METROMAIL CORP, S-1/A, 1996-05-16

METROMAIL CORP
S-1/A, 1996-05-16
ADVERTISING AGENCIES

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 16, 1996

REGISTRATION NO. 333-2042
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

AMENDMENT NO. 2 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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

METROMAIL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 7331 13-3015410
(STATE OR OTHER (PRIMARY STANDARD (IRS EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)

METROMAIL CORPORATION
360 EAST 22ND STREET
LOMBARD, ILLINOIS 60148
(708) 620-3300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

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

SUSAN L. HENRICKS,
PRESIDENT
METROMAIL CORPORATION
360 EAST 22ND STREET
LOMBARD, ILLINOIS 60148
(708) 620-3300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

COPIES TO:
MONICA M. FOHRMAN DENNIS V. OSIMITZ ROBERT F. WALL
R. R. DONNELLEY & SONS SIDLEY & AUSTIN WINSTON & STRAWN
COMPANY ONE FIRST NATIONAL PLAZA 35 W. WACKER DR.
77 W. WACKER DRIVE CHICAGO, ILLINOIS 60603 CHICAGO, ILLINOIS 60601
CHICAGO, ILLINOIS 60601 (312) 853-7000 (312) 558-5600
(312) 326-8000

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

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

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under 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 delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]

CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER SHARE OFFERING PRICE(1)(2) FEE(3)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par
value.................. $282,900,000 $97,552
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Includes aggregate proceeds from shares which the U.S. Underwriters have
the option to purchase from the Company to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) promulgated under the Securities Act of 1933.

(3) Of the amount shown, $3,449 was paid at the time of the original filing of
the Registration Statement on March 7, 1996.

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

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

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

METROMAIL CORPORATION

CROSS REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY PART I OF FORM S-1

<TABLE>
<CAPTION>
REGISTRATION STATEMENT ITEM AND
CAPTION LOCATION OR HEADING IN PROSPECTUS
------------------------------- ---------------------------------
<S> <C>
1.Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus...... Outside Front Cover Page
2.Inside Front and Outside Back Inside Front Cover Page; Available
Cover Pages of Prospectus..... Information
3.Summary Information and Risk Prospectus Summary; The Company; Risk
Factors....................... Factors
4.Use of Proceeds................. Use of Proceeds
5.Determination of Offering Price. Underwriters
6.Dilution........................ Dilution
7.Selling Security Holders........ Not Applicable
8.Plan of Distribution............ Outside Front Cover Page; Underwriters
9.Description of Securities to be Outside Front Cover Page; Dividend Policy;
Registered.................... Description of Capital Stock and Corporate
Charter
10.Interests of Named Experts and
Counsel....................... Legal Matters; Experts
11.Information with Respect to the Prospectus Summary; Risk Factors; The
Registrant.................... Company; Use of Proceeds; Capitalization;
Dividend Policy; Dilution; Selected
Consolidated and Combined Financial and
Other Data; Unaudited Pro Forma Financial
Information; Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Business;
Management; Ownership of Capital Stock;
Relationship with R.R. Donnelley;
Description of Capital Stock and Corporate
Charter; Shares Eligible for Future Sale;
Financial Statements
12.Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities................... Not Applicable
</TABLE>
<PAGE>

EXPLANATORY NOTE

This Registration Statement contains two forms of prospectus: one to be used
in connection with an underwritten offering in the United States (the "U.S.
Prospectus") and one to be used in a concurrent underwritten offering outside
the United States (the "International Prospectus"). The U.S. Prospectus and
the International Prospectus are identical except for the front cover page.
The form of U.S. Prospectus is included herein and is followed by the front
cover page to be used in the International Prospectus, which is labeled
"Alternate Page for International Prospectus."

If required pursuant to Rule 424(b) of the General Rules and Regulations
under the Securities Act of 1933, as amended, ten copies of each of the
Prospectuses in the forms in which they are used will be filed with the
Securities and Exchange Commission.
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (Subject to Completion)

Issued May 16, 1996
12,000,000 Shares

LOGO METROMAIL
COMMON STOCK

-----------

OF THE 12,000,000 SHARES OF COMMON STOCK BEING OFFERED HEREBY BY METROMAIL
CORPORATION (THE "COMPANY" OR "METROMAIL"), 9,600,000 SHARES ARE BEING
OFFERED INITIALLY IN THE UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS
AND 2,400,000 SHARES ARE BEING OFFERED INITIALLY OUTSIDE OF THE UNITED
STATES AND CANADA BY THE INTERNATIONAL UNDERWRITERS. SEE "UNDERWRITERS."
ALL THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY THE
COMPANY. PRIOR TO THIS OFFERING, ALL OF THE COMMON STOCK OF THE COMPANY
WAS OWNED BY R. R. DONNELLEY & SONS COMPANY ("R.R. DONNELLEY"). UPON
COMPLETION OF THIS OFFERING, R.R. DONNELLEY WILL OWN APPROXIMATELY
41.7% OF THE OUTSTANDING COMMON STOCK OF THE COMPANY (APPROXIMATELY
38.4% IF THE U.S. UNDERWRITERS EXERCISE THEIR OVER-ALLOTMENT OPTION
IN FULL). THE NET PROCEEDS OF THIS OFFERING WILL BE USED TO REPAY
AMOUNTS OWED TO R.R. DONNELLEY AND ITS SUBSIDIARIES. PRIOR TO
THIS OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE COMMON
STOCK OF THE COMPANY. IT IS CURRENTLY ESTIMATED THAT THE
INITIAL PUBLIC OFFERING PRICE WILL BE BETWEEN $18.50 AND
$20.50 PER SHARE. SEE "UNDERWRITERS" FOR A DISCUSSION OF THE
FACTORS CONSIDERED IN DETERMINING THE INITIAL PUBLIC
OFFERING PRICE.

-----------

THE COMMON STOCK HAS BEEN APPROVED
FOR LISTING, SUBJECT TO
OFFICIAL NOTICE OF ISSUANCE,
ON THE NEW YORK STOCK
EXCHANGE, INC. UNDER THE
SYMBOL "ML."

-----------

SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF
THE COMMON STOCK.

-----------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

-----------

PRICE $ A SHARE

-----------

<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS
PRICE TO DISCOUNTS AND TO
PUBLIC COMMISSION(1) COMPANY(2)
-------- ------------- ----------
<S> <C> <C> <C>
Per Share................................... $ $ $
Total(3).................................... $ $ $
</TABLE>
- -----
(1) The Company and R.R. Donnelley have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities
Act of 1933, as amended.

(2) Before deducting expenses payable by the Company estimated at
$1,500,000.

(3) The Company has granted the U.S. Underwriters an option, exercisable
within 30 days of the date hereof, to purchase up to an aggregate of
1,800,000 additional Shares at the Price to Public less Underwriting
Discounts and Commissions for the purpose of covering over-allotments,
if any. If the U.S. Underwriters exercise such option in full, the total
Price to Public, Underwriting Discounts and Commissions and Proceeds to
Company will be $ , $ and $ , respectively.
See "Underwriters."

-----------

The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters named herein and subject to approval of certain legal matters
by Winston & Strawn, counsel for the Underwriters. It is expected that the
delivery of the Shares will be made on or about , 1996 at the offices
of Morgan Stanley & Co. Incorporated, New York, N.Y., against payment therefor
in immediately available funds.

-----------

MORGAN STANLEY & CO. LEHMAN BROTHERS
Incorporated

, 1996
<PAGE>

INSIDE FRONT COVER OF THE PROSPECTUS:

Flow chart summarizing Metromail's business, as described elsewhere in this
Prospectus. The flow chart illustrates the Company's (1) selected data sources,
(2) database, (3) format for delivering products and services and (4) direct
marketing and reference products and services (and the applications for and
users thereof).
<PAGE>

LOGO METROMAIL

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

2
<PAGE>

NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR
SUCH PERSON TO MAKE SUCH AN OFFERING OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE
SUBSEQUENT TO THE DATE HEREOF.

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

FOR INVESTORS OUTSIDE THE UNITED STATES: NO ACTION HAS BEEN OR WILL BE TAKEN
IN ANY JURISDICTION BY THE COMPANY OR ANY UNDERWRITER THAT WOULD PERMIT A
PUBLIC OFFERING OF THE COMMON STOCK OR POSSESSION OR DISTRIBUTION OF THIS
PROSPECTUS IN ANY JURISDICTION WHERE ACTION FOR THAT PURPOSE IS REQUIRED,
OTHER THAN IN THE UNITED STATES. PERSONS INTO WHOSE POSSESSION THIS PROSPECTUS
COMES ARE REQUIRED BY THE COMPANY AND THE UNDERWRITERS TO INFORM THEMSELVES
ABOUT, AND TO OBSERVE ANY RESTRICTIONS AS TO, THE OFFERING OF THE COMMON STOCK
AND THE DISTRIBUTION OF THIS PROSPECTUS.

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

UNTIL , 1996 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING),
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

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

In this Prospectus, references to "dollar" and "$" are to United States
dollars, and the term "United States" or "U.S." means the United States of
America, its states, its territories, its possessions and all areas subject to
its jurisdiction.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................. 4
Risk Factors........................ 9
The Company......................... 18
Use of Proceeds..................... 18
Capitalization...................... 19
Dividend Policy..................... 20
Dilution............................ 20
Selected Consolidated and Combined
Financial and Other Data........... 21
Unaudited Pro Forma Financial
Information........................ 22
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 26
Business............................ 33
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management.......................... 49
Ownership of Capital Stock.......... 58
Relationship with R.R. Donnelley.... 60
Description of Capital Stock and
Corporate Charter.................. 63
Shares Eligible for Future Sale..... 65
Certain United States Federal Income
Tax Considerations For Non-U.S.
Holders of Common Stock............ 66
Underwriters........................ 69
Legal Matters....................... 71
Experts............................. 72
Additional Information.............. 72
Exchange Rates...................... 72
Index to Financial Statements....... F-1
</TABLE>

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

The Company intends to furnish to its stockholders annual reports containing
consolidated financial statements audited by an independent public accounting
firm and quarterly reports for the first three quarters of each fiscal year
containing interim unaudited financial information.

