stock (whether such shares or any such securities are then owned by such
person or are thereafter acquired directly from the Company) or (2) enter into
any swap or other arrangement that transfers to another, in whole or in part,
any of the economic consequences of ownership of ZDNet Stock, whether any such
transaction described in clause (1) or (2) above is to be settled by delivery
of ZDNet Stock or such other securities, in cash or otherwise. The restrictions
described in this paragraph do not apply to (a) the sale to the underwriters of
the shares of ZDNet Stock under the Underwriting Agreement, (b) the issuance by
the Company of shares of ZDNet Stock upon the exercise of an option or a
warrant or the conversion of a security outstanding on the date of this
prospectus of which the Underwriters have been advised in writing, or (c)
transactions by any person other than the Company relating to shares of ZDNet
Stock or other securities acquired in open market transactions after the
completion of the Offering.

169
<PAGE>

CERTAIN UNITED STATES TAX CONSEQUENCES

CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

The following summary of the federal income tax consequences of the ownership
of ZDNet Stock is based on the Code, Treasury Department regulations, published
positions of the Internal Revenue Service (the "IRS") and court decisions now
in effect, all of which are subject to change.

You should consult your own tax advisors with regard to the application
of the federal income tax laws to your particular situation, as well as to
the applicability and effect of any state, local, or foreign tax laws to
which you may be subject.

We believe that, for federal income tax purposes, ZDNet Stock will be
considered our common stock. Accordingly, for federal income tax purposes, we
believe that neither you nor we will recognize any income, gain or loss as a
result of the issuance of ZDNet Stock.

There are, however, no court decisions or other authorities bearing directly
on the classification of instruments with characteristics similar to those of
ZDNet Stock. In addition, the IRS has announced that it will not issue advance
rulings on the classification of an instrument that has certain voting and
liquidation rights in an issuing corporation but whose dividend rights are
determined by reference to the earnings of a segregated portion of the issuing
corporation's assets, including assets held by a subsidiary.

Certain non-corporate holders of ZDNet Stock could be subject to backup
withholding at a rate of 31% on the payment of dividends on or proceeds from
the sale of such stock. Backup withholding will apply only if the stockholder
(1) fails to furnish its taxpayer identification number ("TIN"), which, for an
individual, would be his or her social security number, (2) furnishes an
incorrect TIN, (3) is notified by the IRS that it has failed to properly report
payments of interest or dividends or (4) under certain circumstances, fails to
certify under penalties of perjury that it has furnished a correct TIN and has
been notified by the IRS that it is subject to backup withholding for failure
to report payments of interest or dividends. Stockholders should consult their
tax advisors regarding their qualification for exemption from backup
withholding and the procedures for obtaining such an exemption if applicable.
The amount of any backup withholding from a payment to a holder of ZDNet Stock
will be allowed as a credit against such stockholder's federal income tax
liability and may entitle such holder to a refund, provided that the required
information is furnished to the IRS.

170
<PAGE>

VALIDITY OF ZDNET STOCK

The validity of ZDNet Stock offered hereby will be passed upon for the
Company by Sullivan & Cromwell, New York, New York, U.S. counsel to the
Company, and for the Underwriters by Hale and Dorr LLP, Boston, Massachusetts,
U.S. counsel to the Underwriters.

EXPERTS

The combined financial statements of Ziff-Davis Inc. and ZD COMDEX and Forums
Inc. as of December 31, 1996 and 1997 and for the three years in the period
ended December 31, 1997, the consolidated financial statements of Ziff-Davis
Inc. as of December 31, 1995 and February 28, 1996 and for the year ended
December 31, 1995 and for the period from January 1, 1996 to February 28, 1996,
the combined financial statements of the ZD Group as of December 31, 1996 and
1997 and for the three years in the period ended December 31, 1997, the
combined financial statements of the ZD Publishing Group as of December 31,
1995 and February 28, 1996 and for the year ended December 31, 1995 and for the
period from January 1, 1996 to February 28, 1996, the combined financial
statements of the ZDNet Group as of December 31, 1996 and 1997 and for the
period from February 29, 1996 to December 31, 1996 and for the year ended
December 31, 1997, and the combined financial statements of the ZDNet Group as
of December 31, 1995 and February 28, 1996 and for the year ended December 31,
1995 and for the period from January 1, 1996 to February 28, 1996, included in
this prospectus have been so included in reliance upon the reports of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.

WHERE YOU CAN FIND MORE INFORMATION

The Company has filed a Registration Statement under the Securities Act that
registers ZDNet Stock offered by this prospectus.

The Registration Statement (including the attached exhibits and schedules)
that we filed with the Securities and Exchange Commission (the "COMMISSION")
contains additional relevant information about the Company and ZDNet Stock. The
rules and regulations of the Commission allow us to omit certain information
included in the Registration Statement from this prospectus.

In addition, we file reports, proxy statements and other information with the
Commission under the Exchange Act. You may read and copy this information at
the following locations of the Commission:

Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-
2511

171
<PAGE>

You may also obtain copies of this information by mail from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates. Further information on the
operation of the Commission's Public Reference Room in Washington, D.C. can be
obtained by calling the Commission at 1-800-SEC-0330.

The Commission also maintains an Internet world wide web site that contains
reports, proxy statements and other information about issuers, such as the
Company, who file electronically with the Commission. The address of that site
is http://www.sec.gov.

Our existing Common Stock is listed on the NYSE. You may also obtain copies
of this information at the offices of the NYSE, 20 Broad Street, New York, New
York 10005.

You should rely only on the information contained in this prospectus. We have
not authorized anyone to give any information or make any representation about
us or this offering that is different from, or in addition to, that contained
in this prospectus or in any of the materials that we have incorporated into
this document. Therefore, if anyone does give you information of this sort, you
should not rely on it. If you are in a jurisdiction where offers to sell, or
solicitations of offers to buy, the securities offered by this document are
unlawful, or if you are a person to whom it is unlawful to direct these types
of activities, then the offer presented in this document does not extend to
you. The information contained in this document speaks only as of the date of
this document unless the information specifically indicates that another date
applies.

172
<PAGE>

INDEX OF CERTAIN TERMS

<TABLE>
<CAPTION>
PAGE ON WHICH
TERM IS DEFINED IN THE
TERM PROSPECTUS
- ---- ----------------------
<S> <C>
50% of Total Market Capitalization Threshold........... 154
65% of Total Market Capitalization Trigger............. 154
Affiliate.............................................. 168
All or Substantially All of the Assets................. 151
Available Dividend Amount.............................. 148
Board.................................................. 39
business combination................................... 165
Central Services....................................... 44
Change in Control...................................... 132
Code................................................... 130
COMDEX................................................. 136
Commission............................................. 171
Committee.............................................. 125
Covered Employee....................................... 131
Current Certificate of Incorporation................... 147
DGCL................................................... 157
Disposition............................................ 150
Exchange Act........................................... 147
Exempt Disposition..................................... 151
Fair Value............................................. 151
GameSpot............................................... 44
Group.................................................. 147
Group Subsidiaries..................................... 154
Incentive Plan......................................... 129
interested stockholder................................. 165
International Underwriters............................. U-2
IRS.................................................... 170
Kingston Technology.................................... 136
MAC.................................................... 31
MAC Assets............................................. 136
MHA.................................................... 85
Market Capitalization.................................. 152
Market Value........................................... 152
Nasdaq NMS............................................. 152
Net Proceeds........................................... 152
Net tangible book value per share equivalent........... 41
Non-Employee Directors................................. 125
Non-Employee Directors' Plan........................... 128
Number of Shares Issuable with Respect to ZD's Retained
Interest in ZDNet..................................... 145
NYSE................................................... 124
Offering............................................... 39
Outstanding Interest Percentage........................ 159
Preferred Stock........................................ 147
Primary Shares......................................... 159
Proportionate Interest................................. 153
Publicly Traded........................................ 153
Repriced Softbank Options.............................. 126
Restated Certificate of Incorporation.................. 147
Retained Interest...................................... 7
Retained Interest Percentage........................... 159
</TABLE>

173
<PAGE>

<TABLE>
<CAPTION>
PAGE ON WHICH
TERM IS DEFINED IN THE
TERM PROSPECTUS
- ---- ----------------------
<S> <C>
SAR.................................................... 130
SBH.................................................... 125
SIM.................................................... 48
Secondary Shares....................................... 159
Shares................................................. U-1
Softbank............................................... 31
Softbank Options....................................... 126
Softbank Plans......................................... 133
Stock Purchase Plan.................................... 132
TIN.................................................... 170
Total Number of Notional ZDNet Shares Deemed
Outstanding........................................... 153
Trading Day............................................ 153
Underwriters........................................... U-2
U.S. Underwriters...................................... U-1
Vulcan................................................. 85
ZD..................................................... 4
ZD Events.............................................. 136
ZD Group............................................... 4
ZD Stock............................................... 147
ZDNet.................................................. 4
ZDNet Group............................................ 4
ZDNet Stock............................................ 147
ZDMI................................................... 101
</TABLE>

174
<PAGE>

ANNEX I

ILLUSTRATION OF CERTAIN TERMS
The following illustrations show how to calculate the Retained Interest
Percentage, the Outstanding Interest Percentage, the Number of Shares Issuable
with Respect to ZD's Retained Interest in ZDNet and the Total Number of
Notional ZDNet Shares Deemed Outstanding after giving effect to certain
hypothetical dividends, issuances, repurchases and transfers, in each case
based on the assumptions set forth herein. In these illustrations, the Number
of Shares Issuable with Respect to ZD's Retained Interest in ZDNet is initially
assumed to be 100. Unless otherwise specified, each illustration below should
be read independently as if none of the other transactions referred to below
had occurred. Actual calculations may be slightly different due to rounding.

"TOTAL NUMBER OF NOTIONAL ZDNET SHARES DEEMED OUTSTANDING" means the number
of shares of ZDNet Stock outstanding plus the Number of Shares Issuable with
Respect to ZD's Retained Interest in ZDNet.

At any given time, the percentage interest in ZDNet intended to be
represented by the outstanding shares of ZDNet Stock (i.e., the OUTSTANDING
INTEREST PERCENTAGE) is equal to:

Outstanding Shares of ZDNet Stock
----------------------------------------------------------
Total Number of Notional ZDNet Shares Deemed Outstanding

and the remaining percentage interest in ZDNet intended to be represented by
ZD's Retained Interest in ZDNet (i.e., the RETAINED INTEREST PERCENTAGE) is
equal to:

Number of Shares Issuable with Respect to ZD's Retained
Interest in ZDNet
----------------------------------------------------------
Total Number of Notional ZDNet Shares Deemed Outstanding

The sum of the Outstanding Interest Percentage and the Retained Interest
Percentage would always equal 100%. In our example, before the first issuance
the Number of Shares Issuable with Respect to ZD's Retained Interest in ZDNet
and the Total Number of Notional ZDNet Shares Deemed Outstanding are each equal
to 100, the Retained Interest Percentage is 100% and the Outstanding Interest
Percentage is 0%.

THE OFFERING

The following illustrations reflect an assumed issuance by the Company of 15
shares of ZDNet Stock in the Offering.

OFFERING FOR ACCOUNT OF ZD

Assume the issuance is attributed to ZD in respect of its Retained Interest
(as currently planned), with the net proceeds credited solely to ZD.

I-1
<PAGE>

<TABLE>
<S> <C>
Shares previously issued and outstanding............................. 0
Newly issued shares for account of ZD................................ 15
---
Total issued and outstanding after the Offering.................. 15
===

. The Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet would decrease by the number of shares of ZDNet Stock sold for the
account of ZD.

Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet prior to the Offering......................................... 100
Shares issued in the Offering........................................ 15
---
Number of Shares Issuable with Respect to ZD's Retained Interest
in ZDNet after the Offering..................................... 85
===
</TABLE>
. As a result, the issued and outstanding shares (15) would represent an
Outstanding Interest Percentage of 15%, calculated as follows:

15
--------
15 + 85

The Retained Interest Percentage would accordingly be 85%.

. In this case, in the event of any dividend or other distribution paid on
the outstanding shares of ZDNet Stock (other than a dividend or other
distribution payable in shares of ZDNet Stock), ZD would be credited, and
ZDNet would be charged, with an amount equal to 567% (representing the
ratio of the Number of Shares Issuable with Respect to ZD's Retained
Interest in ZDNet (85) to the total number of shares of ZDNet Stock
issued and outstanding following the Offering (15)) of the aggregate
amount of such dividend or distribution. If, for example, a dividend of
$1.00 per share were declared and paid on the 15 shares of ZDNet Stock
outstanding (an aggregate of $15), ZD would be credited with $85, and
ZDNet would be charged with that amount in addition to the $15 dividend
paid to the holders of ZDNet Stock (a total of $100).

OFFERING FOR ACCOUNT OF ZDNET

Assume the issuance is attributed to ZDNet as an increase in its equity, with
the net proceeds credited solely to ZDNet.

<TABLE>
<S> <C>
Shares previously issued and outstanding............................... 0
Newly issued shares for account of ZDNet............................... 15
---
Total issued and outstanding after the Offering.................... 15
===
</TABLE>

. The Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet (100) would remain unchanged.

I-2
<PAGE>

. As a result, the issued and outstanding shares (15) would represent an
Outstanding Interest Percentage of about 13%, calculated as follows:

15
15 + 100

The Retained Interest Percentage would accordingly be about 87%.

ADDITIONAL OFFERINGS OF ZDNET STOCK

The following illustrations reflect an assumed issuance of an additional 15
shares of ZDNet Stock after the assumed initial issuance of 15 shares for the
account of ZD.

ADDITIONAL OFFERING FOR ACCOUNT OF ZD

Assume the issuance is attributed to ZD in respect of its Retained Interest,
with the net proceeds credited solely to ZD.

<TABLE>
<S> <C>
Shares previously issued and outstanding............................... 15
Newly issued shares for account of ZD.................................. 15
---
Total issued and outstanding after additional offering............. 30
===
</TABLE>

. The Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet would decrease by the number of shares of ZDNet Stock issued for
the account of ZD

<TABLE>
<S> <C>
Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet prior to the additional offering............................. 85
Newly issued shares for account of ZD............................... 15
---
Number of Shares Issuable with Respect to ZD's Retained Interest
in ZDNet after the additional offering........................... 70
===
</TABLE>

. As a result, the total issued and outstanding shares (30) would in the
aggregate represent an Outstanding Interest Percentage of 30%, calculated
as follows:

30
--------
30 + 70

The Retained Interest Percentage would accordingly be reduced to 70%.

. In this case, in the event of any dividend or other distribution paid on
ZDNet Stock (other than a dividend or other distribution payable in
shares of ZDNet Stock), ZD

I-3
<PAGE>

would be credited, and ZDNet would be charged, with an amount equal to
233% (representing the ratio of the Number of Shares Issuable with Respect
to ZD's Retained Interest in ZDNet (70) to the total number of shares of
ZDNet Stock issued and outstanding following the additional offering (30))
of the aggregate amount of such dividend or distribution.

ADDITIONAL OFFERING FOR ACCOUNT OF ZDNET

Assume the issuance is attributed to ZDNet as an increase in its equity, with
the net proceeds credited solely to ZDNet.

<TABLE>
<S> <C>
Shares previously issued and outstanding............................... 15
Newly issued shares for account of ZDNet............................... 15
---
Total issued and outstanding after the additional offering......... 30
===
</TABLE>

. The Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet (85) would remain unchanged.

. As a result, the total issued and outstanding shares (30) would in the
aggregate represent an Outstanding Interest Percentage of about 26%,
calculated as follows:

30
--------
30 + 85

The Retained Interest Percentage would accordingly be reduced to about 74%.

. In this case, in the event of any dividend or other distribution paid on
ZDNet Stock (other than a dividend or other distribution payable in
shares of ZDNet Stock), ZD would be credited, and ZDNet would be charged,
with an amount equal to 283% (representing the ratio of the Number of
Shares Issuable with Respect to ZD's Retained Interest in ZDNet (85) to
the total number of shares of ZDNet Stock issued and outstanding
following the additional offering (30)) of the aggregate amount of such
dividend or distribution.

OFFERINGS OF CONVERTIBLE SECURITIES

If we were to issue any securities convertible into or exercisable for shares
of ZDNet Stock, the Outstanding Interest Percentage and the Retained Interest
Percentage would be unchanged at the time of such issuance. If any shares of
ZDNet Stock were issued upon conversion or exercise of such securities,
however, then the Outstanding Interest Percentage and the Retained Interest
Percentage would be affected as shown above under "Additional Offering for
Account of ZD", if such securities were attributed to ZD, or under "Additional
Offering for Account of ZDNet", if such securities were attributed to ZDNet.

REPURCHASES OF ZDNET STOCK

The following illustrations reflect an assumed repurchase by the Company of 5
shares of ZDNet Stock after the assumed initial issuance of 15 shares of ZDNet
Stock for the account of ZD.

I-4
<PAGE>

REPURCHASE FOR THE ACCOUNT OF ZD

Assume the repurchase is attributed to ZD as an increase in its Retained
Interest in ZDNet, with the cost charged solely against ZD.

<TABLE>
<S> <C>
Shares previously issued and outstanding............................... 15
Shares repurchased for account of ZD................................... 5
---
Total issued and outstanding after repurchase...................... 10
===
</TABLE>

. The Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet would be increased by the number of any shares of ZDNet Stock
repurchased for the account of ZD.

<TABLE>
<S> <C>
Number of Shares Issuable with Respect to ZD's Retained
Interest in ZDNet prior to repurchase.............................. 85
Number of shares repurchased for the account of ZD.................. 5
---
Number of Shares Issuable with Respect to ZD's Retained Interest
in ZDNet after repurchase...................................... 90
===
</TABLE>

. As a result, the total issued and outstanding shares (10) would in the
aggregate represent an Outstanding Interest Percentage of 10%, calculated
as follows:

10
--------
10 + 90

The Retained Interest Percentage would accordingly be increased to 90%.

REPURCHASE FOR ACCOUNT OF ZDNET WITHOUT PARTICIPATION BY ZD

Assume the repurchase is attributed to ZDNet, with the cost being charged
solely against ZDNet. Further assume that the Board does not determine to
transfer assets from ZDNet to ZD to hold constant the Outstanding Interest
Percentage and Retained Interest Percentage.

<TABLE>
<S> <C>
Shares previously issued and outstanding............................... 15
Shares repurchased for account of ZDNet................................ 5
---
Total issued and outstanding after repurchase...................... 10
===
</TABLE>

. The Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet (85) would remain unchanged.

. As a result, the total issued and outstanding shares (10) would in the
aggregate represent an Outstanding Interest Percentage of about 11%,
calculated as follows:

10
--------
10 + 85

The Retained Interest Percentage would accordingly be increased to about
89%.

I-5
<PAGE>

REPURCHASE FOR ACCOUNT OF ZDNET WITH PARTICIPATION BY ZD

Assume the repurchase is attributed to ZDNet, with the cost being charged
solely against ZDNet. Further assume that the repurchase is made in connection
with a tender offer for 5, or 33%, of the then outstanding shares at a price of
$20 per share, and that the Board determines to transfer cash or other assets
from ZDNet to ZD to hold constant the Outstanding Interest Percentage and
Retained Interest Percentage.

. In order to hold constant the Outstanding Interest Percentage and
Retained Interest Percentage, the Board could determine that the Market
Value of a share of ZDNet Stock in this context is $20 and transfer from
ZDNet to ZD an amount of cash or other assets equal to 567% (representing
the ratio of the Number of Shares Issuable with Respect to ZD's Retained
Interest in ZDNet (85) to the total number of shares of ZDNet Stock
issued and outstanding (15), in each case immediately prior to the
repurchase) of the aggregate amount of the cash paid in the tender offer
to holders of outstanding shares of ZDNet Stock ($100), or a total of
$567.

. In that case, the Number of Shares Issuable with Respect to ZD's Retained
Interest in ZDNet (85) would decrease by the amount of cash so
transferred ($567) divided by the Market Value per share of ZDNet Stock
($20).

<TABLE>
<S> <C>
Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet prior to transfer............................................. 85
Adjustment in respect of ZD's Retained Interest to reflect transfer
to ZD of funds theretofore allocated to ZDNet....................... 28
---
Number of Shares Issuable with Respect to ZD's Retained Interest
in ZDNet after transfer......................................... 57
===
</TABLE>

. As a result, the total issued and outstanding shares (10) would in the
aggregate continue to represent an Outstanding Interest Percentage of
15%, calculated as follows:
10
--------
10 + 57

The Retained Interest Percentage would accordingly continue to be 85%.

. Assuming that the Board transferred only half of the $567 amount, or
$283.50, from ZDNet to ZD, the Number of Shares Issuable with Respect to
ZD's Retained Interest in ZDNet (85) would decrease by the amount of cash
so transferred ($283.50) divided by the Market Value per share of ZDNet
Stock ($20).

<TABLE>
<S> <C>
Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet prior to transfer............................................ 85
Adjustment in respect of ZD's Retained Interest to reflect transfer
to ZD of cash theretofore allocated to ZDNet....................... 14
---
Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet after transfer............................................... 71
===
</TABLE>

I-6
<PAGE>

. In that case, as a result, the total issued and outstanding shares (10)
would in the aggregate represent an Outstanding Interest Percentage of
about 12%, calculated as follows:

10
10 + 71

The Retained Interest Percentage would accordingly be increased to about
88%.

ZDNET STOCK DIVIDENDS

The following illustrations reflect assumed dividends of ZDNet Stock on
outstanding shares of ZD Stock and outstanding shares of ZDNet Stock,
respectively, after the assumed initial issuance of 15 shares of ZDNet Stock
for the account of ZD.

ZDNET STOCK DIVIDEND ON ZD STOCK

Assume 1,000 shares of ZD Stock are outstanding and the Company declares a
dividend of 1/20 of a share of ZDNet Stock on each outstanding share of ZD
Stock.

<TABLE>
<S> <C>
Shares previously issued and outstanding.............................. 15
Newly issued shares for account of ZD................................. 50
---
Total issued and outstanding after dividend......................... 65
===
</TABLE>

. Any dividend of shares of ZDNet Stock to the holders of shares of ZD
Stock would be treated as a reduction in the Number of Shares Issuable
with Respect to ZD's Retained Interest in ZDNet.

<TABLE>
<S> <C>
Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet prior to dividend........................................... 85
Number of shares distributed on outstanding shares of ZD Stock for
account of ZD..................................................... 50
---
Number of Shares Issuable with Respect to ZD's Retained Interest
in ZDNet after dividend......................................... 35
===
</TABLE>

. As a result, the total issued and outstanding shares (65) would in the
aggregate represent an Outstanding Interest Percentage of 65%, calculated
as follows:

65
65 + 35

The Retained Interest Percentage would accordingly be reduced to 35%.
Note, however, that after the dividend, the holders of ZD Stock would also
hold 50 shares of ZDNet Stock, which would be intended to represent a 50%
interest in the value attributable to ZDNet.

I-7
<PAGE>

ZDNET STOCK DIVIDEND ON ZDNET STOCK

Assume the Company declares a dividend of 1/5 of a share of ZDNet Stock on
each outstanding share of ZDNet Stock.

<TABLE>
<S> <C>
Shares previously issued and outstanding............................... 15
Newly issued shares for account of ZDNet............................... 3
---
Total issued and outstanding after dividend........................ 18
===
</TABLE>

. The Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet would be increased proportionately to reflect the stock dividend
payable in shares of ZDNet Stock to holders of shares of ZDNet Stock.
That is, the Number of Shares Issuable with Respect to ZD's Retained
Interest in ZDNet would be increased by a number equal to 567%
(representing the ratio of the Number of Shares Issuable with Respect to
ZD's Retained Interest in ZDNet (85) to the number of shares of ZDNet
Stock issued and outstanding (15), in each case immediately prior to such
dividend) of the aggregate number of shares issued in connection with
such dividend (3), or 17.

<TABLE>
<S> <C>
Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet prior to dividend.............................................. 85
Adjustment in respect of ZD's Retained Interest to reflect shares
distributed on outstanding shares of ZDNet Stock..................... 17
---
Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet after dividend............................................... 102
===
</TABLE>

. As a result, the total issued and outstanding shares (18) would in the
aggregate continue to represent an Outstanding Interest Percentage of
15%, calculated as follows:

18
---------
18 + 102

The Retained Interest Percentage would accordingly continue to be 85%.

CAPITAL TRANSFERS OF CASH OR OTHER ASSETS BETWEEN ZD AND ZDNET

CAPITAL CONTRIBUTION OF CASH OR OTHER ASSETS FROM ZD TO ZDNET

The following illustration reflects the assumed contribution by ZD to ZDNet,
after the assumed initial issuance of 15 shares of ZDNet Stock for the account
of ZD, of $40 of assets allocated to ZD at a time when the Market Value of the
ZDNet Stock is $20 per share.

<TABLE>
<S> <C>
Shares previously issued and outstanding............................... 15
Newly issued shares.................................................... 0
---
Total issued and outstanding after contribution.................... 15
===
</TABLE>

I-8
<PAGE>

. The Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet would be increased to reflect the contribution to ZDNet of assets
theretofore allocated to ZD by a number equal to the value of the assets
contributed ($40) divided by the Market Value of ZDNet Stock at that time
($20), or 2 shares.

<TABLE>
<S> <C>
Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet prior to contribution........................................ 85
Increase to reflect contribution to ZDNet of assets allocated to
ZD................................................................. 2
---
Number of Shares Issuable with Respect to ZD's Retained Interest
in ZDNet after contribution.................................... 87
===
</TABLE>

. As a result, the total issued and outstanding shares (15) would in the
aggregate represent an Outstanding Interest Percentage of a little less
than 15%, calculated as follows:

15
--------
15 + 87

The Retained Interest Percentage would accordingly be increased to a little
more than 85%.

RETURN OF CAPITAL TRANSFER OF CASH OR OTHER ASSETS FROM ZDNET TO ZD

The following illustration reflects the assumed transfer by ZDNet to ZD,
after the assumed initial issuance of 15 shares of ZDNet Stock for the account
of ZD, of $40 of assets allocated to ZDNet on a date on which the Market Value
of ZDNet Stock is $20 per share.

<TABLE>
<S> <C>
Shares previously issued and outstanding............................. 15
Newly issued shares.................................................. 0
---
Total issued and outstanding after contribution.................. 15
===

. The Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet would be decreased to reflect the transfer to ZD of assets
theretofore allocated to ZDNet by a number equal to the value of the
assets transferred ($40) divided by the Market Value of ZDNet Stock at
that time ($20), or 2 shares.

Number of Shares Issuable with Respect to ZD's Retained Interest in
ZDNet prior to contribution......................................... 85
Decrease to reflect transfer to ZD of assets allocated to ZDNet...... 2
---
Number of Shares Issuable with Respect to ZD's Retained Interest
in ZDNet after contribution..................................... 83
===
</TABLE>

. As a result, the total issued and outstanding shares (15) would in the
aggregate represent an Outstanding Interest Percentage of a little more
than 15%, calculated as follows:
15
--------
15 + 83

The Retained Interest Percentage would accordingly be decreased to a little
less than 85%.

I-9
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ZDNET
Report of Independent Accountants....................................... F-4
Combined Balance Sheets as of December 31, 1996 and 1997 and September
30, 1998 (unaudited)................................................... F-5
Combined Statements of Operations for the period from February 29, 1996
to December 31, 1996, for the year ended December 31, 1997 and for the
nine months ended September 30, 1997 and 1998 (unaudited).............. F-6
Combined Statements of Cash Flows for the period from February 29, 1996
to December 31, 1996, for the year ended December 31, 1997 and for the
nine months ended September 30, 1997 and 1998 (unaudited).............. F-7
Combined Statements of Changes in Division Equity for the period from
February 29, 1996 to December 31, 1996, for the year ended December 31,
1997 and for the nine months ended September 30, 1998 (unaudited)...... F-8
Notes to combined financial statements.................................. F-9
ZDNET (PREDECESSOR)
Report of Independent Accountants....................................... F-29
Combined Balance Sheets as of December 31, 1995 and February 28, 1996... F-30
Combined Statements of Operations for the year ended December 31, 1995
and for the period from January 1, 1996 to February 28, 1996........... F-31
Combined Statements of Cash Flows for the year ended December 31, 1995
and for the period from January 1, 1996 to February 28, 1996........... F-32
Combined Statements of Changes in Division Equity for the year ended
December 31, 1995 and for the period from January 1, 1996 to February
28, 1996............................................................... F-33
Notes to combined financial statements.................................. F-34
</TABLE>

F-1
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ZD GROUP (A DIVISION OF ZIFF-DAVIS INC.)
Report of independent accountants....................................... F-44
Combined balance sheets as of December 31, 1996 and 1997 and September
30, 1998 (unaudited)................................................... F-45
Combined statements of operations for the years ended December 31, 1995,
December 31, 1996, and December 31, 1997 and the nine months ended
September 30, 1997 and 1998 (unaudited) F-46
Combined statements of cash flows for the years ended December 31, 1995,
December 31, 1996 and 1997 and the nine months ended September 30, 1997
and 1998 (unaudited)................................................... F-47
Combined statements of changes in division equity for the years ended
December 31, 1995, December 31, 1996 and 1997 and the nine months ended
September 30, 1998 (unaudited)......................................... F-48
Notes to combined financial statements.................................. F-49
ZD PUBLISHING (A DIVISION OF ZIFF-DAVIS INC.)
Report of independent accountants....................................... F-81
Combined balance sheets as of December 31, 1995 and February 28, 1996... F-82
Combined statements of operations for the year ended December 31, 1995
and for the period from January 1, 1996 to February 28, 1996........... F-83
Combined statements of cash flows for the year ended December 31, 1995
and for the period from January 1, 1996 to February 28, 1996........... F-84
Combined statements of changes in division equity for the year ended
December 31, 1995 and for the period ended February 28, 1996........... F-85
Notes to combined financial statements.................................. F-86
</TABLE>

F-2
<PAGE>

ZIFF-DAVIS INC.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
ZIFF-DAVIS INC.
Report of independent accountants...................................... F-100
Combined balance sheets as of December 31, 1996 and 1997 and September
30, 1998 (unaudited).................................................. F-101
Combined statements of operations for the years ended December 31,
1995, December 31, 1996, and December 31, 1997 and the nine months
ended September 30, 1997 and 1998 (unaudited)......................... F-102
Combined statements of cash flows for the years ended December 31,
1995, December 31, 1996 and 1997 and the nine months ended September
30, 1997 and 1998 (unaudited)......................................... F-103
Combined statements of changes in stockholders' equity for the years
ended December 31, 1995, December 31, 1996 and 1997 and the nine
months ended September 30, 1998 (unaudited)........................... F-104
Notes to combined financial statements................................. F-105
ZDI (FORMERLY ZIFF-DAVIS PUBLISHING COMPANY)
Report of independent accountants...................................... F-132
Consolidated balance sheets as of December 31, 1995 and February 28,
1996.................................................................. F-133
Consolidated statements of operations for the year ended December 31,
1995 and for the period from January 1, 1996 to February 28, 1996..... F-134
Consolidated statements of cash flows for the year ended December 31,
1995 and for the period from January 1, 1996 to February 28, 1996..... F-135
Consolidated statements of changes in stockholders' equity for the year
ended December 31, 1995 and for the period ended February 28, 1996.... F-136
Notes to combined financial statements................................. F-137
</TABLE>

F-3
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Ziff-Davis Inc.

In our opinion, the accompanying combined balance sheets and the related
combined statements of operations, cash flows and changes in division equity,
present fairly, in all material respects, the financial position of the ZDNet
Group ("ZDNet") (a division of Ziff-Davis Inc., the "Company") at December 31,
1996 and 1997, and the results of its operations and its cash flows for the
period from February 29, 1996 to December 31, 1996 and for the year ended
December 31, 1997, in conformity with generally accepted accounting principles.
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 of these statements in accordance with
generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.

As described in Note 1 to the financial statements, ZDNet is a division of
Ziff-Davis Inc.; accordingly, the financial statements of ZDNet should be read
in conjunction with the audited financial statements of Ziff-Davis Inc.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
New York, NY
December 17, 1998

F-4
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

COMBINED BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
--------------- SEPTEMBER 30,
1996 1997 1998
------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................... $ -- $ 28 $ 425
Accounts receivable, net of allowance for
doubtful accounts of $201, $522 and $802, for
1996, 1997 and September 30, 1998,
respectively.................................. 6,600 11,396 15,449
Deferred taxes................................. -- 69 242
Other current assets........................... 1,252 28 53
------- ------- -------
Total current assets......................... 7,852 11,521 16,169
Property and equipment, net...................... 2,070 3,145 4,964
Investment, at cost.............................. -- -- 5,000
Deferred taxes................................... 4,722 5,496 5,626
Intangible assets, net........................... 67,863 67,164 63,746
------- ------- -------
Total assets................................. $82,507 $87,326 $95,505
======= ======= =======
LIABILITIES AND DIVISION EQUITY
Current liabilities:
Accounts payable............................... $ 2,715 $ 645 $ 2,744
Accrued expenses............................... 1,124 2,208 3,063
Unearned income................................ 93 -- 59
------- ------- -------
Total current liabilities.................... 3,932 2,853 5,866
Non-current liabilities.......................... -- 1,181 817
------- ------- -------
Total liabilities............................ 3,932 4,034 6,683
------- ------- -------
Commitments and contingencies (Notes 12, 13 and
14)
Division equity.................................. 78,575 83,292 88,822
------- ------- -------
Total liabilities and division equity........ $82,507 $87,326 $95,505
======= ======= =======
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

F-5
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS
PERIOD FROM ENDED
FEBRUARY 29, 1996 YEAR ENDED SEPTEMBER 30,
TO DECEMBER 31, DECEMBER 31, -----------------
1996 1997 1997 1998
----------------- ------------ -------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue, net................. $ 16,215 $ 32,218 $ 21,277 $37,566
Cost of operations:
Production and content..... 14,863 23,543 17,638 19,025
Selling, general and
administrative expenses... 13,280 23,475 17,757 22,049
Depreciation and
amortization of property
and equipment............. 656 1,495 896 1,362
Amortization of intangible
assets.................... 4,829 6,186 4,628 3,418
-------- -------- -------- -------
Total operating
expenses................ 33,628 54,699 40,919 45,854
-------- -------- -------- -------
Loss from operations......... (17,413) (22,481) (19,642) (8,288)
Minority interest............ -- 400 436 330
-------- -------- -------- -------
Loss before income taxes..... (17,413) (22,081) (19,206) (7,958)
Income tax benefit........... (488) (843) (743) (303)
-------- -------- -------- -------
Net loss..................... $(16,925) $(21,238) $(18,463) $(7,655)
======== ======== ======== =======
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

F-6
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS
PERIOD FROM ENDED
FEBRUARY 29, 1996 YEAR ENDED SEPTEMBER 30,
TO DECEMBER 31, DECEMBER 31, -----------------
1996 1997 1997 1998
----------------- ------------ -------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net loss.................... $(16,925) $(21,238) $(18,463) $(7,655)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and
amortization............. 656 1,495 896 1,362
Amortization of intangible
assets................... 4,829 6,186 4,628 3,418
Deferred tax benefit...... (488) (843) (743) (303)
Changes in operating
assets and liabilities:
Accounts receivable..... (1,901) (4,629) (3,829) (4,138)
Other current assets.... (1,217) 4,093 4,053 (1)
Accounts payable and
accrued expenses....... 2,333 (1,416) 824 2,867
Unearned income......... 93 (93) 95 59
Other, net.............. -- 1,181 1,153 (329)
-------- -------- -------- -------
Net cash used in operating
activities................. (12,620) (15,264) (11,386) (4,720)
-------- -------- -------- -------
Cash flows from investing
activities:
Capital expenditures...... (1,010) (2,374) (1,345) (3,181)
Investments and
acquisitions, net of cash
acquired................. -- (2,998) (2,998) (5,000)
-------- -------- -------- -------
Net cash used in investing
activities................. (1,010) (5,372) (4,343) (8,181)
-------- -------- -------- -------
Cash flows from financing
activities:
Capital contributions from
ZD Group................. 13,630 20,664 15,799 13,298
-------- -------- -------- -------
Net cash provided by
financing activities....... 13,630 20,664 15,799 13,298
-------- -------- -------- -------
Net increase in cash and
cash equivalents........... -- 28 70 397
Cash and cash equivalents at
beginning of period........ -- -- -- 28
-------- -------- -------- -------
Cash and cash equivalents at
end of period.............. $ -- $ 28 $ 70 $ 425
======== ======== ======== =======
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

F-7
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

COMBINED STATEMENTS OF CHANGES IN DIVISION EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
CUMULATIVE TOTAL
PAID-IN ACCUMULATED TRANSLATION DIVISION
CAPITAL DEFICIT ADJUSTMENT EQUITY
-------- ----------- ----------- --------
<S> <C> <C> <C> <C>
Balance at February 29, 1996....... $ 81,900 $ -- $ -- $ 81,900
Capital contribution from ZD
Group............................. 13,630 -- -- 13,630
Net loss........................... -- (16,925) -- (16,925)
Foreign currency translation
adjustment........................ -- -- (30) (30)
-------- -------- ----- --------
Balance at December 31, 1996....... 95,530 (16,925) (30) 78,575
Capital contribution from ZD
Group............................. 25,831 -- -- 25,831
Net loss........................... -- (21,238) -- (21,238)
Foreign currency translation
adjustment........................ -- -- 124 124
-------- -------- ----- --------
Balance at December 31, 1997....... 121,361 (38,163) 94 83,292
Capital contribution from ZD
Group............................. 13,298 -- -- 13,298
Net loss........................... -- (7,655) -- (7,655)
Foreign currency translation
adjustment........................ -- -- (113) (113)
-------- -------- ----- --------
Balance at September 30, 1998
(unaudited)....................... $134,659 $(45,818) $ (19) $ 88,822
======== ======== ===== ========
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

F-8
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

1. BASIS OF PRESENTATION

ZDNet Group ("ZDNet") is the online business division of Ziff-Davis Inc. (the
"Company")

In order to prepare separate financial statements for the ZD Group ("ZD") (as
described below) and ZDNet, the Company has allocated all of its consolidated
assets, liabilities, revenues, expenses and cash flow between ZD and ZDNet.
Thus, the financial statements of ZD and ZDNet, taken together, comprise all of
the accounts included in the corresponding consolidated financial statements of
the Company.

ZDNet's financial statements reflect the application of certain cash
management and allocation policies adopted by the Board of Directors of the
Company (the "Board"). These policies are summarized under "Certain Cash
Management and Allocation Policies" below.

Even though the Company has allocated all of its consolidated assets,
liabilities, revenue, expenses and cash flow between ZD and ZDNet, that
allocation and the division of the Company's Common Stock will not change the
legal title to any assets or responsibility for any liabilities and will not
affect the rights of any creditors. Holders of ZDNet Stock (as described below)
will continue to be common stockholders of the Company and, as such, will be
subject to all risks associated with an investment in the entire Company and
all of its businesses, assets and liabilities.

Financial events which occur at ZD that affect the Company's consolidated
results of operations or financial position could affect the results of
operations or financial condition of ZDNet. Accordingly, financial information
for ZDNet should be read in conjunction with financial information for ZD and
financial information for the consolidated Company.

Acquisition of ZDNet

In February 1996, SOFTBANK Corp. (SOFTBANK Corp. and its affiliates
hereinafter referred to as "Softbank") acquired the stock of Ziff-Davis
Holdings Corp. ("Holdings") for an aggregate purchase price of approximately
$1,800,000, plus transaction costs. Softbank is a Japanese corporation which as
of December 31, 1997 was 50.2% owned by Mr. Son, its president, including 43.4%
directly owned by his wholly-owned holding company, MAC Inc. (MAC Inc. and
affiliates hereinafter referred to as "MAC"). Concurrent with the acquisition,
in a separate agreement, MAC, directly or through wholly-owned affiliates,
acquired certain assets and assumed certain liabilities of ZD Inc. (the "MAC
Assets"), a wholly-owned subsidiary of Holdings (formerly Ziff-Davis Inc.), for
an aggregate purchase price of approximately $302,000. The ZDNet Group
comprised a portion of the MAC Assets.

F-9
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

These acquisitions have been accounted for as of February 29, 1996 using the
purchase method of accounting. The excess of the purchase price over the fair
value of the assets acquired and liabilities assumed relating to ZDNet was
$72,692.

Acquisition of GameSpot, Inc.

In January 1997, the Company's parent company (SOFTBANK Holdings, Inc.)
acquired 70% of GameSpot, Inc. ("GameSpot", formerly SpotMedia Communications,
Inc.) for approximately $3,000. Funds for this acquisition were provided by the
Company to the parent. As part of the reorganization and initial public
offering on May 4, 1998 (described below), GameSpot was contributed to the
Company's ZDNet Group. Because GameSpot and the Company were under common
control at the time of the transaction, the GameSpot acquisition has been
accounted for in a manner similar to a pooling of interests and GameSpot's
results have been included in ZDNet's results since the point of common
ownership (January 1997). The "pooling" of GameSpot results in a non-cash
capital contribution of $5,167 for the year ended December 31, 1997.

Reorganization and Initial Public Offering (amounts in thousands except share
and per share data)

On May 4, 1998, Softbank, through its wholly owned subsidiary SOFTBANK
Holdings, Inc. ("SBH"), completed a reorganization whereby the common stock of
ZD Inc. and ZD Events Inc. were contributed to the Company in exchange for
73,619,355 shares of the Company's common stock. Concurrently with the
reorganization, the Company (i) completed an initial public offering of
25,800,000 shares at an initial public offering purchase price of $15.50 per
share, (ii) issued $250,000 of 8 1/2% Subordinated Notes due 2008, (iii)
entered into a $1,350,000 credit facility with a group of banks under which
$1,250,000 was borrowed and (iv) converted $908,673 of intercompany
indebtedness to equity. In addition, the Company received approximately $9,100
of fixed assets from Kingston Technology Company ("Kingston") in exchange for
580,645 shares of ZDI common stock. These assets have been subsequently leased
back to Kingston. Total shares of common stock issued to Softbank and its
affiliates were 74,200,000. The transactions described above are herein
referred to as the "Reorganization".

Proceeds, net of transaction costs, from the initial public offering and
funding transactions in the reorganization of $1,863,260 were used to complete
the purchase of certain assets from MAC for $370,000, and repay intercompany
indebtedness. The ZDNet business was a portion of the MAC Assets acquired at
that time.

F-10
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

On May 14, 1998 an affiliate of Softbank sold 50,000 shares of Ziff-Davis
Inc.'s common stock to an unrelated third party. On May 28, 1998, Ziff-Davis
Inc.'s U.S. underwriters exercised their option to purchase 2.0 million
additional shares of common stock to cover over-allotments. The Company
purchased the additional shares from SBH resulting in no change to the total
number of shares outstanding.

Interim Financial Information

The unaudited, combined financial statements for ZDNet as at September 30,
1998 and for the nine months ended September 30, 1997 and September 30, 1998
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
to present fairly the combined financial position of ZDNet at September 30,
1998 and the results of its combined operations and cash flows for the nine
months ended September 30, 1997 and 1998 have been included. Operating results
for the periods presented are not necessarily indicative of the results that
may be expected for the year ended December 31, 1998.

2. ZDNET STOCK PROPOSAL (UNAUDITED)

The stockholders of the Company are scheduled to vote on a proposal (the
"Tracking Stock Proposal") to authorize the issuance of a new series of common
stock, designated as Ziff Davis Inc.--ZDNet Group Common Stock, par value $0.01
per share (the "ZDNet Stock"), intended to reflect the performance of the
Company's ZDNet Group. If the Company issues any ZDNet Stock, the Company's
existing Common Stock, par value $0.01 per share, would be re-classified as
Ziff Davis Inc.--ZD Group Common Stock, par value $0.01 per share (the "ZD
Stock"), and that stock would be intended to reflect the performance of the
Company's ZD Group. ZDNet comprises the Company's online business division, and
ZD Group comprises the Company's other businesses and a "Retained Interest" in
ZDNet (i.e., the Company's interest in ZDNet excluding the interest intended to
be represented by outstanding shares of ZDNet Stock).

F-11
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

conduct the offering at a later time, or not to make the offering at all,
depending on the circumstances at the time. In addition to or instead of the
offering, the Company reserves the right to distribute ZDNet Stock to
stockholders of the Company.

ZD currently has a 100% Retained Interest in ZDNet. Following approval of the
Tracking Stock Proposal, the Company currently plans to offer to the public,
for cash, shares of ZDNet Stock intended to represent 15% to 20% of the equity
value attributed to ZDNet.

Currently, the Company provides all funding for ZD and ZDNet as described in
Note 4 (Certain Cash Management and Allocation Policies). The Company intends
to continue these practices until ZDNet Stock is first issued. Accordingly, no
interest expense or income to or from ZD has been reflected in the financial
statements of ZDNet for any period prior to the date on which ZDNet Stock is
first issued.

After the date on which ZDNet Stock is first issued, for financial statement
purposes:

(a) The Company will attribute each future incurrence or issuance of
external debt or preferred stock (and the proceeds thereof) to ZD, except
in cases where the Board determines otherwise. The Board may determine from
time to time to attribute an incurrence or issuance of debt or preferred
stock (and the proceeds thereof) to ZDNet to the extent that the Company
incurs or issues the debt or preferred stock for the benefit of ZDNet, but
the Board will not be required to do so.

(b) The Company will attribute each future issuance of ZD Stock (and the
proceeds thereof) to ZD. The Company may attribute any future issuance of
ZDNet Stock (and the proceeds thereof) to ZD in respect of its Retained
Interest in ZDNet (in a manner analogous to a secondary offering of common
stock of a subsidiary owned by a corporate parent) or to ZDNet (in a manner
analogous to a primary offering of common stock). Dividends on and
repurchases of ZD Stock will be charged against ZD, and dividends on and
repurchases of ZDNet Stock will be charged against ZDNet. In addition, at
the time of any dividend on ZDNet Stock, the Company will credit to ZD, and
charge against ZDNet, a corresponding amount in respect of ZD's Retained
Interest in ZDNet.

(c) Whenever ZDNet holds cash (other than cash of ZDNet's foreign
operations or cash of ZDNet's subsidiaries that are not wholly owned),
ZDNet will normally transfer that cash to ZD. Conversely, whenever ZDNet
has a cash need (other than cash needs of ZDNet's foreign operations or
cash needs of ZDNet's subsidiaries that are not wholly owned), ZD will
normally fund that cash need. However, the Board will determine, in its

F-12
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

sole discretion, whether to provide any particular funds to either Group.
The Board is not obligated to cause either Group to provide funds to the
other Group if the Board determines it is not in the best interest of the
Company to do so.

(d) The Company will account for all cash transfers from one Group to or
for the account of the other Group (other than transfers in return for
assets or services rendered or transfers in respect of ZD's Retained
Interest that correspond to dividends paid on ZDNet Stock) as inter-Group
revolving credit advances unless (i) the Board determines that a given
transfer (or type of transfer) should be accounted for as a long-term loan,
(ii) the Board determines that a given transfer (or type of transfer)
should be accounted for as a capital contribution increasing ZD's Retained
Interest in ZDNet or (iii) the Board determines that a given transfer (or
type of transfer) should be accounted for as a return of capital reducing
ZD's Retained Interest in ZDNet. There are no specific criteria to
determine when the Company will account for a cash transfer as a long-term
loan, a capital contribution or a return of capital rather than an inter-
Group revolving credit advance. The Board would make such a determination
in the exercise of its business judgment at the time of such transfer (or
the first of such type of transfer) based upon all relevant circumstances.
Factors the Board would consider include (i) the current and projected
capital structure of each Group, (ii) the relative levels of internally
generated funds of each Group, (iii) the financing needs and objectives of
the recipient Group, (iv) the investment objectives of the transferring
Group, (v) the availability, cost and time associated with alternative
financing sources and (vi) prevailing interest rates and general economic
conditions.

(e) Any cash transfer accounted for as an inter-Group revolving credit
advance will bear interest at the rate at which the Company could borrow
such funds on a revolving credit basis as the Board determines in its sole
discretion. Any cash transfer accounted for as a long-term loan will have
interest rate, amortization, maturity, redemption and other terms that
generally reflect the then prevailing terms on which the Company could
borrow such funds (as the Board determines in its sole discretion).

(f) Any cash transfer from ZD to ZDNet (or for its account) accounted for
as a capital contribution will correspondingly increase ZDNet's division
equity and ZD's Retained Interest in ZDNet. As a result, the number of
shares of ZDNet Stock that could be issued by the Company for the account
of ZD in respect of its Retained Interest in ZDNet (the "Number of Shares
Issuable with Respect to ZD's Retained Interest in ZDNet") will increase by
(i) the amount of such capital contribution divided by (ii) the Market
Value of ZDNet Stock on the date of transfer.

F-13
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

(g) Any cash transfer from ZDNet to ZD (or for its account) accounted for
as a return of capital will correspondingly reduce ZDNet's division equity
and ZD's Retained Interest in ZDNet. As a result, the Number of Shares
Issuable with Respect to ZD's Retained Interest in ZDNet will decrease by
(i) the amount of such return of capital divided by (ii) the Market Value
of ZDNet Stock on the date of transfer.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of combination

The combined financial statements include the accounts of ZDNet. All
significant transactions between these businesses have been eliminated on
combination.

Cash and cash equivalents

ZDNet considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.

Concentration of credit risk

ZDNet places its temporary cash investments with high credit quality
financial institutions. At times, such investments may be in excess of
federally insured limits. ZDNet has not experienced losses in such accounts.

ZDNet's customers represent a variety of technology companies in the United
States and other countries. ZDNet extends credit to its customers and
historically has not experienced significant losses relating to receivables
from individual customers or groups of customers.

Property and equipment

Property and equipment have been recorded at cost or estimates of fair value
at the date of acquisition. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets which range from three to
eight years. Leasehold improvements are amortized using the straight-line
method over the service life of the improvement or the life of the related
lease, whichever is shorter. Maintenance and repair costs are charged to
expense as incurred.

Intangible assets

F-14
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

which represents the excess of the purchase price over the estimated fair
values of net assets acquired, is amortized over a period of 10 to 20 years
(refer to Note 6). ZDNet assesses the recoverability of its intangible assets
whenever adverse events or changes in circumstances indicate that expected
future cash flows (undiscounted and without interest charges) may not be
sufficient to support the carrying amount of intangible assets. If undiscounted
cash flows are not sufficient to support the recorded assets, an impairment
loss is recognized to reduce the carrying value of the intangibles to its
estimated recoverable value. ZDNet has not experienced any impairment of its
intangible assets.

Revenue recognition

ZDNet's revenue is derived principally from the sale of advertisements on
short-term contracts. Advertising revenue is recognized ratably in the period
in which the advertisement is displayed, provided that no significant
obligations remain and collection of the resulting receivable is probable.
ZDNet's obligations typically include guarantees of a minimum number of
"impressions", or times that an advertisement appears in pages viewed by users
of ZDNet's online properties. To the extent minimum guaranteed impressions are
not met, ZDNet defers recognition of the corresponding revenue until the
remaining guaranteed impression levels are achieved.

Revenue from subscription based fees and services is recognized evenly over
the term of the contract.

Revenue from barter transactions is recognized during the period in which the
advertisements are displayed. Barter transactions are recorded at the lower of
estimated fair value of the goods or services received or the estimated fair
value of the advertisements given. To date, barter transactions have been
insignificant.

Foreign currency

The effect of translating foreign currency financial statements into U.S.
dollars is included in the cumulative translation adjustment account in
division equity. Gains and losses on foreign currency transactions, which are
not significant to operations, have been included in selling, general and
administrative expenses. ZDNet has not historically entered into forward
currency contracts.

Income taxes

ZDNet uses the asset and liability approach for financial accounting and
reporting of deferred taxes.

F-15
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

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 amounts reported in the financial statements. Actual results
may differ from these estimates.

Fair value of financial instruments

All current assets and liabilities are carried at cost, which approximates
fair value because of the short-term maturity of those instruments.

Stock-based compensation

ZDNet has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"), to account for stock
options. Effective January 1, 1996, ZDNet adopted the disclosure only
provisions of Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-based Compensation".

Comprehensive Income

The company implemented SFAS No. 130 "Reporting Comprehensive Income",
effective January 1, 1998. This standard requires ZDNet to report the total
changes in division equity that do not result directly from transactions with
stockholders, including those which do not affect retained earnings. These
changes are not material to ZDNet's combined financial statements.

New Accounting Pronouncements

SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information", issued in June 1997, establishes standards for reporting
information about operating segments in annual financial statements and interim
financial reports. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. Generally,
financial information will be required to be reported on the basis that is used
internally for evaluating segment performance and deciding how to allocate
resources to segments.

SFAS No. 132, "Employer's Disclosure about Pensions and Other Post-Retirement
Benefits", is effective for the year ended December 31, 1998. This standard
revises the disclosure requirements for employers' pension and other retiree
benefits.

ZDNet will adopt the above statements beginning with their 1998 financial
statements.

F-16
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

4. CERTAIN CASH MANAGEMENT AND ALLOCATION POLICIES

ZDNet's financial statements reflect the application of certain cash
management and allocation policies summarized below. The Company's Board of
Directors may rescind, modify or add to any of these policies.

Treasury Activities

The Company manages most treasury activities on a centralized, consolidated
basis. These activities include the investment of surplus cash, the issuance,
repayment and repurchase of short-term and long-term debt, and the issuance and
repurchase of common stock and preferred stock. ZDNet generally remits its cash
receipts (other than receipts of foreign operations or subsidiaries that are
not wholly owned) to the Company, and the Company generally funds ZDNet's cash
disbursements (other than disbursements of foreign operations or subsidiaries
that are not wholly owned), on a daily basis.

In the financial statements of ZD and ZDNet, (i) all external debt and equity
transactions (and the proceeds thereof) were attributed to ZD, (ii) whenever
ZDNet held cash (other than cash of ZDNet's foreign operations or cash of
ZDNet's subsidiaries that are not wholly owned), that cash was transferred to
ZD and accounted for as a return of capital (i.e., as a reduction in ZDNet's
division equity and ZD's Retained Interest in ZDNet) and (iii) whenever ZDNet
had a cash need (other than cash needs of ZDNet's foreign subsidiaries or cash
needs of ZDNet's subsidiaries that are not wholly owned), that cash need was
funded by ZD and accounted for as a capital contribution (i.e., as an increase
in ZDNet's division equity and ZD's Retained Interest in ZDNet). Accordingly,
no interest expense or income to or from ZD has been reflected in the financial
statements of ZDNet.

Corporate General and Administrative Expenses

F-17
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

ZDNet based on utilization. Where determinations based on utilization alone are
impracticable, the Company uses other methods and criteria that management
believes to be equitable and to provide a reasonable estimate of the cost
attributable to ZDNet.

Taxes

Federal income taxes, which are determined on a consolidated basis, except
for GameSpot, are allocated to ZDNet (and reflected in its financial
statements) in accordance with the Company's tax allocation policy. In general,
this policy provides that the consolidated tax provision (and related tax
payments or refunds) are allocated between the Groups based principally upon
the financial income, taxable income, credits and other amounts directly
related to the respective Groups. Tax benefits that cannot be used by the Group
generating such attributes, but can be utilized on a consolidated basis, are
allocated to the Group that generated such benefits. As a result, the allocated
Group amounts of taxes payable or refundable are not necessarily comparable to
those that would have resulted if the Groups had filed separate tax returns.
State income taxes generally are computed on a separate company basis.

Royalty Charges

ZD charges ZDNet an annual fee for the use of various brands and editorial
content. The current annual fee, which is reflected in ZDNet's financial
statements as part of its production and content costs, is equal to 5% of the
first $100,000 of ZDNet's revenue for the year, 4% of the next $50,000 of
ZDNet's revenue for that year and 3% of any incremental revenue over $150,000
for that year. The Board may at some point in the future change this fee as it,
in its sole discretion, deems appropriate in light of the circumstances from
time to time.

5. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consists of following:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1996 1997
------ ------
<S> <C> <C>
Computers and equipment.................................... $1,800 $4,274
Furniture and fixtures..................................... 717 708
Leasehold improvements..................................... 209 314
------ ------
2,726 5,296
Accumulated depreciation and amortization.................. (656) (2,151)
------ ------
$2,070 $3,145
====== ======
</TABLE>

F-18
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

6. INTANGIBLE ASSETS, NET

Intangible assets, net consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1997
------- --------
<S> <C> <C>
Subscription lists...................................... $ 4,300 $ 4,300
Advertising lists....................................... 2,400 2,400
Goodwill................................................ 65,992 71,479
------- --------
72,692 78,179
Accumulated amortization................................ (4,829) (11,015)
------- --------
$67,863 $ 67,164
======= ========
</TABLE>

Intangible assets primarily relate to the acquisitions of the MAC Assets. As
discussed in Note 1, the acquisitions were accounted for under the purchase
method of accounting. As such, purchase price was allocated to tangible and
identifiable intangible assets with the remaining amount being allocated to
goodwill.

Advertising lists, exhibitor relationships and subscriber lists were recorded
at their estimated fair value as determined by an income approach.
Trademarks/trade names were recorded at their estimated fair value using a
relief from royalty approach.

All intangible assets are being amortized using the straight-line method over
their estimated useful lives, up to 20 years. In determining the estimated
useful lives, ZDNet considered its competitive position in the markets in which
they operate, the historical attrition rates of advertisers, subscribes and
exhibitors, legal and contractual obligations and other factors.

Recoverability of goodwill and intangible assets is assessed at a minimum on
an annual basis. Impairments would be recognized in operating results if a
permanent diminution in value were to occur based upon an undiscounted cash
flow analysis.

7. ACCRUED EXPENSES

Accrued expenses consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1996 1997
------ ------
<S> <C> <C>
Payroll and related employee benefits....................... $ 852 $1,440
Licenses.................................................... -- 108
Other taxes................................................. 119 189
Other....................................................... 153 471
------ ------
$1,124 $2,208
====== ======
</TABLE>

F-19
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

8. INCOME TAXES

Income tax benefits and related assets and liabilities attributed to ZDNet
are determined in accordance with the Company's tax allocation policy (Note 4).

ZDNet has been included in a consolidated federal income tax return, except
for the periods in which ZDNet was owned by MAC Inc. (described in Note 1),
which were assets of a separate taxpayer, and GameSpot, which is a 70% owned
subsidiary and files separate federal and state income tax returns on a stand-
alone basis.

Loss before income taxes is attributable to the following jurisdictions:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
-------- --------
<S> <C> <C>
United States.......................................... $(15,263) $(18,853)
Foreign................................................ (2,150) (3,228)
-------- --------
Total.................................................. $(17,413) $(22,081)
======== ========
</TABLE>

Components of the income tax benefit are as follows:

<TABLE>
<CAPTION>
DECEMBER
31,
------------
1996 1997
----- -----
<S> <C> <C>
U.S. federal income taxes:
Current................................................... $ -- $ --
Deferred.................................................. (378) (653)
State and local income taxes:
Current................................................... -- --
Deferred.................................................. (110) (190)
Foreign income taxes........................................ -- --
----- -----
Total income tax benefit................................ $(488) $(843)
===== =====
</TABLE>

A reconciliation of the U.S. federal statutory tax rate to ZDNet's effective
tax rate on loss before income taxes is as follows:

<TABLE>
<CAPTION>
DECEMBER
31,
------------
1996 1997
----- -----
<S> <C> <C>
Federal statutory tax rate................................... 35.0% 35.0%
State and local taxes (net of federal tax benefit)........... 6.0 6.0
Nonrecognition of combined losses of MAC Assets.............. (33.3) (27.7)
Change in valuation allowance................................ (4.9) (9.5)
----- -----
Effective tax rate........................................... 2.8% 3.8%
===== =====
</TABLE>

F-20
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

The effective tax rate differs from the federal statutory tax rate primarily
as a result of ZDNet's inability to deduct losses incurred by ZDNet while owned
by MAC. In addition, tax benefits attributable to losses in foreign
jurisdictions and certain U.S. losses are subject to the establishment of a
valuation allowance in as much as such loss carryforwards are not expected to
be utilized.

Following is a summary of the components of the deferred tax accounts at
December 31, 1996 and 1997:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1996 1997
------ ------
<S> <C> <C>
Current deferred tax assets.................................. $ -- $ 69
------ ------
Noncurrent deferred tax assets
Net operating loss and other carryforwards.................. 6,146 9,081
Other....................................................... -- 10
------ ------
Gross noncurrent deferred tax assets........................ 6,146 9,091
Valuation allowance.......................................... (1,424) (3,595)
------ ------
Net noncurrent deferred tax assets.......................... 4,722 5,496
------ ------
Total net deferred tax assets............................. $4,722 $5,565
====== ======
</TABLE>

The valuation allowance primarily relates to tax benefits of foreign net
operating loss carryforwards acquired in the MAC Asset purchase which are not
expected to be realized. No deferred tax asset has been established for the
U.S. losses generated by ZDNet while owned by MAC Inc. since these losses will
not be available to the Company as a deduction.

ZDNet has U.S. and foreign net operating loss carryforwards at December 31,
1997 of approximately $25,000, which will begin to expire in 2000. The
utilization of certain net operating loss carryforwards of approximately
$10,000 is subject to limitations primarily due to the change of ownership
resulting from Softbank's acquisition of the Company's stock. Management
believes that such limitations will not significantly affect the Company's
ability to recognize the deferred tax asset relating to the carryforwards.
Accordingly, no valuation allowance to reduce the deferred tax asset relating
to the carryforwards has been established.

9. RELATED PARTY TRANSACTIONS

ZDNet transacts business with other businesses that are affiliates of the
Company's majority shareholder, Softbank, and with ZD. ZDNet is allocated a
portion of the Company's corporate general and administrative costs and ZDNet
pays ZD a royalty for the use of various ZD brands and editorial content. (See
Note 4).

F-21
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

Management believes that transactions conducted with other affiliated
companies are entered into at a rate no less favorable than could be provided
from independent third party providers. The amounts receivable or payable to
these affiliated companies are included in accounts receivable, net or accounts
payable in the accompanying balance sheets, with the exception of $1,250
prepaid to Softbank Interactive Marketing ("SIM") which is included in other
current assets at December 31, 1996. Details of these amounts are:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
Accounts receivable:
Softbank Kingston................................... $ 29 $ 60
US Web.............................................. 30 7
Asia Communications Global Limited.................. -- 61
Inquiry.com, Inc. .................................. 7 50
Trend Micro, Inc. .................................. 24 10
Sega Entertainment.................................. 1 32
---- ----
Total............................................. $ 91 $220
==== ====
Accounts payable:
SIM................................................. $585 $ 2
Yahoo!.............................................. 27 --
PointCast........................................... -- 42
---- ----
Total............................................. $612 $ 44
==== ====
</TABLE>

ZDNet purchases advertising in the ZD Group's publications at discounts to
market rates. Had ZD charged market rates for such advertising, ZDNet Group's
operating expenses would have increased by $2,235, and $2,671 for the period
from February 29, 1996 to December 31, 1996 and for the year ended December 31,
1997, respectively.

F-22
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

Related party transactions included in the accompanying combined statements
of operations include the following:

<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 29, 1996 YEAR ENDING
TO DECEMBER 31, DECEMBER 31,
1996 1997
----------------- ------------
<S> <C> <C>
Revenue, net
ZD Group....................................... $ -- $ 76
ZDTV........................................... -- 11
GeoCities...................................... -- 30
Kingston Technology Company.................... 88 353
US Web......................................... 93 75
Asia Communications Global Limited............. -- 61
Electric Minds, Inc. .......................... -- 15
Inquiry.com, Inc. ............................. 29 149
Trend Micro, Inc. ............................. 28 77
Sega Entertainment............................. 4 248
------ ------
Total........................................ $ 242 $1,095
====== ======
Expenses
ZD Group....................................... $1,294 $2,842
ZDTV........................................... -- (120)
SIM............................................ 585 1,613
Yahoo!......................................... 27 --
PointCast...................................... -- 42
------ ------
Total.......................................... $1,906 $4,377
====== ======
</TABLE>

Included in selling, general and administrative expenses is an allocation for
the Company's Central Services amounting to $2,391, and $3,877 for the ten
month period ended December 31, 1996, and the year ended December 31, 1997,
respectively.

ZDNet is reimbursed by certain affiliates for pre-determined costs incurred
by ZDNet on the affiliates' behalf. These reimbursements are reflected as a
reduction of expenses in the accompanying statements of operations.

10. EMPLOYEE BENEFIT PLANS

The Company maintains various defined contribution retirement plans.
Substantially, all of ZDNet's employees are eligible to participate in one of
the plans under which annual contributions may be made by the Company for the
benefit of all eligible employees. In certain cases, employees may also make
contributions to the plan in which they participate which, and subject to
certain limitations, may be matched by ZDNet up to certain specified

F-23
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

percentages. Employees are generally eligible to participate in a plan upon
joining the Company and receive matching contributions after one year of
employment. ZDNet made contributions to the plan totaling $447 and $751 for the
period from February 29, 1996 to December 31, 1996 and the year ended December
31, 1997, respectively.

11. EMPLOYEE STOCK OPTION PLAN

Certain employees of ZDNet participate in the Softbank 1996 and 1997
Executive Stock Option Plans which provides for the granting of nonqualified
stock options to purchase the common stock of Softbank to officers, directors
and key employees of the Company. Softbank is the Company's major stockholder
and is a publicly traded company in Japan. Under the plans, options have been
granted at exercise prices equal to the closing market price in Japan's public
equities market (market price denominated in Japanese yen) on the date of
grant. As of December 31, 1997, substantially all options granted become
exercisable in various installments over the first six anniversaries of the
date of grant and expire ten years after the date of grant.

Information relating to stock options during 1995, 1996 and 1997 is as
follows:

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OF OPTION PRICE
SHARES PER SHARE(1)
--------- ----------------
<S> <C> <C>
Shares outstanding under options at
December 31, 1995......................... -- --
Granted.................................. 24,716(2) $87.15
Exercised................................ -- --
Forfeited................................ -- --
------
Shares outstanding under options at
December 31, 1996......................... 24,716 87.15
Granted.................................. 17,800 64.50
Exercised................................ -- --
Forfeited................................ (8,096) 78.76
------
Shares outstanding under options at
December 31, 1997......................... 34,420 $77.41
======
Shares exercisable.........................
December 31, 1996........................ -- --
December 31, 1997........................ 5,120 $78.97
</TABLE>
- --------
(1) The exercise price of the stock options is set in Japanese yen. The
exercise prices as shown above have been converted to U.S. dollars based
upon the exchange rate as of the date of grant for the respective options.
(2) Adjusted for a 1.4:1 stock split during 1996 and a 1.3:1 stock split during
1997.

F-24
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

As permitted by SFAS 123, ZDNet has chosen to continue to account for stock
options in accordance with the provisions of APB 25 and accordingly, no
compensation expense related to stock option grants was recorded in 1996 or
1997. Pro forma information regarding net income is required by SFAS 123 and
has been determined as if ZDNet had accounted for stock options under the fair
value method. The fair value of the option grants was estimated at the date of
grant using the Black-Scholes option-pricing model with the following
assumptions for 1996 and 1997:

<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Risk-free interest rate.................................. 5.89% 6.35%
Dividend yield........................................... 0.26% 0.22%
Volatility factor........................................ 54.03% 51.35%
Expected life............................................ 6 years 6 years
</TABLE>

The weighted average fair value of options granted in 1996 and 1997 was
$64.30 and $34.05, respectively. For purposes of the pro forma disclosures, the
estimated fair value of the options is amortized to expense over the options'
vesting period. Had compensation cost for the stock option plans been
determined based upon the fair value at the grant date for awards during 1996
and 1997, consistent with the provisions of SFAS 123, ZDNet's net loss would
have increased by approximately $156 and $167, respectively. On January 23,
1998, the exercise price of all of the shares outstanding under option
agreements were reset to an exercise price equal to the closing market price on
Japan's Tokyo Stock Exchange First section at that date. In conjunction with
the repricing, those options previously exercisable at December 31, 1997 may
now by exercised only after July 19, 1998. Repricing the stock options did not
result in compensation expense to ZDNet.

12. OPERATING LEASES COMMITMENTS

ZDNet utilizes equipment and space under lease to the Company. ZDNet's
allocation of the minimum lease payments are as follows:

<TABLE>
<S> <C>
1998................................. $ 1,087
1999................................. 1,343
2000................................. 1,498
2001................................. 1,510
2002................................. 1,059
Thereafter........................... 8,085
-------
Total minimum payments............. $14,582
=======
</TABLE>

Rental expense from operating leases amounted to $668 and $1,348, for the
period February 29, 1996 to December 31, 1996, and the year ended December 31,
1997, respectively.

F-25
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

13. CONTINGENCIES

ZDNet and the Company are subject to various legal proceedings arising in the
normal course of business.

Legal Proceeding

The Company was named as a defendant in an action, filed on April 17, 1998 in
the Supreme Court of the State of New York, by minority shareholders of
SOFTBANK Interactive Marketing Inc. ("SIM"), formerly an indirect subsidiary of
Softbank. The complaint alleges, among other things, that SBH, SIM's majority
shareholder, acting with the Company and two of its senior officers and
directors who were directors of SIM (and who were also named as defendants),
had conflicts of interest between SIM and other Softbank investments (including
investments in the Company) and failed to act in the best interests of SIM and
the minority shareholders by taking actions which benefited the Company. The
complaint states claims based on common law fraud, breach of fiduciary duty and
aiding and abetting theories and seeks in excess of $200,000 in damages. The
Company and the other defendants have moved to dismiss all of the claims
against them other than a breach of contract claim which is solely against SBH.

Although the outcome of this case cannot be predicated, the Company believes
that there are substantial defenses to the claims and intends to defend
vigorously.

Class Action Litigations

Following a decline in the price per share of the Company's common stock
after the October 8, 1998 announcement, eight securities class action suits
were filed against the Company and certain of its directors and officers in the
United States District Court for the Southern District of New York.

The complaints allege that defendants violated Sections 11, 12(a) (2) and 15
of the Securities Act of 1933 in connection with the registration statement
filed by the Company with the Securities and Exchange Commission relating to
the initial public offering of the Company's common stock on April 29, 1997
(the "IPO"). More particularly, the complaints allege that the registration
statement contained false and misleading statements and failed to disclose
facts that could have indicated an impending decline in the Company's revenue.
The complaints seek on behalf of a class of purchasers of the Company's common
stock from the date of the IPO through October 8, 1998 unspecified damages,
interest, fees and costs, recission and injunctive relief such as the
imposition of a constructive trust upon the proceeds of the IPO.

F-26
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

The complaints are as follows: Napoli v. Ziff-Davis Inc., et al., No. 98 Civ.
7158 (filed Oct. 9, 1998); Steinberg, et al. v. Ziff-Davis Inc., et al., No. 98
Civ. 7205 (filed Oct. 13, 1998); Flinker v. Ziff-Davis Inc., et al., No. 98
Civ. 7231 (filed Oct. 14, 1998); Koenig v. Ziff-Davis Inc., et al., No. 98 Civ.
7260 (filed Oct. 15, 1987); Schindler v. Ziff-Davis Inc., et al., No. 98 Civ.
7418 (filed Oct. 19, 1998); Miller v. Ziff-Davis Inc., et al., No. 98 Civ. 7541
(filed Oct. 23, 1998); Felgoise v. Ziff-Davis Inc., et al., No. 98 Civ. 8045
(filed Nov. 9, 1998); and Javier v. Ziff-Davis Inc., et al., No. 98 Civ. 8201
(filed Nov. 17, 1998). All of the complaints have been assigned to Judge
Shirley Wohl Kram. Service upon defendants has not yet been effected.

Although the outcome of the foregoing cases cannot be predicted, the Company
believes that there are substantial defenses to these claims.

14. SUBSEQUENT EVENTS

Investment

On July 22, 1998, ZDNet purchased $5.0 million in Series C, convertible, non-
voting preferred shares of Deja News Inc., an Internet discussion network. This
investment is being accounted for on a cost basis.

1998 Incentive Compensation Plan

The Company adopted the 1998 Incentive Compensation Plan (the "Plan") to
provide long-term incentives for its key employees and enhance shareholder
value. The Plan provides for the grant of options, stock appreciation rights,
stock awards and other interests in the Company's Common Stock. The Company has
reserved shares of Common Stock for issuance under the Plan. On February 13,
1998, the Company granted options to purchase 5,254,700 shares with an exercise
price of $16.00 per share representing the fair value of such options at that
date. Such options vest ratably over five years.

On September 23, 1998, the Board of Directors approved the reduction of the
exercise price of all options outstanding under the Plan from $16.00 to $6.00,
the closing market

F-27
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

price of the Company's common stock on that date. In addition, the vesting
period of the options was extended by three months.

The Company adopted the Employee Stock Purchase Plan (the "Stock Purchase
Plan") whereby eligible employees may purchase the Company Common Stock with
after tax payroll deductions of 1% to 10% of their base pay. The price at which
shares of Common Stock will be purchased is the lesser of 85% of the fair
market value of a share of Common Stock on (i) the first business day of a
purchase period or (ii) the last business day of a purchase period. The Company
has reserved 1,500,000 shares of Common Stock for issuance under the Stock
Purchase Plan.