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

The following trademarks are mentioned in this Prospectus: BehaviorBank(R),
Cole(R), MetroBase(R), Metromail(R), MetroNet(R), MetroSearch(R) and National
Look Up 900 Service(R), which are registered trademarks of Metromail;
AnalytiX(R), which is a registered trademark of Customer Insight Company; and
Windows(R), which is a registered trademark of Microsoft Corporation.

3
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and the financial statements
and pro forma information (and the notes related thereto) included elsewhere in
this Prospectus. Unless otherwise indicated, all information in this Prospectus
assumes no exercise of the U.S. Underwriters' over-allotment option. See
"Underwriters."

THE COMPANY

Metromail Corporation ("Metromail" or the "Company") is a leading provider of
marketing-oriented consumer information and reference services which it
supplies to a wide variety of organizations engaged in direct mail, telephone
and target marketing, as well as to clients who need specific reference and
information services. In providing these information services, Metromail
utilizes its proprietary database, which it believes is one of the most
comprehensive and accurate databases in the United States, containing
geographic, demographic and other marketing information on over 143 million
individuals and over 90% of the households in the United States. The Company
has assembled this database over almost 50 years from a wide variety of
publicly available and proprietary, third-party sources and acquired databases.
The markets in which the Company participates are experiencing increasing
demand for high-quality consumer information. In 1995, Metromail generated net
sales and earnings from operations of $237.2 million and $30.6 million,
respectively.

The Company offers two general categories of products and services: direct
marketing services and reference services. To its direct marketing clients the
Company provides: (i) targeted lists of potential customers; (ii) value-added
enhancements of pre-existing customer lists; (iii) processing and mail
services; and (iv) proprietary marketing database software for personal
computers used to access marketing data from a client's customer database. The
Company's reference services include: (1) a National Directory Assistance
("NDA") database for on-line or operator-assistance providers; (2) an on-line
look-up/skip-locate service for collection agencies, consumer finance companies
and credit card issuers; and (3) the Cole directories, which list households in
sequence, by telephone number or address, in approximately 150 markets in the
United States and Canada, delivered in printed form or on CD-ROM.

Metromail's innovative marketing and distribution programs are important
elements of the Company's success to date. Metromail uses a multi-channel
distribution strategy to target a broad base of potential clients. The Company
has its own sales force, which the Company believes to be the largest direct
sales force in its industry, to call primarily on large national accounts. The
Company also sells its products and services through direct mail, telemarketing
and sales through third-party resellers such as advertising agencies and list
brokers. In addition, the Company has invested in the development of
sophisticated database marketing software applications which enable clients to
create and manage their own databases as well as gain more efficient access to
the data available through Metromail's proprietary database. Metromail is
consolidating all of its existing databases into a single universal file
through an advanced technology initiative. The Company believes that this
consolidation will enable it to reduce the costs and time of updating its
database and accelerate the speed at which information can be retrieved from
the database.

Metromail expects to benefit from continued growth in its markets resulting
from the ongoing shift from "mass" marketing to "information-driven" targeted
marketing, increased access to data and growth in several existing end markets
and industries, as well as the emergence of new end markets. The Company
believes that its competitive strengths will enable it to continue to compete
effectively in its markets. These strengths include the Company's (i)
comprehensive proprietary database and expertise in gathering data; (ii)
ability to leverage its database into a wide range of information products and
services; (iii) large base of established clients and comprehensive, multi-
channel sales network; (iv) advanced technological capabilities in database
management and software development; and (v) experienced management team and
employees.

4
<PAGE>

The Company's principal strategy is to capitalize on its competitive
strengths to provide high value-added information and information services to
an expanding universe of clients. Key elements of the Company's strategy
include:

. Maintaining, integrating and expanding its proprietary database;

. Developing new products and services and targeting new markets;

. Developing technologies to analyze, package and distribute information
more efficiently; and

. Selectively acquiring data, distribution channels and businesses
available as a result of ongoing consolidation in the industry.

R. R. Donnelley & Sons Company ("R.R. Donnelley") is currently the sole
stockholder of the Company and upon completion of the Offering will own
approximately 41.7% of the outstanding Common Stock (approximately 38.4% if the
over-allotment option granted by the Company to the U.S. Underwriters is
exercised in full). While R.R. Donnelley in the future may reduce its ownership
interest in the Company,
R.R. Donnelley has advised the Company that it has no plans to do so. In
connection with the Offering,
R.R. Donnelley has agreed not to offer, pledge, sell or otherwise dispose of,
directly or indirectly, any shares of Common Stock (or any security convertible
into or exercisable or exchangeable for Common Stock) for a period of 180 days
after the date of this Prospectus without the prior written consent of Morgan
Stanley & Co. Incorporated. See "Relationship with R.R. Donnelley" and
"Underwriters."

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company:
U.S. Offering.......................... 9,600,000 shares
International Offering................. 2,400,000 shares
Total................................ 12,000,000 shares
Common Stock to be outstanding
immediately after the Offering.......... 20,600,000 shares(1)
Use of Proceeds.......................... The net proceeds to the Company from
the Offering are estimated to be ap-
proximately $219.6 million ($252.8
million if the U.S. Underwriters ex-
ercise their overallotment option in
full) (assuming an initial public of-
fering price of $19.50 per share, af-
ter deducting estimated underwriting
discounts and offering expenses pay-
able by the Company). The net pro-
ceeds from the Offering together
with, to the extent necessary,
borrowings under a bank credit facil-
ity to be entered into by the Company
upon consummation of the Offering
will be used to repay the debt and
advances owed to R.R. Donnelley and
its subsidiaries, which as of March
31, 1996 totalled approximately
$248.8 million. See "Use of Pro-
ceeds."
NYSE Symbol.............................. ML
</TABLE>
- --------

(1) Excludes 1,600,000 shares of Common Stock reserved for issuance under the
Company's 1996 Stock Incentive Plan and 1996 Broad-Based Employee Stock
Plan, including 34,000 shares of restricted Common Stock and options to
purchase approximately 1,300,000 shares of Common Stock (at the initial
public offering price set forth on the cover page of this Prospectus) that
the Company expects to grant to employees in connection with the Offering.
See "Management--Stock Plans," "Management--Employment Agreements" and
Notes to Consolidated and Combined Financial Statements of Metromail.

5
<PAGE>

SUMMARY CONSOLIDATED AND COMBINED FINANCIAL AND OTHER DATA

The following table summarizes selected historical consolidated and combined
financial and other data of the Company. Statement of operations data for each
of the three years in the period ended December 31, 1995 have been derived from
the audited consolidated and combined financial statements of the Company
contained herein. Statement of operations data for the three month periods
ended March 31, 1995 and 1996, respectively, and balance sheet data as of March
31, 1996 have been derived from the unaudited consolidated and combined
financial statements of the Company contained herein. Statement of operations
data for each of the two years in the period ended December 31, 1992 and other
data are derived from unaudited information. The information set forth below
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Unaudited Pro Forma Financial
Information" and Consolidated and Combined Financial Statements of Metromail
and notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------------------------------- ----------------
1991 1992 1993 1994(1) 1995(1) 1995 1996
-------- -------- -------- -------- -------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Direct marketing
sales................. $114,871 $120,364 $127,683 $156,806 $189,713 $38,860 $41,894
Reference sales........ 30,394 33,317 36,032 38,665 47,474 10,972 12,475
-------- -------- -------- -------- -------- ------- -------
Total net sales...... 145,265 153,681 163,715 195,471 237,187 49,832 54,369
Database and
production costs...... 88,945 86,184 95,016 108,806 134,361 30,279 33,606
Amortization of
goodwill.............. 6,054 6,054 6,054 6,608 7,446 1,790 1,889
Selling expenses....... 26,211 26,252 29,625 37,107 45,913 10,345 11,821
General and
administrative
expenses.............. 15,919 13,232 12,372 14,408 16,645 3,898 4,909
Provisions for
doubtful accounts..... 1,584 1,798 1,959 1,848 2,180 425 419
Provision for
litigation expense.... -- -- -- -- -- -- 1,500(2)
-------- -------- -------- -------- -------- ------- -------
Earnings from
operations.......... 6,552 20,161 18,689 26,694 30,642 3,095 225
Interest expense--
related party......... 22,898 21,337 22,112 18,999 21,329 4,968 5,345
Interest expense....... -- -- -- -- 80 -- 60
Other expense
(income)--net......... (120) (57) (138) 24 (87) (10) (5)
-------- -------- -------- -------- -------- ------- -------
Earnings (loss)
before income taxes. (16,226) (1,119) (3,285) 7,671 9,320 (1,863) (5,175)
Income taxes........... (4,069) 2,034 1,181 5,684 6,585 (130) (1,394)
-------- -------- -------- -------- -------- ------- -------
Net income (loss)
from operations
before cumulative
effect of accounting
change.............. (12,157) (3,153) (4,466) 1,987 2,735 (1,733) (3,781)
Cumulative after-tax
effect of change in
accounting for post
retirement benefits
other than pensions... -- -- 4,388 -- -- -- --
-------- -------- -------- -------- -------- ------- -------
Net income (loss).... $(12,157) $ (3,153) $ (8,854) $ 1,987 $ 2,735 $(1,733) $(3,781)
======== ======== ======== ======== ======== ======= =======
</TABLE>

<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
-----------------------
ACTUAL AS ADJUSTED(3)
-------- --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Total assets.......................................... $375,678 $375,678
Total debt............................................ 252,684 33,616
Total shareholders' equity............................ 81,709 301,339
</TABLE>

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------------- ---------------
1991 1992 1993 1994(1) 1995(1) 1995 1996
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT WHERE NOTED)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA (FOR OR AT
END OF PERIODS):
Capital expenditures... $ 7,699 $ 3,117 $13,426 $ 9,940 $28,459 $ 6,877 $ 7,860
Depreciation and
amortization.......... 12,780 11,596 13,143 14,781 20,851 4,774 5,437
Computer processing
capacity (in MIPS).... 112 123 185 280 396 280 396
Number of individuals
in database........... 132,839 130,122 138,709 146,276 146,579 143,156 143,770
Number of households in
database.............. 92,268 92,362 92,859 95,130 94,958 95,465 95,770
</TABLE>
- --------
(1) In 1994, the Company purchased Customer Insight Company for approximately
$20.0 million. In 1995, an affiliate of R.R. Donnelley acquired
International Communication & Data Plc for approximately $15.3 million. See
Notes 1 and 14 of Notes to Consolidated and Combined Financial Statements
of Metromail.

(3) Adjusted to give effect to the Offering being consummated and the assumed
net proceeds of the Offering together with, to the extent necessary,
borrowings under a bank credit facility to be entered into by the Company
upon consummation of the Offering being applied, as of March 31, 1996, to
the repayment of the debt and advances due to R.R. Donnelley and its
subsidiaries. See "Use of Proceeds."

6
<PAGE>

SUMMARY UNAUDITED PRO FORMA

CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS

The unaudited pro forma consolidated and combined statements of operations
for the year ended December 31, 1995 and the three months ended March 31, 1996
set forth below illustrate: (i) the effects of the historical estimated results
of operations (under the Company's accounting policies) of International
Communication & Data Plc ("ICD") for the period from January 1, 1995 to April
30, 1995, the date on which ICD was acquired by an affiliate of the Company;
(ii) the estimated net operating effects resulting from the Company being a
public entity, which include pricing of certain services the Company will
provide to and receive from R.R. Donnelley after the Offering under certain
intercompany agreements, as well as other incremental public company expenses;
and (iii) the Offering being consummated and the assumed net proceeds therefrom
together with, to the extent necessary, borrowings under a bank credit facility
to be entered into by the Company upon consummation of the Offering being used
to repay the debt and advances owed to R.R. Donnelley and its subsidiaries at
January 1, 1995, resulting in (a) the elimination of interest expense
associated with the debt and advances owed to R.R. Donnelley and its
subsidiaries and (b) additional interest expense related to borrowings under
such bank credit facility described in clause (a) and to finance operating and
investing activities in 1995 and in the first three months of 1996.

The pro forma adjustments are based on available information and upon certain
assumptions the Company believes are reasonable. The pro forma statements of
operations do not purport to represent what the Company's results of operations
would actually have been or to project the Company's results of operations for
any future period.

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1995 MARCH 31, 1996
------------------ ------------------
AS AS
ACTUAL ADJUSTED(1) ACTUAL ADJUSTED(1)
-------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C> <C>
Direct marketing sales............ $189,713 $194,768 $41,894 $41,894
Reference sales................... 47,474 47,474 12,475 12,475
-------- -------- ------- -------
Total net sales.................. 237,187 242,242 54,369 54,369
Database and production costs..... 134,361 134,727 33,606 33,313
Amortization of goodwill.......... 7,446 7,571 1,889 1,889
Selling expenses.................. 45,913 47,257 11,821 11,909
General and administrative
expenses......................... 16,645 20,103 4,909 5,389
Provisions for doubtful accounts.. 2,180 2,281 419 419
Provision for litigation expense.. -- -- 1,500(2) 1,500(2)
-------- -------- ------- -------
Earnings (loss) from operations.. 30,642 30,303 225 (50)
Interest expense--related party... 21,329 -- 5,345 --
Interest expense.................. 80 1,230 60 616
Other expense (income)--net....... (87) (87) (5) (5)
-------- -------- ------- -------
Earnings (loss) before income
taxes........................... 9,320 29,160 (5,175) (661)
Income taxes...................... 6,585 14,599 (1,394) 430
-------- -------- ------- -------
Net income (loss)................ $ 2,735 $ 14,561 $(3,781) $(1,091)
======== ======== ======= =======
Pro forma net income (loss) per
share........................... $ .71(3) $ (.05)(3)
======== =======
</TABLE>
- --------

(1) For a detailed description of the adjustments to these unaudited pro forma
consolidated and combined statements of operations, see "Unaudited Pro
Forma Financial Information."

(2) Reflects an accrual for anticipated litigation costs in respect of a
purported class action filed against the Company, R.R. Donnelley and
certain other defendants in April 1996. Because R.R. Donnelley has agreed
to pay the legal fees and expenses incurred by the Company in defending
this action, such expenses will not affect the cash flows of the Company;
however, applicable accounting principles require the Company to recognize
such expenses and apply all R.R. Donnelley payments in respect of such
expenses to additional paid-in capital. Excluding the effect of this
accrual, (i) earnings from operations, loss before income taxes and net
loss would have been $1.725 million, $3.675 million and $2.887 million for
the three months ended March 31, 1996, respectively, and (ii) earnings from
operations, earnings before income taxes, net loss and pro forma net loss
per share for the three months ended March 31, 1996, as adjusted, would
have been $1.450 million, $0.839 million, $0.197 million and $.01,
respectively. See "Risk Factors--Litigation and Government Inquiries with
Respect to Use of Data" and Note 15 of Notes to Consolidated and Combined
Financial Statements of Metromail.

(3) Pro forma net income (loss) per share is computed by dividing pro forma net
income (loss) for the year ended December 31, 1995 and the three months
ended March 31, 1996 by the pro forma weighted average shares outstanding
during such periods of 20,600,000.

7
<PAGE>

RECENT UNAUDITED RESULTS OF OPERATIONS

The following table sets forth a summary of certain unaudited results of
operations of Metromail for the months ended April 30, 1995 and 1996. The
unaudited results of operations for the month ended April 30, 1996 set forth
below are not necessarily indicative of results that may be expected for the
full year.

<TABLE>
<CAPTION>
MONTH ENDED
APRIL 30,
----------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Total net sales............................................. $16,026 $26,014
Earnings from operations.................................... 1,016 2,412
Net income (loss)........................................... (616) 374
</TABLE>

Total net sales for the month ended April 30, 1996 increased 63.0% to $26.0
million from $16.0 million for the month ended April 30, 1995. This $10.0
million increase reflected growth across all areas and the inclusion of the
operating results of International Communication & Data Plc, which was acquired
by an affiliate of R.R. Donnelley in May 1995. Management expects the Company's
earnings from operations for the three-month period ending June 30, 1996 to be
below earnings from operations for the comparable period in 1995 ($10.5
million), but higher than earnings from operations for the three-month period
ended March 31, 1996 ($0.2 million, which included a $1.5 million provision for
litigation expense). The Company's operating earnings for the second quarter of
1995 benefited, in an amount estimated at $2.0 million, from the deferral of
expenses from the second quarter to the second half of the year as part of a
company-wide expense-reduction initiative during the second quarter.

8
<PAGE>

RISK FACTORS

In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
shares of Common Stock offered hereby.

REGULATION OF DATA COLLECTION AND THE DIRECT MARKETING INDUSTRY

The Company's business involves the collection of consumer data and the
distribution of information about consumers to direct marketers. Growing
concerns about individual privacy and the collection, distribution and use of
information about individuals have led to self-regulation of such practices by
the direct marketing industry through guidelines suggested by the Direct
Marketing Association, the leading trade association of direct marketers (the
"DMA"), and to increased federal and state regulation. See "Business--
Regulation." To date, the guidelines suggested by the DMA, including
procedures permitting individuals who do not wish to receive direct marketing
mail or telephone calls to "opt out," and the federal and state regulation of
the collection, distribution or use of information about individuals or of the
direct marketers or their activities have not had a material adverse effect on
the Company or, in the Company's opinion, on the direct marketing industry. No
assurance can be given that the DMA will not adopt additional guidelines that,
although not legally binding, would be adhered to by the direct marketing
industry, or that additional federal or state laws or regulations will not be
enacted, and no assurance can be given that any such guidelines, laws or
regulations (including further implementation of "opt out" requirements or
implementation of "opt in" requirements where individuals must consent to the
receipt of direct marketing materials) will not have the effect of materially
increasing the cost to the Company of collecting certain kinds of information,
preclude the use by direct marketers of information that the Company could
lawfully collect or otherwise have a material adverse effect on the Company's
business, operating results or financial condition.

Because of the possibility of increased regulation brought on by privacy
concerns, the Company has begun collecting certain data directly from
individuals, who agree that the data supplied by them may be used for direct
marketing and other purposes. See "Business--Metromail's Database." The
Company believes that it is unlikely that future regulations will seek to
restrict the use by direct marketers of self-reported data, although no
assurance to that effect can be given. Although the Company intends to
continue to pursue actively the collection of self-reported data, the
percentage of data in the Company's current database that constitutes self-
reported data is relatively small.