F-28
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Ziff-Davis Inc.

In our opinion, the accompanying combined balance sheets and the related
combined statements of operations, cash flows and changes in division equity,
present fairly, in all material respects, the financial position of the ZDNet
Group ("ZDNet") (a division of Ziff-Davis Inc., the "Company") at December 31,
1995 and February 28, 1996, and the results of its operations and its cash
flows for the year ended December 31, 1995 and for the period from January 1,
1996 to February 28, 1996, in conformity with generally accepted accounting
principles. 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 of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.

As discussed in Note 11 to the financial statements, the Company was acquired
by SOFTBANK Holdings Inc. on February 29, 1996. As described in Note 1 to the
financial statements, ZDNet is a division of Ziff-Davis Inc.; accordingly, the
financial statements of ZDNet should be read in conjunction with the audited
financial statements of Ziff-Davis Inc.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
New York, NY
December 17, 1998

F-29
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Accounts receivable................................. $ 3,773 $ 4,707
Other current assets................................ 51 35
Deferred taxes...................................... 168 209
------- -------
Total current assets.............................. 3,992 4,951
Property and equipment, net........................... 1,585 1,716
Deferred taxes........................................ 3,610 4,025
Intangible assets, net................................ 82,585 82,025
------- -------
Total assets...................................... $91,772 $92,717
======= =======
LIABILITIES AND DIVISION EQUITY
Current liabilities:
Accounts payable.................................... $ 1,385 $ 698
Accrued expenses.................................... 705 794
------- -------
Total current liabilities......................... 2,090 1,492
------- -------
Commitments and contingencies (Notes 9 and 10)
Division equity....................................... 89,682 91,225
------- -------
Total liabilities and division equity............. $91,772 $92,717
======= =======
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

F-30
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

COMBINED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED JANUARY 1, 1996
DECEMBER 31, TO FEBRUARY 28,
1995 1996
------------ ---------------
<S> <C> <C>
Revenue, net...................................... $13,576 $ 2,903
Cost of operations:
Production and content.......................... 10,709 1,802
Selling, general and administrative expenses.... 8,360 1,774
Depreciation and amortization of property and
equipment...................................... 678 37
Amortization of intangible assets............... 3,362 560
------- -------
Total operating expenses...................... 23,109 4,173
------- -------
Loss before income taxes.......................... (9,533) (1,270)
Income tax benefit................................ (3,778) (456)
------- -------
Net loss.......................................... $(5,755) $ (814)
======= =======
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

F-31
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED JANUARY 1, 1996
DECEMBER 31, TO FEBRUARY 28,
1995 1996
------------ ---------------
<S> <C> <C>
Cash flows from operating activities:
Net loss......................................... $(5,755) $ (814)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization.................. 678 37
Amortization of intangible assets.............. 3,362 560
Deferred tax benefit........................... (3,778) (456)
Changes in operating assets and liabilities:
Accounts receivable.......................... (1,684) (938)
Other current assets......................... 321 16
Accounts payable and accrued expenses........ 1,063 (587)
------- -------
Net cash used in operating activities............ (5,793) (2,182)
------- -------
Cash flows from investing activities:
Capital expenditures........................... (1,590) (168)
------- -------
Net cash used in investing activities............ (1,590) (168)
------- -------
Cash flows from financing activities:
Capital contributions from ZD Publishing....... 7,106 2,350
------- -------
Net cash provided by financing activities........ 7,106 2,350
------- -------
Net decrease in cash and cash equivalents........ (277) --
Cash and cash equivalents at beginning of
period.......................................... 277 --
------- -------
Cash and cash equivalents at end of period....... $ -- $ --
======= =======
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

F-32
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

COMBINED STATEMENTS OF CHANGES IN DIVISION EQUITY
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
CUMULATIVE TOTAL
PAID-IN ACCUMULATED TRANSLATION DIVISION
CAPITAL DEFICIT ADJUSTMENT EQUITY
------- ----------- ----------- --------
<S> <C> <C> <C> <C>
Balance as of January 1, 1995........ $88,329 $ -- $-- $88,329
Capital contributions from ZD
Publishing.......................... 7,106 -- -- 7,106
Net loss............................. -- (5,755) -- (5,755)
Foreign currency translation
adjustment.......................... -- -- 2 2
------- ------- ---- -------
Balance as of December 31, 1995...... 95,435 (5,755) 2 89,682
Capital contributions from ZD
Publishing.......................... 2,350 -- -- 2,350
Net loss............................. -- (814) -- (814)
Foreign currency translation
adjustment.......................... -- -- 7 7
------- ------- ---- -------
Balance as of February 28, 1996...... $97,785 $(6,569) $ 9 $91,225
======= ======= ==== =======
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

F-33
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

1. ORGANIZATION AND BASIS OF PRESENTATION

The combined financial statements include the accounts of the online business
division ("ZDNet") of Ziff-Davis Inc. (the "Company"). All significant
transactions between the business divisions have been eliminated in
combination.

The Company, formerly Ziff-Davis Publishing Company, was a wholly-owned
subsidiary of Ziff-Davis Holdings Corp. ("Holdings").

The Company is engaged in operating a website (through the ZDNet Group),
publishing magazines, journals and training manuals and providing market
research about the computer industry, with operations in the United States,
Canada and Europe.

In order to prepare separate financial statements for ZD Publishing and
ZDNet, the Company has allocated all of its consolidated assets, liabilities,
revenues, expenses and cash flow between ZD and ZDNet. ZDNet Group (or "ZDNet")
comprises the Company's online business division, and ZD Publishing (or "ZD")
comprises the Company's other businesses and a 100% "Retained Interest" in
ZDNet. Thus, the financial statements of ZD and ZDNet, taken together, comprise
all of the accounts included in the corresponding consolidated financial
statements of the Company.

Management believes the financial statements for ZDNet have been prepared on
a basis that is reasonable and appropriate. ZDNet's financial statements
reflect the application of certain cash management and allocation policies
adopted by the Board of Directors of the Company (the "Board"). These policies
are summarized under "Certain Cash Management and Allocation Policies" below.

Even though the Company has allocated all of its consolidated assets,
liabilities, revenues, expenses and cash flow between ZD and ZDNet, that
allocation will not change the legal title to any assets or responsibility for
any liabilities and will not affect the rights of any creditors. Holders of
common stock of the Company are subject to all risks associated with an
investment in the entire Company and all of its businesses, assets and
liabilities.

Financial impacts arising from ZD that affect the Company's consolidated
results of operations or financial position could affect the results of
operations or financial condition of ZDNet. Accordingly, financial information
for ZDNet should be read in conjunction with financial information for ZD and
financial information for the consolidated Company.

Acquisition

Effective January 1, 1995, Holdings, through the Company, directly and
indirectly acquired certain assets and assumed certain liabilities of the Ziff-
Davis publishing business

F-34
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

and related businesses (the "Acquisition" or the "Acquired Businesses") from
Ziff Communications Company, L.P., a limited partnership ("LLC") and other
persons and entities (collectively referred to as the "Sellers"), for an
aggregate purchase price of approximately $1,400,000 plus transaction costs.
The Company funded the Acquisition through the issuance of common stock, bank
borrowings and a subordinated note payable to Holdings.

The acquisition has been accounted for using the purchase method of
accounting.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and cash equivalents

ZDNet considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.

Concentration of credit risk

One customer accounted for approximately 80% of net revenue for the year
ended December 31, 1995 and the period from January 1, 1996 to February 28,
1996.

Property and equipment

Property and equipment have been recorded at cost or estimates of fair value
at the date of acquisition. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets which range from two to
eight years. Leasehold improvements are amortized using the straight-line
method over the service life of the improvement or the life of the related
lease, whichever is shorter. Maintenance and repair costs are charged to
expense as incurred.

F-35
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

Intangible assets

Intangible assets consist principally of advertising lists, subscriber lists
and goodwill. Amortization of these assets is computed on a straight-line basis
over their estimated useful lives. Identifiable intangible assets are amortized
over a period of 4 years and goodwill, which represents the excess of the
purchase price over the estimated fair values of net assets acquired, is
amortized over a period of 40 years (refer to Note 5). ZDNet assesses the
recoverability of its intangible assets whenever adverse events or changes in
circumstances indicate that expected future cash flows (undiscounted and
without interest charges) may not be sufficient to support the carrying amount
of intangible assets. If undiscounted cash flows are not sufficient to support
the recorded assets, an impairment loss is recognized to reduce the carrying
value of the intangibles to its estimated recoverable value. The ZDNet Group
has not experienced any impairment of its intangible assets.

Revenue recognition

ZDNet's revenue is derived principally from subscription based fees and
services. This revenue is generated primarily by charging monthly membership
fees to provide access to product reviews, software reviews and shareware.
Advertising revenue is recognized ratably in the period in which the
advertisement is displayed, provided that no significant obligations remain and
collection of the resulting receivable is probable. ZDNet's obligations
typically include guarantees of minimum number of "impressions," or times that
an advertisement appears in pages viewed by users of ZDNet's online properties.
To the extent minimum guaranteed impressions are not met, ZDNet defers
recognition of the corresponding revenues until the remaining guaranteed
impression levels are achieved.

Foreign currency

Income taxes

ZDNet uses the assets and liability approach for financial accounting and
reporting of deferred taxes.

F-36
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

Use of estimates

Fair value of financial instruments

All current assets and liabilities are carried at cost, which approximates
fair value because of the short-term maturity of those instruments.

Impairment of long-lived assets

In 1995, the Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of" ("SFAS 121"). The Company adopted SFAS 121 in fiscal 1996
with no effect on operations.

3. CERTAIN CASH MANAGEMENT AND ALLOCATION POLICIES

ZDNet's financial statements reflect the application of certain cash
management and allocation policies summarized below.

Treasury activities

The Company manages most treasury activities on a centralized, consolidated
basis. These activities include the investment of surplus cash, the issuance,
repayment and repurchase of short-term and long-term debt, and the issuance and
repurchase of common stock and preferred stock. ZDNet generally remits its cash
receipts (other than receipts of foreign operations or subsidiaries that are
not wholly owned) to the Company, and the Company generally funds ZDNet's cash
disbursements (other than disbursements of foreign operations or subsidiaries
that are not wholly owned), on a daily basis.

In the historical financial statements of ZD and ZDNet, (i) all external debt
and equity transactions (and the proceeds thereof) were attributed to ZD, (ii)
whenever ZDNet held cash (other than cash of ZDNet's foreign operations or cash
of ZDNet's subsidiaries that are not wholly owned), that cash was transferred
to ZD and accounted for as a return of capital (i.e., as a reduction in ZDNet's
division equity and ZD's Retained Interest in ZDNet) and (iii) whenever ZDNet
had a cash need (other than cash needs of ZDNet's foreign operations or cash
needs of ZDNet's subsidiaries that are not wholly owned), that cash need was
funded by ZD and accounted for as a capital contribution (i.e., as an increase
in

F-37
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

ZDNet's division equity and ZD's Retained Interest in ZDNet). Accordingly, no
interest expense or income to or from ZD has been reflected in the financial
statements of ZDNet.

Corporate General and Administrative Expenses

The Company allocates the cost of certain corporate general and
administrative services and shared services (including certain legal,
accounting (tax and financial), information systems, telecommunications,
purchasing, marketing, intellectual property, public relations, corporate
office and travel expenses (collectively, "Central Services"), to ZDNet based
on utilization. Where determinations based on utilization alone are
impracticable, the Company uses other methods and criteria that management
believes to be equitable and to provide a reasonable estimate of the cost
attributable to ZDNet.

Taxes

Federal income taxes, which are determined on a consolidated basis, are
allocated to ZDNet (and reflected in its financial statements) in accordance
with the Company's tax allocation policy. In general, this policy provides that
the consolidated tax provision (and related tax payments or refunds) are
allocated between the Groups based principally upon the financial income,
taxable income, credits and other amounts directly related to the respective
Groups. Tax benefits that cannot be used by the Group generating such
attributes, but can be utilized on a consolidated basis, are allocated to the
Group that generated such benefits. As a result, the allocated Group amounts of
taxes payable or refundable are not necessarily comparable to those that would
have resulted if the Groups had filed separate tax returns. State income taxes
generally are computed on a separate company basis.

Royalty Charges

F-38
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

4. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ------------
<S> <C> <C>
Computers and equipment.......................... $1,391 $1,561
Furniture and fixtures........................... 596 596
Leasehold improvements........................... 168 168
------ ------
2,155 2,325
Accumulated depreciation and amortization........ (570) (609)
------ ------
$1,585 $1,716
====== ======
</TABLE>

5. INTANGIBLE ASSETS, NET

Intangible assets, net consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ------------
<S> <C> <C>
Subscriber lists................................. $ 4,300 $ 4,300
Advertising lists................................ 2,400 2,400
Goodwill......................................... 79,247 79,247
------- -------
85,947 85,947
Accumulated amortization......................... (3,362) (3,922)
------- -------
$82,585 $82,025
======= =======
</TABLE>

Intangible assets primarily related to the acquisition of the Ziff-Davis
publishing business. As discussed in Note 1, the acquisition was accounted for
under the purchase method of accounting. As such the purchase price was
allocated to tangible and identifiable intangible assets with the remaining
amount allocated to goodwill.

Advertising and subscriber lists were recorded at their estimated fair value
as determined by an "income" approach.

All intangible assets are being amortized using the straight-line method over
their estimated useful lives, up to 40 years. In determining the estimated
useful lives, ZDNet considers its competitive position in the markets in which
it operates, the historical attrition rates of advertisers, exhibitors and
subscribers, legal and contractual obligations, and other factors.

F-39
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

6. INCOME TAXES

Income tax benefits and related assets and liabilities attributed to ZDNet
are determined in accordance with the Company's tax allocation policy (Note 3).

Loss before income taxes is attributable to the following jurisdictions:

<TABLE>
<CAPTION>
YEAR ENDED JANUARY 1, 1996
DECEMBER 31, TO FEBRUARY 28,
1995 1996
------------ ---------------
<S> <C> <C>
United States................................. $(8,810) $ (923)
Foreign....................................... (723) (347)
------- -------
Total....................................... $(9,533) $(1,270)
======= =======
</TABLE>

Components of the income tax benefit are as follows:

<TABLE>
<CAPTION>
YEAR ENDED JANUARY 1, 1996
DECEMBER 31, TO FEBRUARY 28,
1995 1996
------------ ---------------
<S> <C> <C>
U.S. federal income taxes:
Current..................................... $ -- $ --
Deferred.................................... (2,927) (353)
State and local income taxes:
Current..................................... -- --
Deferred.................................... (851) (103)
Foreign income taxes.......................... -- --
------- -----
Total income tax benefit.................. $(3,778) $(456)
======= =====
</TABLE>

A reconciliation of the U.S. federal statutory tax rate to ZDNet's effective
tax rate on loss before income taxes is as follows:

<TABLE>
<CAPTION>
YEAR ENDED JANUARY 1, 1996
DECEMBER 31, TO FEBRUARY 28,
1995 1996
------------ ---------------
<S> <C> <C>
Federal statutory tax rate.................. 35.0% 35.0%
State and local taxes (net of federal tax
benefit)................................... 6.0 6.0
Foreign losses.............................. (0.7) (5.0)
Other nondeductible expenses................ (0.7) (0.1)
---- ----
Effective tax rate........................ 39.6% 35.9%
==== ====
</TABLE>

F-40
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

Following is a summary of the components of the deferred tax accounts at
December 31, 1995 and February 28, 1996:

<TABLE>
<CAPTION>
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ------------
<S> <C> <C>
Current deferred tax assets:
Allowance for doubtful accounts.............. $ 103 $ 103
Employee compensation, bonus and vacation.... 65 106
------- -------
Current deferred tax assets................ 168 209
Noncurrent deferred tax assets and
(liabilities):
Basis difference in intangible assets........ (1,047) (1,187)
Basis difference in property and equipment... 23 13
Net operating loss carryforwards............. 4,969 5,696
------- -------
Gross noncurrent deferred tax assets....... 3,945 4,522
Valuation allowance.......................... (335) (497)
------- -------
Net noncurrent deferred tax assets......... 3,610 4,025
------- -------
Total net deferred tax assets.................. $ 3,778 $ 4,234
======= =======
</TABLE>

As of December 31, 1995 and February 28, 1996, ZDNet had total deferred tax
assets of $4,825 and $5,421, respectively, and total deferred tax liabilities
of $1,047 and $1,187, respectively.

As of February 28, 1996, ZDNet has U.S. and foreign net operating loss
carryforwards of approximately $14,000, which will begin to expire on December
31, 2000. The December 31, 1995 and February 28, 1996 net deferred tax asset is
reduced by a valuation allowance of $335 and $497, respectively, relating to
tax benefits of foreign net operating loss carryforwards which are not expected
to be realized.

7. RELATED PARTY TRANSACTIONS

ZD provides all necessary funding for the operations and investments of
ZDNet; this funding is accounted for as a capital contribution. For the year
ended December 31, 1995 and for the period January 1, 1996 to February 28, 1996
such capital contributions were $7,106 and $2,350, respectively.

ZDNet is allocated a portion of the Company's corporate general and
administrative costs (see Note 3). ZDNet pays ZD a royalty for the use of
various ZD brands and editorial content (See Note 3).

Included in production and content is $679 and $145 for the ZD royalty
charges for the year ended December 31, 1995 and for the period January 1, 1996
to February 28, 1996.

F-41
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

Included in selling, general and administrative expenses is an allocation
from the Company's Central Services amounting to $2,017 and $356 for the year
ended December 31, 1995 and for the period January 1, 1996 to February 28,
1996.

As ZDNet and ZD are affiliated through common ownership, it is possible that
the terms of these transactions are not the same as those that would result
from transactions among unrelated parties.

ZDNet purchases advertising in the ZD publications at a discount to market
rates. Had ZD charged market rates for such advertising, ZDNet Group's net loss
would have increased by $178, and $57 for the year ended December 31, 1995 and
the period from January 1, 1996 to February 28, 1996, respectively.

8. EMPLOYEE BENEFIT PLANS

The Company maintains various defined contribution retirement plans.
Substantially all of the ZDNet's employees are eligible to participate in one
of the plans under which annual contributions may be made by the ZDNet for the
benefit of all eligible employees. In certain cases, employees may also make
contributions to the plan in which they participate and subject to certain
limitations, may be matched by the ZDNet up to certain specified percentages.
Employees are generally eligible to participate in a plan upon joining the
ZDNet and receive matching contributions after one year of employment. ZDNet
made contributions to the plans totaling $335 and $16 in 1995 and the two
months ended February 28, 1996, respectively.

9. OPERATING LEASE COMMITMENTS

ZDNet utilizes equipment and space under lease to the Company. ZDNet's
portion of the minimum lease payments based on square feet utilized are as
follows:

<TABLE>
<CAPTION>
OPERATING
YEAR ENDING DECEMBER 31, LEASES
------------------------ ---------
<S> <C>
1996 (ten-month period)............ $ 520
1997............................... 971
1998............................... 1,087
1999............................... 1,343
2000............................... 1,498
Thereafter......................... 10,653
-------
Total minimum lease payments..... $16,072
=======
</TABLE>

Rental expense from operating leases amount to $783 and $111 for the year
ended December 31, 1995 and for the period from January 1, 1996 to February 28,
1996, respectively.

F-42
<PAGE>

ZDNET
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

10. CONTINGENCIES

ZDNet Group and the Company are subject to various legal proceedings arising
in the normal course of business. Management believes that the ultimate
liability, if any, in the aggregate will not be material to the combined
balance sheet, future operations or cash flows of ZDNet.

11. SUBSEQUENT EVENT

Acquisition of the Company

In February 1996, Softbank Corp. entered into an agreement to acquire the
stock of Ziff-Davis Inc. for an aggregate purchase price of approximately $1.8
billion, plus acquisition costs. In a separate agreement, MAC Inc. Ltd., an
affiliated company of Softbank Corp., acquired directly and through affiliates,
certain of the assets and assumed certain liabilities of Ziff-Davis Inc. for an
aggregate purchase price of approximately $302 million.

F-43
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Ziff-Davis Inc.

In our opinion, the accompanying combined balance sheets and the related
combined statements of operations, cash flows and changes in division equity,
present fairly, in all material respects, the financial position of the ZD
Group ("ZD") (a division of Ziff-Davis Inc., the "Company") at December 31,
1997 and 1996, and the results of its operations and cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

As described in Note 1 to the financial statements, ZD is a division of Ziff-
Davis Inc.; accordingly the financial statements of ZD should be read in
conjunction with the audited financial statements of Ziff-Davis Inc.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
New York, NY
December 17, 1998

F-44
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER
--------------------- 1998
1996 1997 CONSOLIDATED
---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................ $ 29,915 $ 30,273 $ 26,728
Accounts receivable, net................. 197,263 209,914 179,881
Inventories.............................. 16,804 17,853 19,065
Prepaid expenses and other current
assets.................................. 33,938 37,872 45,353
Due from affiliates...................... 77,208 131,290 46,472
Deferred taxes........................... 8,674 8,725 8,552
---------- ---------- ----------
Total current assets....................... 363,802 435,927 326,051
Property and equipment, net................ 51,491 50,391 63,185
Retained interest in ZDNet................. 78,575 83,292 88,822
Intangible assets, net..................... 3,080,470 2,963,169 2,884,167
Other assets............................... 10,625 15,329 49,419
---------- ---------- ----------
Total assets............................... $3,584,963 $3,548,108 $3,411,644
========== ========== ==========
LIABILITIES AND DIVISION EQUITY
Current liabilities:
Accounts payable......................... $ 54,390 $ 54,823 $ 41,499
Accrued expenses......................... 78,797 77,886 101,607
Unearned income, net..................... 174,783 154,682 220,813
Due to affiliates and management......... 69,416 398,332 --
Current portion of notes payable to
affiliates.............................. 33,198 125,790 7,692
Other current liabilities................ 3,890 4,222 6,323
---------- ---------- ----------
Total current liabilities.................. 414,474 815,735 377,934
Notes payable to affiliates................ 2,522,252 2,408,240 71,924
Notes payable, net of amortized discount... -- -- 1,454,123
Deferred taxes............................. 186,031 185,613 152,623
Other liabilities.......................... 14,450 12,390 10,992
---------- ---------- ----------
Total liabilities.......................... 3,137,207 3,421,978 2,067,596
---------- ---------- ----------
Commitments and contingencies (Notes 17, 19
and 20).
Division equity............................ 447,756 126,130 1,344,048
---------- ---------- ----------
Total liabilities and division equity...... $3,584,963 $3,548,108 $3,411,644
========== ========== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-45
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

COMBINED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)

The accompanying notes are an integral part of these financial statements.

F-46
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ -----------------------
1998
1995 1996 1997 1997 CONSOLIDATED
-------- ---------- -------- --------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operat-
ing activities:
Net income (loss)....... $ 10,945 $ (52,081) $(71,179) $(143,810) $ (86,179)
Adjustments to reconcile
net loss to net cash
provided (used) by
operating activities:
Depreciation and amor-
tization............. 24,305 134,251 147,259 112,173 109,814
Amortization of debt
discount............. -- -- -- -- 1,313
Loss from retained in-
terest in ZDNet...... -- 16,925 21,238 18,463 7,655
Income from equity in-
vestments............ -- (115) (2,030) (252) (4,688)
Deferred tax provision
(benefit)............ 11,924 25,445 (469) (241) (33,286)
Changes in operating
assets and liabili-
ties:
Accounts receiv-
able............... (25,379) (36,185) (14,270) 27,224 32,760
Inventories......... -- 7,788 (853) (1,631) (591)
Accounts payable and
accrued expenses... 9,516 10,517 (5,960) (29,707) 3,836
Unearned income..... (3,153) 1,299 (20,101) 80,023 62,711
Due to affiliates
and management..... (7,460) (29,303) (38,543) (50,666) 10,707
Other, net.......... 5,470 (4,377) (3,192) (20,840) (16,541)
-------- ---------- -------- --------- ----------
Net cash provided (used)
by operating activi-
ties................... 26,168 74,164 11,900 (9,264) 87,511
-------- ---------- -------- --------- ----------
Cash flows from invest-
ing activities:
Capital expenditures.. (3,367) (21,355) (27,822) (17,291) (24,218)
Capital contributions
to ZDNet............. -- (13,630) (20,664) (15,799) (13,298)
Investment in joint
ventures............. -- -- -- (60) (1,193)
Acquisitions, net of
cash acquired........ (814,520) (2,124,823) (11,002) -- (6,999)
-------- ---------- -------- --------- ----------
Net cash used by invest-
ing activities......... (817,887) (2,159,808) (59,488) (33,150) (45,708)
-------- ---------- -------- --------- ----------
Cash flows from financ-
ing activities:
Proceeds from equity
offering............. -- -- -- -- 380,337
Proceeds from issuance
of notes payable..... -- -- -- -- 242,723
Proceeds from issuance
of bank debt......... -- -- -- -- 1,240,200
Proceeds from notes
payable to affili-
ates................. 575,450 1,080,000 10,000 -- --
Payments of amounts
due to affiliates.... -- -- -- -- (314,798)
Payments of bank
debt................. -- -- -- (19,162) (45,000)
Payments of notes pay-
able to affiliates... (77,450) -- (31,420) -- (1,569,532)
Purchase of treasury
shares............... -- -- -- -- (29,500)
Sale of treasury
shares............... -- -- -- -- 29,500
Advance from majority
shareholder.......... -- -- -- -- 20,377
Contributed capital... 317,408 1,015,651 69,366 69,366 345
Payment of dividends.. -- (8,000) -- -- --
-------- ---------- -------- --------- ----------
Net cash provided (used)
by financing activi-
ties................... 815,408 2,087,651 47,946 50,204 (45,348)
-------- ---------- -------- --------- ----------
Net increase (decrease)
in cash and cash equiv-
alents................. 23,689 2,007 358 7,790 (3,545)
Cash and cash
equivalents at
beginning of period.... 4,219 27,908 29,915 29,915 30,273
-------- ---------- -------- --------- ----------
Cash and cash equiva-
lents at end of peri-
od..................... $ 27,908 $ 29,915 $ 30,273 $ 37,705 $ 26,728
======== ========== ======== ========= ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-47
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

COMBINED STATEMENTS OF CHANGES IN DIVISION EQUITY
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
RETAINED CUMULATIVE TOTAL
PAID-IN EARNINGS DEFERRED TRANSLATION DIVISION
CAPITAL (DEFICIT) COMPENSATION ADJUSTMENT EQUITY
---------- --------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
Balance at January 1,
1995................... $ 62,178 $ 886 $ -- $ -- $ 63,064
Capital contribution
from Softbank.......... 317,408 317,408
Net income.............. 10,945 10,945
Foreign currency
translation
adjustment............. 111 111
---------- --------- ------ ------ ----------
Balance at December 31,
1995................... 379,586 11,831 -- 111 391,528
Acquisition of Ziff-
Davis Inc.............. 1,014,178 1,014,178
Return of capital....... (899,948) (899,948)
Capital contribution.... 1,474 1,474
Dividend paid........... (8,000) (8,000)
Shares contributed to
restricted stock plan.. 3,528 (3,528) --
Compensation earned on
restricted stock....... 1,080 1,080
Net loss................ (52,081) (52,081)
Foreign currency
translation
adjustment............. (475) (475)
---------- --------- ------ ------ ----------
Balance at December 31,
1996................... 498,818 (48,250) (2,448) (364) 447,756
Return of capital....... (381,434) (381,434)
Capital contribution.... 128,482 128,482
Shares contributed to
restricted stock plan.. 2,464 (2,464) --
Compensation earned on
restricted stock....... 3,916 3,916
Net loss................ (71,179) (71,179)
Foreign currency
translation
adjustment............. (1,411) (1,411)
---------- --------- ------ ------ ----------
Balance at December 31,
1997................... 248,330 (119,429) (996) (1,775) 126,130
Capital contribution.... 9,007 9,007
Capitalization of
amounts due to
affiliates............. 908,673 908,673
Contribution of
subsidiaries from SBH
to Ziff-Davis Inc...... 736 736
Initial public
offering............... 375,493 375,493
Acquisition of fixed
assets from an
affiliate.............. 9,000 9,000
Purchase of treasury
shares from SBH........ (29,500) (29,500)
Sale of treasury shares
to the public.......... 29,500 29,500
Net loss................ (86,179) (86,179)
Compensation earned on
restricted stock....... 189 189
Foreign currency
translation
adjustment............. 999 999
---------- --------- ------ ------ ----------
Balance at September 30,
1998 (unaudited)....... $1,551,239 $(205,608) $ (807) $ (776) $1,344,048
========== ========= ====== ====== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-48
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

1. ORGANIZATION AND BASIS OF PRESENTATION

ZD Group ("ZD") is the division of Ziff-Davis Inc. (the "Company", formerly
ZD Inc.) focused on the business of print publishing, trade shows and
conferences, market research and education.

In order to prepare separate financial statements for ZD and ZDNet, the
Company has allocated all of its consolidated assets, liabilities, revenues,
expenses and cash flow between ZD and ZDNet. Thus, the financial statements of
ZD and ZDNet, taken together, comprise all of the accounts included in the
corresponding consolidated financial statements of the Company.

ZD's financial statements reflect the application of certain cash management
and allocation policies adopted by the Board of Directors of the Company (the
"Board"). These policies are summarized in Note 5 "Certain Cash Management and
Allocation Policies" below.

Even though the Company has allocated all of its consolidated assets,
liabilities, revenues, expenses and cash flow between ZD and ZDNet, that
allocation and the division of the Company's Common Stock will not change the
legal title to any assets or responsibility for any liabilities and will not
affect the rights of any creditors. Holders of ZD Stock (as described below)
will continue to be common stockholders of the Company and, as such, will be
subject to all risks associated with an investment in the entire Company and
all of its businesses, assets and liabilities.

Financial impacts arising from ZDNet that affect the Company's consolidated
results of operations or financial position could affect the results of
operations or financial condition of ZD or the market price of ZD Stock. In
addition, net losses of ZDNet, and any dividends or distributions on, or
repurchases of, ZDNet Stock will reduce the assets of the Company legally
available for dividends on ZD Stock. Accordingly, financial information for ZD
should be read in conjunction with financial information for ZDNet and
financial information for the consolidated Company.

ZD operates in two business segments: (1) publishing and (2) events.

Publishing

The publishing segment is engaged in publishing magazines, journals,
newsletters, electronic information products, training manuals and providing
market research about the computer industry. The publishing segment's principal
operations are in the United States and Europe, although it also licenses or
syndicates its editorial content to over 50 other publications distributed
worldwide. The publishing segment includes a 100% retained interest in the
ZDNet Group ("ZDNet"). ZDNet is the online business division of the Company.

F-49
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

Events

The events segment is engaged in the organization, production and management
of trade shows, conferences and seminars for the computer industry. The events
segment's principal operations are in the United States and to a lesser extent
in Europe and Asia.

As further described below, the combined financial statements include the
accounts of COMDEX (formerly Softbank COMDEX, Inc.) and ZDI as of their
respective acquisition dates and Forums (formerly Softbank Forums Inc.) for all
periods presented. Effective December 31, 1997, COMDEX and Forums merged and
the surviving company was renamed ZD COMDEX and Forums Inc., ("ZDCF"). During
1998, ZDCF was renamed ZD Events Inc.

Acquisition of ZDI (formerly Ziff-Davis Publishing Company and Ziff-Davis
Holdings Corp.)

In February 1996, SOFTBANK Corp. (SOFTBANK Corp. and its affiliates
hereinafter referred to as "Softbank") acquired the stock of Ziff-Davis
Holdings Corp. ("Holdings") for an aggregate purchase price of approximately
$1,800,000, plus transaction costs. Softbank is a Japanese corporation which,
as of December 31, 1997, was 50.2% owned by Mr. Son, its president, including
43.4% directly owned by his wholly-owned holding company, MAC Inc. (MAC Inc.
and affiliates hereinafter referred to as "MAC"), also a Japanese corporation.
Concurrent with the acquisition, in a separate agreement, MAC, directly or
through wholly-owned affiliates, acquired certain of the assets and assumed
certain of the liabilities of ZDI (the "MAC Assets") for an aggregate purchase
price of approximately $302,000.

Subsequent to the acquisition, Holdings and ZDI were merged with ZDI being
the surviving corporation.

Unaudited summarized pro forma financial information

The following unaudited summarized pro forma financial information presents
the results of operations of ZD as if the acquisition of ZD Publishing had
taken place on January 1, 1995:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------------
1995 1996
-------- ----------
<S> <C> <C>
Revenue, net........................................ $958,148 $1,061,486
======== ==========
Income from operations.............................. $ 91,996 $ 107,070
======== ==========
Net loss............................................ $(61,816) $ (67,011)
======== ==========
</TABLE>

F-50
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

The pro forma results include amortization of intangible assets and interest
expense on debt assumed issued to finance the purchase. The pro forma results
are not necessarily indicative of what actually would have occurred if the
acquisition had been completed as of the beginning of the year, nor are they
necessarily indicative of future combined results.

Purchase of MAC Assets

In 1997, ZD agreed to purchase certain of the MAC Assets for $370,000. The
acquisition was effected in two tranches; the first of which closed on October
31, 1997 and the second, closed upon completion of the initial public offering
of Ziff-Davis Inc.'s Common Stock (further described below). At December 31,
1997, ZD has accrued the $370,000 purchase price which has been recorded as a
return of capital.

The acquisitions from MAC described above have been accounted for in a manner
similar to a pooling of interests as all entities involved are under common
control. Accordingly, the accompanying combined financial statements include
the results of operations of the MAC Assets from February 29, 1996. Throughout
these financial statements any reference to ZD includes ZDI, ZD Events and the
MAC Assets, (including ZD's 100% retained interest in ZDNet) from February 29,
1996.

Acquisition of Sendai

On May 8, 1996, ZD acquired substantially all of the assets and liabilities
of Sendai Publishing Group, Inc., a publisher and distributor of magazines,
books, products and computer services related to the electronic gaming
industry, for approximately $27,500, plus transaction costs. The acquisition
was accounted for as a purchase and accordingly, Sendai's results are included
in the combined financial statements since the date of acquisition. The excess
of the purchase price over assets acquired approximated $33,378. The operations
of Sendai did not have a material effect on the combined results of operations
for the year ended December 31, 1996.

Acquisition of COMDEX

Effective April 1, 1995, Softbank acquired the assets of the COMDEX trade
show business, now part of ZD Events, for approximately $803,000, plus
transaction costs. The acquisition has been accounted for as of April 1, 1995
using the purchase method of accounting and accordingly COMDEX's results are
included in the combined financial statements since the date of acquisition.
The excess of the purchase price over the fair value of the assets acquired and
liabilities assumed was $849,000.

F-51
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

2. REORGANIZATION AND INITIAL PUBLIC OFFERING (AMOUNTS IN THOUSANDS EXCEPT
SHARE AND PER SHARE DATA)

On May 4, 1998, Softbank, through its wholly-owned subsidiary SOFTBANK
Holdings Inc. ("SBH"), completed a reorganization whereby the common stock of
ZD Inc. and ZD Events Inc. were contributed to the Company in exchange for
73,619,355 shares of the Company's common stock. Concurrently with the
reorganization, the Company (1) completed an initial public offering of
25,800,000 shares at an initial public offering price of $15.50 per share, (2)
issued $250,000 of 8 1/2% Subordinated Notes due 2008, (3) entered into a
$1,350,000 credit facility with a group of banks under which $1,250,000 was
borrowed and (4) converted $908,673 of intercompany indebtedness to equity. In
addition, the Company received approximately $9,100 of fixed assets from
Kingston Technology Company ("Kingston") in exchange for 580,645 shares of the
Company's common stock. These assets have been subsequently leased back to
Kingston. Total shares of common stock issued to Softbank and its affiliates
were 74,200,000. The transactions described above are herein referred to as the
"Reorganization".

Proceeds, net of transaction costs, from the initial public offering and
funding transactions in the Reorganization of $1,863,260 were used to complete
the purchase of certain assets from MAC for $370,000, and repay intercompany
indebtedness.

On May 14, 1998 an affiliate of Softbank sold 50,000 shares of Ziff-Davis
Inc.'s common stock to an unrelated third party. On May 28, 1998, Ziff-Davis
Inc.'s U.S. underwriters exercised their option to purchase 2.0 million
additional shares of common stock to cover over-allotments. ZD purchased the
additional shares from SBH resulting in no change to the total number of shares
outstanding.