REGULATION OF REFERENCE SERVICES

The Company is not aware of any generally accepted industry guidelines for
the use of information on individuals in connection with the Company's
reference services. The Company has adopted its own privacy principles for its
reference services. See "Business--Metromail's Database."

Certain of the reference services provided by the Company to certain credit
card issuers and their member banks are subject to the Fair Credit Reporting
Act ("FCRA"). Legislation has been introduced in Congress seeking to amend the
FCRA to provide consumers with easier access to their credit reports,
facilitate the correction of errors in reports and address the issue of
"prescreening," a procedure used in some direct marketing programs. The
Company does not believe that enactment of any of these bills, as currently
drafted, would have a material adverse impact on the Company, although it is
possible that some of the Company's clients could be negatively impacted.

No assurance can be given that industry guidelines for the use of
information on individuals in connection with the Company's reference services
will not be adopted or that additional federal or state laws or regulations,
or amendments to the FCRA different than those currently pending, will not be
enacted, and no assurance can be given that any such guidelines, laws or
regulations will not have a material adverse effect on the Company's business,
operating results or financial condition.

9
<PAGE>

ABSENCE OF LONG-TERM CONTRACTS; LACK OF PREDICTABILITY OF SALES; FLUCTUATIONS
IN OPERATING RESULTS

The Company's sales, particularly with respect to its direct marketing
products, are generally not derived from long-term contracts. Therefore, the
Company must continually engage in sales efforts and must be prepared to
adjust its pricing terms to meet competition. Although the Company lacks long-
term contracts, the Company has had a continuing business relationship with
each of its top 25 clients in 1995 for five or more years. Net sales to the
top 25 clients accounted for 34.9%, 33.7% and 28.9% of total net sales in
1993, 1994 and 1995, respectively.

The Company's net sales are affected by a number of seasonal characteristics
and other factors. The primary factors affecting the sales of the Company's
direct marketing services are the timing and extent of the direct marketing
activities of the Company's clients. These activities are influenced by
general factors, such as postal rates, paper prices and overall economic
conditions, and by factors specific to a client, such as the client's
advertising budget and choice of advertising media. The Company's net sales
can also be affected by the availability of new or updated data. Thus, if the
Company does not update its database as quickly as do its competitors, the
Company's net sales could be adversely affected.

The potential unpredictability of the Company's net sales can lead to
fluctuations in quarterly and annual operating results, especially because
many expenses are incurred by the Company ratably throughout the year. In
addition, the expenses associated with acquiring data, and the timing of
acquisitions and the costs and expenses associated therewith, might also
affect operating results. The Company's net sales have historically been
somewhat seasonal, with a higher percentage of net sales being achieved in the
second half of a given year. In 1993, 1994 and 1995, total net sales of the
Company during the second half of the year constituted 58%, 58% and 56%,
respectively, of total net sales for the year. The Company's software sales
are also seasonal. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

NET LOSSES IN 1991, 1992 AND 1993 AND IN CERTAIN QUARTERS

The Company experienced net losses for the years ended December 31, 1991,
1992 and 1993 and for certain quarters in the past three years, including the
quarter ended March 31, 1996. See "Selected Consolidated and Combined
Financial and Other Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Quarterly Results." In each
such period, however, the Company had earnings from operations, and the net
losses resulted primarily from interest expense incurred by the Company with
respect to debt and advances owed to R.R. Donnelley or a subsidiary of
R.R. Donnelley. The Company expects interest expense to be substantially
decreased upon consummation of the Offering and the application of the net
proceeds therefrom together with, to the extent necessary, borrowings under a
bank credit facility to be entered into by the Company upon consummation of
the Offering to the repayment of the debt and advances owed to R.R. Donnelley
and its subsidiaries. See "Use of Proceeds" and Note 11 of Notes to
Consolidated and Combined Financial Statements of Metromail.

COMPETITION

The markets in which the Company competes are highly competitive and
fragmented. The Company's direct marketing services compete with several large
national companies that offer many of the same services as the Company. These
competitors include Acxiom Corporation; Database America Information Services,
Inc.; Direct Marketing Technology Inc.; Donnelley Marketing, Inc. (a privately
held company that is unaffiliated with R.R. Donnelley); Harte-Hanks
Communications, Inc.; May & Speh, Inc.; Neodata, Inc.; R.L. Polk and Company;
and TRW Information Systems and Services. The Company also competes with
numerous smaller companies, many of which provide only some of the direct
marketing services provided by the Company or focus on providing information
with respect to a particular industry or with respect to consumers in a
particular geographic region. Although the Company believes that its
competitive strengths enable it to compete effectively with its current
competitors, there can be no assurance that other companies, some of which may
have greater resources or better sources of data than the Company, will not
begin competing with respect to one or more of the direct marketing services
provided by the Company.

10
<PAGE>

The Company's reference services also face intense competition. The
Company's National Directory Assistance service competes with Acxiom
Corporation and with local telephone companies in the regions where such
companies provide local telephone service. The Company's MetroNet service
competes with CDB Infotek Inc., Computer Graphics and First Data Corporation.
The Company's Cole directories publishing service competes with R.L. Polk and
Company in many of the geographic areas for which the Company publishes
directories. In addition, certain of the information the Company currently
offers in connection with its reference services is increasingly available to
computer users, at little or no cost, over public on-line sources. Although
the Company believes that the quality and scope of its reference services
enable it to compete effectively with its current competitors, there can be no
assurance that other companies having greater resources than the Company, such
as major telecommunication companies, will not begin competing with the
reference services offered by the Company. There can be no assurance that a
significant increase in the availability of certain of the information
contained in the Company's reference services over public on-line sources will
not have a material adverse effect on the Company's business, operating
results or financial condition. See "Business--Competition."

TECHNOLOGICAL CHANGES

The Company's ability to compete successfully is dependent in part on the
time it takes for the Company to input collected information into its database
and produce the information desired by its clients and the costs of doing so.
The Company believes that its data input procedures and computer resources, as
well as the redesign of the file structure of its database that is nearing
completion and implementation, will allow the Company to continue to compete
effectively in this area. See "Business--Technology." The Company's future
success is dependent on its ability to keep pace with technological
improvements in this area. If the Company is unable to do so, the Company's
business, operating results or financial condition could be materially
adversely affected.

The market for the marketing database software that the Company licenses to
third parties is characterized by rapid technological change. The introduction
by competitors of products embodying new technologies could render the
Company's existing products obsolete and unmarketable. The Company's future
success will depend upon its ability to enhance its current products and to
develop and introduce new products and services on a timely basis that keep
pace with technological developments and address the increasingly
sophisticated needs of its clients. There can be no assurance that the Company
will be successful in developing and marketing product enhancements or new
products that respond to technological change, that the Company will not
experience difficulties that could delay or prevent the successful
development, introduction and marketing of these products or that the
Company's new products and enhancements will adequately meet the requirements
of the marketplace and achieve market acceptance. If the Company is unable,
for technological or other reasons, to develop and introduce new products or
enhancements of existing products in a timely manner in response to changing
market conditions or customer requirements, the Company's business, operating
results or financial condition could be materially adversely affected.

LITIGATION AND GOVERNMENT INQUIRIES WITH RESPECT TO USE OF DATA

In 1993, the Company purchased the assets of Computerized Marketing
Technologies, Inc. and affiliated companies ("CMT") relating to a database
created through the use of questionnaires distributed to consumers. Following
this purchase, the Company continued CMT's practice of contracting with
Computerized Image & Data Systems, Inc. ("CIDS") for CIDS to provide data
input services with respect to completed surveys. CIDS had been subcontracting
a portion of these services to a correctional facility maintained by the State
of Texas. This facility was a major supplier of data input services to the
State of Texas, including services with respect to voter registration and
drivers' license records, and according to CIDS, was selected as a
subcontractor, in part, because of the procedures followed by the facility to
safeguard the information made available to the prisoners. In June 1994, the
Company became aware of a report that a woman in Ohio, who apparently had
completed a Company survey, had received a letter purporting to contain
sexually explicit language from a convicted rapist held in the facility that
provided data input services. Immediately after becoming aware of this report,
the

11
<PAGE>

Company requested the third party to terminate its subcontract with the
facility. On April 18, 1996, a complaint was filed in the District Court of
Travis County, Texas against the Company, R.R. Donnelley, CIDS, the Texas
Department of Criminal Justice, the executive director of the Texas Department
of Criminal Justice and the chairman of the Texas Board of Criminal Justice by
the woman who allegedly had received the letter. The complaint alleges the
following causes of action against the Company and R.R. Donnelley and certain
of the other defendants: (1) defendants' conduct represented an intentional or
reckless disregard of plaintiffs' safety; (2) the conduct of the Company, R.R.
Donnelley and CIDS in inducing plaintiffs to provide information without
disclosing to plaintiffs that such information would be provided to convicted
felons constituted fraud; (3) defendants have been unjustly enriched by their
actions; (4) defendants' conduct resulted in the invasion of plaintiffs'
privacy; (5) defendants' conduct resulted in the infliction of severe
emotional distress upon plaintiffs; and (6) defendants were grossly negligent
in entrusting plaintiffs' information to convicted felons. In addition, the
complaint alleged two causes of action solely against the Texas Department of
Criminal Justice and the two state officials. The complaint seeks restitution,
actual and exemplary damages in an unspecified amount and injunctive relief on
behalf of the named plaintiff and a purported class consisting of all persons
who completed Company surveys and whose completed surveys were processed by
inmates in the Texas prison system from January 1, 1993 to the present time.
The Company is not yet able to determine the number of persons comprising the
purported class but believes the number of persons who completed surveys in
this period and whose surveys were processed by such inmates could exceed 1.3
million. The Company believes that there are several bases for challenging
certification of the class and that if such challenge is successful, this
litigation would not have a material adverse effect on the Company. Further,
the Company believes that there are a number of valid defenses to the claims
alleged, and the Company intends to defend vigorously this suit. However,
because this litigation is in its early stages, it is not possible to make a
meaningful determination of the ultimate outcome or to make an estimate of the
loss, if any, should the outcome be unfavorable. The Company has made a
preliminary estimate of its costs of litigating the case and has accrued $1.5
million in its financial statements for the three months ended March 31, 1996.
R.R. Donnelley has agreed to pay the legal fees and expenses incurred by the
Company in defending this case, but the Company would be responsible for any
other amounts payable by it as a result of this case. No assurances can be
given that this accrual will be adequate or that this litigation will not
result in a material adverse effect on the Company's business, operating
results or financial condition.

In 1995, the Company settled two lawsuits filed against it which involved
allegations that it had improperly used certain voter registration
information. One lawsuit involved a complaint filed against the Company in
1992 by Aristotle Industries, Inc., a company that publishes and sells
political and election-related information products. The other lawsuit
involved a purported class action. In addition, during the last two years, the
Company has held discussions with several federal and state government
agencies concerning its alleged misuse of voter registration data and its use
of telephone surveys to confirm certain information derived from such voter
registration data. No action has been taken against the Company by any
government agency with respect to such matters, and the Company currently has
no reason to believe that any such action will be taken against it. See
"Business--Litigation; Government Inquiries." No assurance can be given,
however, that actions will not be taken against the Company by one or more
government agencies or that further actions will not be filed against the
Company with respect to its use of voter registration data.

In 1995, following a demand on the Board of Directors of R.R. Donnelley,
currently the sole stockholder of the Company, from John Aristotle Phillips,
founder and president of Aristotle Industries, Inc. and a stockholder of R.R.
Donnelley, a special committee of independent directors of R.R. Donnelley,
assisted by independent counsel, conducted a review of certain allegations
made by Mr. Phillips. In particular, the committee investigated, among other
things, allegations that (i) the Company had illegally used data derived from
certain state voter files to augment its commercial database; (ii) the Company
may have made improper use of driver's license, credit or U.S. Postal Service
data; (iii) the Company had improperly used misleading consumer surveys; (iv)
the Company had inadequate internal controls to ensure compliance with laws
and regulations applicable to its business; and (v) the Company engaged in a
cover-up of illegal conduct. The committee reported its findings and
recommendations to the full Board of Directors of R.R. Donnelley in July,
1995. The committee concluded that, while application of the relevant state
statutes and regulations to the Company's past conduct is far from

12
<PAGE>

clear, the Company did not intentionally violate any of those states' laws
governing the use of voter or driver data. Nor did the committee find any
evidence that the Company was violating any laws relating to credit or postal
data. The committee also concluded that the Company had not engaged in a
cover-up of any illegal conduct with respect to such data. The committee did
conclude that the Company lacked effective management procedures and adequate
controls on the acquisition and use of data and that it had used inappropriate
consumer survey techniques to verify the validity of data acquired from third
party sources.

During the course of the review and in response to the recommendations of
the committee, the Company has taken a number of steps designed to reduce the
likelihood of future claims and to improve the Company's data collection
procedures. Among these steps were the following: (i) the Company removed from
its commercial databases all data identified as having been derived, directly
or indirectly, from voter registration records, whether or not the state in
question restricts the use of such data, and took steps to provide database
updates to ensure that clients were not using Company-supplied lists generated
from or including voter data (the Company has subsequently included in its
database certain data derived from voter registration information purchased by
it from Aristotle Industries, Inc.); (ii) the Company conducted a thorough
review of its use of data derived from state driver's license and real estate
files and following such review removed certain data from its database to
ensure that all such use is in compliance with applicable state and federal
laws; and (iii) the Company suspended use of telephone surveys to verify the
accuracy of age or other data. The Company has also taken a number of steps to
better ensure that its future acquisition and use of data complies with
applicable laws, regulations and fair information practices. These include the
following: (1) the Company established a new Fair Information Practices Group
responsible for monitoring the acquisition, handling and use of data; (2) the
Company established a procedure for pre-acquisition legal review of all new
data; (3) the Company instituted procedures for periodic review of existing
data to ensure that use of such data continues to comply with new or changed
laws and regulations; and (4) the Company's Fair Information Practices Group
was directed to develop improved procedures for data validation and the secure
storage of information, establish improved testing procedures to ensure the
validity of data from new and existing sources, develop training programs for
Company employees to ensure that they are fully versed in data security and
ethical business practices and institute procedures to audit its clients' use
of the Company's data. Since the institution of these procedures, the Company
is aware of one instance in which Company employees fulfilling a telephone
order failed to adhere to the procedures requiring them to audit a client's
use of data regarding children. As a result of this instance, which has
received media attention, additional employee training is being undertaken.
See "Business--Metromail's Database."

The Company believes that it has lawfully acquired the data contained in its
database and is using it in a lawful manner. No assurances can be given that
claims will not be brought against it with respect to data which has been or
is now included in its database or that such claims would not result in a
material adverse effect on the Company's business, operating results or
financial condition.

The Company is aware that Mr. Phillips has contacted a number of legislators
and government agencies with the intent of instigating government
investigations into the data collection and use practices of the Company. The
Company has had discussions with a number of governmental agencies concerning
these contacts. Based on these discussions, the Company does not believe that
it is currently the subject of any investigation. Mr. Phillips has also given
numerous interviews with the press and issued a number of press releases about
the Company which the Company believes were designed to generate adverse
publicity about the Company. Mr. Phillips has also filed a complaint with the
DMA's Committee on Ethical Practice in which he alleges that certain of the
Company's reference products and services violate the DMA Guidelines for
Ethical Business Practices. The Company, which received a copy of the
complaint in late March 1996, believes such complaint to be without merit and
is in the process of responding to it. Mr. Phillips has also been involved
with others in a campaign which is seeking legislation or regulations to ban
the commercial sale of personal information regarding minors and urging
individuals to call the Company to have information on their families removed
from the Company's database and has also raised the possibility that the
campaign could include a boycott against the clients or suppliers of the
Company. No assurance can be given that Mr. Phillips or others will cease
these efforts or that governmental investigations or regulation or adverse
publicity or other actions that adversely affect the Company's business,
operating results or financial condition will not result from these efforts.

13
<PAGE>

The Company is aware of law suits brought by individuals against others in
which such individuals, relying on state statutes, common law or
constitutional privacy doctrines, have asserted ownership of personal
identifying information, such as their names, and requested compensation for
inclusion of their names in solicitation lists. The Company is not aware of
any such suits that have been successful. The Company is unable to predict,
however, what future success plaintiffs in such suits will have and whether
such suits will impact the Company's business.

DEPENDENCE ON PROPRIETARY INFORMATION

The Company's success is in large part dependent upon its proprietary
information and technology. The Company relies on a combination of copyright,
trade secret and contract protection to establish and protect its proprietary
rights in its products and technology. The Company generally enters into
confidentiality agreements with its management and technical staff and limits
access to and distribution of its proprietary information. The Company also
has implemented a number of procedures and controls designed to prohibit
unauthorized access to the Company's computerized database. There can be no
assurance that the steps taken by the Company in this regard will be adequate
to deter misappropriation of its proprietary rights or information or
independent third party development of substantially similar products and
technology. Although the Company believes that its products and technology do
not infringe any proprietary rights of others, the growing use of copyrights
and patents to protect proprietary rights has increased the risk that third
parties will increasingly assert claims of infringement in the future. See
"Business--Proprietary Information."

RISK OF LOSS OF DATA CENTERS OR INTERRUPTION OF TELECOMMUNICATIONS SERVICES

The Company's operations are dependent on its ability to protect its data
centers in Lombard, Illinois and Lincoln, Nebraska against damage from fire,
power loss, telecommunications failure or similar event. The Company has taken
precautions to protect itself from events that could interrupt its operations,
including off-site storage of back-up data, contractual arrangements for back-
up facilities with a leading disaster recovery services company, Halon fire
compression systems in the data centers (which are designed to extinguish a
fire without damaging computer equipment) and, in the case of the Lombard data
center, access to two separate electrical power grids. No assurance can be
given that such precautions will be adequate, and operations may still be
interrupted, even for extended periods. In addition, the on-line services
provided by the Company are dependent on telecommunications links to the
regional Bell operating companies for which the Company currently has no back-
up, although the Company is currently evaluating various back-up options. Any
damage to either data center or any failure of the Company's telecommunication
links that causes interruptions in the Company's operations could have a
material adverse effect on the Company's business, operating results or
financial condition. The Company's property and business interruption
insurance may not be adequate to compensate the Company for all losses that
may occur. See "Business--Technology."

POSTAL RATES AND PAPER PRICES

The direct marketing activity of the Company's clients can be affected by
postal rate changes, especially postal rate increases that are imposed without
sufficient notice to allow clients to adjust their marketing budgets.
Increases in postal rates may lead to fewer mailings of direct marketing
materials or to mailings to fewer addresses or to mailings by a client only to
its previous customers and not to a list of prospects, with a corresponding
decline in the need for certain of the direct marketing services of the type
provided by the Company. Increased rates can also lead to pressure on the
Company to reduce prices for its products and services to offset the postal
rate increase. However, increased mailing costs can cause direct marketers to
desire to target their mailings more carefully, which can result in increased
demand for list development and list enhancement services of the type provided
by the Company. Known or anticipated future postal rate increases may also
affect direct marketing activity by causing direct marketers to accelerate
mailings of direct marketing materials to a time before the increase becomes
effective.