F-52
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

Unaudited Pro Forma Financial Information

The following summary pro forma information has been prepared as if the
reorganization and initial public offering, described above, had been
consummated on January 1, 1998. The pro forma adjustments for the nine month
period include a $5,219 reduction of interest expense, a $900 increase in
depreciation expense and a $900 reduction of selling, general and
administrative expenses, as well as the tax effect of these items recorded at
the combined federal and state statutory rate of 41%.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1998
------------------
<S> <C>
Revenue, net........................................... $ 692,981
Depreciation and amortization.......................... 110,714
Loss from operations................................... (9,107)
Interest expense, net.................................. 105,966
Loss before income taxes............................... (114,246)
Income tax benefit..................................... 31,146
Net loss............................................... $ (83,100)
Proforma net loss per basic common share............... $ (0.83)
Proforma weighted average common shares outstanding.... 100,000,000
</TABLE>

Interim financial information

The unaudited, combined financial statements for the nine months ended
September 30, 1997 and 1998 and as of September 30, 1998 have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary to present fairly the financial
position of ZD at September 30, 1998 and the results of its operations and cash
flows for the nine months ended September 30, 1998 and 1997 have been included.
Operating results for the periods presented are not necessarily indicative of
the results that may be expected for the year ended December 31, 1998.

3. ZDNET STOCK PROPOSAL (UNAUDITED)

F-53
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

per share, would be re-designated as Ziff Davis Inc.--ZD Group Common Stock,
par value $0.01 per share (the "ZD Stock"), and that stock would be intended to
reflect the performance of the Company's ZD Group. ZDNet Group (or "ZDNet")
comprises the Company's online business division, and ZD Group (or "ZD")
comprises the Company's other businesses and a "Retained Interest" in ZDNet
(i.e., the Company's interest in ZDNet excluding the interest intended to be
represented by outstanding shares of ZDNet Stock).

Following approval of the Tracking Stock Proposal, the Company currently
plans to offer to the public, for cash, shares of ZDNet Stock intended to
represent 15% to 20% of the equity value attributed to ZDNet. The Company
expects to offer ZDNet Stock to the public sometime in the first quarter of
1999. However, the Company could choose to conduct the offering at a later
time, or not to make the offering at all, depending on the circumstances at the
time. In addition to or instead of the offering, the Company reserves the right
to distribute ZDNet Stock to stockholders of the Company.

Currently, the Company provides all funding for ZD and ZDNet as described in
Note 5 (Certain Cash Management and Allocation Policies). The Company intends
to continue these practices until ZDNet Stock is first issued. Accordingly, no
interest income or expense from or to ZDNet has been reflected in the financial
statements of ZD for any period prior to the date on which ZDNet Stock is first
issued.

After the date on which ZDNet Stock is first issued, for financial statement
purposes:

F-54
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

(c) Whenever ZDNet holds cash (other than cash of ZDNet's foreign
operations or cash of ZDNet's operations that are not wholly-owned), ZDNet
will normally transfer that cash to ZD. Conversely, whenever ZDNet has a
cash need (other than cash needs of ZDNet's foreign operations or cash
needs of ZDNet's operations that are not wholly-owned), ZD will normally
fund that cash need. However, the Board will determine, in its sole
discretion, whether to provide any particular funds to either Group. The
Board is not obligated to cause either Group to provide funds to the other
Group if the Board determines it is not in the best interest of the Company
to do so.

(d) The Company will account for all cash transfers from one Group to or
for the account of the other Group (other than transfers in return for
assets or services rendered or transfers in respect of ZD's Retained
Interest that correspond to dividends paid on ZDNet Stock) as inter-Group
revolving credit advances unless (i) the Board determines that a given
transfer (or type of transfer) should be accounted for as a long-term loan,
(ii) the Board determines that a given transfer (or type of transfer)
should be accounted for as a capital contribution increasing ZD's Retained
Interest in ZDNet or (iii) the Board determines that a given transfer (or
type of transfer) should be accounted for as a return of capital reducing
ZD's Retained Interest in ZDNet. There are no specific criteria to
determine when the Company will account for a cash transfer as a long-term
loan, a capital contribution or a return of capital rather than
an inter-Group revolving credit advance. The Board would make such a
determination in the exercise of its business judgment at the time of such
transfer (or the first of such type of transfer) based upon all relevant
circumstances. Factors the Board would consider include (i) the current and
projected capital structure of each Group, (ii) the relative levels of
internally generated funds of each Group, (iii) the financing needs and
objectives of the recipient Group, (iv) the investment objectives of the
transferring Group, (v) the availability, cost and time associated with
alternative financing sources and (vi) prevailing interest rates and
general economic conditions.

F-55
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

(e) Any cash transfer accounted for as an inter-Group revolving credit
advance will bear interest at the rate at which the Company could borrow
such funds on a revolving credit basis. Any cash transfer accounted for as
a long-term loan will have interest rate, amortization, maturity,
redemption and other terms that generally reflect the then prevailing terms
on which the Company could borrow such funds (as the Board determines in
its sole discretion).

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Combination

The combined financial statements include the accounts of ZD. All significant
transactions between these businesses have been eliminated in combination and
consolidation. The financial statements of ZD prepared subsequent to the
Reorganization described above have been prepared on a consolidated basis.

Investments in which ZD Group's ownership interests range from 20 to 50
percent and in which ZD Group has the ability to exercise significant influence
over the operating and financial policies of such company are accounted for
under the equity method.

Cash and cash equivalents

ZD Group considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.

F-56
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

Concentration of credit risk

ZD Group places its temporary cash investments with high credit quality
financial institutions. At times, such investments may be in excess of
federally insured limits. ZD Group has not experienced losses in such accounts.

ZD Group's advertisers and exhibitors include principally customers who
represent a variety of technology companies in the United States and other
countries. ZD Group extends credit to their customers and distributors and
historically have not experienced significant losses relating to receivables
from individual customers or groups of customers.

Property and equipment

Property and equipment have been recorded at cost or estimated fair value at
the date of acquisition. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets which range from three to
thirty years. Leasehold improvements are amortized using the straight-line
method over the service life of the improvement or the life of the related
lease, whichever is shorter. Maintenance and repair costs are charged to
expense as incurred.

Inventories

Inventories, which consist principally of paper, are stated at the lower of
cost or market. Cost is determined on a first-in, first-out basis.

Investment in ZDNet Group

The Company determined the accounting for ZD's retained interest in ZDNet, in
part, by analogy to APB No. 18, "The Equity Method of Accounting for
Investments in Common Stock".

Intangible assets

F-57
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

purchase price over the estimated fair values of net assets acquired, is
amortized over a period of 5 to 40 years (refer to Note 8). ZD Group assesses
the recoverability of their intangible assets whenever adverse events or
changes in circumstances indicate that expected future cash flows (undiscounted
and without interest charges) may not be sufficient to support the carrying
amount of intangible assets. If undiscounted cash flows are not sufficient to
support the recorded assets, an impairment loss is recognized to reduce the
carrying value of the intangibles to its estimated recoverable value. ZD Group
has not experienced any impairment of its intangible assets.

Revenue recognition

Advertising revenue for ZD Group's publications, less agency commissions, is
recognized as income in the month that the related publications are sent to
subscribers or become available for sale at newsstands.

Circulation revenue consists of both subscription revenue and single copy
newsstand sales. Subscription revenue, less estimated cancellations, is
deferred and recognized as income in the month that the related publications
are sent to subscribers. Newsstand sales, less estimated returns, are
recognized in the month that the related publications become available for sale
at newsstands.

Payments received in advance of trade shows, conferences and seminars are
initially reported on the balance sheet as deferred revenue and are recognized
as income when the events take place.

Revenue generated by market research is recognized when the service is
provided.

Operating costs and expenses

Cost of production includes the direct costs of producing magazines,
newsletters and training materials, primarily paper, printing and distribution,
and the direct costs associated with organizing, producing and managing trade
shows, seminars, conferences and expositions. Selling, general and
administrative costs include subscriber acquisition costs which are expensed as
incurred. Editorial and product development costs are expensed as incurred.
Product development costs include the cost of artwork, graphics, prepress,
plates and photography for new products.

Foreign currency

The effect of translating foreign currency financial statements into U.S.
dollars is included in the cumulative translation adjustments account in
division equity. Gains and

F-58
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

losses on foreign currency transactions, which are not significant to
operations, have been included in selling, general and administrative expenses.
The Company has not historically entered into forward currency contracts.

Other non-operating income

Other non-operating income includes management fee income and ZD's equity
share of income or loss from joint ventures.

Income taxes

ZD uses the asset and liability approach for financial accounting and
reporting of deferred taxes.

Use of estimates

Fair value of financial instruments

All current assets and liabilities are carried at cost, which approximates
fair value because of the short-term maturity of those instruments. The
recorded amounts of ZD Group's long-term debt payable to affiliates also
approximate fair value based upon the current rates available to ZD Group for
debt with similar remaining maturities.

Stock-based compensation

ZD Group has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees", ("APB 25") to account for stock
options. Effective January 1, 1996, ZD Group adopted the disclosure-only
provisions of Statement of Financial Accounting Standard ("SFAS") No. 123,
"Accounting for Stock-Based Compensation".

Comprehensive Income

The company implemented SFAS No. 130 "Reporting Comprehensive Income",
effective January 1, 1998. This standard requires ZD Group to report the total
changes in division equity that do not result directly from transactions with
stockholders, including those

F-59
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

which do not affect retained earnings. These changes are not material to ZD
Group's combined financial statements.

New Accounting Pronouncements

SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information", issued in June 1997, establishes standards for reporting
information about operating segments in annual financial statements and interim
financial reports. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. Generally,
financial information will be required to be reported on the basis that is used
internally for evaluating segment performance and deciding how to allocate
resources to segments.

ZD Group will adopt the above statements beginning with their December 31,
1998 financial statements.

In June 1998, the Financial Accounting Standards Board issued SFAS 133
"Accounting for Derivative Instruments and Hedging Activities". SFAS 133
establishes accounting and reporting standards for derivative instruments and
for hedging activities and is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. ZD does not expect the adoption of SFAS 133 to
have a material impact on the ZD's results of operations.

5. CERTAIN CASH MANAGEMENT AND ALLOCATION POLICIES

ZD's financial statements reflect the application of certain cash management
and allocation policies summarized below. The Company's Board of Directors may
rescind, modify or add to any of these policies.

Treasury Activities

The Company manages most treasury activities on a centralized, consolidated
basis. These activities include the investment of surplus cash, the issuance,
repayment and repurchase of short-term and long-term debt, and the issuance and
repurchase of common stock and preferred stock. Each of ZD and ZDNet generally
remits its cash receipts (other than receipts of foreign operations or
subsidiaries that are not wholly-owned) to the Company, and the Company
generally funds ZD's and ZDNet's cash disbursements (other

F-60
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

than disbursements of foreign subsidiaries or subsidiaries that are not wholly-
owned), on a daily basis.

In the financial statements of ZD and ZDNet, (1) all external debt and equity
transactions (and the proceeds thereof) were attributed to ZD, (2) whenever
ZDNet held cash (other than cash of ZDNet's foreign operations or cash of
ZDNet's subsidiaries that are not wholly-owned), that cash was transferred to
ZD and accounted for as a return of capital (i.e., as a reduction in ZDNet's
division equity and ZD's Retained Interest in ZDNet) and (3) whenever ZDNet had
a cash need (other than cash needs of ZDNet's foreign operations or cash needs
of ZDNet's subsidiaries that are not wholly-owned), that cash need was funded
by ZD and accounted for as a capital contribution (i.e., as an increase in
ZDNet's division equity and ZD's Retained Interest in ZDNet).

Corporate General and Administrative Expenses

The Company allocates the cost of certain corporate general and
administrative services and shared services (including certain legal,
accounting (tax and financial), information systems, telecommunications,
purchasing, marketing, intellectual property, public relations, corporate
office and travel expenses) (collectively, "Central Services") to ZD based on
utilization. Where determinations based on utilization alone are impracticable,
the Company uses other methods and criteria that management believes to be
equitable and to provide a reasonable estimate of the cost attributable to ZD.

Taxes

Federal income taxes, which are determined on a consolidated basis, are
allocated to ZD (and reflected in its financial statements) in accordance with
the Company's tax allocation policy. In general, this policy provides that the
consolidated tax provision (and related tax payments or refunds) are allocated
between the Groups based principally upon the financial income, taxable income,
credits and other amounts directly related to the respective Groups. Tax
benefits that cannot be used by the Group generating such attributes, but can
be utilized on a consolidated basis, are allocated to the Group that generated
such benefits. As a result, the allocated Group amounts of taxes payable or
refundable are not necessarily comparable to those that would have resulted if
the Groups had filed separate tax returns. State income taxes generally are
computed on a separate company basis.

Royalty Charges

ZD charges ZDNet an annual fee for the use of various brands and editorial
content. The current annual fee, which is reflected in ZD's financial
statements as a reduction of its

F-61
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

selling, general and administrative costs, is equal to 5% of the first $100,000
of ZDNet's revenue for the year, 4% of the next $50,000 of ZDNet's revenue for
that year and 3% of any incremental revenue over $150,000 for that year. The
Board may at some point in the future change this fee as it, in its sole
discretion, deems appropriate in light of the circumstances from time to time.

6. ACCOUNTS RECEIVABLE, NET

Accounts receivable, net consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
-------- --------
<S> <C> <C>
Accounts receivable.................................. $278,028 $297,647
Allowance for doubtful accounts, returns and
cancellations....................................... (80,765) (87,733)
-------- --------
$197,263 $209,914
======== ========
</TABLE>

7. PROPERTY AND EQUIPMENT, NET

Property and equipment, net, consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1997
------- -------
<S> <C> <C>
Computers and equipment.................................. $28,713 $45,896
Leasehold improvements................................... 38,230 39,719
Furniture and fixtures................................... 17,685 16,911
------- -------
84,628 102,526
Accumulated depreciation and amortization................ (33,137) (52,135)
------- -------
$51,491 $50,391
======= =======
</TABLE>

F-62
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

8. INTANGIBLE ASSETS, NET

Intangible assets, net, consist of the following:

<TABLE>
<CAPTION>
RANGE OF DECEMBER 31,
USEFUL LIVES ----------------------
(YEARS) 1996 1997
------------ ---------- ----------
<S> <C> <C> <C>
Advertising lists.................... 7-34 $ 885,700 $ 885,700
Exhibitor relationships.............. 4-27 154,070 154,070
Trademarks/trade names............... 30-40 735,595 735,595
License agreements................... 6-14 11,212 11,212
Subscriber lists..................... 3-10 47,175 47,175
Other................................ 2-20 57,599 57,599
Goodwill............................. 5-40 1,315,001 1,316,077
---------- ----------
3,206,352 3,207,428
Accumulated amortization............. (125,882) (244,259)
---------- ----------
$3,080,470 $2,963,169
========== ==========
</TABLE>

Intangible assets primarily relate to the acquisitions of ZDI, COMDEX and the
MAC Assets. As discussed in Note 1, the acquisitions were accounted for under
the purchase method of accounting. As such, purchase price was allocated to
tangible and identifiable intangible assets with the remaining amount being
allocated to goodwill.

All intangible assets are being amortized using the straight-line method over
their estimated useful lives, up to 40 years. In determining the estimated
useful lives, ZD considered its competitive position in the markets in which it
operates the historical attrition rates of advertisers, subscribers and
exhibitors, legal and contractual obligations, and other factors.

F-63
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

9. ACCRUED EXPENSES

Accrued expenses consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
-------- --------
<S> <C> <C>
Payroll and related employee benefits.................. $ 24,126 $ 27,672
Accrued interest-related party......................... 4,449 6,226
Other taxes payable.................................... 6,191 2,633
Other.................................................. 44,031 41,355
-------- --------
$ 78,797 $ 77,886
======== ========

10. UNEARNED INCOME

Unearned income consists of the following:

<CAPTION>
DECEMBER 31,
------------------
1996 1997
-------- --------
<S> <C> <C>
Unexpired subscriptions................................ $100,294 $ 82,167
Prepaid conference fees................................ 91,776 80,706
Reserve for cancellations.............................. (17,287) (8,191)
-------- --------
$174,783 $154,682
======== ========
</TABLE>

11. INCOME TAXES

Income tax benefits and related assets and liabilities attributed to ZD are
determined in accordance with the Company's tax allocation policy (Note 5).

ZD has been included in consolidated U.S. federal income tax returns filed by
Softbank, except for operations relating to the MAC Assets (described in Note
1), which were assets of a separate taxpayer. The tax expense reflected in the
consolidated statements of operations and tax liabilities reflected in the
consolidated balance sheet have been prepared on a separate return basis as
though the Company filed stand-alone income tax returns. No tax benefit has
been recorded for the losses related to the MAC Assets, as such losses are not
available to the Company.

ZD and Softbank do not have a tax sharing agreement. Therefore, no
intercompany tax payments have been made and no related intercompany receivable
or payable has been recorded.

Income (loss) before income taxes is attributable to the following
jurisdictions:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1996 1997
------- -------- --------
<S> <C> <C> <C>
United States................................. $25,094 $(23,757) $(77,023)
Foreign....................................... (2,225) (2,879) 5,375
------- -------- --------
Total......................................... $22,869 $(26,636) $(71,648)
======= ======== ========
</TABLE>

F-64
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

Components of the provision (benefit) for income taxes are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1996 1997
------- -------- -----
<S> <C> <C> <C>
U.S. federal income taxes:
Current...................................... $ -- $ -- $ --
Deferred..................................... 9,240 19,716 (364)
State and local income taxes:
Current...................................... -- -- --
Deferred..................................... 2,684 5,729 (105)
Foreign income taxes........................... -- -- --
------- -------- -----
Total provision (benefit) for income
taxes..................................... $11,924 $ 25,445 $(469)
======= ======== =====

A reconciliation of the U.S. federal statutory tax rate to ZD's effective tax
rate on income (loss) before income taxes is as follows:

<CAPTION>
DECEMBER 31,
-------------------------
1995 1996 1997
------- -------- -----
<S> <C> <C> <C>
Federal statutory tax rate..................... 35.0% 35.0% 35.0%
State and local taxes (net of federal tax
benefit)...................................... 6.0 6.0 6.0
Loss related to retained interest in ZDNet..... -- (26.1) (12.2)
Non-recognition of combined losses of MAC
Assets........................................ 9.9 (96.9) (24.0)
Amortization of non-deductible goodwill........ 1.0 (13.3) (5.8)
Other.......................................... 0.2 (0.2) 1.7
------- -------- -----
Effective tax rate............................. 52.1% (95.5)% 0.7%
======= ======== =====
</TABLE>

The effective tax rate differs from the federal statutory tax rate primarily
as a result of ZD's inability to deduct losses of the MAC Assets prior to May
4, 1998, and ZD's policy of recording the losses related to its 100% retained
interest in ZDNet on a net of tax basis. The amortization of nondeductible
goodwill resulted primarily from the stock acquisition of 100% of the stock of
ZDI in 1996.

F-65
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

Following is a summary of the components of the deferred tax accounts at
December 31, 1996 and 1997:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
--------- ---------
<S> <C> <C>
Current deferred tax assets and (liabilities):
Allowance for doubtful accounts................... $ 8,825 $ 8,713
Other............................................. (151) 12
--------- ---------
Current deferred net tax assets................. 8,674 8,725
--------- ---------
Noncurrent deferred tax assets and (liabilities):
Basis difference in intangible assets............. (273,375) (288,286)
Net operating loss and other carryforwards........ 123,652 124,233
Other............................................. 11,603 13,701
--------- ---------
Noncurrent deferred tax liabilities............. (138,120) (150,352)
Valuation allowance................................. (47,911) (35,261)
--------- ---------
Net noncurrent deferred tax liabilities......... (186,031) (185,613)
--------- ---------
Total net deferred tax liabilities.................. $(177,357) $(176,888)
========= =========
</TABLE>

As of December 31, 1996 and 1997 ZD had total deferred tax assets of $96,169
and $111,398, respectively, and total deferred tax liabilities of $273,526 and
$288,286, respectively. The December 31, 1996 and 1997 net deferred tax assets
are reduced by a valuation allowance of $47,911 and $35,261, respectively,
primarily relating to tax benefits of foreign net operating loss carryforwards
which are not expected to be realized. The decrease in the valuation allowance
in 1997 is primarily related to the expiration of foreign net operating loss
carryforwards. No deferred tax asset has been established for the losses
associated with the MAC Assets, which will not be available to ZD as a
deduction.

ZD has U.S. and foreign net operating loss carryforwards of approximately
$261,000, which will begin to expire in 1998. ZD's utilization of certain net
operating loss carryforwards, of approximately $113,000, is subject to
limitations, due to the change of ownership resulting from the Softbank
acquisition of the ZDI stock
on February 29, 1996. Management believes that such limitations will not
significantly affect ZD's ability to recognize the deferred tax assets relating
to the carryforward. Accordingly, no valuation allowance to reduce the deferred
tax asset relating to the carryforward has been established. In addition, ZD
has alternative minimum tax credit carryforwards of $385 which may be carried
forward indefinitely until used.

ZD's foreign subsidiaries have no undistributed earnings for remittance to
the U.S. and, therefore, no U.S. or foreign tax provision on remittances has
been recorded.

F-66
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

12. DUE TO AFFILIATES AND MANAGEMENT

ZD is a member of a group of companies affiliated through common majority
ownership with Softbank and has various transactions and relationships with
members of the group. Due to these relationships, it is possible that the terms
of those transactions are not the same as those that would result from
transactions among unrelated parties.

Receivables/payables

Receivables from affiliates consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1997
------- --------
<S> <C> <C>
Receivable from:
MAC and subsidiaries.................................... $ 7,140 $ 42,687
Softbank................................................ 67,451 84,365
Other affiliates........................................ 2,617 4,238
------- --------
$77,208 $131,290
======= ========

Payables to management and affiliates consist of the following:

<CAPTION>
DECEMBER 31,
----------------
1996 1997
------- --------
<S> <C> <C>
Payable to:
Management.............................................. $29,834 $ --
MAC and subsidiaries.................................... -- 270,000
Softbank................................................ 39,582 126,371
Other affiliates........................................ -- 1,961
------- --------
$69,416 $398,332
======= ========
</TABLE>

As part of the 1996 acquisition of ZDI, ZD agreed to assume certain
obligations to management arising out of prior employment arrangements with
previous owners. In January 1997, ZD paid all amounts due, including accrued
interest, through the payment date.

Prior to the Reorganization and initial public offering, ZD was a member of
Softbank's central cash management system. Under this system, ZD would
periodically transfer excess cash to Softbank for cash management purposes and
in turn receive cash advances from Softbank to fund ZD's short-term working
capital requirements. Interest is accrued based on the net balance outstanding
at the end of each month. Interest income is earned at the 30-day LIBOR rate
for the applicable month. Interest expense is incurred at the 30-day LIBOR rate
plus 0.5%.

F-67
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

Other affiliated arrangements

During the years ended December 31, 1996, and 1997, ZD incurred $2,000 and
$1,631 advertising expense with Yahoo!, Inc. (Yahoo!), an affiliated company.
No advertising expense with Yahoo! was incurred in 1995.

ZD sells advertising space and exhibition services to Kingston, an affiliated
company. During the years ended December 31, 1995, 1996 and 1997, ZD recorded
revenues of $0, $882 and $2,667, respectively, from sales to Kingston. These
services were provided under terms consistent with those provided to
unaffiliated customers.

ZD has entered into an agreement to manage certain trade shows and
expositions owned by Softbank and its affiliates, whereby ZD earns management
and licensing fees. The fees earned by ZD for the years ended December 31,
1995, 1996 and 1997 were $1,979, $3,394 and $4,057, respectively.

ZD has an arrangement with SOFTBANK Services, an affiliated company, whereby
ZD is charged for administrative services provided plus a management fee. For
the years ended December 31, 1995, 1996, and 1997 the Company incurred services
fees of $0, $359, and $1,259, respectively, in relation to this agreement.

ZD has entered into certain licensing agreements with Softbank for the
publishing and distribution of Japanese language editions of certain
publications. The fees earned by ZD for the years ended December 31, 1996 and
1997 were approximately $964, and $1,818, respectively.

ZD is allocated a portion of the Company's corporate general and
administrative costs (See Note 5). ZD receives from ZDNet a royalty for the use
of various ZD brands and editorial content (see Note 5).

The royalty income which was recorded as a reduction of selling, general and
administrative expenses was $0, $811 and $1,611 for the years ended December
31, 1995, 1996 and 1997, respectively.

ZD's publications sell advertising to ZDNet at discounts to market rates. Had
ZD charged market rates for such advertising, ZD's revenue would have increased
by $0, $2,235 and $2,671 for the years ended December 31, 1995, 1996 and 1997
respectively.

The Company has entered into a license and services agreement with MAC to
develop ZDTV: Your Computer Channel. ZDTV is owned by MAC, but as part of this
license and services agreement MAC has granted the Company an option
exercisable through December 31, 1998 to purchase all of MAC's interest in ZDTV
for an amount equal to

F-68
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

MAC's investment plus 10% per annum. The Company is currently funding ZDTV's
operations on behalf of MHA through unsecured advances which, for approved
levels of expenditure, are to be reimbursed by MHA. Such advances bear interest
at the 30-day LIBOR rate plus .50%. The cumulative advances, which totaled
$14.4 million net of $10.1 million in repayments through December 31, 1997,
were repaid concurrently with the Reorganization (See Note 2).

The Company has entered into operating leases for television production
equipment and has sublet such equipment to ZDTV. The terms of the subleases are
substantially identical to the terms of the leases which provide for annual
lease payments totaling approximately $610 through 2003.

Notes payable to affiliates

ZD's long-term debt is payable to Softbank and consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1997
---------- ----------
<S> <C> <C>
Notes payable to affiliate(1)...................... $1,080,000 $1,080,000
Notes payable to affiliate(2)...................... 900,000 900,000
Notes payable to affiliate(3)...................... 398,000 375,027
Note payable to affiliate(4)....................... 100,000 94,231
Note payable to affiliate(5)....................... 77,450 74,772
Note payable to affiliate(6)....................... -- 10,000
---------- ----------
Total............................................ 2,555,450 2,534,030
Less--Current portion.............................. (33,198) (125,790)
---------- ----------
$2,522,252 $2,408,240
========== ==========
</TABLE>
- --------
(1) Principal and interest payments are due in 53 consecutive quarterly
installments on the last business day of each calendar quarter beginning
March 31, 1998 through March 31, 2011. The notes bear interest at a rate of
7.8% per annum.

(2) These notes mature on December 31, 2001 and bear an interest rate of 6.5%
per annum, payable on the last business day of each quarter beginning March
31, 1997.

(3) Notes mature on February 28, 2010. The notes bear interest at a rate of
8.0% per annum.

(4) Notes mature on February 28, 2009. The notes bear interest at 9.9% per
annum.

(5) Note is payable in 52 equal quarterly installments commencing March 31,
1997. The note bears interest at a rate of 8.0% per annum.

(6) Note is payable on January 1, 2007. The note bears interest at a rate of
8.0% per annum.

F-69
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

Scheduled principal payments due on long-term debt outstanding at December
31, 1997 are as follows:

<TABLE>
<S> <C>
1998............................................................ $ 125,790
1999............................................................ 125,790
2000............................................................ 125,790
2001............................................................ 1,025,790
2002............................................................ 125,790
Thereafter...................................................... 1,005,080
----------
Total......................................................... $2,534,030
==========
</TABLE>

See Note 2 for a discussion of the reorganization and initial public offering
which restructured ZD's debt and equity structures.

During 1995, 1996 and 1997 ZD incurred $44,005, $120,646 and $190,445,
respectively of interest expense due to Softbank related to the above notes
payable.

Guarantee of Softbank's U.S. debt

In April 1996, Softbank signed a line of credit agreement totaling $50,000
with an independent lender for which ZD, along with certain other Softbank
affiliates, are guarantors. In January 1997 and October 1997, this line of
credit was increased to $75,000 and $150,000, respectively. At December 31,
1997, $102,500 was outstanding under the line of credit. In March 1998, ZD
increased its guarantee of Softbank's U.S. debt from $150,000 to $450,000. On
May 4, 1998, ZD was released from this guarantee.

Return of capital and dividends

On December 15, 1996, ZD declared a return of capital of approximately
$900,000 paid through the issuance of a note payable to a subsidiary of
Softbank and a cash dividend of $8,000 to Softbank. In 1997, ZD recorded a
return of capital of $381,434 in connection with the purchase of companies
under common control.

13. EMPLOYEE STOCK COMPENSATION PLANS

Executive stock option plan

The Softbank 1996 and 1997 Executive Stock Option Plans provide for the
granting of nonqualified stock options to purchase the common stock of Softbank
to officers, directors and key employees of ZD. Under the plans, options have
been granted at exercise prices equal to the closing market price in Japan's
public equities market (market price denominated in Japanese yen) on the date
of grant. As of December 31, 1997, substantially

F-70
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

all options granted become exercisable in various installments over the first
six anniversaries of the date of grant and expire ten years after the date of
grant.

Information relating to stock options during 1995, 1996 and 1997 is as
follows:

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OPTION PRICE
OF SHARES PER SHARE(1)
--------- ----------------
<S> <C> <C>
Shares outstanding under options at
December 31, 1995......................... -- --
Granted.................................... 714,777(2) $87.15
Exercised.................................. -- --
Forfeited.................................. 12,740(2) 87.15
-------
Shares outstanding under options at
December 31, 1996......................... 702,037 87.15
Granted.................................... 368,563 61.25
Exercised.................................. -- --
Forfeited.................................. 138,034 78.89
-------
Shares outstanding under options at
December 31, 1997......................... 932,566 $78.14
=======
Shares exercisable
At December 31, 1996..................... -- --
At December 31, 1997 (price range $44.26-
$87.15)................................. 102,510 $82.21
</TABLE>
--------
(1) The exercise price of the stock options is set in Japanese yen. The
exercise prices as shown above have been converted to U.S. dollars
based upon the exchange rate as of the date of grant for the
respective options.

(2) Adjusted for a 1.4:1 stock split during 1996 and a 1.3:1 stock
split during 1997.

As permitted by SFAS 123, ZD has chosen to continue to account for stock
options in accordance with the provisions of APB 25 and, accordingly, no
compensation expense related to stock option grants was recorded in 1996 or
1997. Pro forma information regarding net income is required by SFAS 123 and
has been determined as if ZD Group had accounted for stock options under the
fair value method. The fair value of the option grants was estimated at the
date of grant using the Black Scholes option-pricing model with the following
assumptions for 1996 and 1997:

<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Risk-free interest rate.................................... 5.89% 6.35%
Dividend yield............................................. 0.26% 0.22%
Volatility factor.......................................... 54.03% 51.35%
Expected life.............................................. 6 years 6 years
</TABLE>

F-71
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

The weighted average fair value of options granted in 1996 and 1997 was
$64.30 and $34.05, respectively. For purposes of the pro forma disclosures, the
estimated fair value of the options is amortized to expense over the options'
vesting period. Had compensation cost for the stock option plans been
determined based upon the fair value at the grant date for awards during 1996
and 1997, consistent with the provisions of SFAS 123, ZD's net loss would have
been increased by approximately $3,000 and $4,000, respectively. On January 23,
1998, the exercise price of all of the shares outstanding under option
agreements were reset to an exercise price equal to the closing market price on
Japan's Tokyo Stock Exchange First Section at that date. In conjunction with
the repricing, those options previously exercisable on December 31, 1997 may
now be exercised only after July 19, 1998. Repricing of the stock options will
not result in compensation expense to ZD.

Other stock compensation plans

During 1996 and 1997, ZD granted 45,760 and 61,940 shares of common stock of
Softbank, respectively, (adjusted for a 1.4:1 stock split during 1996 and a
1.3:1 stock split during 1997) to certain key employees, subject to
restrictions as to continuous employment which expire over a three to five-year
period from the date of grant. The granting of the shares to ZD's employees has
been recorded as additional paid-in capital offset by a reduction to
stockholder's equity as deferred compensation. Such amounts were recorded at
the fair value, as established by market price of the shares on the date of
grant. The unearned compensation is being amortized ratably over the restricted
periods. During 1996, restrictions on 13,790 shares expired, 2,160 shares were
forfeited and $1,080 was charged to expense related to the restricted stock
awards. During 1997, restrictions on 75,210 shares expired, 2,150 shares were
forfeited and $3,916 was charged to expense related to these restricted stock
awards.

14. EMPLOYEE BENEFIT PLANS

Pension plan

Certain employees of ZD who have met eligibility requirements are covered by
a noncontributory defined benefit pension plan. The benefits are based on years
of service and average compensation at the time of retirement. ZD Group's
funding policy is to contribute amounts sufficient to meet the minimum funding
requirements as set forth in the Employee Retirement Income Security Act of
1974 ("ERISA"). Contributions to the plan are determined in accordance with the
projected unit credit cost method. Plan assets consist of U.S. equity
securities, high grade corporate bonds and commercial paper, and U.S. treasury
notes.

F-72
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

The weighted average assumed discount rate of 7% and rate of increase in
future compensation levels of 6% was used in the determination of the actuarial
present value of the projected benefit obligation at December 31, 1996 and
1997. The weighted average expected long-term rate of return on plan assets at
December 31, 1996 and 1997 was 7%.

Net periodic pension cost includes the following components:

<TABLE>
<CAPTION>
1995 1996 1997
----- ------ -----
<S> <C> <C> <C>
Service cost......................................... $ 472 $ 700 $ 391
Interest cost........................................ 363 472 456
Expected return on plan assets....................... (172) (300) (445)
Amortization of transition obligation................ 149 199 75
----- ------ -----
Net periodic pension cost............................ $ 812 $1,071 $ 477
===== ====== =====
</TABLE>
The following table sets forth the funded status and amounts recognized in
the balance sheet:

<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation............................ $ 4,132 $ 5,721
======= =======
Accumulated benefit obligations...................... 4,224 5,721
======= =======
Projected benefit obligations.......................... 7,967 5,721
Plan assets at fair value.............................. (4,467) (6,004)
======= =======
Projected benefit obligation in excess (less than) of
plan assets........................................... 3,500 (283)
Unrecognized net transition asset (liability).......... (2,297) 1,279
------- -------
Pension liability included in balance sheet............ $ 1,203 $ 996
======= =======
</TABLE>

During 1997, ZD decided to terminate the defined benefit pension plan and
pursuant to this decision, all accrued benefits became fully vested as of
August 31, 1997. The above amounts reflect the effects of such termination. All
accrued plan obligations will be settled during 1998. There was no significant
gain or loss recognized in connection with the termination.

Retirement plans

The Company maintains various defined contribution retirement plans.
Substantially all of ZD Group's employees are eligible to participate in one of
the plans under which annual contributions may be made by the Company for the
benefit of all eligible employees. In certain cases, employees may also make
contributions to the plan in which they participate

F-73
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

which, and subject to certain limitations, may be matched by the Company up to
certain specified percentages. Employees are generally eligible to participate
in a plan upon joining the Company and receive matching contributions after one
year of employment. The ZD Group made contributions to the plans totaling
$2,115, $10,023 and $12,974 in 1995, 1996 and 1997, respectively.

15. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES

ZD has investments in the following companies/joint ventures/divisions:

<TABLE>
<CAPTION>
CARRYING VALUE AT
DECEMBER 31,
OWNERSHIP -----------------
COMPANY/JOINT VENTURE/DIVISION PERCENTAGE 1996 1997
------------------------------ ---------- -------- --------
<S> <C> <C> <C>
Mac Publishing LLC......................... 50% $ -- $ 16,244
ExpoComm LLC............................... 50% $ 7,698 $ 7,758
Family PC G.P.............................. 50% $ 10,138 $ 9,342
ZDNet Group................................ 100% $ 78,575 $ 83,292
</TABLE>

The entities listed above are engaged primarily in the publication or
distribution of print media, the organization, production and management of
trade shows and providing interactive information and programming to
technology-oriented internet users. Other investments and joint ventures are
not material to ZD's financial statements. ZD has equity income (loss) from
joint ventures of $(796) and $335 in 1996 and 1997, respectively. In addition,
ZD had equity losses of $16,925 and $21,238 in 1996 and 1997, respectively,
from its 100% Retained Interest in ZDNet Group.