14
<PAGE>

The price of paper can also impact the direct marketing activity of certain
of the Company's clients, especially catalogers. In a period of rising paper
prices, catalogers may mail fewer catalogs or may mail to fewer addresses,
with a corresponding decline in the need for list enhancement and lettershop
services of the type provided by the Company. In addition, clients may
aggressively seek price reductions for the services offered by the Company to
offset increased material costs. Although the price of paper can also impact
the profitability of the Company's printed Cole directories, as the Company
might not be able to pass on the full amount of increased costs of producing
the directories to its clients, the Company does not expect that any such
impact would have a material adverse effect on the Company's business,
operating results or financial condition.

GROWTH THROUGH ACQUISITIONS AND NEW PRODUCTS

The Company's business strategy includes growth through acquisitions of
proprietary information and of distribution channels and businesses
complementary to the Company's business. The Company has made a number of
acquisitions in the past and believes that it has been successful in
integrating the acquired assets and businesses into the Company's operations.
There can be no assurance, however, that future acquisitions will be
consummated on acceptable terms or that any acquired assets or business will
be successfully integrated into the Company's operations. The Company may use
Common Stock or Preferred Stock (which could result in dilution to the
purchasers of Common Stock in the Offering) or may incur indebtedness or use a
combination of stock and indebtedness for all or a portion of the
consideration to be paid in future acquisitions. While the Company
continuously evaluates acquisition opportunities, it has no current
commitments or agreements with respect to any material acquisitions.

The Company's business strategy also includes growth through the
introduction of new products or services that leverage the information
contained in the Company's database. There can be no assurance that new
products or services introduced by the Company will achieve acceptance.

DEPENDENCE ON KEY PERSONNEL

The Company's performance depends in large part on the continued service of
its key technical, sales and management personnel and on its ability to
continue to attract, retain and motivate highly qualified personnel,
especially its management and highly skilled software personnel. Competition
for such personnel is intense, and the process of locating key personnel with
the combination of skills and attributes required to execute the Company's
strategy is often lengthy. There can be no assurance that the Company will be
able to attract or retain such personnel in the future, and the inability to
do so could have a material adverse effect upon the Company's business,
operating results or financial condition. See "Business--Employees" and
"Management."

ABSENCE OF PRIOR PUBLIC TRADING MARKET; DETERMINATION OF OFFERING PRICE

Prior to the Offering, there has been no public market for the Common Stock.
Although the Common Stock has been approved for listing on the NYSE, subject
to official notice of issuance, there can be no assurance that an active
public market will develop for the Common Stock or that, if such a market
develops, the market price will equal or exceed the initial public offering
price set forth on the cover page of this Prospectus. For a discussion of the
factors that were considered in determining the initial public offering price,
see "Underwriters." The prices at which the Common Stock trades after the
Offering will be determined by the marketplace and may be influenced by many
factors, including, among others, the Company's operating and financial
performance, the depth and liquidity of the market for the Common Stock,
future sales of Common Stock (or the perception thereof), investor perception
of the Company and its prospects, developments in the regulation of the direct
marketing industry, the Company's dividend policy and general economic and
market conditions. See "Shares Eligible for Future Sale."

ANTITAKEOVER MATTERS

The Company's Restated Certificate of Incorporation and By-laws contain
certain provisions that may delay, defer or prevent a takeover of the Company.
The Company's Board of Directors has the authority to issue up to

15
<PAGE>

20,000,000 shares of preferred stock, par value $.01 per share (the "Preferred
Stock"), and to determine the price, rights, preferences and restrictions,
including voting rights, of these shares, without any further vote or action
by the stockholders. The rights of holders of Common Stock will be subject to,
and may be adversely affected by, the rights of holders of any Preferred Stock
that may be issued in the future. The Restated Certificate of Incorporation
also provides for a classified board of directors, with three classes of
directors, each class being elected for three-year, staggered terms, prohibits
the removal of directors except for "cause" and prohibits stockholder action
by written consent. In addition, the Company's By-laws include provisions
establishing advance notice procedures with respect to stockholder proposals
and director nominations and permits the calling of special stockholder
meetings only by the Board of Directors, the Chairman or the President. The
Company has elected (effective March 5, 1997) not to be governed by Section
203 of the General Corporation Law of the State of Delaware, which, if
applicable, would impose a three-year moratorium on certain business
combinations between the Company and an "interested stockholder" (in general,
a stockholder owning 15% or more of the Company's outstanding voting stock).
See "Description of Capital Stock and Corporate Charter."

PRINCIPAL STOCKHOLDER; POTENTIAL CONFLICTS OF INTEREST; POSSIBLE FUTURE SALES
OF COMMON STOCK BY R.R. DONNELLEY

The net proceeds of the Offering (estimated to be $219.6 million, assuming
an initial public offering price of $19.50 per share and after deducting the
estimated underwriting discount and offering expenses payable by the Company)
will be used to repay a portion of the amounts owed to R.R. Donnelley and its
subsidiaries, which as of March 31, 1996 totalled approximately $248.8
million. The Company anticipates repaying the remaining balance of the amounts
owed to R.R. Donnelley and its subsidiaries upon closing of the Offering
through borrowings under a $45 million bank credit facility the Company
expects to enter into upon such closing. See "Use of Proceeds." Upon
completion of the Offering, R.R. Donnelley will hold approximately 41.7% of
the outstanding Common Stock (approximately 38.4% if the U.S. Underwriters
exercise their overallotment option in full). Consequently, R.R. Donnelley
will be able to significantly influence such actions as the election of
directors of the Company, the approval of matters submitted for stockholder
approval or preventing a potential takeover (even if advantageous to the other
stockholders). However, R.R. Donnelley will not have any rights or preferences
as compared to any other stockholder of the Company, other than those it may
have by reason of the number of shares of Common Stock it owns.

Currently, three of the four members of the Board of Directors of the
Company are officers of R.R. Donnelley, one of whom will cease being an
officer of R.R. Donnelley upon completion of the Offering. The Company
anticipates that, following the Offering, the Board of Directors will be
increased to six members and two additional directors who are not affiliated
with R.R. Donnelley or the Company will be elected by the Board of Directors
to fill the vacancies.

Prior to the Offering, the Company obtained certain services from, and
provided certain services to, R.R. Donnelley, participated in a number of
employee benefit plans maintained by R.R. Donnelley and was included as part
of R.R. Donnelley's federal income and certain other tax returns. Prior to the
completion of the Offering, the Company will enter into certain agreements
with R.R. Donnelley relating to these matters. None of the agreements to be
entered into by the Company with R.R. Donnelley resulted from "arms-length"
negotiations. In addition, the Company did not retain separate counsel from
that retained by R.R. Donnelley in negotiating such agreements. The Company
believes, however, that the terms of such agreements are at least as favorable
to it as could be obtained from unaffiliated parties for comparable services
or arrangements. These agreements may be modified in the future and additional
arrangements or transactions may be entered into between R.R. Donnelley and
the Company. Any material modifications and any additional agreements or
transactions will be subject to review and approval by the Board of Directors
of the Company, acting pursuant to a special committee comprised of directors
not otherwise affiliated with the Company or R.R. Donnelley. The Company
intends that, insofar as a determination can objectively be made, each future
agreement or transaction between R.R. Donnelley and the Company will be on
terms at least as favorable to the Company as could be obtained from
unaffiliated parties for comparable services or arrangements. Although the
Company and R.R. Donnelley do not currently

16
<PAGE>

compete directly with one another in any material respect, there can be no
assurance that they will not do so in the future. Any officer of R.R.
Donnelley who serves as a director of the Company may have conflicts of
interest in addressing business opportunities and strategies with respect to
which the Company's and R.R. Donnelley's interests differ. Except with respect
to agreements and transactions between the Company and R.R. Donnelley, the
Company and R.R. Donnelley have not adopted any formal procedures designed to
assure that conflicts of interest will not occur or to resolve any such
conflicts that do occur. See "Relationship with R.R. Donnelley."

Subject to the restrictions described below and to applicable law, after
completion of the Offering, R.R. Donnelley may sell any and all of the shares
of Common Stock then owned by it. No prediction can be made as to the effect,
if any, that future sales of Common Stock, or the availability of Common Stock
for future sale, will have on the market price of the Common Stock prevailing
from time to time. Sales of substantial amounts of Common Stock, or the
perception that such sales could occur, could adversely affect prevailing
market prices for the Common Stock and the ability of the Company to raise
capital by issuing its equity securities.

R.R. Donnelley has agreed with the Underwriters, subject to certain
exceptions, not to 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, or otherwise transfer or dispose of,
directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or enter into
any swap or other arrangement that transfers, in whole or in part, any of the
economic consequences of ownership of the Common Stock, for a period of 180
days after the date of this Prospectus without the prior written consent of
Morgan Stanley & Co. Incorporated. Although R.R. Donnelley in the future may
effect sales of Common Stock that would reduce its ownership interest in the
Company, R.R. Donnelley has advised the Company it has no plans to do so. See
"Relationship with R.R. Donnelley," "Shares Eligible for Future Sale" and
"Underwriters."

DILUTION

The purchasers of the shares of Common Stock offered hereby will experience
an estimated immediate dilution of $17.24 per share. The per share purchase
price of the Common Stock offered hereby will exceed the net tangible book
value per share of the Common Stock immediately following the Offering. See
"Dilution." The net tangible assets of the Company as of March 31, 1996
represent approximately 32.2% of the Company's total assets, which include a
significant amount of goodwill and other intangible assets. See Note 6 of
Notes to Consolidated and Combined Financial Statements of Metromail.

17
<PAGE>

THE COMPANY

Metromail Corporation, a Delaware corporation ("Metromail" or the
"Company"), was incorporated in 1979. It is a successor to several predecessor
businesses, including a list development business that was started in 1946.
The Company became a public company in 1984 and remained so until mid-1987
when it was acquired by R.R. Donnelley. Since R.R. Donnelley's acquisition of
the Company, the Company has made several acquisitions, including the
acquisition in 1994 of the assets of Customer Insight Company, a company that
developed PC-based marketing oriented database solutions. Data by Design, a
database marketing consulting service in the United Kingdom, and International
Communication & Data Plc, a compiler of lists in the United Kingdom primarily
through the use of surveys, were acquired by R.R. Donnelley in 1994 and 1995,
respectively. The Company has managed these United Kingdom operations since
their acquisition by R.R. Donnelley, with ownership being transferred to the
Company in early 1996.

The Company's executive offices are located at 360 East 22nd Street,
Lombard, Illinois 60148 and its telephone number is (708) 620-3300. Its
Internet address is http://www.cyberdirect.com/metromail.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 12,000,000 shares of
Common Stock offered hereby are estimated to be approximately $219.6 million,
assuming an initial public offering price of $19.50 per share and after
deducting the estimated underwriting discount and offering expenses payable by
the Company. The net proceeds will be used to repay a portion of the amounts
owed by the Company to R.R. Donnelley or a subsidiary of R.R. Donnelley. As of
March 31, 1996, the amounts owed to R.R. Donnelley and its subsidiary totalled
approximately $248.8 million, comprised as follows: (i) approximately $160.0
million principal amount of and accrued interest on a promissory note due 1997
issued in 1987 to a subsidiary of R.R. Donnelley that bears interest at the
rate of 9 3/4% per annum and becomes immediately due and payable upon the
completion of the Offering; (ii) approximately $54.5 million principal amount
of and accrued interest on a promissory note payable on demand to such
subsidiary that bears interest at the prime rate per annum (8.5% as of March
31, 1996); and (iii) certain other intercompany obligations to R.R. Donnelley,
which as of March 31, 1996 totalled approximately $34.4 million. The Company
anticipates repaying the remaining balance of the amounts owed to R.R.
Donnelley and its subsidiary through borrowings under a $45 million bank
credit facility it expects to enter into upon consummation of the Offering.
If, however, the net proceeds of the Offering are sufficient to pay all debt
and advances owed to R.R. Donnelley and its subsidiary, any remaining net
proceeds will be used, first, to repay debt owed by ICD under a revolving
credit agreement that bears interest per annum at LIBOR plus 1/4% (6.35% as of
March 31, 1996), which totalled approximately $3.8 million as of March 31,
1996, and, second, for general corporate purposes, including working capital.
Pending such uses, the net proceeds of the Offering may be invested in short-
term interest-bearing securities. See Notes 11 and 12 of Notes to Consolidated
and Combined Financial Statements of Metromail.

18
<PAGE>

CAPITALIZATION

The following table sets forth the short-term debt and advances and total
capitalization of the Company (i) as of March 31, 1996 and (ii) pro forma as
adjusted to give effect to the issuance and sale of 12,000,000 shares of
Common Stock offered hereby at an assumed initial public offering price of
$19.50 per share and the application of the estimated net proceeds therefrom
together with, to the extent necessary, borrowings under a bank credit
facility to be entered into by the Company upon consummation of the Offering
to the repayment of the debt and advances owed to R.R. Donnelley and its
subsidiaries. See "Use of Proceeds." This table should be read in conjunction
with the Consolidated and Combined Financial Statements of Metromail and the
Unaudited Pro Forma Financial Information and the related notes thereto
appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
MARCH 31, 1996
-------------------
PRO FORMA
AS
ACTUAL ADJUSTED
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt and advances, primarily due to related
party..................................................... $252,684 $ --
======== ========
Long-term debt(1).......................................... $ -- $ 33,616
Shareholders' equity:
Common Stock--Metromail, $.01 par value, 75,000,000
shares authorized; 8,600,000 issued and
outstanding and 20,600,000 shares issued
and outstanding, as adjusted(2)......................... 86 206
Additional paid-in capital............................... 111,779 331,289
Retained deficit......................................... (30,156) (30,156)
-------- --------
Total shareholders' equity............................. 81,709 301,339
-------- --------
Total capitalization................................... $ 81,709 $334,955
======== ========
</TABLE>
- --------

(1) The Company expects to establish a $45 million bank credit facility at the
time of the closing of the Offering, which will be used to repay any
remaining balance of debt and advances owed to R.R. Donnelley and its
subsidiaries after application of the assumed net proceeds of the
Offering.

(2) Excludes 1,600,000 shares of Common Stock reserved for issuance under the
Company's 1996 Stock Incentive Plan and 1996 Broad-Based Employee Stock
Plan, including 34,000 shares of restricted Common Stock and options to
purchase an aggregate of approximately 1,300,000 shares of Common Stock
(at the initial public offering price set forth on the cover page of this
Prospectus) that the Company expects to grant to employees in connection
with the Offering. See "Management--Stock Plans," "Management--Employment
Agreements" and Notes to Consolidated and Combined Financial Statements of
Metromail.

19
<PAGE>

DIVIDEND POLICY

The Company currently intends to retain earnings to finance the growth of
its business and therefore does not intend to pay any cash dividends for the
foreseeable future. Payment of any cash dividends in the future will depend on
the Company's results of operations, financial condition, cash requirements
and other factors deemed relevant by the Board of Directors of the Company.
Any credit facility entered into by the Company may contain restrictions on
the Company's payment of cash dividends. The Company has not paid any cash
dividends in the last two fiscal years.

DILUTION

The net tangible book value of the Company as of March 31, 1996 was
$(173.1), or $(20.12) per share of Common Stock. See "Capitalization." Net
tangible book value per share is equal to the Company's total tangible assets
less total liabilities, divided by the total number of shares of Common Stock
outstanding. After giving effect to the sale of the 12,000,000 shares of
Common Stock offered by the Company hereby at an assumed initial public
offering price of $19.50 per share (less the estimated underwriting discount
and offering expenses payable by the Company) and the application of the
estimated net proceeds therefrom as if such sale and application occurred on
March 31, 1996, the pro forma as adjusted net tangible book value of the
Company at such date would have been approximately $46.6 million or $2.26 per
share. This represents an immediate increase in net tangible book value of
$22.38 per share to R.R. Donnelley and an immediate dilution of $17.24 per
share to the purchasers of shares of Common Stock in the Offering. "Dilution"
per share is determined by subtracting pro forma net tangible book value per
share from the amount paid for a share of Common Stock in the Offering. The
following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.......... $19.50
Net tangible book value per share before the Offering.. $(20.12)
Increase in net tangible book value per share
attributable to the Offering.......................... 22.38
-------
Pro forma net tangible book value per share after giving
effect to the Offering.................................. 2.26
------
Dilution per share to purchasers of Common Stock in the
Offering................................................ $17.24
======
</TABLE>

20
<PAGE>

SELECTED CONSOLIDATED AND COMBINED FINANCIAL AND OTHER DATA

The following table sets forth selected historical and pro forma
consolidated and combined financial and other data of the Company. Statement
of operations data for each of the three years in the period ended December
31, 1995 and balance sheet data as of December 31, 1994 and 1995 have been
derived from the audited consolidated and combined financial statements of the
Company contained herein. Statement of operations data for the three month
periods ended March 31, 1995 and 1996, respectively, and balance sheet data as
of March 31, 1996 have been derived from the unaudited consolidated and
combined financial statements of the Company contained herein. Statement of
operations data for each of the two years in the period ended December 31,
1992, balance sheet data as of December 31, 1991, 1992 and 1993 and other data
are derived from unaudited information. The unaudited financial data includes
all adjustments that the Company considers necessary for a fair presentation
of the consolidated and combined financial position and consolidated and
combined results of operations for the periods reflected therein. The pro
forma financial information set forth below includes adjustments based on
available information and upon certain assumptions the Company believes are
reasonable. The pro forma financial information set forth below does not
purport to represent what the Company's results of operations or financial
position would actually have been or to project the Company's results of
operations or financial position for any future period.