16. SUPPLEMENTAL CASH FLOW INFORMATION

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1995 1996 1997
-------- ---------- --------
<S> <C> <C> <C>
Cash paid during the year for:
Interest to related parties................ $ 8,390 $ 99,509 $185,447
Income taxes............................... -- 360 4
Noncash investing and financing activities:
Fair value of assets acquired.............. $836,479 $2,508,603 $ 14,000
Liabilities assumed........................ 21,959 370,518 --
-------- ---------- --------
Cash paid.................................. 814,520 2,138,085 14,000
Less--Cash acquired........................ -- 13,262 --
Net cash paid for acquisitions............. $814,520 $2,124,823 $ 14,000
======== ========== ========
Return of capital dividends................ $ -- $ 899,948 $381,434
======== ========== ========
Capital contributions...................... $ -- $ 5,002 $ 61,580
======== ========== ========
</TABLE>

F-74
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

17. OPERATING LEASE COMMITMENTS

ZD utilizes equipment and space under lease to the Company. ZD's portion of
the minimum lease payments based on square feet utilized are as follows:

<TABLE>
<S> <C>
1998.............................................................. $ 33,825
1999.............................................................. 31,359
2000.............................................................. 27,377
2001.............................................................. 24,381
2002.............................................................. 23,873
Thereafter........................................................ 240,322
--------
Total........................................................... $381,137
========
</TABLE>

Netted in the above totals is approximately $5,000 for which ZD has
noncancelable subleases in place. Total sublease income approximates ZD's
required payments under the related leases. Rent expense amounted to
approximately $2,492, $22,347, and $28,646 for the years ended December 31,
1995, 1996 and 1997, respectively.

18. SEGMENT INFORMATION

Business segment information

ZD's operations have been classified into two business segments: (i)
publishing, and (ii) events.

Publishing

The publishing segment is engaged in publishing magazines, journals,
newsletters, online content, training manuals and providing market research
about the computer industry. The publishing segment's principal operations are
in the United States and Europe, although it also licenses or syndicates its
editorial content to over 50 other publications distributed worldwide. The
publishing segment includes a 100% Retained Interest in the ZDNet Group.

Events

The events segment is engaged in the organization, production and management
of trade shows, conferences and seminars for the computer industry. The events
segment's principal operations are in North America and to a lesser extent in
Europe, Asia and Latin America.

F-75
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

Summarized financial information by business segment as of December 31, 1995,
1996 and 1997 for each of the periods then ended is set forth below:

<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Revenue, net:
Publishing............................. $ -- $ 674,040 $ 834,015
Events................................. 202,729 264,884 287,528
---------- ---------- ----------
$ 202,729 $ 938,924 $1,121,543
========== ========== ==========
Income from operations:
Publishing............................. $ -- $ 36,089 $ 72,478
Events................................. 62,675 68,505 59,235
---------- ---------- ----------
$ 62,675 $ 104,594 $ 131,713
========== ========== ==========
Total assets at December 31:
Publishing............................. $ -- $2,441,441 $2,423,822
Events................................. 1,090,981 1,143,522 1,124,286
---------- ---------- ----------
$1,090,981 $3,584,963 $3,548,108
========== ========== ==========
Depreciation and amortization:
Publishing............................. $ -- $ 101,102 $ 111,133
Events................................. 24,305 33,149 36,126
---------- ---------- ----------
$ 24,305 $ 134,251 $ 147,259
========== ========== ==========
Capital expenditures:
Publishing............................. $ -- $ 13,647 $ 19,025
Events................................. 3,367 7,708 8,797
---------- ---------- ----------
$ 3,367 $ 21,355 $ 27,822
========== ========== ==========
</TABLE>

F-76
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

Operating income by business segment excludes interest income and interest
expense.

<TABLE>
<CAPTION>
NORTH AMERICA OTHER AREAS COMBINED
------------- ----------- ----------
<S> <C> <C> <C>
Year ended December 31, 1995:
Revenue, net....................... $ 192,789 $ 9,940 $ 202,729
=========== ======== ==========
Income (loss) from operations...... $ 64,930 $ (2,255) $ 62,675
=========== ========
Other non-operating income......... 4,199
Related party-interest expense..... 44,005
----------
Income before taxes................ $ 22,869
----------
Total assets at December 31, 1995.. $ 1,081,829 $ 9,152 $1,090,981
=========== ======== ==========
Year ended December 31, 1996:
Revenue, net....................... $ 838,749 $100,175 $ 938,924
=========== ======== ==========
Income (loss) from operations...... $ 107,474 $ (2,880) $ 104,594
=========== ========
Loss related to Retained Interest
in ZDNet.......................... (16,925)
Other non-operating income......... 6,341
Related party-interest expense..... 120,646
----------
Loss before taxes.................. $ (26,636)
----------
Total assets at December 31, 1996.. $ 3,550,161 $ 34,802 $3,584,963
=========== ======== ==========
Year ended December 31, 1997:
Revenue, net....................... $ 1,008,682 $112,862 $1,121,544
=========== ======== ==========
Income from operations............. $ 126,344 $ 5,369 $ 131,713
=========== ========
Loss related to Retained Interest
in ZDNet.......................... (21,238)
Other non-operating income......... 8,322
Related party-interest expense..... 190,445
----------
Loss before taxes.................. $ (71,648)
----------
Total assets at December 31, 1997.. $ 3,502,753 $ 45,355 $3,548,108
=========== ======== ==========
</TABLE>

Transactions between geographic areas are not significant.

19. CONTINGENCIES

ZD is subject to various claims and legal proceedings arising in the normal
course of business.

Class Action Litigations

Following a decline in the price per share of ZD's common stock after the
October 8, 1998 announcement, eight securities class action suits have been
filed against ZD and

F-77
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

certain of its directors and officers in the United States District Court for
the Southern District of New York.

The complaints allege that defendants violated Sections 11, 12(a) (2) and 15
of the Securities Act of 1933 in connection with the registration statement
filed by the Company with the Securities and Exchange Commission relating to
the initial public offering of the Company's common stock on April 29, 1998
(the "IPO"). More particularly, the complaints allege that the registration
statement contained false and misleading statements and failed to disclose
facts that could have indicated an impending decline in the Company's revenue.
The complaints seek on behalf of a class of purchasers of the Company's common
stock from the date of the IPO through October 8, 1998 unspecified damages,
interest, fees and costs, recission, and injunctive relief such as the
imposition of a constructive trust upon the proceeds of the IPO.

The complaints are as follows: Napoli v. Ziff-Davis Inc., et al., No. 98 Civ.
7158 (filed Oct. 9, 1998); Steinberg, et al. v. Ziff-Davis Inc., et al., No. 98
Civ. 7205 (filed Oct. 13, 1998); Flinker v. Ziff-Davis Inc., et al., No. 98
Civ. 7231 (filed Oct. 14, 1998); Koenig v. Ziff-Davis Inc., et al., No. 98 Civ.
7260 (filed Oct. 15, 1997; Schindler v. Ziff-Davis Inc., et al., No. 98 Civ.
7418 (filed Oct. 19, 1998); Miller v. Ziff-Davis Inc., et al., No. 98 Civ. 7541
(filed Oct. 23, 1998); Felgoise v. Ziff-Davis Inc., et al., No. 98 Civ. 8045
(filed Nov. 9, 1998); and Javier v. Ziff Davis Inc., et al., No. 98 Civ. 8201
(filed Nov. 17, 1998). All of the complaints have been assigned to Judge
Shirley Wohl Kram. Service upon defendants has not yet been effected.

Although the outcome of the foregoing cases cannot be predicted, the Company
believes that there are substantial defenses to these claims.

Legal Proceeding

F-78
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

alleges, among other things, that SBH, SIM's majority shareholder, acting with
the Company and two of its senior officers and directors who were directors of
SIM (and who were also named as defendants), had conflicts of interest between
SIM and other Softbank
investments (including investments in the Company) and failed to act in the
best interests of SIM and the minority shareholders by taking actions which
benefited the Company. The complaint states claims based on common law fraud,
breach of fiduciary duty and aiding and abetting theories and seeks in excess
of $200,000 in damages. The Company and the other defendants have moved to
dismiss all of the claims against them other than a breach of contract claim
which is solely against SBH.

Although the outcome of this case cannot be predicted, the Company believes
that there are substantial defenses to the claims and intends to defend
vigorously.

20. SUBSEQUENT EVENTS

Acquisition

On October 28, 1998, ZD acquired the assets of Sky TV Inc. and certain
affiliates for approximately $12 million in cash. Sky TV is a media company
that provides video content for distribution principally through airline in-
flight, cable and broadcast television. Sky TV's principal offices are located
in Dallas and San Francisco.

ZDTV

On November 17, 1998, ZD announced its intention to exercise its option to
purchase ZDTV for a purchase price expected to be approximately $85 million,
against which ZD will be able to apply approximately $53 million in advances
owed to it by MAC Holdings America Inc. In addition, ZD announced a letter of
intent had been entered into with Vulcan Programming, Inc. ("Vulcan"), whereby
Vulcan would purchase 33% of ZDTV for approximately $54 million. Other than
advances to ZDTV which are reported on the Company's balance sheet, the results
of operations of ZDTV are not included in the Company's results.

1998 Incentive Compensation Plan

The Company adopted the 1998 Incentive Compensation Plan (the "Plan") to
provide long-term incentives for its key employees and enhance shareholder
value. The Plan provides for the grant of options, stock appreciation rights,
stock awards and other interests in the Company's Common Stock. The Company has
reserved 8,500,000 shares of Common Stock for issuance under the Plan. On
February 13, 1998, the Companies granted options to purchase 5,254,700 shares
with an exercise price of $16.00 per share representing the fair value of such
options at that date. Such options vest ratably over five years.

F-79
<PAGE>

ZD GROUP
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

On September 23, 1998, the Board of Directors approved the reduction of the
exercise price of all options outstanding under the Plan from $16.00 to $6.00
the closing market price of the Company's common stock on that date. In
addition, the vesting period of the options was extended by three months.

The Company adopted the Employee Stock Purchase Plan (the "Stock Purchase
Plan") whereby eligible employees may purchase the Company Common Stock with
after tax payroll deductions of 1% to 10% of their base pay. The price at which
shares of Common Stock will be purchased is the lesser of 85% of the fair
market value of a share of Common Stock on (1) the first business day of a
purchase period or (2) the last business day of a purchase period. The Company
has reserved 1,500,000 shares of Common Stock for issuance under the Stock
Purchase Plan.

Interest Rate Swaps

On June 10, 1998, ZD entered into interest rate swap agreements, with an
aggregate notional amount of $550,000. Under these swap agreements, which began
on August 10, 1998, ZD will receive a floating rate of interest based on three-
month LIBOR, which resets quarterly, and ZD will pay a fixed rate of interest,
each quarter, for the terms of the respective agreements. The terms of these
agreements range from 3 to 7 years and the weighted average fixed rate ZD will
pay is 5.85%. ZD has entered into these agreements solely to hedge its interest
rate risk under its floating rate bank debt.

For the nine months period ended September 30, 1998, these interest rate
swaps did not have a material impact on the financial statements.

Restructuring (unaudited)

On October 8, 1998, ZDI announced that anticipated results for the fourth
quarter would be below expectations and that, as a result, a company-wide
restructuring would be implemented in which three publications would be
discontinued and its work force reduced by approximately 10%. As of November
16, 1998 those three publications have been discontinued and the work force
reduction has also largely been completed. The cost of this restructuring,
estimated at $50 to $60 million will be recognized in the fourth quarter of
1998.

Credit Facility (unaudited)

On December 16, 1998, the lenders on the Company's $1,350,000 credit facility
agreed to amend certain provisions of that facility. The amended provisions
include an increase to allowed leverage ratios. In return, the Company agreed
to pay a one-time fee and to an increase in interest rates on amounts borrowed
under the facility. Had the increased interest rates been in effect for the
period from the May 4, 1998 reorganization to September 30, 1998, interest
expense would have increased by approximately $7,300.

F-80
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Ziff-Davis Inc., (formerly Ziff-Davis Publishing Company)

In our opinion, the accompanying combined balance sheets and the related
combined statements of operations, cash flows and changes in division equity,
present fairly, in all material respects, the financial position of the ZD
Publishing Group ("ZD"), a division of Ziff-Davis Inc., formerly Ziff-Davis
Publishing Company (the "Company") at December 31, 1995 and February 28, 1996,
and the results of its operations and its cash flows for the year ended
December 31, 1995 and for the period from January 1, 1996 to February 28, 1996,
in conformity with generally accepted accounting principles. 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 of these statements in accordance with
generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.

As discussed in Note 17 to the Financial Statements, the Company was acquired
by SOFTBANK Holdings Inc. on February 29, 1996. As described in Note 1 to the
financial statements, ZD is a division of Ziff-Davis Inc.; accordingly the
financial statements of ZD should be read in conjunction with the audited
financial statements of Ziff-Davis Inc.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
New York, NY
December 17, 1998

F-81
<PAGE>

ZD PUBLISHING
(A DIVISION OF ZIFF-DAVIS INC.)

COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31, FEBRUARY
1995 28, 1996
------------ ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 10,083 $ 13,669
Accounts receivable, net............................. 109,305 111,368
Inventories.......................................... 21,825 26,009
Deferred taxes....................................... 21,961 23,361
Prepaid postage and other current assets............. 16,570 16,817
---------- ----------
Total current assets................................... 179,744 191,224
Property and equipment, net............................ 62,525 56,873
Retained interest in ZDNet............................. 89,682 91,225
Intangible assets, net................................. 1,265,479 1,256,659
Deferred charges and other assets...................... 27,996 26,457
---------- ----------
Total assets........................................... $1,625,426 $1,622,438
========== ==========
LIABILITIES AND DIVISION EQUITY
Current liabilities:
Accounts payable..................................... $ 55,103 $ 43,097
Accrued expenses..................................... 68,109 77,539
Unearned income, net................................. 81,737 86,435
Due to affiliates and management..................... 58,480 58,762
Current portion of long-term debt.................... 6,847 6,847
Other current liabilities............................ 2,048 2,733
---------- ----------
Total current liabilities.............................. 272,324 275,413
Deferred taxes......................................... 15,432 14,840
Long-term debt......................................... 439,153 439,153
Subordinated debentures--related party................. 525,000 525,000
Other liabilities...................................... 8,367 7,315
---------- ----------
Total liabilities...................................... 1,260,276 1,261,721
---------- ----------
Commitments and contingencies (Notes 15 and 16)
Division equity........................................ 365,150 360,717
---------- ----------
Total liabilities and division equity.................. $1,625,426 $1,622,438
========== ==========
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

F-82
<PAGE>

ZD PUBLISHING
(A DIVISION OF ZIFF-DAVIS INC.)

COMBINED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
JANUARY 1,
YEAR ENDED 1996 TO
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ------------
<S> <C> <C>
Revenue, net........................................ $755,419 $122,562
Cost of production.................................. 192,900 30,974
Selling, general and administrative expenses........ 409,730 68,508
Depreciation and amortization of property and
equipment.......................................... 36,482 6,036
Amortization of intangible assets................... 51,024 8,504
-------- --------
Income from operations............................ 65,283 8,540
Interest expense, net............................... (92,609) (14,030)
Equity in losses of joint ventures.................. (3,391) (235)
Net loss related to retained interest in ZDNet...... (5,755) (814)
-------- --------
Loss before income taxes.......................... (36,472) (6,539)
Income tax benefit.................................. (10,470) (1,992)
-------- --------
Net loss............................................ $(26,002) $ (4,547)
======== ========
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

F-83
<PAGE>

ZD PUBLISHING
(A DIVISION OF ZIFF-DAVIS INC.)

COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 1,
YEAR ENDED 1996 TO
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss........................................... $ (26,002) $(4,547)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization.................... 87,506 14,540
Loss from retained interest in ZDNet............. 5,755 814
Loss from equity investments..................... 3,391 235
Deferred tax benefit............................. (10,470) (1,992)
Changes in operating assets and liabilities:
Accounts receivable............................ (11,175) (2,060)
Inventories.................................... (9,014) (4,184)
Accounts payable and accrued expenses.......... 7,073 (2,587)
Unexpired subscriptions, net................... 2,499 4,698
Due to management and affiliates............... (3,020) 282
Other, net..................................... (3,687) 1,121
----------- -------
Net cash provided by operating activities.......... 42,856 6,320
----------- -------
Cash flows from investing activities:
Capital expenditures............................. (12,573) (384)
Capital contributions to ZDNet................... (7,106) (2,350)
Proceeds from sale of businesses................. 23,508 --
----------- -------
Net cash provided (used) by investing activities... 3,829 (2,734)
----------- -------
Cash flows from financing activities:
Borrowings under revolving credit facility....... 80,625 24,335
Repayment of revolving credit facility........... (60,625) (24,335)
Repayment of acquisition indebtedness............ (1,122,931) --
----------- -------
Net cash used by financing activities.............. (1,102,931) --
----------- -------
Net (decrease) increase in cash and cash
equivalents....................................... (1,056,246) 3,586
Cash and cash equivalents at beginning of period... 1,066,329 10,083
----------- -------
Cash and cash equivalents at end of period......... $ 10,083 $13,669
=========== =======
Supplemental cash flow disclosures:
Interest paid.................................... $ 78,811 $29,255
Income taxes paid................................ $ 92,729 $ --
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

F-84
<PAGE>

ZD PUBLISHING
(A DIVISION OF ZIFF-DAVIS INC.)

COMBINED STATEMENTS OF CHANGES IN DIVISION EQUITY
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
CUMULATIVE TOTAL
PAID-IN ACCUMULATED TRANSLATION DIVISION
CAPITAL DEFICIT ADJUSTMENT EQUITY
-------- ----------- ----------- --------
<S> <C> <C> <C> <C>
Balance at January 1, 1995......... $391,275 $ -- $ -- $391,275
Net loss........................... -- (26,002) -- (26,002)
Foreign currency translation
adjustment........................ -- -- (123) (123)
-------- -------- ----- --------
Balance at December 31, 1995....... 391,275 (26,002) (123) 365,150
Net loss........................... -- (4,547) -- (4,547)
Foreign currency translation
adjustment........................ -- -- 114 114
-------- -------- ----- --------
Balance at February 28, 1996....... $391,275 $(30,549) $ (9) $360,717
======== ======== ===== ========
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

F-85
<PAGE>

ZD PUBLISHING
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

1. ORGANIZATION AND BASIS OF PRESENTATION

ZD Publishing ("ZD") is a division of Ziff-Davis Inc. Ziff-Davis Inc. (the
"Company") is a wholly-owned subsidiary of Ziff-Davis Holdings Corp.
("Holdings").

ZD is engaged in publishing magazines, journals and training manuals and
providing market research about the computer industry, with operations in the
United States, Canada and Europe.

In order to prepare separate financial statements for ZD and ZDNet, the
Company has allocated all of its consolidated assets, liabilities, revenues,
expenses and cash flow between ZD and ZDNet. ZDNet Group (or "ZDNet") comprises
the Company's online business division, and ZD comprises the Company's other
businesses and a "100% Retained Interest" in ZDNet. Thus, the financial
statements of ZD and ZDNet, taken together, comprise all of the accounts
included in the corresponding consolidated financial statements of the Company.

Management believes the financial statements for ZD have been prepared on a
basis that is reasonable and appropriate. ZD's financial statements reflect the
application of certain cash management and allocation policies adopted by the
Board of Directors of the Company (the "Board"). These policies are summarized
under "Certain Cash Management and Allocation Policies" below.

Financial impacts arising from ZDNet that affect the Company's consolidated
results of operations or financial position could affect the results of
operations or financial condition of ZD. Accordingly, financial information for
ZD should be read in conjunction with financial information for ZDNet and
financial information for the consolidated Company.

Acquisition

Effective January 1, 1995, Holdings, through the Company, directly and
indirectly acquired certain assets and assumed certain liabilities of the ZD
Publishing Group publishing business and related businesses (the "Acquisition"
or the "Acquired Businesses") from Ziff Communications Company, L.P., a limited
partnership ("ZCC") and other persons and entities (collectively referred to as
the "Sellers"), for an aggregate purchase price of approximately $1,400,000
plus transaction costs. The Company funded the Acquisition through the issuance
of Common Stock, bank borrowings and a subordinated note payable to Holdings.

F-86
<PAGE>

ZD PUBLISHING
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

The acquisition has been accounted for using the purchase method of
accounting.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Combination

The combined financial statements include the accounts of ZD Publishing. All
significant transactions between businesses have been eliminated in
combination.

Investments in companies in which ownership interests range from 20 to 50
percent are accounted for under the equity method. ZD has an equity investment
interest in Family PC G.P. of 50%. The equity investment in Family PC G.P. is
not material to ZD's combined financial statements.

Cash and cash equivalents

ZD considers all highly liquid investments with an original maturity of three
months or less to be cash equivalents.

Concentration of credit risk

ZD places its temporary cash investments with high credit quality financial
institutions. At times, such investments may be in excess of federally insured
limits. ZD has not experienced losses in such accounts.

ZD's customers represent a variety of technology companies in the United
States and other countries. ZD Publishing Group extends credit to its customers
and historically has not experienced significant losses relating to receivables
from individual customers or groups of customers.

Property and equipment

Property and equipment have been recorded at their estimated fair value at
the date of acquisition. Depreciation is computed using the straight-line
method over the estimated useful lives of the acquired assets, ranging from 3
to 39 years. Leasehold improvements are amortized using the straight-line
method over the service life of the improvement or the life of the related
lease, whichever is shorter. Maintenance and repair costs are charged to
expense as incurred.

Paper inventories

Paper inventories are stated at the lower of cost or market. Cost is
determined on a first-in, first-out basis.

F-87
<PAGE>

ZD PUBLISHING
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

Investment in ZDNet Group

The Company determined the accounting for ZD's Retained Interest in ZDNet, in
part, by analogy to APB No. 18, "The Equity Method of Accounting for
Investments in Common Stock".

Intangible assets

Intangible assets consist principally of advertising lists, trademarks and
trade names and goodwill. Amortization of these assets is computed on a
straight-line basis over their estimated useful lives. Identifiable intangible
assets are amortized over a period of 2 to 39 years and goodwill, which
represents the excess of the purchase price over the estimated fair values of
net assets acquired, is amortized over 40 years. ZD assesses the recoverability
of its intangible assets whenever adverse events or changes in circumstances
indicate that expected future cash flows (undiscounted and without interest
charges) may not be sufficient to support the carrying amount of intangible
assets. If undiscounted cash flows are not sufficient to support the recorded
assets, an impairment loss is recognized to reduce the carrying value of the
intangibles to its estimated recoverable value.

Revenue recognition

Advertising revenue for ZD Publishing Group's publications, less agency
commissions, is recognized as income in the month that the related publications
are sent to subscribers or becomes available for sale at newsstands.

Circulation revenue consists of both subscription and single copy newsstand
sales. Subscription revenue, less estimated cancellations, is deferred and
recognized as income in the month that the related publications are sent to
subscribers. Newsstand sales, less estimated returns, are recognized in the
month that the related publications become available for sale at newsstands.

Revenue generated by market research is recognized when the service is
provided.

F-88
<PAGE>

ZD PUBLISHING
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

Operating costs and expenses

Cost of production includes paper, manufacturing, distribution and
fulfillment. Selling and promotion costs include subscriber acquisition costs
which are expensed as incurred. Editorial and product development costs are
generally expensed as incurred. Product development costs include the cost of
artwork, graphics, prepress, plates and photography for new products.

Foreign currency

Gains and losses on foreign currency transactions, which are not significant,
have been included in selling, general and administrative expenses. The effect
of translation of foreign currency financial statements into U.S. dollars is
included in the cumulative translation adjustments account in division equity.

Income taxes

ZD uses the asset and liability approach for financial accounting and
reporting of deferred taxes.

Use of estimates

Fair value of financial instruments

All current assets and liabilities are carried at cost, which approximates
fair value because of the short-term maturity of those instruments. The
recorded amounts of ZD's long-term debt also approximate fair value which was
based upon the current rates available to ZD for debt with similar remaining
maturities.

Impairment of long-lived assets

In 1995, the Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of" ("SFAS 121"). ZD Publishing Group adopted SFAS 121 in fiscal
1996 with no effect on operations.

F-89
<PAGE>

ZD PUBLISHING
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

3. CERTAIN CASH MANAGEMENT AND ALLOCATION POLICIES

ZD's financial statements reflect the application of certain cash management
and allocation policies summarized below.

Treasury Activities

The Company manages most treasury activities on a centralized, consolidated
basis. These activities include the investment of surplus cash, the issuance,
repayment and repurchase of short-term and long-term debt, and the issuance and
repurchase of common stock and preferred stock. Each of ZD and ZDNet generally
remits its cash receipts (other than receipts of foreign operations or
subsidiaries that are not wholly-owned) to the Company, and the Company
generally funds ZD's and ZDNet's cash disbursements (other than disbursements
of foreign operations or subsidiaries that are not wholly-owned), on a daily
basis.

In the financial statements of ZD and ZDNet, (1) all external debt and equity
transactions (and the proceeds thereof) were attributed to ZD, (2) whenever
ZDNet held cash (other than cash of ZDNet's foreign operations or cash of
ZDNet's subsidiaries that are not wholly owned), that cash was transferred to
ZD and accounted for as a return of capital (i.e., as a reduction in ZDNet's
division equity and ZD's Retained Interest in ZDNet) and (3) whenever ZDNet had
a cash need (other than cash needs of ZDNet's foreign operations or cash needs
of ZDNet's subsidiaries that are not wholly-owned), that cash need was funded
by ZD and accounted for as a capital contribution (i.e., as an increase in
ZDNet's division equity and ZD's Retained Interest in ZDNet). Accordingly, no
interest income or expense from or to ZDNet has been reflected in the financial
statements of ZD for any period.

Corporate General and Administrative Expenses

The Company allocates the cost of certain corporate, general and
administrative services and shared services (including certain legal,
accounting (tax and financial), information systems, telecommunications,
purchasing, marketing, intellectual property, public relations, corporate
office and travel expenses (collectively, "Central Services"), to ZD Publishing
based on utilization. Where determinations based on utilization alone are
impracticable, the Company uses other methods and criteria that management
believes to be equitable and to provide a reasonable estimate of the cost
attributable to ZD.

Taxes

F-90
<PAGE>

ZD PUBLISHING
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

related tax payments or refunds) are allocated between the Groups based
principally upon the financial income, taxable income, credits and other
amounts directly related to the respective Groups. Tax benefits that cannot be
used by the Group generating such attributes, but can be utilized on a
consolidated basis, are allocated to the Group that generated such benefits. As
a result, the allocated Group amounts of taxes payable or refundable are not
necessarily comparable to those that would have resulted if the Groups had
filed separate tax returns. State income taxes generally are computed on a
separate company basis.

Royalty Charges

ZD charges ZDNet an annual fee for the use of various brands and editorial
content. The current annual fee, which is reflected in ZD's financial
statements as a reduction of selling, general and administrative expenses, is
equal to 5% of the first $100,000 of ZDNet revenue, 4% of the next $50,000 of
ZDNet's revenue for that year and 3% of any incremental revenue over $150,000
for that year.

4. ACCOUNTS RECEIVABLE, NET

Accounts receivable, net consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ------------
<S> <C> <C>
Accounts receivable............................ $165,188 $161,329
Allowance for doubtful accounts, returns and
cancellations................................. (55,883) (49,961)
-------- --------
$109,305 $111,368
======== ========

5. PROPERTY AND EQUIPMENT, NET

Property and equipment, net, consist of the following:

<CAPTION>
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ------------
<S> <C> <C>
Computers and equipment........................ $ 54,447 $ 54,829
Leasehold improvements......................... 25,831 25,831
Furniture and fixtures......................... 11,808 11,808
Other.......................................... 7,029 7,029
-------- --------
99,115 99,497
Accumulated depreciation and amortization...... (36,590) (42,624)
-------- --------
$ 62,525 $ 56,873
======== ========
</TABLE>

F-91
<PAGE>

ZD PUBLISHING
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

6. INTANGIBLE ASSETS, NET

Intangible assets, net, consist of the following:

<TABLE>
<CAPTION>
RANGE OF
LIVES DECEMBER 31, FEBRUARY 28,
(YEARS) 1995 1996
-------- ------------ ------------
<S> <C> <C> <C>
Advertiser lists........................ 7-39 $ 643,400 $ 643,400
Trademarks and trade names.............. 30 235,820 235,820
Subscriber lists........................ 3-10 43,136 43,136
Other................................... 2-5 28,800 28,800
License agreements...................... 6-14 11,211 11,211
Goodwill................................ 40 354,136 353,820
---------- ----------
1,316,503 1,316,187
Accumulated amortization................ (51,024) (59,528)
---------- ----------
$1,265,479 $1,256,659
========== ==========
</TABLE>

Intangible assets primarily relate to the acquisition of ZD. As discussed in
Note 1, the acquisition was accounted for under the purchase method of
accounting. As such the purchase price was allocated to tangible and
identifiable intangible assets with the remaining amount allocated to goodwill.

Advertising lists, exhibitor relationships and subscriber lists were recorded
at their estimated fair value as determined by an "income" approach.
Trademarks/trade names were recorded at their estimated fair value using a
"relief from royalty" approach.

All intangible assets are being amortized using the straight-line method over
their estimated useful lives, up to 40 years. In determining the estimated
useful lives, ZD considered its competitive position in the markets in which it
operates, the historical attrition rates of advertisers, exhibitors and
subscribers, legal and contractual obligations, and other factors.

7. ACCRUED EXPENSES

Accrued expenses consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ------------
<S> <C> <C>
Payroll and related employee benefits............ $35,044 $35,152
Accrued interest................................. 16,804 27,526
Other taxes payable.............................. 1,588 2,576
Other accrued expenses........................... 14,673 12,285
------- -------
$68,109 $77,539
======= =======
</TABLE>

F-92
<PAGE>

ZD PUBLISHING
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

8. INCOME TAXES

Income tax benefits and related assets and liabilities attributed to ZD are
determined in accordance with the Company's tax allocation policy (Note 3)

Loss before income taxes is attributable to the following jurisdictions:

<TABLE>
<CAPTION>
JANUARY 1
YEAR ENDED TO
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ------------
<S> <C> <C>
United States.................................... $(28,059) $(4,648)
Foreign.......................................... (8,413) (1,891)
-------- -------
Total.......................................... $(36,472) $(6,539)
======== =======
</TABLE>

Components of the income tax benefit are as follows:
<TABLE>
<CAPTION>
JANUARY 1
YEAR ENDED THROUGH
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ------------
<S> <C> <C>
U.S. federal income taxes:
Current........................................ $ -- $ --
Deferred....................................... (8,114) (1,544)
State and local income taxes:
Current........................................ -- --
Deferred....................................... (2,356) (448)
Foreign income taxes............................. -- --
-------- -------
Total income tax benefit..................... $(10,470) $(1,992)
======== =======
</TABLE>

A reconciliation of the U.S. federal statutory tax rate to ZD Publishing
Group's effective tax rate on loss before income taxes is as follows:
<TABLE>
<CAPTION>
JANUARY 1
YEAR ENDED TO
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ------------
<S> <C> <C>
Federal statutory tax note..................... 35.0% 35.0%
State and local taxes (net of federal tax
benefit)...................................... 6.0 6.0
Equity in losses of ZDNet...................... (6.5) (5.1)
Foreign losses................................. (2.6) (1.7)
Amortization of nondeductible goodwill......... (1.4) (1.4)
Other nondeductible expenses................... (1.8) (2.3)
---- ----
Effective tax rate........................... 28.7% 30.5%
==== ====
</TABLE>

F-93
<PAGE>

ZD PUBLISHING
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

Following is a summary of the components of the deferred tax accounts at
December 31, 1995 and February 28, 1996:

<TABLE>
<CAPTION>
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ------------
<S> <C> <C>
Current deferred tax assets:
Allowance for doubtful accounts.............. $ 8,293 $ 8,432
Employee compensation, bonus, and vacation... 12,183 12,581
Other........................................ 1,485 2,348
-------- --------
Current deferred tax assets................ 21,961 23,361
-------- --------
Noncurrent deferred tax assets and
(liabilities):
Basis difference in intangible assets........ (68,224) (70,402)
Basis difference in property and equipment... (3,401) (1,876)
Deferred rental expense...................... 3,285 3,139
Net operating loss carryforwards............. 97,196 98,258
Acquisition reserves......................... 2,773 2,756
Other........................................ (220) (36)
-------- --------
Gross noncurrent deferred tax assets....... 31,409 31,839
Valuation allowance.......................... (46,841) (46,679)
-------- --------
Net noncurrent deferred tax assets and
(liabilities)............................. (15,432) (14,840)
-------- --------
Total net deferred tax assets.................. $ 6,529 $ 8,521
======== ========
</TABLE>

As of December 31, 1995 and February 28, 1996, ZD had total deferred tax
assets of $78,374 and $80,835, respectively, and total deferred tax liabilities
of $71,845 and $72,314, respectively.

As of February 28, 1996, ZD has U.S. and foreign net operating loss
carryforwards of approximately $230,000, which will begin to expire on December
31, 1996. The December 31, 1995 and the February 28, 1996 net deferred tax
asset is reduced by a valuation allowance of $46,841 and $46,679, respectively,
relating to tax benefits of foreign net operating loss carryforwards which are
not expected to be recognized.

ZD's foreign operations have no undistributed earnings for remittance to the
U.S. and therefore no U.S. or foreign tax provision on remittances has been
recorded.

F-94
<PAGE>

ZD PUBLISHING
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

9. DUE TO MANAGEMENT AND AFFILIATES

Payables to management and affiliates consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ------------
<S> <C> <C>
Payable to:
Management..................................... $28,161 $28,443
Sellers........................................ 21,500 21,500
Holdings....................................... 8,819 8,819
------- -------
$58,480 $58,762
======= =======
</TABLE>

As part of the Acquisition, ZD agreed to assume certain obligations to
management arising out of prior employment arrangements. Approximately $40,000
was due under these arrangements, of which approximately $12,000 was paid in
1995. The balance of the obligation, including accrued interest, was paid in
1997.

Amounts due to sellers represent final amounts payable related to the
Acquisition.

10. LONG-TERM DEBT

Long-term debt at December 31, 1995 and February 28, 1996 is comprised of the
following:

<TABLE>
<S> <C>
Bank debt:
Tranche A........................................................ $ 86,604
Tranche B........................................................ 179,479
Tranche C........................................................ 159,917
Revolving credit arrangement..................................... 20,000
--------
446,000
Less--Current portion............................................ (6,847)
--------
$439,153
========
</TABLE>

On December 21, 1994, the Company borrowed $515,000 under the terms of a
Credit Agreement. The proceeds of the loan were used to finance a portion of
the Acquisition and pay certain transaction costs.

Tranche A, as amended on August 31, 1995, is a six-year term loan due
quarterly in varying amounts from September 30, 1995 through December 31, 2000.
Tranche B is a seven-year term loan due quarterly in varying amounts commencing
September 30, 1995 through September 30, 2001, with a final payment of $126,000
on December 31, 2001. Tranche C is an eight-year term loan providing for
quarterly payments, aggregating $1,000 per calendar year commencing September
30, 1995 through December 31, 2001, followed by four quarterly payments of
$39,500 through December 31, 2002.

F-95
<PAGE>

ZD PUBLISHING
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

The Credit Agreement also provides the Company with an additional $85,000,
increased to $150,000 under terms of the August 31, 1995 amendment, under a
revolving credit arrangement through December 31, 2000. These funds are
available for loans, letters of credit, and swing-line loans, subject to
certain maximum levels of borrowing. At least once during each year, for a
period of 30 consecutive days, the loans outstanding under the revolving credit
facility must be reduced so that the aggregate outstanding amount does not
exceed $130,000 during such 30-day period. The commitment fee for the revolving
credit facility is .50% during 1995 and 1996 on the unused portion of the
facility. The Company has the option to permanently reduce the amount available
for borrowings under the revolving credit facility by a minimum of $5,000 at
any time. At December 31, 1995 and February 28, 1996, $130,000 under the
revolving credit facility is available for borrowing.

During 1995 and the period January 1, 1996 to February 28, 1996, the Tranche
A and revolving credit loans bore interest, payable at least quarterly, at
either the Average Bank Rate ("ABR"), as defined, plus 1.25%, or at the
Eurodollar rate, plus 2.5% at the election of the Company. Tranche B and C
loans bore interest, payable at least quarterly, at either the ABR, plus 1.75%
and 2.25%, respectively, or at the Eurodollar rate, as defined, plus 3% and
3.5%, respectively, at the election of the Company. Swing-line loans bear
interest at the ABR, plus the applicable margins as discussed above. Borrowings
outstanding at December 31, 1995 and February 28, 1996 were $446,000 and the
weighted average interest rate was 8.8% and 10.1%, respectively.

The Company is required to comply with various restrictive covenants,
including maintaining certain financial ratios, restrictions on additional
indebtedness, capital expenditures, acquisitions, certain asset sales,
declaration of dividends and acquisition of the Company's or Holdings' Common
Stock. All borrowings under the Credit Agreement are secured by the common
stock and other equity interests of the Company and its wholly-owned
subsidiaries.

The Company is required to make mandatory prepayments of the loans with the
net proceeds of certain asset sales and debt issuances, if any. The Company is
also required, commencing with the year ending December 31, 1995, to prepay the
loans with a portion of excess cash flow, as defined, once certain cash
balances are achieved. These cash balances were not achieved during 1995 or for
the period from January 1, 1996 to February 28, 1996 and therefore no
prepayments occurred.

F-96
<PAGE>

ZD PUBLISHING
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

Scheduled principal payments for each of the next five years are as follows:

<TABLE>
<S> <C>
1996.............................................................. $ 6,847
1997.............................................................. 13,518
1998.............................................................. 21,524
1999.............................................................. 23,658
2000.............................................................. 52,795
Thereafter........................................................ 327,658
--------
Total........................................................... $446,000
========
</TABLE>

11. RELATED PARTY TRANSACTIONS

Prior to the Acquisition, ZCC provided certain services to ZD, including
legal, tax, human resources, payroll, facilities management and management
information services. The remaining unpaid balance (approximately $8,100) for
such services was paid in the normal course of business during 1995. Beginning
in 1995, ZD sublet office space and provided administrative services to ZCC.
Such office space and services were provided to ZCC at ZD's cost. The majority
partners of ZCC have a continuing investment in Holdings of approximately 6%.

On the closing date of the Acquisition, ZD paid approximately $280,000 in
cash to the Sellers and issued notes due January 13, 1995 and January 16, 1995
totaling $1,033,931, for the balance. These notes were subsequently fully paid
in January, 1995.

See Note 12 for a description of subordinated debentures.

In connection with the Acquisition, ZD paid transaction costs of $14,000 to
an affiliate of Holdings.

The Company paid $44,555 and $3,791 in interest to Holdings for the year
ended December 31, 1995 and for the period from January 1, 1996 to February 28,
1996, respectively.

ZD receives from ZDNet a royalty for the use of various brands and editorial
contents (See Note 3). The royalty charges recorded as a reduction of selling
general and administrative expenses were $679 and $145 for the year ended
December 31, 1995 and the period January 1, 1996 to February 28, 1996.

ZD's publications sell advertising to ZDNet at discounts to market rates. Had
ZD charged market rates for such advertising, ZD's revenue would have increased
by $178 and $57 for the years ended December 31, 1995, and the period from
January 1, 1996 to February 28, 1996, respectively.

F-97
<PAGE>

ZD PUBLISHING
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

12. SUBORDINATED DEBENTURES--RELATED PARTY

On December 21, 1994, the Company issued a $525,000 subordinated note payable
to Holdings to finance a portion of the Acquisition. The note bears interest at
8 1/2% per annum with interest payable semiannually on February 28 and August
31 of each year. The principal is repayable in three installments of $175,000
each on December 21, 2005, December 21, 2006 and December 21, 2007. This note
is fully subordinated in right of payment to the bank borrowings (see Note 10).

13. EMPLOYEE BENEFIT PLANS

Retirement plans

The Company and its subsidiaries maintain various defined contribution
retirement plans. Substantially all of ZD's employees are eligible to
participate in one of the plans under which annual contributions may be made by
ZD for the benefit of all eligible employees. Employees may also make
contributions to the plan in which they participate which, subject to certain
limitations, may be matched by the Company up to certain specified percentages.
Employees are generally eligible to participate in a plan upon joining the
Company and receive matching contributions immediately upon commencement of
employment. In addition, the employees become eligible to receive a
discretionary Company contribution after one year of employment. ZD made
contributions of $8,097 and $1,391 for the year ended December 31, 1995 and for
the period ended February 28, 1996, respectively.

14. SALE OF BUSINESSES

During 1995, ZD disposed of two subsidiaries and received cash consideration
of $23,508. No gain or loss was realized on the dispositions.

15. OPERATING LEASE COMMITMENTS

ZD utilizes equipment and space under lease to the Company. ZD's portion of
the minimum lease payments based on square feet utilized as follows:

<TABLE>
<S> <C>
1996 (ten-month period)........................................... $15,251
1997.............................................................. 18,635
1998.............................................................. 17,132
1999.............................................................. 11,189
2000.............................................................. 8,113
Thereafter........................................................ 3,930
-------
Total........................................................... $74,250
=======
</TABLE>

F-98
<PAGE>

ZD PUBLISHING
(A DIVISION OF ZIFF-DAVIS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

Netted in the above totals is approximately $2,300 for which ZD has
noncancelable subleases in place. Total sublease income approximates ZD's
required payments under the related leases. Rent expense amounted to
approximately $22,117 and $3,909 for the year ended December 31, 1995 and for
the period from January 1, 1996 to February 28, 1996, respectively.

16. CONTINGENCIES

ZD is subject to various claims and legal proceedings arising in the normal
course of business. Management believes that the ultimate liability, if any, in
the aggregate will not be material to the combined balance sheet, future
operations or cash flows.

17. SUBSEQUENT EVENT

Acquisition of the Company

In February 1996, SOFTBANK Corp. entered into an agreement to acquire the
stock of the Company for an aggregate purchase price of approximately
$1,800,000, plus transaction costs. In a separate agreement, MAC Inc. Ltd., an
affiliated company of SOFTBANK Corp., acquired directly and through affiliates,
certain of the assets and assumed certain of the liabilities of ZD for an
aggregate purchase price of approximately $302,000.

F-99
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholder of
Ziff-Davis Inc. and ZD COMDEX and Forums Inc.

In our opinion, the accompanying combined balance sheets and the related
combined statements of operations, cash flows and changes in stockholder's
equity, present fairly, in all material respects, the financial position of
Ziff-Davis Inc. and ZD COMDEX and Forums Inc. and their subsidiaries (the
"Companies") at December 31, 1997 and 1996, and the results of Ziff-Davis
Inc.'s operations and cash flows for the period from February 29, 1996 to
December 31, 1996 and for the year ended December 31, 1997 and the results of
ZD COMDEX and Forums Inc.'s operations and cash flows for each of the three
years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles. 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. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

/s/ Price Waterhouse LLP

Price Waterhouse LLP
New York, NY
February 17, 1998

F-100
<PAGE>

ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)

COMBINED BALANCE SHEETS
(FINANCIAL AND OTHER INFORMATION SUBSEQUENT TO FEBRUARY 17, 1998 IS UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
---------------------- 1998
1996 1997 CONSOLIDATED
---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............. $ 29,915 $ 30,301 $ 27,153
Accounts receivable, net.............. 203,863 221,310 195,330
Inventories........................... 16,804 17,853 19,065
Prepaid expenses and other current as-
sets................................. 35,190 37,900 45,406
Due from affiliates................... 77,208 131,290 46,472
Deferred taxes........................ 8,674 8,794 8,794
---------- ---------- ----------
Total current assets.................... 371,654 447,448 342,220
Property and equipment, net............. 53,561 53,536 68,149
Intangible assets, net.................. 3,148,333 3,030,333 2,947,913
Other assets............................ 10,625 15,329 54,419
---------- ---------- ----------
Total assets............................ $3,584,173 $3,546,646 $3,412,701
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................... $ 57,105 $ 55,468 $ 44,243
Accrued expenses...................... 79,921 80,094 104,670
Unearned income, net.................. 174,876 154,682 220,872
Due to affiliates and management...... 69,416 398,332 --
Current portion of notes payable to
affiliates........................... 33,198 125,790 7,692
Other current liabilities............. 3,890 4,222 6,323
---------- ---------- ----------
Total current liabilities............... 418,406 818,588 383,800
Notes payable to affiliates............. 2,522,252 2,408,240 71,924
Notes payable, net of unamortized dis-
count.................................. -- -- 1,454,123
Deferred taxes.......................... 181,309 180,117 146,997
Other liabilities....................... 14,450 13,571 11,809
---------- ---------- ----------
Total liabilities....................... 3,136,417 3,420,516 2,068,653
---------- ---------- ----------
Commitments and contingencies (Notes 15,
16 and 18)
Stockholders' equity:
Preferred stock(1).................... -- -- --
Common stock(2)....................... -- -- 1,000
Additional paid-in capital............ 498,818 248,330 1,550,239
Accumulated deficit................... (48,250) (119,429) (205,608)
Deferred compensation................. (2,448) (996) (807)
Cumulative translation adjustment..... (364) (1,775) (776)
---------- ---------- ----------
Total stockholders' equity.............. 447,756 126,130 1,344,048
---------- ---------- ----------
Total liabilities and stockholders' eq-
uity................................... $3,584,173 $3,546,646 $3,412,701
========== ========== ==========
</TABLE>
- --------
(1) September 30, 1998: par value $.01 per share, 10,000,000 shares authorized,
no shares issued and outstanding; December 31, 1997 and 1996: par value
$.01 per share, 10,000,000 shares authorized, no shares issued and
outstanding.
(2) September 30, 1998: par value $.01 per share, 120,000,000 shares
authorized, 100,000,000 shares issued and outstanding; December 31, 1997
and 1996: par value $.01 per share, 2,000 shares authorized, 200 shares
issued and outstanding.

The accompanying notes are an integral part of these financial statements.

F-101
<PAGE>

ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)

COMBINED STATEMENTS OF OPERATIONS
(FINANCIAL AND OTHER INFORMATION SUBSEQUENT TO FEBRUARY 17, 1998 IS UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

The accompanying notes are an integral part of these financial statements.

F-102
<PAGE>

ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)

COMBINED STATEMENTS OF CASH FLOWS
(FINANCIAL AND OTHER INFORMATION SUBSEQUENT TO FEBRUARY 17, 1998 IS UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------- -----------------------
1998
1995 1996 1997 1997 CONSOLIDATED
--------- ----------- -------- --------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operat-
ing activities:
Net income (loss)....... $ 10,945 $ (52,081) $(71,179) $(143,810) $ (86,179)
Adjustments to reconcile
net income (loss) to
net cash provided
(used) by operating ac-
tivities:
Depreciation and amor-
tization.............. 24,305 139,736 154,940 117,697 114,594
Amortization of debt
issuance costs and
discount.............. -- -- -- -- 1,313
Income from equity in-
vestments............. -- (115) (2,030) (252) (4,688)
Deferred tax provision
(benefit)............. 11,924 24,957 (1,312) (984) (33,589)
Changes in operating
assets and liabili-
ties:
Accounts receivable... (25,379) (38,086) (18,899) 23,395 28,622
Inventories........... -- 7,788 (853) (1,631) (591)
Accounts payable and
accrued expenses..... 9,516 12,850 (7,376) (28,883) 6,703
Unearned income....... (3,153) 1,392 (20,194) 80,118 62,770
Due to affiliates and
management........... (7,460) (29,303) (38,543) (50,666) 10,707
Other, net............ 5,470 (5,595) 2,082 (15,634) (16,871)
--------- ----------- -------- --------- -----------
Net cash provided (used)
by operating
activities............. 26,168 61,543 (3,364) (20,650) 82,791
--------- ----------- -------- --------- -----------
Cash flows from invest-
ing activities:
Capital expenditures.. (3,367) (22,365) (30,196) (18,636) (27,399)
Investments........... -- -- -- (60) (6,193)
Acquisitions, net of
cash acquired........ (814,520) (2,124,823) (14,000) (2,998) (6,999)
--------- ----------- -------- --------- -----------
Net cash used by invest-
ing activities......... (817,887) (2,147,188) (44,196) (21,694) (40,591)
--------- ----------- -------- --------- -----------
Cash flows from financ-
ing activities:
Proceeds from equity
offering............. -- -- -- -- 380,337
Proceeds from issuance
of notes payable..... -- -- -- -- 242,723
Proceeds from issuance
of bank debt......... -- -- -- -- 1,240,200
Proceeds from notes
payable to affili-
ates................. 575,450 1,080,000 10,000 -- --
Payments of amounts
due to affiliates.... -- -- -- -- (314,798)
Payments of bank
debt................. -- -- -- -- (45,000)
Principal payments on
notes payable to
affiliates........... (77,450) -- (31,420) (19,162) (1,569,532)
Purchase of treasury
shares............... -- -- -- -- (29,500)
Sale of treasury
shares............... -- -- -- -- 29,500
Advance from majority
shareholder.......... -- -- -- -- 20,377
Contributed capital... 317,408 1,015,652 69,366 69,366 345
Payment of dividends.. -- (8,000) -- -- --
--------- ----------- -------- --------- -----------
Net cash provided (used)
by financing
activities............. 815,408 2,087,652 47,946 50,204 (45,348)
Net increase (decrease)
in cash and cash
equivalents............ 23,689 2,007 386 7,860 (3,148)
Cash and cash
equivalents at
beginning of period.... 4,219 27,908 29,915 29,915 30,301
--------- ----------- -------- --------- -----------
Cash and cash equiva-
lents at end of peri-
od..................... $ 27,908 $ 29,915 $ 30,301 $ 37,775 $ 27,153
========= =========== ======== ========= ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-103
<PAGE>

ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)

COMBINED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(FINANCIAL AND OTHER INFORMATION SUBSEQUENT TO FEBRUARY 17, 1998 IS UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
ZIFF-DAVIS INC. ZDI ZDCF ADDITIONAL RETAINED CUMULATIVE
------------------- TREASURY ------------- ------------- PAID-IN EARNINGS DEFERRED TRANSLATION
SHARES AMOUNT STOCK SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) COMPENSATION ADJUSTMENT
----------- ------ -------- ------ ------ ------ ------ ---------- --------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
January 1,
1995........... -- $ -- $ -- -- $ -- 100 $ -- $ 62,178 $ 886 $ -- $ --
Capital
contribution
from Softbank.. 317,408
Net income...... 10,945
Foreign currency
translation
adjustment..... 111
----------- ------ ------- ---- ----- ---- ----- ---------- --------- ------ ------
Balance at
December 31,
1995........... -- -- -- -- -- 100 -- 379,586 11,831 -- 111
Acquisition of
Ziff-Davis
Inc............ 100 -- 1,014,178
Return of
capital........ (899,948)
Capital
contribution... 1,474
Dividend paid... (8,000)
Shares
contributed to
restricted
stock plan..... 3,528 (3,528)
Compensation
earned on
restricted
stock.......... 1,080
Net loss........ (52,081)
Foreign currency
translation
adjustment..... (475)
----------- ------ ------- ---- ----- ---- ----- ---------- --------- ------ ------
Balance at
December 31,
1996........... -- -- -- 100 -- 100 -- 498,818 (48,250) (2,448) (364)
Return of
capital........ (381,434)
Capital
contribution... 128,482
Shares
contributed to
restricted
stock plan..... 2,464 (2,464)
Compensation
earned on
restricted
stock.......... 3,916
Net loss........ (71,179)
Foreign currency
translation
adjustment..... (1,411)
----------- ------ ------- ---- ----- ---- ----- ---------- --------- ------ ------
Balance at
December 31,
1997........... -- -- -- 100 -- 100 -- 248,330 (119,429) (996) (1,775)
Capital
contribution... 9,007
Capitalization
of amounts due
to affiliates.. 908,673
Contribution of
subsidiaries
from SBH to
Ziff-Davis
Inc............ 73,619,355 736 (100) -- (100) --
Initial public
offering....... 25,800,000 258 375,235
Acquisition of
fixed assets
from an
affiliate...... 580,645 6 8,994
Purchase of
treasury shares
from SBH....... (2,000,000) (20) (29,480)
Sale of treasury
shares to the
public......... 2,000,000 20 29,480
Net loss........ (86,179)
Compensation
earned on
restricted
stock.......... 189
Foreign currency
translation
adjustment..... 999
----------- ------ ------- ---- ----- ---- ----- ---------- --------- ------ ------
Balance at
September 30,
1998
(unaudited).... 100,000,000 $1,000 $ -- -- $ -- -- $ -- $1,550,239 $(205,608) $ (807) $ (776)
=========== ====== ======= ==== ===== ==== ===== ========== ========= ====== ======
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
Balance at
January 1,
1995........... $ 63,064
Capital
contribution
from Softbank.. 317,408
Net income...... 10,945
Foreign currency
translation
adjustment..... 111
-------------
Balance at
December 31,
1995........... 391,528
Acquisition of
Ziff-Davis
Inc............ 1,014,178
Return of
capital........ (899,948)
Capital
contribution... 1,474
Dividend paid... (8,000)
Shares
contributed to
restricted
stock plan..... --
Compensation
earned on
restricted
stock.......... 1,080
Net loss........ (52,081)
Foreign currency
translation
adjustment..... (475)
-------------
Balance at
December 31,
1996........... 447,756
Return of
capital........ (381,434)
Capital
contribution... 128,482
Shares
contributed to
restricted
stock plan..... --
Compensation
earned on
restricted
stock.......... 3,916
Net loss........ (71,179)
Foreign currency
translation
adjustment..... (1,411)
-------------
Balance at
December 31,
1997........... 126,130
Capital
contribution... 9,007
Capitalization
of amounts due
to affiliates.. 908,673
Contribution of
subsidiaries
from SBH to
Ziff-Davis
Inc............ 736
Initial public
offering....... 375,493
Acquisition of
fixed assets
from an
affiliate...... 9,000
Purchase of
treasury shares
from SBH....... (29,500)
Sale of treasury
shares to the
public......... 29,500
Net loss........ (86,179)
Compensation
earned on
restricted
stock.......... 189
Foreign currency
translation
adjustment..... 999
-------------
Balance at
September 30,
1998
(unaudited).... $1,344,048
=============
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-104
<PAGE>

ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS
(FINANCIAL AND OTHER INFORMATION SUBSEQUENT TO FEBRUARY 17, 1998 IS UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

1. THE COMPANIES AND BASIS OF PRESENTATION

The financial statements as of December 31, 1997 and for each of the three
years in the period then ended, are prepared on a combined basis and include
the accounts of ZDI ("Ziff-Davis Inc.") and ZDCF ("ZD COMDEX and Forums, Inc.")
and their subsidiaries and predecessor companies (collectively the
"Companies"). The Companies are wholly owned indirect subsidiaries of SOFTBANK
Corp., a Japanese corporation which, as of December 31, 1997, was 50.2% owned
by Mr. Son, its President, including 43.4% directly owned by his wholly owned
holding company, MAC Inc. (along with its affiliates "MAC"), also a Japanese
corporation. SOFTBANK Corp. and its affiliates are hereafter referred to as
"Softbank". Concurrent with the Reorganization and Initial Public Offering
(described below) Ziff-Davis Inc. was renamed ZD Inc. and ZD COMDEX and Forums
Inc. was renamed ZD Events, Inc.

The Companies operate in two business segments: (1) publishing and (2)
events.

Publishing

Events

Acquisition of ZDI (formerly Ziff-Davis Publishing Company and Ziff-Davis
Holdings Corp.)

In February 1996, Softbank acquired the stock of Ziff-Davis Holdings Corp.
("Holdings") for an aggregate purchase price of approximately $1,800,000, plus
transaction costs. Concurrent with the acquisition, in a separate agreement,
MAC, directly or through wholly owned affiliates, acquired certain of the
assets and assumed certain of the liabilities of ZDI (the "MAC Assets") for an
aggregate purchase price of approximately $302,000.

F-105
<PAGE>

ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(FINANCIAL AND OTHER INFORMATION SUBSEQUENT TO FEBRUARY 17, 1998 IS UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

The acquisitions of ZDI by the Companies and the MAC Assets by MAC have been
accounted for as of February 29, 1996 using the purchase method of accounting.
The excess of the purchase price over the fair value of the assets acquired and
liabilities assumed was $1,922,000 and $285,000, respectively.

Subsequent to the acquisition, Holdings and ZDI were merged with ZDI being
the surviving corporation.

Unaudited summarized pro forma financial information

The following unaudited summarized pro forma financial information presents
the results of operations of the Companies as if the acquisition of ZDI had
taken place on January 1, 1995:

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------------
1995 1996
-------- ----------
<S> <C> <C>
Revenue, net........................................ $971,724 $1,080,604
======== ==========
Income from operations.............................. $ 80,113 $ 88,065
======== ==========
Net loss............................................ $(61,816) $ (67,011)
======== ==========
</TABLE>

Purchase of MAC Assets

In 1997, ZDI agreed to purchase certain of the MAC Assets for $370,000. The
acquisition occurred in two tranches, the first of which closed on October 31,
1997 and the second, of which closed upon completion of an initial public
offering of Ziff-Davis Inc.'s Common Stock (further described below). At
December 31, 1997, ZDI accrued the $370,000 purchase price which has been
recorded as a return of capital.

The acquisitions from MAC described above have been accounted for in a manner
similar to a pooling of interests as all entities involved are under common
control. Accordingly, the accompanying combined financial statements include
the results of operations of the MAC Assets from February 29, 1996. Throughout
these financial statements any reference to ZDI and ZDCF or the Companies
includes ZDI, ZDCF and the MAC Assets from February 29, 1996.

Acquisition of Sendai

On May 8, 1996, ZDI acquired substantially all of the assets and liabilities
of Sendai Publishing Group, Inc., a publisher and distributor of magazines,
books, products and

F-106
<PAGE>

ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(FINANCIAL AND OTHER INFORMATION SUBSEQUENT TO FEBRUARY 17, 1998 IS UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

computer services related to the electronic gaming industry, for approximately
$27,500, plus transaction costs. The acquisition was accounted for as a
purchase and accordingly, Sendai's results are included in the combined
financial statements since the date of acquisition. The excess of the purchase
price over assets acquired approximated $33,378. The operations of Sendai did
not have a material effect on the combined results of operations for the year
ended December 31, 1996.

Acquisition of COMDEX

Effective April 1, 1995, Softbank acquired the assets of the COMDEX trade
show business, now part of ZDCF, for approximately $803,000, plus transaction
costs. The acquisition has been accounted for as of April 1, 1995 using the
purchase method of accounting and accordingly COMDEX's results are included in
the combined financial statements since the date of acquisition. The excess of
the purchase price over the fair value of the assets acquired and liabilities
assumed was $849,000.

2. REORGANIZATION AND INITIAL PUBLIC OFFERING (UNAUDITED)

On February 4, 1998, a nonstock corporation, ZD Inc. (the "Company"), was
formed in contemplation of a reorganization and initial public offering of the
Companies. Concurrent with the initial public offering (described below),
Ziff-Davis Inc. was renamed ZD Inc. and ZDCF was renamed ZD Events Inc. and ZD
Inc. was renamed Ziff-Davis Inc.

On May 4, 1998 Softbank, through its wholly owned subsidiary SOFTBANK
Holdings Inc. ("SBH"), completed a reorganization whereby the common stock of
ZD Inc. and ZD Events Inc. were contributed to Ziff-Davis Inc. in exchange for
73,619,335 shares of Ziff-Davis Inc.'s common stock. Concurrently, with the
reorganization, Ziff-Davis Inc. (1) completed an initial public offering of
25,800,000 common shares at an initial public offering price of $15.50 per
share, (2) issued $250,000 of 8 1/2% Subordinated Notes due 2008, (3) entered
into a $1,350,000 credit facility with a group of banks under which $1,250,000
was borrowed and (4) converted $908,673 of intercompany indebtedness to equity.
In addition, Ziff-Davis Inc. received approximately $9,100 of fixed assets from
Kingston Technology Company ("Kingston"), a related party, in exchange for
580,645 shares of Ziff-Davis Inc.'s common stock. These assets have been
subsequently leased back to Kingston. Total shares of common stock issued to
Softbank and its affiliates were 74,200,000. The transactions described above
are hereafter referred to as the Reorganization.

Proceeds, net of transaction costs, from the initial public offering and
funding transactions in the reorganization of $1,863,260 were used to complete
the purchase of certain assets form MAC for $370,000 and repay intercompany
indebtedness.

F-107
<PAGE>

ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(FINANCIAL AND OTHER INFORMATION SUBSEQUENT TO FEBRUARY 17, 1998 IS UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

Unaudited Pro Forma Financial Information

The following summary pro forma information has been prepared as if the
Reorganization, described above, had been consummated on January 1, 1998. The
pro forma adjustments for the nine month period include a $5,219 reduction of
interest expense, a $900 increase in depreciation expense and a $900 reduction
of selling, general and administrative expenses, as well as the tax effect of
these items recorded at the combined federal and state statutory rate of 41%.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1998
------------------
<S> <C>
Revenue, net:............................................. $ 730,547
Depreciation and amortization ............................ 115,494
Loss from operations...................................... (17,395)
Interest expense, net..................................... 105,966
Loss before income taxes.................................. (114,549)
Income tax benefit........................................ 31,449
Net loss.................................................. (83,100)
Net loss per basic common share........................... (0.83)
Weighted average common shares outstanding................ 100,000,000
</TABLE>

Interim Financial Information

The unaudited, financial statements for the nine months ended September 30,
1997 and 1998 and as of September 30, 1998 have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary to present fairly the financial position of
the Company at September 30, 1998 and the results of its operations and cash
flows for the nine months ended September 30, 1998 and 1997 have been included.
Operating results for the periods presented are not necessarily indicative of
the results that may be expected for the year ended December 31, 1998. As a
result of the Reorganization described above, the financial statements
presented for September 30, 1998 are prepared on a consolidated basis.

F-108
<PAGE>

ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(FINANCIAL AND OTHER INFORMATION SUBSEQUENT TO FEBRUARY 17, 1998 IS UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Combination and Consolidation

The combined financial statements include the accounts of ZDI and ZDCF
including, as discussed above, the MAC Assets. All significant transactions
between these entities have been eliminated in combination and consolidation.
The financial statements of Ziff-Davis Inc. prepared subsequent to the
Reorganization described above have been prepared on a consolidated basis.

Investments in companies in which ownership interests range from 20%to 50%
and the Companies have the ability to exercise significant influence over the
operating and financial policies of such companies are accounted for under the
equity method.

Cash and cash equivalents

The Companies consider all highly liquid investments with an original
maturity of three months or less to be cash equivalents.

Concentration of credit risk

The Companies place their temporary cash investments with high credit quality
financial institutions. At times, such investments may be in excess of
federally insured limits. The Companies have not experienced losses in such
accounts.

The Companies' advertisers and exhibitors include principally customers who
represent a variety of technology companies in the United States and other
countries. The Companies extend credit to their customers and distributors and
historically have not experienced significant losses relating to receivables
from individual customers or groups of customers.

Property and equipment

Property and equipment have been recorded at cost or their estimated fair
value at the date of acquisition. Depreciation is computed using the straight-
line method over the estimated useful lives of the assets which range from
three to thirty years. Leasehold improvements are amortized using the straight-
line method over the service life of the improvement or the life of the related
lease, whichever is shorter. Maintenance and repair costs are charged to
expense as incurred.

Inventories

Inventories, which consist principally of paper, are stated at the lower of
cost or market. Cost is determined on a first-in, first-out basis.

F-109
<PAGE>

ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(FINANCIAL AND OTHER INFORMATION SUBSEQUENT TO FEBRUARY 17, 1998 IS UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

Intangible assets

Intangible assets consist principally of advertising lists, exhibitor
relationships, trademarks and trade names, and goodwill. Amortization of these
assets is computed on a straight-line basis over their estimated useful lives.
Identifiable intangible assets are amortized over a period of 2 to 40 years and
goodwill, which represents the excess of the purchase price over the estimated
fair values of net assets acquired, is amortized over a period of 5 to 40 years
(refer to Note 6). The Companies assess the recoverability of their intangible
assets whenever adverse events or changes in circumstances indicate that
expected future cash flows (undiscounted and without interest charges) may not
be sufficient to support the carrying amount of intangible assets. If
undiscounted cash flows are not sufficient to support the recorded assets, an
impairment loss is recognized to reduce the carrying value of the intangibles
to its estimated recoverable value. The Companies have not experienced any
impairment of their intangible assets.

Revenue recognition

Advertising revenue for the Companies' publications, less agency commissions,
is recognized as income in the month that the related publications are sent to
subscribers or become available for sale at newsstands.

Payments received in advance of trade shows, conferences and seminars are
initially reported on the balance sheet as deferred revenue and are recognized
as income when the events take place.

Revenue generated by market research is recognized when the service is
provided.

Online revenues are derived principally from the sale of advertisements on
short-term contracts. Online revenues are recognized ratably in the period in
which the advertisement is displayed, provided that no significant obligations
remain and collection of the resulting receivable is probable. The Companies'
obligations typically include guarantees of minimum number of "impressions", or
times that an advertisement appears in pages viewed by users of the Companies'
online properties. To the extent minimum guaranteed impressions are not met,
the Companies defers recognition of the corresponding revenues until the
remaining guaranteed impression levels are achieved.

F-110
<PAGE>

ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(FINANCIAL AND OTHER INFORMATION SUBSEQUENT TO FEBRUARY 17, 1998 IS UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

Operating costs and expenses

Cost of production includes the direct costs of producing magazines, online
content, newsletters and training materials, primarily paper, printing and
distribution, and the direct costs associated with organizing, producing and
managing trade shows, seminars, conferences and expositions. Selling, general
and administrative costs include subscriber acquisition costs which are
expensed as incurred. Editorial and product development costs are expensed as
incurred. Product development costs include the cost of artwork, graphics,
prepress, plates and photography for new products.

Foreign currency

The effect of translating foreign currency financial statements into U.S.
dollars is included in the cumulative translation adjustments account in
stockholder's equity. Gains and losses on foreign currency transactions, which
are not significant to operations, have been included in selling, general and
administrative expenses. The Companies have not historically entered into
forward currency contracts.

Other non-operating income

Other non-operating income includes management fee income and the Companies'
equity share of income or loss from joint ventures.

Income taxes

The Companies use the asset and liability approach for financial accounting
and reporting of deferred taxes.

Use of estimates

Fair value of financial instruments

All current assets and liabilities are carried at cost, which approximates
fair value because of the short-term maturity of those instruments. The
recorded amounts of the Companies' long-term debt payable to affiliates also
approximate fair value based upon the current rates available to the Companies
for debt with similar remaining maturities.

Stock-based compensation

The Companies have elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25"), to account for stock
options.

F-111
<PAGE>

ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(FINANCIAL AND OTHER INFORMATION SUBSEQUENT TO FEBRUARY 17, 1998 IS UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

Effective January 1, 1996, the Companies adopted the disclosure-only provisions
of Statement of Financial Accounting Standard ("SFAS") No. 123, "Accounting for
Stock-Based Compensation".

Earnings per share

Historical earnings per share data have been omitted on the basis that they
are not meaningful due to the insignificant number of shares outstanding. Pro
forma earnings per share is computed assuming 100 million weighted average
common shares outstanding.

Reclassifications

Certain amounts have been reclassified, where appropriate, to conform to the
current financial statement presentation.

New Accounting Pronouncements

SFAS No. 130, "Reporting Comprehensive Income", issued in June 1997, will
require the Companies to disclose, in financial statement format, all non-owner
changes in equity. Such changes include, for example, cumulative foreign
currency translation adjustments and unrealized gains and losses on securities
available for sale. Such transactions have historically not been material to
the Company's financial statements.

SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information", issued in June 1997, establishes standards for reporting
information about operating segments in annual financial statements and interim
financial reports. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. Generally,
financial information will be required to be reported on the basis that is used
internally for evaluating segment performance and deciding how to allocate
resources to segments.

The Company expects to adopt the above statements beginning with their 1998
financial statements.

F-112
<PAGE>

ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(FINANCIAL AND OTHER INFORMATION SUBSEQUENT TO FEBRUARY 17, 1998 IS UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

4. ACCOUNTS RECEIVABLE, NET

Accounts receivable, net consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
-------- --------
<S> <C> <C>
Accounts receivable.................................. $284,829 $309,565
Allowance for doubtful accounts, returns and
cancellations....................................... (80,966) (88,255)
-------- --------
$203,863 $221,310
======== ========
</TABLE>

5. PROPERTY AND EQUIPMENT, NET

Property and equipment, net, consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1997
-------- -------
<S> <C> <C>
Computers and equipment................................. $ 30,513 $50,170
Leasehold improvements.................................. 38,439 40,033
Furniture and fixtures.................................. 18,402 17,619
-------- -------
87,354 107,822
Accumulated depreciation and amortization............... (33,793) (54,286)
-------- -------
$ 53,561 $53,536
======== =======
</TABLE>

6. INTANGIBLE ASSETS, NET

Intangible assets, net, consist of the following:

<TABLE>
<CAPTION>
RANGE OF DECEMBER 31,
USEFUL LIVES ----------------------
(YEARS) 1996 1997
------------ ---------- ----------
<S> <C> <C> <C>
Advertising lists..................... 7-34 $ 888,100 $ 888,100
Exhibitor relationships............... 4-27 154,070 154,070
Trademarks/trade names................ 30-40 735,595 735,595
License agreements.................... 6-14 11,212 11,212
Subscriber lists...................... 3-10 51,475 51,475
Other................................. 2-20 57,599 57,599
Goodwill.............................. 5-40 1,380,993 1,387,556
---------- ----------
3,279,044 3,285,607
Accumulated amortization.............. (130,711) (255,274)
---------- ----------
$3,148,333 $3,030,333
========== ==========
</TABLE>

F-113
<PAGE>

ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(FINANCIAL AND OTHER INFORMATION SUBSEQUENT TO FEBRUARY 17, 1998 IS UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

All intangible assets are being amortized using the straight-line method over
their estimated useful lives, up to 40 years. In determining the estimated
useful lives, the Companies considered their competitive position in the
markets in which they operate, the historical attrition rates of advertisers,
subscribers and exhibitors, legal and contractual obligations, and other
factors.

7. ACCRUED EXPENSES

Accrued expenses consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1996 1997
------- -------
<S> <C> <C>
Payroll and related employee benefits..................... $24,978 $29,112
Accrued interest-related party............................ 4,449 6,226
Other taxes payable....................................... 6,310 2,822
Other..................................................... 44,184 41,934
------- -------
$79,921 $80,094
======= =======
</TABLE>

8. UNEARNED INCOME

Unearned income consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
-------- --------
<S> <C> <C>
Unexpired subscriptions................................ $100,387 $ 82,167
Prepaid conference fees................................ 91,776 80,706
Reserve for cancellations.............................. (17,287) (8,191)
-------- --------
$174,876 $154,682
======== ========
</TABLE>

9. INCOME TAXES

Prior to the Reorganization and initial public offering described in Note 2,
the Companies have been included in consolidated U.S. federal income tax
returns filed by Softbank, except for operations relating to the MAC Assets
(described in Note 1), which were assets of a separate taxpayer. The tax
expense reflected in the combined statements of operations and tax liabilities
reflected in the combined balance sheet have been prepared

F-114
<PAGE>

ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(FINANCIAL AND OTHER INFORMATION SUBSEQUENT TO FEBRUARY 17, 1998 IS UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

on a separate return basis as though the Companies filed stand-alone income tax
returns. No tax benefit has been recorded for the losses related to the MAC
Assets, as such losses are not available to the Companies.

The Companies and Softbank do not have a tax sharing agreement. Therefore, no
intercompany tax payments have been made and no related intercompany receivable
or payable has been recorded.

Income (loss) before income taxes is attributable to the following
jurisdictions:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1996 1997
------- -------- --------
<S> <C> <C> <C>
United States................................. $25,094 $(22,095) $(74,638)
Foreign....................................... (2,225) (5,029) 2,147
------- -------- --------
Total....................................... $22,869 $(27,124) $(72,491)
======= ======== ========
</TABLE>

Components of the provision (benefit) for income taxes are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
U.S. federal income taxes:
Current........................................ $ -- $ -- $ --
Deferred....................................... 9,240 19,338 (1,017)
State and local income taxes:
Current........................................ -- -- --
Deferred....................................... 2,684 5,619 (295)
Foreign income taxes............................. -- -- --
------- ------- -------
Total provision (benefit) for income taxes..... $11,924 $24,957 $(1,312)
======= ======= =======
</TABLE>

A reconciliation of the U.S. federal statutory tax rate to the Companies'
effective tax rate on income (loss) before income taxes is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996 1997
---- ------ -----
<S> <C> <C> <C>
Federal statutory tax
rate................... 35.0% 35.0% 35.0%
State and local taxes
(net of federal tax
benefit)............... 6.0 6.0 6.0
Non-recognition of
combined losses of MAC
Assets................. 9.9 (116.6) (32.2)
Amortization of non-
deductible goodwill.... 1.0 (13.1) (5.8)
Other................... 0.2 (3.3) (1.2)
---- ------ -----
Effective tax rate...... 52.1% (92.0)% 1.8%
==== ====== =====
</TABLE>

The effective tax rate differs from the federal statutory tax rate primarily
as a result of the Companies' inability to deduct losses of the MAC Assets
prior to May 4, 1998. The amortization of nondeductible goodwill resulted
primarily from the acquisition of 100% of the stock of ZDI in 1996.

F-115
<PAGE>

ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(FINANCIAL AND OTHER INFORMATION SUBSEQUENT TO FEBRUARY 17, 1998 IS UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

Following is a summary of the components of the deferred tax accounts at
December 31, 1996 and December 31, 1997:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
--------- ---------
<S> <C> <C>
Current deferred tax assets and (liabilities):
Allowance for doubtful accounts................... $ 8,825 $ 8,750
Other............................................. (151) 44
--------- ---------
Current deferred net tax assets................. 8,674 8,794
--------- ---------
Noncurrent deferred tax assets and (liabilities):
Basis difference in intangible assets............. (273,375) (288,286)
Net operating loss and other carryforwards........ 129,798 133,314
Other............................................. 11,603 13,711
--------- ---------
Noncurrent deferred tax liabilities............. (131,974) (141,261)
Valuation allowance................................. (49,335) (38,856)
--------- ---------
Net noncurrent deferred tax liabilities......... (181,309) (180,117)
--------- ---------
Net deferred tax liabilities........................ $(172,635) $(171,323)
========= =========
</TABLE>

As of December 31, 1996 and 1997 the Companies had total deferred tax assets
of $100,891 and $116,963, respectively, and total deferred tax liabilities of
$273,526 and $288,286, respectively. The December 31, 1996 and December 31,
1997 net deferred tax assets are reduced by a valuation allowance of $49,335
and $38,856, respectively, primarily relating to tax benefits of foreign net
operating loss carryforwards which are not expected to be realized. The
decrease in the valuation allowance in 1997 is primarily related to the
expiration of foreign net operating loss carryforwards. No deferred tax asset
has been established for the losses associated with the MAC Assets, which will
not be available to the Companies as a deduction.

The Companies have U.S. and foreign net operating loss carryforwards of
approximately $286,322, which will begin to expire in 1998. The Companies'
utilization of certain net operating loss carryforwards, of approximately
$122,549, is subject to limitations, due to the change of ownership resulting
from the Softbank acquisition of the ZDI stock on February 29, 1996. Management
believes that such limitations will not significantly affect the Companies'
ability to recognize the deferred tax assets relating to the carryforward.
Accordingly, no valuation allowance to reduce the deferred tax asset relating
to the carryforward has been established. In addition, the Companies have
alternative minimum tax credit carryforwards of $385 which may be carried
forward indefinitely until used.

The Companies' foreign subsidiaries have no undistributed earnings for
remittance to the U.S. and, therefore, no U.S. or foreign tax provision on
remittances has been recorded.

F-116
<PAGE>

ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(FINANCIAL AND OTHER INFORMATION SUBSEQUENT TO FEBRUARY 17, 1998 IS UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

10. DUE TO AFFILIATES AND MANAGEMENT

The Companies are members of a group of companies affiliated through common
ownership with Softbank and has various transactions and relationships with
members of the group. Because of these relationships, it is possible that the
terms of those transactions are not the same as those that would result from
transactions among unrelated parties.

Receivables/payables

Receivables from affiliates consist of the following:

Payables to management and affiliates consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1997
------- --------
<S> <C> <C>
Payable to:
Management.............................................. $29,834 $ --
MAC and subsidiaries.................................... -- 270,000
Softbank................................................ 39,582 126,371
Other affiliates........................................ -- 1,961
------- --------
$69,416 $398,332
======= ========
</TABLE>

As part of the 1996 acquisition of ZDI, the Companies agreed to assume
certain obligations to management arising out of prior employment arrangements
with previous owners. In January 1997, the Companies paid all amounts due,
including accrued interest, through the payment date.

Prior to the Reorganization and initial public offering, the Companies were
members of Softbank's central cash management system. Under this system, the
Companies would periodically transfer excess cash to Softbank for cash
management purposes and in turn receive cash advances from Softbank to fund the
Companies' short-term working capital requirements. Interest is accrued based
on the net balance outstanding at the end of each month. Interest income is
earned at the 30-day LIBOR rate for the applicable month. Interest expense is
incurred at the 30-day LIBOR rate plus 0.5%.

F-117
<PAGE>

ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(FINANCIAL AND OTHER INFORMATION SUBSEQUENT TO FEBRUARY 17, 1998 IS UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

Other affiliated arrangements

During the years ended December 31, 1996 and 1997, the Companies incurred
$2,000 and $1,631, advertising expense with Yahoo!, Inc. ("Yahoo!"), an
affiliated company. No advertising expense with Yahoo! was incurred in 1995.

The Companies sell advertising space and exhibition services to Kingston
Technology Company ("Kingston"), an affiliated company. During the years ended
December 31, 1995, 1996 and 1997, the Companies recorded revenues of $0, $882
and $2,667, respectively, from sales to Kingston. These services were provided
under terms consistent with those provided to unaffiliated customers.

ZDCF has entered into an agreement to manage certain trade shows and
expositions owned by Softbank and its affiliates, whereby ZDCF earns management
and licensing fees. The fees earned by ZDCF for the years ended December 31,
1995, 1996 and 1997 were $1,979, $3,394 and $4,057, respectively.

In 1996 and 1997, the Companies had an arrangement with SOFTBANK Interactive
Marketing ("SIM"), an affiliated company, for the provision of interactive
media sales. The Companies paid commissions to SIM of $600 and $1,800 during
the years ended December 31, 1996 and 1997, respectively. Effective December
31, 1997, SIM was acquired by an unrelated third party. Management believes
that the sale of SIM by Softbank will have no material impact on the Companies.

The Companies have an arrangement with SOFTBANK Services, an affiliated
company, whereby the Companies are charged for administrative services provided
plus a management fee. For the years ended December 31, 1995, 1996 and 1997,
the Companies incurred services fees of $0, $359 and $1,259, respectively, in
relation to this agreement.

ZDI has entered into certain licensing agreements with Softbank for the
publishing and distribution of Japanese language editions of certain
publications. The fees earned by ZDI for the years ended December 31, 1996 and
1997 were approximately $964 and $1,818, respectively, in each year.

The Companies have entered into a license and services agreement with MAC to
develop ZDTV: Your Computer Channel. ZDTV is owned by MAC, but as part of this
license and services agreement MAC has granted the Companies an option
exercisable through December 31, 1998 (See Note 18) to purchase all of MAC's
interest in ZDTV for an amount equal to MAC's investment plus 10% per annum.
The Companies are currently funding ZDTV's operations on behalf of MAC through
unsecured advances which, for approved levels of expenditure, are to be
reimbursed by MAC. Such advances bear interest at the 30-

F-118
<PAGE>

ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(FINANCIAL AND OTHER INFORMATION SUBSEQUENT TO FEBRUARY 17, 1998 IS UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

day LIBOR rate plus .50%. The Companies' cumulative advances, which totaled
$14.4 million net of $10.1 million in repayments through December 31, 1997,
were repaid concurrently with the Reorganization (See Notes 2 and 18).

ZDI has entered into operating leases for television production equipment and
has sublet such equipment to ZDTV, an affiliated company. The terms of the
subleases are substantially identical to the terms of the leases which provide
for annual lease payments totaling approximately $610 through 2003.

Notes payable to affiliates

The Companies' long-term debt is payable to Softbank and consists of the
following:

(2) These notes mature on December 31, 2001 and bear an interest rate of 6.5%
per annum, payable on the last business day of each quarter beginning March
31, 1997.

(3) Notes mature on February 28, 2010. The notes bear interest at a rate of
8.0% per annum.

(4) Notes mature on February 28, 2009. The notes bear interest at 9.9% per
annum.

(5) Note is payable in 52 equal quarterly installments commencing March 31,
1997. The note bears interest at a rate of 8.0% per annum.

(6) Note is payable on January 1, 2007. The note bears interest at a rate of
8.0% per annum.

F-119
<PAGE>

ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(FINANCIAL AND OTHER INFORMATION SUBSEQUENT TO FEBRUARY 17, 1998 IS UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

Scheduled principal payments due on long-term debt outstanding at December
31, 1997 are as follows:

During 1995, 1996 and 1997, the Companies incurred $44,005, $120,646 and
$190,445, respectively of interest expense due to Softbank related to the above
notes payable.

Guarantee of Softbank's U.S. debt

In April 1996, Softbank signed a line of credit agreement totaling $50,000
with an independent lender for which the Companies, along with certain other
Softbank affiliates, are guarantors. In January 1997 and October 1997, this
line of credit was increased to $75,000 and $150,000, respectively. At December
31, 1997, $102,500 was outstanding under the line of credit (see Note 18).

Return of capital and dividends

On December 15, 1996, the Companies declared a return of capital of
approximately $900,000 paid through the issuance of a note payable to a
subsidiary of Softbank and a cash dividend of $8,000 to Softbank. In 1997, the
Companies recorded a return of capital of $381,434 in connection with the
purchase price of companies under common control.

11. EMPLOYEE STOCK COMPENSATION PLANS

Executive stock option plan

The SOFTBANK 1996 and 1997 Executive Stock Option Plans provide for the
granting of nonqualified stock options to purchase the common stock of Softbank
to officers, directors and key employees of the Companies. Under the plans,
options have been granted at exercise prices equal to the closing market price
in Japan's public equities market (market price denominated in Japanese yen) on
the date of grant. As of

F-120
<PAGE>

ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(FINANCIAL AND OTHER INFORMATION SUBSEQUENT TO FEBRUARY 17, 1998 IS UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

December 31, 1997, substantially all options granted become exercisable in
various installments over the first six anniversaries of the date of grant and
expire ten years after the date of grant.

Information relating to stock options during 1995, 1996 and 1997 is as
follows:

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OPTION PRICE
OF SHARES PER SHARE(1)
--------- ----------------
<S> <C> <C>
Shares outstanding under options at
December 31, 1995......................... -- --
Granted.................................... 739,493(2) $87.15
Exercised.................................. -- --
Forfeited.................................. 12,740(2) 87.15
-------
Shares outstanding under options at
December 31, 1996......................... 726,753 87.15
Granted.................................... 386,363 61.40
Exercised.................................. -- --
Forfeited.................................. 146,130 78.88
-------
Shares outstanding under options at
December 31, 1997......................... 966,986 $78.11
=======
Shares exercisable
At December 31, 1996..................... -- --
At December 31, 1997 (price range $44.26-
$87.15)................................. 107,630 $82.06
</TABLE>
- --------
(1) The exercise price of the stock options is set in Japanese yen. The
exercise prices as shown above have been converted to U.S. dollars based
upon the exchange rate as of the date of grant for the respective options.

(2) Adjusted for a 1.4:1 stock split during 1996 and a 1.3:1 stock split during
1997.

As permitted by SFAS 123, the Companies have chosen to continue to account
for stock options in accordance with the provisions of APB 25 and, accordingly,
no compensation expense related to stock option grants was recorded in 1996 or
1997. Pro forma information regarding net income is required by SFAS 123 and
has been determined as if the Companies had accounted for stock options under
the fair value method. The fair value of the option grants was estimated at the
date of grant using the Black-Scholes option-pricing model with the following
assumptions for 1996 and 1997:

F-121
<PAGE>

ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(FINANCIAL AND OTHER INFORMATION SUBSEQUENT TO FEBRUARY 17, 1998 IS UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

The weighted average fair value of options granted in 1996 and 1997 was
$64.30 and $34.05, respectively. For purposes of the pro forma disclosures, the
estimated fair value of the options is amortized to expense over the options'
vesting period. Had compensation cost for the stock option plans been
determined based upon the fair value at the grant date for awards during 1996
and 1997, consistent with the provisions of SFAS 123, the Companies' net loss
would have been increased by approximately $3,100 and $4,200, respectively. On
January 23, 1998, the exercise price of all of the shares outstanding under
option agreements were reset to an exercise price equal to the closing market
price on Japan's Tokyo Stock Exchange First Section at that date.
In conjunction with the repricing, those options previously exercisable on
December 31, 1997 may now be exercised only after July 19, 1998. Repricing of
the stock options will not result in compensation expense to the Companies.

Other stock compensation plans

During 1996 and 1997, the Companies granted 45,760 and 61,940 shares of
common stock of Softbank, respectively, (adjusted for a 1.4:1 stock split
during 1996 and a 1.3:1 stock split during 1997) to certain key employees,
subject to restrictions as to continuous employment which expire over a three
to five-year period from the date of grant. The granting of the shares to the
Companies' employees has been recorded as additional paid-in capital offset by
a reduction to stockholder's equity as deferred compensation. Such amounts were
recorded at the fair value, as established by market price of the shares on the
date of grant. The unearned compensation is being amortized ratably over the
restricted periods. During 1996, restrictions on 13,790 shares expired, 2,160
shares were forfeited and $1,080 was charged to expense related to the
restricted stock awards. During 1997, restrictions on 75,210 shares expired,
2,150 shares were forfeited and $3,916 was charged to expense related to these
restricted stock awards.

12. EMPLOYEE BENEFIT PLANS

Pension plan

Certain employees of ZDCF who have met eligibility requirements are covered
by a noncontributory defined benefit pension plan. The benefits are based on
years of service and average compensation at the time of retirement. The
Companies' funding policy is to contribute amounts sufficient to meet the
minimum funding requirements as set forth in the Employee Retirement Income
Security Act of 1974 ("ERISA"). Contributions to the plan are determined in
accordance with the projected unit credit cost method. Plan assets consist of
U.S. equity securities, high grade corporate bonds and commercial paper, and
U.S. treasury notes.

F-122
<PAGE>

ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(FINANCIAL AND OTHER INFORMATION SUBSEQUENT TO FEBRUARY 17, 1998 IS UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

Net periodic pension cost includes the following components:

<TABLE>
<CAPTION>
1995 1996 1997
---- ------ ----
<S> <C> <C> <C>
Service cost........................................... $472 $ 700 $391
Interest cost.......................................... 363 472 456
Expected return on plan assets......................... (172) (300) (445)
Amortization of transition obligation.................. 149 199 75
---- ------ ----
Net periodic pension cost.............................. $812 $1,071 $477
==== ====== ====
</TABLE>

The following table sets forth the funded status and amounts recognized in
the balance sheet:

<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation.............................. $4,132 $5,721
------ ------
Accumulated benefit obligations........................ 4,224 5,721
====== ======
Projected benefit obligations............................ 7,967 5,721
Plan assets at fair value................................ (4,467) (6,004)
------ ------
Projected benefit obligation in excess (less than) of
plan assets............................................. 3,500 (283)
Unrecognized net transition asset (liability)............ (2,297) 1,279
------ ------
Pension liability included in balance sheet.............. $1,203 $ 996
====== ======
</TABLE>

During 1997, the Companies decided to terminate the defined benefit pension
plan and pursuant to this decision, all accrued benefits became fully vested as
of August 31, 1997. The above amounts reflect the effects of such termination.
All accrued plan obligations will be settled during 1998. There was no
significant gain or loss recognized in connection with the termination. Any
gain or loss associated with the plan settlement will be recognized in 1998.

Retirement plans

The Companies maintain various defined contribution retirement plans.
Substantially all of the Companies' employees are eligible to participate in
one of the plans under which annual contributions may be made by the Companies
for the benefit of all eligible employees. In certain cases, employees may also
make contributions to the plan in which they participate which, and subject to
certain limitations, may be matched by the Companies

F-123
<PAGE>

ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(FINANCIAL AND OTHER INFORMATION SUBSEQUENT TO FEBRUARY 17, 1998 IS UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

up to certain specified percentages. Employees are generally eligible to
participate in a plan upon joining the Companies and receive matching
contributions after one year of employment. The Companies made contributions to
the plans totaling $2,115, $10,470 and $13,725 in 1995, 1996 and 1997,
respectively.

13. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES

The Companies have investments in the following companies/joint ventures:

<TABLE>
<CAPTION>
CARRYING VALUE
AT DECEMBER 31,
OWNERSHIP ---------------
COMPANY/JOINT VENTURE PERCENTAGE 1996 1997
--------------------- ---------- ------- -------
<S> <C> <C> <C>
Mac Publishing LLC.............................. 50% $ -- $16,244
ExpoComm LLC.................................... 50 7,698 7,758
Family PC G.P................................... 50 10,138 9,342
</TABLE>

The companies/joint ventures listed above are engaged primarily in the
publication or distribution of print media and the organization, production and
management of trade shows. Other investments and joint ventures are not
material to the Companies' financial statements.

The Companies equity income (loss) was $0, $(796) and $335 in 1995, 1996 and
1997, respectively.

14. SUPPLEMENTAL CASH FLOW INFORMATION

<TABLE>
<CAPTION>
1995 1996 1997
-------- ---------- --------
<S> <C> <C> <C>
Cash paid during the year for:
Interest to related parties................ $ 8,390 $ 99,509 $185,447
Income taxes............................... -- 360 4
Noncash investing and financing activities:
Fair value of assets acquired.............. $836,479 $2,508,603 $ 20,749
Liabilities assumed........................ 21,959 370,518 6,749
-------- ---------- --------
Cash paid.................................. 814,520 2,138,085 14,000
Less--Cash acquired........................ -- 13,262 --
-------- ---------- --------
Net cash paid for acquisitions............. $814,520 $2,124,823 $ 14,000
-------- ---------- --------
Return of capital dividends................ $ -- $ 899,948 $381,434
======== ========== ========
Capital contributions...................... $ -- $ 5,002 $ 61,580
======== ========== ========
</TABLE>

F-124
<PAGE>

ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(FINANCIAL AND OTHER INFORMATION SUBSEQUENT TO FEBRUARY 17, 1998 IS UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

15. OPERATING LEASE COMMITMENTS

The Companies are obligated under various operating leases which expire at
various dates through 2021. Future minimum rental commitments under
noncancelable operating leases are as follows:

<TABLE>
<S> <C>
1998.............................................................. $ 34,912
1999.............................................................. 32,702
2000.............................................................. 28,875
2001.............................................................. 25,891
2002.............................................................. 24,932
Thereafter........................................................ 248,407
--------
Total............................................................. $395,719
========
</TABLE>

Netted in the above totals is approximately $5,000 for which ZDI has
noncancelable subleases in place. Total sublease income approximates ZDI's
required payments under the related leases. Rent expense amounted to
approximately $2,492, $23,015 and $29,994 for the years ended December 31,
1995, 1996 and 1997, respectively.

16. CONTINGENCIES

The Companies are subject to various claims and legal proceedings arising in
the normal course of business.

17. SEGMENT INFORMATION

Business segment information

The Companies' operations have been classified into two business segments:
(1) publishing and (2) events.

Publishing

Events

The events segment is engaged in the organization, production and management
of trade shows, conferences and seminars for the computer industry. The events
segment's principal operations are in North America and to a lesser extent in
Europe, Asia and Latin America.

F-125
<PAGE>

ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(FINANCIAL AND OTHER INFORMATION SUBSEQUENT TO FEBRUARY 17, 1998 IS UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

Summarized financial information by business segment as of December 31, 1995,
1996 and 1997 and for each of the years then ended is set forth below:

<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Revenue, net:
Publishing............................. $ -- $ 690,255 $ 866,233
Events................................. 202,729 264,884 287,528
---------- ---------- ----------
$ 202,729 $ 955,139 $1,153,761
========== ========== ==========
Income from operations:
Publishing............................. $ -- $ 18,676 $ 49,997
Events................................. 62,675 68,505 59,235
---------- ---------- ----------
$ 62,675 $ 87,181 $ 109,232
========== ========== ==========
Total assets at December 31:
Publishing............................. $ -- $2,440,651 $2,422,360
Events................................. 1,090,981 1,143,522 1,124,286
---------- ---------- ----------
$1,090,981 $3,584,173 $3,546,646
========== ========== ==========
Depreciation and amortization:
Publishing............................. $ -- $ 106,587 $ 118,814
Events................................. 24,305 33,149 36,126
---------- ---------- ----------
$ 24,305 $ 139,736 $ 154,940
========== ========== ==========
Capital expenditures:
Publishing............................. $ -- $ 14,657 $ 21,399
Events................................. 3,367 7,708 8,797
---------- ---------- ----------
$ 3,367 $ 22,365 $ 30,196
========== ========== ==========
</TABLE>

F-126
<PAGE>

ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(FINANCIAL AND OTHER INFORMATION SUBSEQUENT TO FEBRUARY 17, 1998 IS UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

Operating income by business segment excludes interest income and interest
expense.

<TABLE>
<CAPTION>
NORTH AMERICA OTHER AREAS COMBINED
------------- ----------- ----------
<S> <C> <C> <C>
Year ended December 31, 1995:
Revenue, net............................. $ 192,789 $ 9,940 $ 202,729
========== ======== ==========
Income (loss) from operations............ $ 64,930 $ (2,255) $ 62,675
========== ======== ----------
Other non-operating income............... 4,199
Related party-interest expense........... 44,005
----------
Income before taxes...................... $ 22,869
==========
Total assets at December 31, 1995........ $1,081,829 $ 9,152 $1,090,981
========== ======== ==========
Year ended December 31, 1996:
Revenue, net............................. $ 854,666 $100,473 $ 955,139
========== ======== ==========
Income (loss) from operations............ $ 92,210 $ (5,029) $ 87,181
========== ======== ----------
Other non-operating income............... 6,341
Related party-interest expense........... 120,646
----------
Loss before taxes........................ $ (27,124)
==========
Total assets at December 31, 1996........ $3,549,102 $ 35,071 $3,584,173
========== ======== ==========
Year ended December 31, 1997:
Revenue, net............................. $1,040,297 $113,464 $1,153,761
========== ======== ==========
Income from operations................... $ 107,085 $ 2,147 $ 109,232
========== ======== ----------
Other non-operating income............... 8,722
Related party-interest expense........... 190,445
----------
Loss before taxes........................ $ (72,491)
==========
Total assets at December 31, 1997........ $3,500,945 $ 45,701 $3,546,646
========== ======== ==========
</TABLE>

Transactions between geographic areas are not significant.

18. SUBSEQUENT EVENTS (UNAUDITED)

Guarantee of Softbank's U.S. Debt

In March 1998, the Companies increased their guarantee of Softbank's U.S.
debt from $150 million to $450 million. This guarantee was released on May 4,
1998.

Interest Rate Swaps

On June 10, 1998, the Company entered into interest rate swap agreements,
with an aggregate notional amount of $550,000. Under these swap agreements,
which began on August 10, 1998, the Company will receive a floating rate of
interest based on three-month

F-127
<PAGE>

ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(FINANCIAL AND OTHER INFORMATION SUBSEQUENT TO FEBRUARY 17, 1998 IS UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

LIBOR, which resets quarterly, and the Company will pay a fixed rate of
interest, each quarter, for the terms of the respective agreements. The terms
of these agreements range from 3 to 7 years and the weighted average fixed rate
the Company will pay is 5.85%. The Company has entered into these agreements
solely to hedge its interest rate risk under its floating rate bank debt.

For the nine months period ended September 30, 1998, these interest rate
swaps did not have a material impact on the Company's financial statements.

Restructuring

On October 8, 1998, the Company announced that anticipated results for the
fourth quarter would be below expectations. As a result, a Company-wide
restructuring was implemented in which three publications were discontinued and
the work force will be reduced by approximately 10%. The cost of this
restructuring, estimated at $50 to $60 million will be recognized in the fourth
quarter of 1998.

Class Action Litigations

The complaints allege that defendants violated Sections 11, 12(a) (2) and 15
of the Securities Act of 1933 in connection with the registration statement
filed by the Company with the Securities and Exchange Commission relating to
the initial public offering of the Company's stock on April 29, 1998 (the
"IPO"). More particularly, the complaints allege that the registration
statement contained false and misleading statements and failed to disclose
facts that could have indicated an impending decline in the Company's revenue.
The complaints seek on behalf of a class of purchasers of the Company's common
stock from the date of the IPO through October 8, 1998 unspecified damages,
interest, fees and costs, recission, and injunctive relief such as the
imposition of a constructive trust upon the proceeds of the IPO.

The complaints are as follow: Napoli v. Ziff-Davis Inc., et al., No. 98 Civ.
7158 (filed Oct. 9, 1998); Steinberg, et al. v. Ziff-Davis Inc., et al., No. 98
Civ. 7205 (filed Oct. 13, 1998); Flinker v. Ziff-Davis Inc., et al., No. 98
Civ. 7231 (filed Oct. 14, 1998); Koenig v. Ziff-Davis Inc., et al., No. 98 Civ.
7260 (filed Oct. 15, 1998); Schindler v. Ziff-Davis Inc., et al., No. 98 Civ.
7418 (filed Oct. 19. 1998); Miller v. Ziff-Davis Inc., et al., No. 98 Civ. 7541
(filed Oct. 23, 1998); Felgoise v. Ziff-Davis Inc., et. al., No. 98 Civ. 8045
(filed Nov. 9, 1998); and

F-128
<PAGE>

ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(FINANCIAL AND OTHER INFORMATION SUBSEQUENT TO FEBRUARY 17, 1998 IS UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

Javier v. Ziff-Davis Inc., et al., No. 98 Civ. 8201 (filed Nov. 17, 1998). All
of the complaints have been assigned to Judge Shirley Wohl Kram. Service upon
defendants has not yet been effected.

Although the outcome of the foregoing cases cannot be predicted, the Company
believes there are substantial defenses to these claims.

Legal Proceedings

Although the outcome of this case cannot be predicted, the Company believes
that there are substantial defenses to the claims and intends to defend
vigorously.

Acquisitions

On October 28, 1998, the Company acquired the assets of Sky TV Inc. and
certain affiliates for approximately $12,000 in cash. Sky TV is a media company
that produces video content for distribution principally through airline in-
flight, cable and broadcast television. Sky TV's principal offices are located
in Dallas and San Francisco.

F-129
<PAGE>

ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(FINANCIAL AND OTHER INFORMATION SUBSEQUENT TO FEBRUARY 17, 1998 IS UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

On July 22, 1998, the Company purchased $5,000 in Series C, convertible, non-
voting preferred shares of Deja News Inc., an Internet discussion network. This
investment is being accounted for on a cost basis.

ZDTV

On November 17, 1998, the Company announced its intention to exercise its
option to purchase ZDTV for a purchase price expected to be approximately
$85,000, against which the Company will be able to apply approximately $53,000
in advances owed to it by MAC Holdings America Inc. In addition, the Company
announced a letter of intent had been entered into with Vulcan Programming,
Inc. ("Vulcan"), whereby Vulcan would purchase 33% of ZDTV for approximately
$54,000. Other than advances to ZDTV which are reported on the Company's
balance sheet, the results of operations of ZDTV are not included in the
Company's results.

Credit Facility

On December 16, 1998, the lenders on the Company's $1,350,000 credit facility
agreed to amend certain provisions of that facility. The amended provisions
include an increase to allowed leverage ratios. In return, the Company agreed
to pay a one-time fee and to an increase in interest rates on amounts borrowed
under the facility. Had the increased interest rates been in effect for the
period from the May 4, 1998 Reorganization to September 30, 1998, interest
expense would have increased by approximately $7,300.

1998 Incentive Compensation Plan

The Company adopted the 1998 Incentive Compensation Plan (the "Plan") to
provide long-term incentives for its key employees and enhance shareholder
value. The Plan provides for the grant of options, stock appreciation rights,
stock awards and other interests in the Company's Common Stock. The Company has
reserved 8,500,000 shares of Common Stock for issuance under the Plan. On
February 13, 1998, the Company granted options to purchase 5,254,700 shares
with an exercise price of $16.00 per share representing the fair value of such
options at that date. Such options vest ratably over five years.

On September 23, 1998, the Board of Directors approved the reduction of the
exercise price of all options outstanding under the Plan from $16.00 to $6.00,
the closing market price of the Company's common stock on that date. In
addition, the vesting period of the options was extended by three months.

F-130
<PAGE>

ZDI (ZIFF-DAVIS INC.) AND ZDCF (ZD COMDEX AND FORUMS INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(FINANCIAL AND OTHER INFORMATION SUBSEQUENT TO FEBRUARY 17, 1998 IS UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

The Company adopted the Employee Stock Purchase Plan (the "Stock Purchase
Plan") whereby eligible employees may purchase the Company's Common Stock with
after tax payroll deductions of 1% to 10% of their base pay. The price at which
shares of Common Stock will be purchased is the lesser of 85% of the fair
market value of a share of Common Stock on (1) the first business day of a
purchase period or (2) the last business day of a purchase period. The Company
has reserved 1,500,000 shares of Common Stock for issuance under the Stock
Purchase Plan.

F-131
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholder of
Ziff-Davis Inc., (formerly Ziff-Davis Publishing Company)

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, cash flows and changes in stockholder's
equity, present fairly, in all material respects, the financial position of
Ziff-Davis Inc. and its subsidiaries (formerly Ziff-Davis Publishing Company or
the "Company") at December 31, 1995 and February 28, 1996, 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 February 28, 1996, in conformity with
generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

As discussed in Note 16 to the financial statements, the Company was acquired
by SOFTBANK Holdings Inc. on February 29, 1996.

/s/ Price Waterhouse LLP

Price Waterhouse LLP
New York, NY
February 17, 1998

F-132
<PAGE>

ZDI (ZIFF-DAVIS INC., FORMERLY ZIFF-DAVIS PUBLISHING COMPANY)
(A WHOLLY OWNED SUBSIDIARY OF ZIFF-DAVIS HOLDINGS CORP.)

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

<TABLE>
<CAPTION>
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 10,083 $ 13,669
Accounts receivable, net........................... 113,078 116,075
Inventories........................................ 21,825 26,009
Deferred taxes..................................... 22,129 23,570
Prepaid postage and other current assets........... 16,621 16,852
---------- ----------
Total current assets............................. 183,736 196,175
Property and equipment, net.......................... 64,110 58,589
Intangible assets, net............................... 1,348,064 1,338,684
Deferred charges and other assets.................... 27,996 26,457
---------- ----------
Total assets..................................... $1,623,906 $1,619,905
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable................................... $ 56,488 $ 43,795
Accrued expenses................................... 68,814 78,333
Unexpired subscriptions, net....................... 81,737 86,435
Due to management and affiliates................... 58,480 58,762
Current portion of long-term debt.................. 6,847 6,847
Other current liabilities.......................... 2,048 2,733
---------- ----------
Total current liabilities........................ 274,414 276,905
Deferred taxes....................................... 11,822 10,815
Long-term debt....................................... 439,153 439,153
Subordinated debentures--related party............... 525,000 525,000
Other long-term liabilities.......................... 8,367 7,315
---------- ----------
Total liabilities................................ 1,258,756 1,259,188
---------- ----------
Commitments and contingencies (Notes 14, 15 and 16)
Stockholder's equity:
Common stock, $.01 par value; 1,000 shares
authorized; 100 shares issued and outstanding..... -- --
Additional paid-in capital......................... 391,275 391,275
Accumulated deficit................................ (26,002) (30,549)
Cumulative translation adjustment.................. (123) (9)
---------- ----------
Total stockholder's equity....................... 365,150 360,717
---------- ----------
Total liabilities and stockholder's equity....... $1,623,906 $1,619,905
========== ==========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-133
<PAGE>

ZDI (ZIFF-DAVIS INC., FORMERLY ZIFF-DAVIS PUBLISHING COMPANY)
(A WHOLLY OWNED SUBSIDIARY OF ZIFF-DAVIS HOLDINGS CORP.)

CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
JANUARY 1, 1996
YEAR ENDED TO
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ---------------
<S> <C> <C>
Revenue, net..................................... $768,995 $125,465
Cost of production............................... 193,646 31,112
Selling, general and administrative expenses..... 428,053 71,946
Depreciation and amortization of property and
equipment....................................... 37,160 6,073
Amortization of intangible assets................ 54,386 9,064
-------- --------
Income from operations......................... 55,750 7,270
Interest expense, net............................ (92,609) (14,030)
Equity in losses of joint ventures............... 3,391 235
-------- --------
Loss before income taxes....................... (40,250) (6,995)
Income tax benefit............................... (14,248) (2,448)
-------- --------
Net loss......................................... $(26,002) $ (4,547)
======== ========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-134
<PAGE>

ZDI (ZIFF-DAVIS INC., FORMERLY ZIFF-DAVIS PUBLISHING COMPANY)
(A WHOLLY OWNED SUBSIDIARY OF ZIFF-DAVIS HOLDINGS CORP.)

CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
JANUARY 1, 1996
YEAR ENDED TO
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ---------------
<S> <C> <C>
Cash flows from operating activities:
Net loss......................................... $ (26,002) $ (4,547)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization................... 91,546 15,137
Loss from equity investments.................... 3,391 235
Provisions for bad debts, allowances and
cancellations.................................. 14,097 3,014
Deferred tax benefit............................ (14,248) (2,448)
Changes in operating assets and liabilities:
Accounts receivable............................ (26,956) (6,011)
Inventories.................................... (9,014) (4,184)
Accounts payable and accrued expenses.......... 8,136 (3,174)
Unexpired subscriptions, net................... 2,499 4,698
Due to management and affiliates............... (3,020) 282
Other, net..................................... (3,366) 1,136
----------- --------
Net cash provided by operating activities......... 37,063 4,138
----------- --------
Cash flows from investing activities:
Capital expenditures............................. (14,163) (552)
Proceeds from sale of businesses................. 23,508 --
----------- --------
Net cash provided (used) by investing activities.. 9,345 (552)
----------- --------
Cash flows from financing activities:
Borrowings under revolving credit facility....... 80,625 24,335
Repayment of revolving credit facility........... (60,625) (24,335)
Repayment of acquisition indebtedness............ (1,122,931) --
----------- --------
Net cash used by financing activities............. (1,102,931) --
----------- --------
Net (decrease)/increase in cash and cash
equivalents...................................... (1,056,523) 3,586
Cash and cash equivalents at beginning of period.. 1,066,606 10,083
----------- --------
Cash and cash equivalents at end of period........ $ 10,083 $ 13,669
=========== ========
Supplemental cash flow disclosures:
Interest paid.................................... $ 78,811 $ 29,255
Income taxes paid................................ $ 92,729 $ --
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-135
<PAGE>

ZDI (ZIFF-DAVIS INC., FORMERLY ZIFF-DAVIS PUBLISHING COMPANY)
(A WHOLLY OWNED SUBSIDIARY OF ZIFF-DAVIS HOLDINGS CORP.)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CUMULATIVE TOTAL
------------- PAID-IN ACCUMULATED TRANSLATION STOCKHOLDER'S
SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT EQUITY
------ ------ ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1995................... 100 $-- $391,275 $ -- $ -- $391,275
Net loss................ -- -- -- (26,002) -- (26,002)
Foreign currency
translation
adjustment............. -- -- -- -- (123) (123)
--- ---- -------- -------- ----- --------
Balance at December 31,
1995................... 100 -- 391,275 (26,002) (123) 365,150
Net loss................ -- -- -- (4,547) -- (4,547)
Foreign currency
translation
adjustment............. -- -- -- -- 114 114
--- ---- -------- -------- ----- --------
Balance at February 28,
1996................... 100 $-- $391,275 $(30,549) $ (9) $360,717
=== ==== ======== ======== ===== ========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-136
<PAGE>

ZDI (ZIFF-DAVIS INC., FORMERLY ZIFF-DAVIS PUBLISHING COMPANY)
(A WHOLLY OWNED SUBSIDIARY OF ZIFF-DAVIS HOLDINGS CORP.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

1. ORGANIZATION AND ACQUISITION

Ziff-Davis Inc. ("ZDI", formerly Ziff-Davis Publishing Company) is a wholly-
owned subsidiary of Ziff-Davis Holdings Corp. ("Holdings").

ZDI is engaged in publishing magazines, journals and training manuals and
providing market research about the computer industry, with operations in the
United States, Canada and Europe.

Acquisition

Effective January 1, 1995, Holdings, through ZDI, directly and indirectly
acquired certain assets and assumed certain liabilities of the Ziff-Davis
publishing business and related businesses (the "Acquisition" or the "Acquired
Businesses") from Ziff Communications Company, L.P., a limited partnership
("ZCC") and other persons and entities (collectively referred to as the
"Sellers"), for an aggregate purchase price of approximately $1,400,000 plus
transaction costs. ZDI funded the Acquisition through the issuance of Common
Stock, bank borrowings and a subordinated note payable to Holdings.

The acquisition has been accounted for using the purchase method of
accounting.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of ZDI and its
subsidiaries. All significant intercompany accounts and transactions have been
eliminated in consolidation.

Investments in companies in which ownership interests range from 20 to 50
percent are accounted for under the equity method. ZDI has an equity investment
interest in Family PC G.P. of 50%. The equity investment in Family PC G.P. is
not material to ZDI's consolidated financial statements.

Cash and cash equivalents

ZDI considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.

Concentration of credit risk

ZDI places its temporary cash investments with high credit quality financial
institutions. At times, such investments may be in excess of federally insured
limits. ZDI has not experienced losses in such accounts.

F-137
<PAGE>

ZDI (ZIFF-DAVIS INC., FORMERLY ZIFF-DAVIS PUBLISHING COMPANY)
(A WHOLLY OWNED SUBSIDIARY OF ZIFF-DAVIS HOLDINGS CORP.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

ZDI's advertisers include customers who represent a variety of technology
companies in the United States and other countries. ZDI extends credit to its
customers and historically has not experienced significant losses relating to
receivables from individual customers or groups of customers.

Property and equipment

Paper inventories

Paper inventories are stated at the lower of cost or market. Cost is
determined on a first-in, first-out basis.

Intangible assets

Intangible assets consist principally of advertising lists, trademarks and
trade names and goodwill. Amortization of these assets is computed on a
straight-line basis over their estimated useful lives. Identifiable intangible
assets are amortized over a period of 2 to 39 years and goodwill, which
represents the excess of the purchase price over the estimated fair values of
net assets acquired, is amortized over 40 years. ZDI assesses the
recoverability of its intangible assets whenever adverse events or changes in
circumstances indicate that expected future cash flows (undiscounted and
without interest charges) may not be sufficient to support the carrying amount
of intangible assets. If undiscounted cash flows are not sufficient to support
the recorded assets, an impairment loss is recognized to reduce the carrying
value of the intangibles to its estimated recoverable value.

Revenue recognition

Advertising revenue for ZDI's publications, less agency commissions, is
recognized as income in the month that the related publications are sent to
subscribers or becomes available for sale at newsstands.

F-138
<PAGE>

ZDI (ZIFF-DAVIS INC., FORMERLY ZIFF-DAVIS PUBLISHING COMPANY)
(A WHOLLY OWNED SUBSIDIARY OF ZIFF-DAVIS HOLDINGS CORP.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
estimated returns, are recognized in the month that the related publications
become available for sale at newsstands.

Revenue generated by market research is recognized when the service is
provided.

Operating costs and expenses

Foreign currency

Income taxes

ZDI uses the asset and liability approach for financial accounting and
reporting of deferred taxes.

Use of estimates

Fair value of financial instruments

All current assets and liabilities are carried at cost, which approximates
fair value because of the short-term maturity of those instruments. The
recorded amounts of ZDI's long-term debt also approximate fair value which was
based upon the current rates available to ZDI for debt with similar remaining
maturities.

Impairment of long-lived assets

In 1995, the Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of" ("SFAS 121"). ZDI adopted SFAS 121 in fiscal 1996 with no
effect on operations.

F-139
<PAGE>

ZDI (ZIFF-DAVIS INC., FORMERLY ZIFF-DAVIS PUBLISHING COMPANY)
(A WHOLLY OWNED SUBSIDIARY OF ZIFF-DAVIS HOLDINGS CORP.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

Earnings per share

Historical earnings per share data has been omitted on the basis that it is
not meaningful due to the insignificant number of shares outstanding.

3. ACCOUNTS RECEIVABLE, NET

Accounts receivable, net consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ------------
<S> <C> <C>
Accounts receivable............................ $168,961 $166,036
Allowance for doubtful accounts, returns and
cancellations................................. (55,883) (49,961)
-------- --------
$113,078 $116,075
======== ========
</TABLE>

4. PROPERTY AND EQUIPMENT, NET

Property and equipment, net, consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ------------
<S> <C> <C>
Computers and equipment.......................... $ 55,838 $ 56,390
Leasehold improvements........................... 25,999 25,999
Furniture and fixtures........................... 12,404 12,404
Other............................................ 7,029 7,029
-------- --------
101,270 101,822
Accumulated depreciation and amortization........ (37,160) (43,233)
-------- --------
$ 64,110 $ 58,589
======== ========
</TABLE>

5. INTANGIBLE ASSETS, NET

Intangible assets, net, consist of the following:

<TABLE>
<CAPTION>
RANGE OF
LIVES DECEMBER 31, FEBRUARY 28,
(YEARS) 1995 1996
-------- ------------ ------------
<S> <C> <C> <C>
Advertiser lists........................ 7-39 $ 645,800 $ 645,800
Trademarks and trade names.............. 30 235,820 235,820
Subscriber lists........................ 3-10 47,436 47,436
Other................................... 2-5 28,800 28,800
License agreements...................... 6-14 11,211 11,211
Goodwill................................ 40 433,383 433,067
---------- ----------
1,402,450 1,402,134
Accumulated amortization................ (54,386) (63,450)
---------- ----------
$1,348,064 $1,338,684
========== ==========
</TABLE>

F-140
<PAGE>

ZDI (ZIFF-DAVIS INC., FORMERLY ZIFF-DAVIS PUBLISHING COMPANY)
(A WHOLLY OWNED SUBSIDIARY OF ZIFF-DAVIS HOLDINGS CORP.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

Intangible assets primarily relate to the acquisition of ZDI. As discussed in
Note 1, the acquisition was accounted for under the purchase method of
accounting. As such the purchase price was allocated to tangible and
identifiable intangible assets with the remaining amount allocated to goodwill.

All intangible assets are being amortized using the straight-line method over
their estimated useful lives, up to 40 years. In determining the estimated
useful lives, ZDI considered its competitive position in the markets in which
it operates, the historical attrition rates of advertisers, exhibitors and
subscribers, legal and contractual obligations, and other factors.

6. ACCRUED EXPENSES

Accrued expenses consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ------------
<S> <C> <C>
Payroll and related employee benefits............ $35,044 $35,152
Accrued interest................................. 16,804 27,526
Other taxes payable.............................. 1,588 2,576
Other accrued expenses........................... 15,378 13,079
------- -------
$68,814 $78,333
======= =======
</TABLE>

7. INCOME TAXES

Loss before income taxes is attributable to the following jurisdictions:

<TABLE>
<CAPTION>
YEAR JANUARY 1
ENDED TO
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ------------
<S> <C> <C>
United States.................................... $(31,114) $(4,757)
Foreign.......................................... (9,136) (2,238)
-------- -------
Total.......................................... $(40,250) $(6,995)
======== =======
</TABLE>

F-141
<PAGE>

ZDI (ZIFF-DAVIS INC., FORMERLY ZIFF-DAVIS PUBLISHING COMPANY)
(A WHOLLY OWNED SUBSIDIARY OF ZIFF-DAVIS HOLDINGS CORP.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

Components of the income tax benefit are as follows:

<TABLE>
<CAPTION>
YEAR JANUARY 1
ENDED THROUGH
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ------------
<S> <C> <C>
U.S. federal income taxes:
Current........................................ $ -- $ --
Deferred....................................... (11,040) (1,897)
State and local income taxes:
Current........................................ -- --
Deferred....................................... (3,208) (551)
Foreign income taxes............................. -- --
-------- -------
Total income tax benefit..................... $(14,248) $(2,448)
======== =======
</TABLE>

A reconciliation of the U.S. federal statutory tax rate to ZDI's effective
tax rate on loss before income taxes is as follows:

<TABLE>
<CAPTION>
YEAR JANUARY 1
ENDED TO
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ------------
<S> <C> <C>
Federal statutory tax rate..................... 35.0% 35.0%
State and local taxes (net of federal tax
benefit)...................................... 6.0 6.0
Foreign losses................................. (2.5) (2.5)
Amortization of nondeductible goodwill......... (1.3) (1.2)
Other nondeductible expenses................... (1.8) (2.3)
---- ----
Effective tax rate........................... 35.4% 35.0%
==== ====
</TABLE>

F-142
<PAGE>

ZDI (ZIFF-DAVIS INC., FORMERLY ZIFF-DAVIS PUBLISHING COMPANY)
(A WHOLLY OWNED SUBSIDIARY OF ZIFF-DAVIS HOLDINGS CORP.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

Following is a summary of the components of the deferred tax accounts at
December 31, 1995 and February 28, 1996:

<TABLE>
<CAPTION>
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ------------
<S> <C> <C>
Current deferred tax assets:
Allowance for doubtful accounts................. $ 8,396 $ 8,535
Employee compensation, bonus, and vacation...... 12,248 12,687
Other........................................... 1,485 2,348
-------- --------
Current deferred tax assets................... 22,129 23,570
-------- --------
Noncurrent deferred tax assets and (liabilities):
Basis difference in intangible assets........... (69,271) (71,589)
Basis difference in property and equipment...... (3,378) (1,863)
Deferred rental expense......................... 3,285 3,139
Net operating loss carryforwards................ 102,165 103,954
Acquisition reserves............................ 2,773 2,756
Other........................................... (220) (36)
-------- --------
Gross noncurrent deferred tax assets.......... 35,354 36,361
Valuation allowance............................. (47,176) (47,176)
-------- --------
Net noncurrent deferred tax liabilities....... (11,822) (10,815)
-------- --------
Total net deferred tax assets..................... $ 10,307 $ 12,755
======== ========
</TABLE>

As of December 31, 1995 and February 28, 1996, ZDI had total deferred tax
assets of $83,176 and $86,243, respectively, and total deferred tax liabilities
of $72,869 and $73,488, respectively.

As of February 28, 1996, ZDI has U.S. and foreign net operating loss
carryforwards of approximately $244,172, which will begin to expire on December
31, 1996. The December 31, 1995 and the February 28, 1996 net deferred tax
asset is reduced by a valuation allowance of $47,176 relating to tax benefits
of foreign net operating loss carryforwards which are not expected to be
recognized.

ZDI's foreign subsidiaries have no undistributed earnings for remittance to
the U.S. and therefore no U.S. or foreign tax provision on remittances has been
recorded.

8. DUE TO MANAGEMENT AND AFFILIATES

Payables to management and affiliates consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, FEBRUARY 28,
1995 1996
------------ ------------
<S> <C> <C>
Payable to:
Management....................................... $28,161 $28,443
Sellers.......................................... 21,500 21,500
Holdings......................................... 8,819 8,819
------- -------
$58,480 $58,762
======= =======
</TABLE>

F-143
<PAGE>

ZDI (ZIFF-DAVIS INC., FORMERLY ZIFF-DAVIS PUBLISHING COMPANY)
(A WHOLLY OWNED SUBSIDIARY OF ZIFF-DAVIS HOLDINGS CORP.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

As part of the Acquisition, ZDI agreed to assume certain obligations to
management arising out of prior employment arrangements. Approximately $40,000
was due under these arrangements, of which approximately $12,000 was paid in
1995. The balance of the obligation, including accrued interest, was paid in
1997.

Amounts due to sellers represent final amounts payable related to the
Acquisition.

9. LONG-TERM DEBT

Long-term debt at December 31, 1995 and February 28, 1996 is comprised of the
following:

<TABLE>
<S> <C>
Bank debt:
Tranche A......................... $ 86,604
Tranche B......................... 179,479
Tranche C......................... 159,917
Revolving credit arrangement...... 20,000
--------
446,000
Less--Current portion............... (6,847)
--------
$439,153
========
</TABLE>

On December 21, 1994, ZDI borrowed $515,000 under the terms of a Credit
Agreement. The proceeds of the loan were used to finance a portion of the
Acquisition and pay certain transaction costs.

The Credit Agreement also provides ZDI with an additional $85,000, increased
to $150,000 under terms of the August 31, 1995 amendment, under a revolving
credit arrangement through December 31, 2000. These funds are available for
loans, letters of credit, and swing-line loans, subject to certain maximum
levels of borrowing. At least once during each year, for a period of 30
consecutive days, the loans outstanding under the revolving credit facility
must be reduced so that the aggregate outstanding amount does not exceed
$130,000 during such 30-day period. The commitment fee for the revolving credit
facility is .50% during 1995 and 1996 on the unused portion of the facility.
ZDI has the

F-144
<PAGE>

ZDI (ZIFF-DAVIS INC., FORMERLY ZIFF-DAVIS PUBLISHING COMPANY)
(A WHOLLY OWNED SUBSIDIARY OF ZIFF-DAVIS HOLDINGS CORP.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

option to permanently reduce the amount available for borrowings under the
revolving credit facility by a minimum of $5,000 at any time. At December 31,
1995 and February 28, 1996, $130,000 under the revolving credit facility is
available for borrowing.

During 1995 and the period January 1, 1996 to February 28, 1996, the Tranche
A and revolving credit loans bore interest, payable at least quarterly, at
either the Average Bank Rate ("ABR"), as defined, plus 1.25%, or at the
Eurodollar rate, plus 2.5% at the election of ZDI. Tranche B and C loans bore
interest, payable at least quarterly, at either the ABR, plus 1.75% and 2.25%,
respectively, or at the Eurodollar rate, as defined, plus 3% and 3.5%,
respectively, at the election of ZDI. Swing-line loans bear interest at the
ABR, plus the applicable margins as discussed above. Borrowings outstanding at
December 31, 1995 and February 28, 1996 were $446,000 and the weighted average
interest rate was 8.8% and 10.1%, respectively.

ZDI is required to comply with various restrictive covenants, including
maintaining certain financial ratios, restrictions on additional indebtedness,
capital expenditures, acquisitions, certain asset sales, declaration of
dividends and acquisition of ZDI's or Holdings' Common Stock. All borrowings
under the Credit Agreement are secured by the common stock and other equity
interests of ZDI and its wholly-owned subsidiaries.

ZDI is required to make mandatory prepayments of the loans with the net
proceeds of certain asset sales and debt issuances, if any. ZDI is also
required, commencing with the year ending December 31, 1995, to prepay the
loans with a portion of excess cash flow, as defined, once certain cash
balances are achieved. These cash balances were not achieved during 1995 or for
the period from January 1, 1996 to February 28, 1996 and therefore no
prepayments occurred.

Scheduled principal payments for each of the next five years are as follows:

10. RELATED PARTY TRANSACTIONS

Prior to the Acquisition, ZCC provided certain services to ZDI, including
legal, tax, human resources, payroll, facilities management and management
information services.

F-145
<PAGE>

ZDI (ZIFF-DAVIS INC., FORMERLY ZIFF-DAVIS PUBLISHING COMPANY)
(A WHOLLY OWNED SUBSIDIARY OF ZIFF-DAVIS HOLDINGS CORP.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

The remaining unpaid balance (approximately $8,100) for such services was paid
in the normal course of business during 1995. Beginning in 1995, ZDI sublet
office space and provided administrative services to ZCC. Such office space and
services were provided to ZCC at ZDI's cost. The majority partners of ZCC have
a continuing investment in Holdings of approximately 6%.

On the closing date of the Acquisition, ZDI paid approximately $280,000 in
cash to the Sellers and issued notes due January 13, 1995 and January 16, 1995
totaling $1,033,931, for the balance. These notes were subsequently fully paid
in January, 1995.

See Note 11 for a description of subordinated debentures.

In connection with the Acquisition, ZDI paid transaction costs of $14,000 to
an affiliate of Holdings.

The Company paid $44,555 and $3,791 in interest to Holdings for the year
ended December 31, 1995 and for the period from January 1, 1996 to February 28,
1996, respectively.

11. SUBORDINATED DEBENTURES--RELATED PARTY

On December 21, 1994, ZDI issued a $525,000 subordinated note payable to
Holdings to finance a portion of the Acquisition. The note bears interest at 8
1/2% per annum with interest payable semiannually on February 28 and August 31
of each year. The principal is repayable in three installments of $175,000 each
on December 21, 2005, December 21, 2006 and December 21, 2007. This note is
fully subordinated in right of payment to the bank borrowings (see Note 9).

12. EMPLOYEE BENEFIT PLANS

Retirement plans

ZDI and its subsidiaries maintain various defined contribution retirement
plans. Substantially all of ZDI's employees are eligible to participate in one
of the plans under which annual contributions may be made by ZDI for the
benefit of all eligible employees. Employees may also make contributions to the
plan in which they participate which, subject to certain limitations, may be
matched by ZDI up to certain specified percentages. Employees are generally
eligible to participate in a plan upon joining ZDI and receive matching
contributions immediately upon commencement of employment. In addition, the
employees become eligible to receive a discretionary Company contribution after
one year of employment. ZDI made contributions of $8,432 and $1,407 for the
year ended December 31, 1995 and for the period ended February 28, 1996,
respectively.

F-146
<PAGE>

ZDI (ZIFF-DAVIS INC., FORMERLY ZIFF-DAVIS PUBLISHING COMPANY)
(A WHOLLY OWNED SUBSIDIARY OF ZIFF-DAVIS HOLDINGS CORP.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)

13. SALE OF BUSINESSES

During 1995, ZDI disposed of two subsidiaries and received cash consideration
of $23,508. No gain or loss was realized on the dispositions.

14. OPERATING LEASE COMMITMENTS

ZDI is obligated under various operating leases which expire at various dates
through 2006. Future minimum rental commitments under noncancelable operating
leases are as follows:

<TABLE>
<S> <C>
1996 (ten-month period)........................................... $15,771
1997.............................................................. 19,606
1998.............................................................. 18,219
1999.............................................................. 12,532
2000.............................................................. 9,611
Thereafter........................................................ 14,583
-------
Total........................................................... $90,322
=======
</TABLE>

Netted in the above totals is approximately $2,300 for which ZDI has
noncancelable subleases in place. Total sublease income approximates ZDI's
required payments under the related leases. Rent expense amounted to
approximately $22,900 and $4,020 for the year ended December 31, 1995 and for
the period from January 1, 1996 to February 28, 1996, respectively.

15. CONTINGENCIES

ZDI is subject to various claims and legal proceedings arising in the normal
course of business. Management believes that the ultimate liability, if any, in
the aggregate will not be material to the consolidated balance sheet, future
operations or cash flows.

16. SUBSEQUENT EVENTS

Acquisition of the Company

In February 1996, SOFTBANK Corp. entered into an agreement to acquire the
stock of ZDI for an aggregate purchase price of approximately $1,800,000, plus
transaction costs. In a separate agreement, MAC Inc. Ltd., an affiliated
company of SOFTBANK Corp., acquired directly and through affiliates, certain of
the assets and assumed certain of the liabilities of ZDI for an aggregate
purchase price of approximately $302,000.

F-147
<PAGE>

UNDERWRITING

The Company and the underwriters for the U.S. offering (the "U.S.
UNDERWRITERS") named below have entered into an underwriting agreement with
respect to the shares of ZDNet Stock (the "SHARES") being offered in the United
States. Subject to certain conditions, each U.S. Underwriter has severally
agreed to purchase the number of Shares indicated in the following table.
Goldman, Sachs & Co., Donaldson, Lufkin & Jenrette Securities Corporation and
Hambrecht & Quist LLC are the representatives of the U.S. Underwriters.

<TABLE>
<CAPTION>
Number of
U.S. Underwriters Shares
----------------- ---------
<S> <C>
Goldman, Sachs & Co. .............................................. .
Donaldson, Lufkin & Jenrette Securities Corporation................ .
Hambrecht & Quist LLC.............................................. .
---
Total............................................................ .
===
</TABLE>

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

If the U.S. Underwriters sell more Shares than the total number set forth in
the table above, the U.S. Underwriters have an option to buy up to an
additional . Shares from the Company to cover such sales. They may exercise
that option for 30 days. If any Shares are purchased pursuant to this option,
the U.S. Underwriters will severally purchase Shares in approximately the same
proportion as set forth in the table above.

The following table shows the per share and total underwriting discounts to
be paid to the U.S. Underwriters by the Company. Such amounts are shown
assuming both no exercise and full exercise of the U.S. Underwriters' option to
purchase . additional Shares.

Paid by the Company

<TABLE>
<CAPTION>
No Full
Exercise Exercise
-------- --------
<S> <C> <C>
Per Share.................................................. $ . $ .
Total...................................................... $ . $ .
</TABLE>

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

Shares sold by the U.S. Underwriters to the public will initially be offered
at the initial public offering price set forth on the cover of this prospectus.
Any shares sold by the U.S. Underwriters to securities dealers may be sold at a
discount of up to $ . per share from the initial public offering price. Any
such securities dealers may resell any shares purchased from the Underwriters
to certain other brokers or dealers at a discount of up to $ . per share from
the initial public offering price. If all the Shares are not sold at the
initial offering price, the representatives may change the offering price and
the other selling terms.

Goldman Sachs International, Donaldson, Lufkin & Jenrette Securities
Corporation and Hambrecht & Quist LLC have entered into an underwriting
agreement with the underwriters for the offering of . Shares outside of the
United States. The terms and conditions of the offering in the United States
and the international offering outside of the United States are the same and
the sale of Shares in both offerings are conditioned on each other.

U-1
<PAGE>

Goldman Sachs International, Donaldson, Lufkin & Jenrette Securities
Corporation and Hambrecht & Quist LLC are representatives of the underwriters
for the international offering outside the United States (the "INTERNATIONAL
UNDERWRITERS"). We refer to the U.S. Underwriters and the International
Underwriters, collectively, as the "UNDERWRITERS".

The Underwriters have entered into an agreement in which they agree to
restrictions on where and to whom they and any dealer purchasing from them may
offer Shares as a part of the distribution of the Shares. The Underwriters also
have agreed that they may sell Shares among each of the underwriting groups.

The Company has agreed with the Underwriters not to dispose of or hedge any
of their ZDNet Stock or securities convertible into or exchangeable for shares
of ZDNet Stock during the period from the date of this prospectus continuing
through the date 180 days after the date of this prospectus, except with the
prior written consent of the representatives. This agreement does not apply to
any existing employee benefit plans. See "Shares Eligible for Future Sale" for
a discussion of certain transfer restrictions.

Prior to the Offering, there has been no public market for the Shares. The
initial public offering price has been negotiated among the Company and the
representatives. Among the factors to be considered in determining the initial
public offering price of the Shares, in addition to prevailing market
conditions, will be the Company's and ZDNet's historical performance, estimates
of the business potential and earnings prospects of the Company and ZDNet, an
assessment of the management of the Company and ZDNet and the consideration of
the above factors in relation to market valuation of companies in related
businesses.

ZDNet Stock will be listed on the NYSE under the symbol ".". In order to meet
one of the requirements for listing ZDNet Stock on the NYSE, the Underwriters
have undertaken to sell lots of . or more shares to a minimum of . beneficial
holders.

In connection with the offering, the Underwriters may purchase and sell
shares of ZDNet Stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the Underwriters of a greater
number of shares than they are required to purchase in the Offering.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of ZDNet Stock
while the Offering is in progress.

The Underwriters also may impose a penalty bid. This occurs when a particular
Underwriter repays to the Underwriters a portion of the underwriting discount
received by it because the representatives have repurchased shares sold by or
for the account of such Underwriter in stabilizing or short covering
transactions.

These activities by the Underwriters may stabilize, maintain or otherwise
affect the market price of ZDNet Stock. As a result, the price of ZDNet Stock
may be higher than the price that otherwise might exist in the open market. If
these activities are commenced, they may be discontinued by the Underwriters at
any time. These transactions may be effected on the NYSE, in the over-the-
counter market or otherwise.

U-2
<PAGE>

The Underwriters do not expect sales to discretionary accounts to exceed five
percent of the total number of shares offered.

The Company estimates that its share of the total expenses of the Offering,
excluding underwriting discounts, will be approximately $..

At the request of the Company, up to . Shares have been reserved for sale by
the U.S. Underwriters to employees of the Company and its affiliates and
certain other purchasers (the "Directed Offering"). Such Shares will be sold at
the initial public offering price and, to the extent sold, will not otherwise
be available for sale as a part of the Offering. If any such Shares are not
sold in this manner they will be offered by the U.S. Underwriters as a part of
the offering. Purchasers in the Directed Offering are subject to the 180-day
lockup described above.

The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act.

This Prospectus may be used by the Underwriters and other dealers in
connection with offers and sales of the shares, including sales of shares
initially sold by the Underwriters in the offering being made outside of the
United States, to persons located in the United States.

U-3
<PAGE>

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

No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus. You must not rely
on any unauthorized information or representations. This prospectus is an
offer to sell or to buy only the shares offered hereby, but only under
circumstances where it is lawful to do so. The information contained in this
prospectus is current only as of its date.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary.................................................................. 4
Cautionary Statement Regarding Forward-Looking Statements................ 15
Risk Factors............................................................. 16
Trading Prices of and Dividends on Existing Common Stock................. 38
Use of Proceeds.......................................................... 39
Dividend Policy.......................................................... 39
Capitalization........................................................... 40
Dilution................................................................. 41
ZDNet Selected Historical Combined Financial and Other Data.............. 42
ZDNet Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................... 43
ZDNet Description of Business............................................ 56
Management of ZDNet...................................................... 70
ZD Selected Historical Combined Financial and Other Data................. 72
ZD Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................... 73
ZD Description of Business............................................... 88
Company Selected Historical Combined Financial and Other Data............ 104
Company Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................... 105
Company Description of Business.......................................... 120
Management of the Company................................................ 121
Executive Compensation................................................... 126
Certain Transactions..................................................... 135
Security Ownership of Certain Beneficial Owners and Management........... 141
Certain Cash Management and Allocation Policies.......................... 143
Description of Capital Stock............................................. 147
Shares Eligible for Future Sale.......................................... 168
Certain United States Tax Consequences................................... 170
Validity of ZDNet Stock.................................................. 171
Experts.................................................................. 171
Where You Can Find More Information...................................... 171
Index of Certain Terms................................................... 173
Illustration of Certain Terms............................................ I-1
Index to Financial Statements............................................ F-1
Underwriting............................................................. U-1
</TABLE>

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

. Shares

ZIFF-DAVIS INC.-- ZDNET GROUP

Common Stock

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

[LOGO]

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

Joint Global Coordinators and Joint Book-Running Managers

GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE

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

HAMBRECHT & QUIST

Representatives of the Underwriters

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following is a statement of the estimated expenses, other than
underwriting discounts and commissions, to be incurred in connection with the
distribution of the securities registered under this Registration Statement.

<TABLE>
<CAPTION>
AMOUNT TO BE PAID
-----------------
<S> <C>
Securities and Exchange Commission registration fee... $31,970
NASD fees and expenses................................ 12,000
Legal fees and expenses............................... .
Fees and expenses of qualification under state
securities laws (including legal fees)............... .
NYSE listing fees and expenses........................ .
Accounting fees and expenses.......................... .
Printing and engraving fees........................... .
Registrar and transfer agent's fees................... .
Miscellaneous......................................... .
-------
Total............................................... $ .
=======
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify directors and officers as well as other employees and
individuals against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with any threatened, pending or completed actions, suits or
proceedings in which such person is made a party by reason of such person being
or having been a director, officer, employee or agent of the Registrant. The
statute provides that the indemnification is not exclusive of other rights to
which those seeking indemnification may be entitled under any by-law,
agreement, vote of stockholders or disinterested directors or otherwise.
Section 6.4 of the Registrant's By-laws provides for indemnification by the
Registrant of its directors, officers and employees to the fullest extent
permitted by the Delaware General Corporation Law. In addition to the
protection available under the Registrant's Amended and Restated Certificate of
Incorporation, By-laws and insurance policies, the Registrant has entered into
agreements with its outside directors to indemnify them to the fullest extent
permitted by law against losses arising from any claim against them by reason
of being or having been a director.

Section 102(b)(7) of the Delaware General Corporation Law permits a
corporation to provide in its certificate of incorporation that a director of
the corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to
the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) for payments of unlawful dividends or unlawful stock repurchases or
redemptions, or (iv) for any transaction

II-1
<PAGE>

from which the director derived an improper personal benefit. The Company's
Certificate of Incorporation provides for such limitation of liability.

Reference is also made to Section . of the Underwriting Agreement filed as
Exhibit 1.1 to the Registration Statement for information concerning the
Underwriters' obligation to indemnify the Registrant and its officers and
directors in certain circumstances.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

NONE.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(A) EXHIBITS

<TABLE>
<C> <S>
1.1 Underwriting Agreement.*
3.1 Amended and Restated Certificate of Incorporation of the Company (incorporated by
reference to the exhibit in the Company's Registration Statement on Form S-1,
File No.
333-43493).
3.2 Form of Amended and Restated Certificate of Incorporation of the Company.*
3.3 By-laws of the Company (incorporated by reference to the exhibit in the Company's
Registration Statement on Form S-1, File No. 333-43493).
4.1 Specimen of certificate representing the Company's ZD Stock, par value $.01 per
share (incorporated by reference to the Company's Registration Statement on Form
S-1, File No. 333-46493).
4.2 Specimen of certificate representing the Company's ZDNet Stock, par value $.01
per share.*
5.1 Opinion of Sullivan & Cromwell, counsel to the Company.*
8.1 Tax Opinion of Sullivan & Cromwell, counsel to the Company.*
10.1 1998 Incentive Compensation Plan.*
10.2 1998 Employee Stock Purchase Plan.*
10.3 1998 Non-Employee Directors Stock Option Plan.*
10.4 Undertaking, dated as of April 1, 1998, between SOFTBANK Corp. and ZD Inc.
(incorporated by reference to the exhibit in the Company's Registration Statement
on Form S-1, File No. 333-43493).
10.5 License and Services Agreement, dated as of July 28, 1997, between Ziff-Davis
Inc., ZDTV LLC, ZD Television Productions, Inc., MAC Holdings (America) Inc. and
MAC Inc. (incorporated by reference to the exhibit in the Company's Registration
Statement on Form S-1, File No. 333-43493).
10.6 Master License Agreement, dated as of April 1, 1998, between Ziff-Davis Inc. and
SOFTBANK Corp. (incorporated by reference to the exhibit in the Company's
Registration Statement on Form S-1, File No. 333-43493).
10.7 License Agreement, dated as of July 1, 1997, between MAC Inc. and Ziff-Davis Inc.
and SOFTBANK Corp. (incorporated by reference to the exhibit in the Company's
Registration Statement on Form S-1, File No. 333-43493).
</TABLE>

II-2
<PAGE>

<TABLE>
<S> <C>
10.8 Agreement to Produce, dated April 1, 1998, between ZD COMDEX and Forums Inc. and
SOFTBANK Corp. (incorporated by reference to the exhibit in the Company's
Registration Statement on Form S-1, File No. 333-43493).
10.9 Trademark License Agreement, dated as of April 1, 1998, between ZD COMDEX and
Forums Inc. and SOFTBANK Forums KK (incorporated by reference to the exhibit in
the Company's Registration Statement on Form S-1, File No. 333-43493).
10.10 Technical Assistance Agreement, dated as of April 1, 1998, between ZD COMDEX and
Forums Inc. and SOFTBANK Forums KK (incorporated by reference to the exhibit in
the Company's Registration Statement on Form S-1, File No. 333-43493).
10.11 Registration Rights Agreement, dated as of April 1, 1998, between ZD Inc. and
SOFTBANK Holdings Inc. (incorporated by reference to the exhibit in the Company's
Registration Statement on Form S-1, File No. 333-43493).
10.12 Credit Agreement, dated as of March 27, 1996 between SOFTBANK Holdings Inc., the
Guarantors listed therein, The Bank of New York and Morgan Stanley Senior
Funding, Inc., as amended March 9, 1998 (incorporated by reference to the exhibit
in the Company's Registration Statement on Form S-1, File No. 333-43493).
10.13 Secured Guaranteed Credit Agreement, dated as of May 4, 1998, among Ziff-Davis
Inc., the Banks listed therein, Morgan Stanley Senior Funding, Inc., as
Syndication Agent, the Chase Manhattan Bank and DLJ Capital Funding, Inc., as Co-
Documentation Agents, (incorporated by reference to the exhibit in the Company's
Registration Statement on Form S-1, File No. 333-49441).
10.14 Amendment No. 1 and Waiver to Secured Guaranteed Credit Agreement, dated as of
May 28, 1998, among Ziff-Davis Inc., the Banks listed therein and The Bank of New
York, as Administrative Agent.*
10.15 Amendment No. 2 to Secured Guaranteed Credit Agreement, dated as of June 8, 1998,
among Ziff-Davis Inc., the Banks listed therein and The Bank of New York, as
Administrative Agent.*
10.16 Lease of Ziff-Davis Inc. headquarters at 28 East 28th Street, New York, New York
(incorporated by reference to the exhibit in the Company's Registration Statement
on Form S-1, File No. 333-43493).
10.17 Lease Agreement, dated as of May 4, 1998, between Ziff-Davis Inc., ZD Inc., ZD
COMDEX and Forums Inc. and Kingston Technology Company (incorporated by reference
to the exhibit in the Company's Registration Statement on Form S-1, File No. 333-
43493).
10.18 1998 Non-Employee Directors Stock Option Plan Agreement (incorporated by
reference to the exhibit in the Company's Registration Statement on Form S-1,
File No. 333-43493).
10.19 Assignment, dated as of May 4, 1998, between Kingston Technology Company and
Ziff-Davis Inc. (incorporated by reference to the exhibit in the Company's
Registration Statement on Form S-1, File No. 333-43493).
10.20 Employment Agreement, dated as of April 1, 1998, between ZD Inc. and Eric Hippeau
(incorporated by reference to the exhibit in the Company's Registration Statement
on Form S-1, File No. 333-43493).
10.21 Employment Agreement, dated as of April 1, 1998, between ZD COMDEX and Forums
Inc. and Jason E. Chudnofsky (incorporated by reference to the exhibit in the
Company's Registration Statement on Form S-1, File No. 333-43493).
21.1 List of subsidiaries of the Company.*
23.1 Consent of PricewaterhouseCoopers LLP.
</TABLE>

II-3
<PAGE>

<TABLE>
<S> <C>
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Sullivan & Cromwell (included in Exhibit 5 above).*
24.1 Power of Attorney (included in signature page hereto).
27.1 Financial Data Schedule.*
</TABLE>
- --------
* To be filed by amendment

ITEM 17. UNDERTAKINGS

(a) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under "Item 14, Indemnification
of Directors and Officers" above, or otherwise, the registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.

(b) The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, New York on
the 17th day of December, 1998.

ZIFF-DAVIS INC.

By: /s/ Eric Hippeau
----------------------------------
Name:Eric Hippeau
Title: Chairman, Chief Executive
Officer

POWER OF ATTORNEY

Each of the undersigned hereby constitutes and appoints Timothy C. O'Brien
(Chief Financial Officer of the Company) and J. Malcolm Morris (Senior Vice
President and General Counsel), and each of them severally, his/her true and
lawful attorney-in-fact or attorneys-in-fact with power of substitution and
resubstitution to sign in his/her name, place and stead in any and all such
capacities the Registration Statement and any and all amendments thereto
(including post-effective amendments and amendments filed pursuant to Rule
462(b) under the Securities Act) and any documents in connection therewith, and
to file the same with the Securities and Exchange Commission, each of said
attorneys-in-fact to have power to act with or without the other, and to have
full power and authority to do and perform, in the name and on behalf of each
such officer and director of the Registrant who shall have executed such a
power of attorney, every act whatsoever which such attorneys-in-fact, or any of
them, may deem necessary or desirable to be done in connection therewith as
fully and to all intents and purposes as such officer or director of the
Registrant might or could do in person.

Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed by the following persons in the
capacities indicated on December 17, 1998:

<TABLE>
<CAPTION>
NAME TITLE
---- -----

<S> <C>

/s/ Eric Hippeau Chairman, Chief Executive Officer, Director
______________________________________ (Principal Executive Officer)
ERIC HIPPEAU

/s/ Timothy C. O'Brien Chief Financial Officer, Director
______________________________________ (Principal Financial Officer)
TIMOTHY C. O'BRIEN

</TABLE>

II-5
<PAGE>

<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>

/s/ Mark D. Moyer Controller
______________________________________ (Principal Accounting
MARK D. MOYER Officer)

/s/ Masayoshi Son Director
______________________________________
MASAYOSHI SON

/s/ Yoshitaka Kitao Director
______________________________________
YOSHITAKA KITAO

/s/ Ronald D. Fisher Director
______________________________________
RONALD D. FISHER

/s/ Jason E. Chudnofsky Director
______________________________________
JASON E. CHUDNOFSKY

/s/ Claude P. Sheer Director
______________________________________
CLAUDE P. SHEER

/s/ Jonathan D. Lazarus Director
______________________________________
JONATHAN D. LAZARUS

/s/ Jerry C.-Y. Yang Director
______________________________________
JERRY C.-Y. YANG

</TABLE>

II-6

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 or our reports dated December 17, 1998;
relating to the combined financial statements of the ZD Group, the combined
financial statements of the ZD Publishing Group and the combined financial
statements of the ZDNet Group, which appear in such Prospectus. We also consent
to the references to us under the headings "Experts" in such Prospectus.

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
New York, NY
December 17, 1998

<PAGE>

EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our reports dated February 17, 1998;
relating to the combined financial statements of Ziff-Davis Inc. and ZD COMDEX
and Forums Inc., and the consolidated financial statements of Ziff-Davis Inc.
(formerly Ziff-Davis Publishing Company), which appear in such Prospectus. We
also consent to the references to us under the headings "Experts" in such
Prospectus.

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
New York, NY
December 17, 1998