The information set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Unaudited Pro Forma Financial Information" and Consolidated and
Combined Financial Statements of Metromail and notes thereto included
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
--------------------------------------------------------- ------------------------------------
AS AS
ACTUAL ADJUSTED ACTUAL ADJUSTED
----------------------------------------------- -------- -------------------- ------------
1991 1992 1993 1994(1) 1995(1) 1995(2) 1995 1996 1996(2)
-------- -------- -------- -------- -------- -------- --------- --------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND WHERE NOTED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Direct marketing
sales................. $114,871 $120,364 $127,683 $156,806 $189,713 $194,768 $ 38,860 $ 41,894 $ 41,894
Reference sales........ 30,394 33,317 36,032 38,665 47,474 47,474 10,972 12,475 12,475
-------- -------- -------- -------- -------- -------- --------- --------- ---------
Total net sales...... 145,265 153,681 163,715 195,471 237,187 242,242 49,832 54,369 54,369
Database and
production costs...... 88,945 86,184 95,016 108,806 134,361 134,727 30,279 33,606 33,313
Amortization of
goodwill.............. 6,054 6,054 6,054 6,608 7,446 7,571 1,790 1,889 1,889
Selling expenses....... 26,211 26,252 29,625 37,107 45,913 47,257 10,345 11,821 11,909
General and
administrative
expenses.............. 15,919 13,232 12,372 14,408 16,645 20,103 3,898 4,909 5,389
Provisions for
doubtful accounts..... 1,584 1,798 1,959 1,848 2,180 2,281 425 419 419
Provision for
litigation expense.... -- -- -- -- -- -- -- 1,500(3) 1,500 (3)
-------- -------- -------- -------- -------- -------- --------- --------- ---------
Earnings (loss) from
operations.......... 6,552 20,161 18,689 26,694 30,642 30,303 3,095 225 (50)
Interest expense--
related party......... 22,898 21,337 22,112 18,999 21,329 -- 4,968 5,345 --
Interest expense....... -- -- -- -- 80 1,230 -- 60 616
Other expense
(income)--net......... (120) (57) (138) 24 (87) (87) (10) (5) (5)
-------- -------- -------- -------- -------- -------- --------- --------- ---------
Earnings (loss)
before income taxes. (16,226) (1,119) (3,285) 7,671 9,320 29,160 (1,863) (5,175) (661)
Income taxes........... (4,069) 2,034 1,181 5,684 6,585 14,599 (130) (1,394) 430
-------- -------- -------- -------- -------- -------- --------- --------- ---------
Net income (loss)
from operations
before cumulative
effect of accounting
change.............. (12,157) (3,153) (4,466) 1,987 2,735 14,561 (1,733) (3,781) (1,091)
Cumulative after-tax
effect of change in
accounting for post
retirement benefits
other than pensions... -- -- 4,388 -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------- --------- ---------
Net income (loss).... $(12,157) $ (3,153) $ (8,854) $ 1,987 $ 2,735 $ 14,561 $ (1,733) $ (3,781) $ (1,091)
======== ======== ======== ======== ======== ======== ========= ========= =========
Pro forma net income $ .71(4) $ (.05)(4)
(loss) per share.... ======== =========
BALANCE SHEET DATA (AT
END OF PERIODS):
Total assets........... $293,125 $289,845 $293,691 $328,768 $378,721 $ 320,348 $ 375,678 $ 375,678
Total debt............. 186,396 187,863 202,503 219,737 250,376 215,730 252,684 33,616
Total shareholders'
equity................ 88,424 84,726 75,872 78,959 85,392 77,226 81,709 301,339
OTHER DATA (FOR OR AT
END OF PERIODS):
Capital expenditures... $ 7,699 $ 3,117 $ 13,426 $ 9,940 $ 28,459 $ 6,877 $ 7,860
Depreciation and
amortization.......... 12,780 11,596 13,143 14,781 20,851 4,774 5,437
Computer processing
capacity (in MIPS).... 112 123 185 280 396 280 396
Number of individuals
in database........... 132,839 130,122 138,709 146,276 146,579 143,156 143,770
Number of households
in database........... 92,268 92,362 92,859 95,130 94,958 95,465 95,770
</TABLE>
- -------
(1) In 1994, the Company purchased Customer Insight Company for approximately
$20.0 million. In 1995, an affiliate of R.R. Donnelley acquired
International Communication & Data Plc for approximately $15.3 million.
See Notes 1 and 14 of Notes to Consolidated and Combined Financial
Statements of Metromail.

(2) For a detailed description of the adjustments to these unaudited pro forma
consolidated and combined statements of operations and balance sheet, see
"Unaudited Pro Forma Financial Information."

(3) Reflects an accrual for aniticipated litigation costs in respect of a
purported class action filed against the Company, R.R. Donnelley and
certain other defendants in April 1996. R.R. Donnelley has agreed to pay
the legal fees and expenses incurred by the Company in defending this
action. Excluding the effect of this accrual, (i) earnings from
operations, loss before income taxes and net loss would have been $1.725
million, $3.675 million and $2.887 million for the three months ended
March 31, 1996, respectively, and (ii) earnings from operations, earnings
before income taxes, net loss and pro forma net loss per share for the
three months ended March 31, 1996, as adjusted, would have been $1.450
million, $0.839 million, $0.197 million and $.01, respectively. See "Risk
Factors--Litigation and Government Inquiries with Respect to Use of Data"
and Note 15 of Notes to Consolidated and Combined Financial Statements of
Metromail.

(4) Pro forma net income (loss) per share is computed by dividing pro forma
net income (loss) for the year ended December 31, 1995 and the three
months ended March 31, 1996 by the pro forma weighted average shares
outstanding during such periods of 20,600,000.

21
<PAGE>

UNAUDITED PRO FORMA FINANCIAL INFORMATION

The unaudited pro forma consolidated and combined statements of operations
for the year ended December 31, 1995 and the three months ended March 31, 1996
set forth below illustrate: (i) the effects of the historical estimated
results of operations (under the Company's accounting policies) of
International Communication & Data Plc ("ICD") for the period from January 1,
1995 to April 30, 1995, the date on which ICD was acquired by an affiliate of
the Company; (ii) the estimated net operating effects resulting from the
Company being a public entity, which include pricing of certain services the
Company will provide to and receive from R.R. Donnelley after the Offering
under certain intercompany agreements, as well as other incremental public
company expenses; and (iii) the Offering being consummated and the assumed net
proceeds therefrom together with, to the extent necessary, borrowings under a
bank credit facility to be entered into by the Company upon consummation of
the Offering being used to repay the debt and advances owed to R.R. Donnelley
and its subsidiaries at January 1, 1995, resulting in (a) the elimination of
interest expense associated with the debt and advances owed to R.R. Donnelley
and its subsidiaries and (b) additional interest expense related to borrowings
under the facility described in clause (iii) and to finance operating and
investing activities in 1995 and in the three months ended March 31, 1996. The
pro forma adjustments are based on available information and upon certain
assumptions the Company believes are reasonable. The pro forma consolidated
and combined statements of operations do not purport to represent what the
Company's results of operations would actually have been or to project the
Company's results of operations for any future period.

The unaudited pro forma consolidated and combined balance sheet as of March
31, 1996 set forth below illustrates the assumed net proceeds of the Offering
and borrowings under the bank credit facility described above being used to
repay the debt and advances due to R.R. Donnelley and its subsidiaries at
March 31, 1996. The pro forma consolidated and combined balance sheet does not
purport to represent what the Company's financial position would actually have
been or to project the Company's financial position for any future date.

22
<PAGE>

UNAUDITED PRO FORMA CONSOLIDATED AND COMBINED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-------------------------------------------------------------
ICD OPERATING CAPITAL
OPERATING STRUCTURE STRUCTURE AS
ACTUAL ADJUSTMENTS(1) ADJUSTMENTS ADJUSTMENTS ADJUSTED
-------- -------------- ----------- ----------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Direct marketing sales.. $189,713 $5,055 $ -- $ -- $194,768
Reference sales......... 47,474 -- -- -- 47,474
-------- ------ ------ ------- --------
Total net sales....... 237,187 5,055 -- -- 242,242
Database and production
costs.................. 134,361 1,536 (1,170)(2) -- 134,727
Amortization of
goodwill............... 7,446 125 -- -- 7,571
Selling expenses........ 45,913 994 350 (3) -- 47,257
General and
administrative
expenses............... 16,645 1,738 1,720(4) -- 20,103
Provisions for doubtful
accounts............... 2,180 101 -- -- 2,281
-------- ------ ------ ------- --------
Earnings from
operations........... 30,642 561 (900) -- 30,303
Interest expense--
related party.......... 21,329 -- -- (20,329)(5) --
Interest expense........ 80 -- -- 1,150 (5) 1,230
Other expense (income)--
net.................... (87) -- -- -- (87)
-------- ------ ------ ------- --------
Earnings before income
taxes................ 9,320 561 (900) 20,179 29,160
Income taxes............ 6,585 226(6) (364)(6) 8,152 (6) 14,599
-------- ------ ------ ------- --------
Net income ........... $ 2,735 $ 335 $ (536) $12,027 $ 14,561
======== ====== ====== ======= ========
Pro forma net income
per share ........... $ .71(7)
========
</TABLE>
- --------
(1) Represents the estimated results of operations of ICD from January 1, 1995
through April 30, 1995 under the Company's accounting policies, which
provide for amortization of certain database assets over a shorter period
than provided for by ICD prior to its acquisition by R.R. Donnelley. The
amounts set forth for such results of operations were translated from
British pounds into United States dollars using an average exchange rate
of 1 to 1.56.

(2) Represents (i) the estimated amount of decreased database and production
costs of $0.7 million resulting from the increased charges for computer
services to be provided by Metromail to R.R. Donnelley after the Offering
pursuant to a certain intercompany agreement and (ii) decreased retiree
medical costs of $0.47 million as a result of the prospective assumption
by R.R. Donnelley of the liabilities and expenses associated with 122
retired and 93 current employees of Metromail who met the eligibility
requirements (55 years of age and 10 years of service) for those benefits.
The costs of retiree medical benefits for all Metromail employees were
reported in Metromail's historical results of operations. The Company has
recorded a liability in its historical financial statements to R.R.
Donnelley for that portion of the liability to be assumed by R.R.
Donnelley for periods subsequent to the Offering. This liability will be
extinguished through payment of a portion of the net proceeds of the
Offering to R.R. Donnelley. See "Use of Proceeds" and Notes to
Consolidated and Combined Financial Statements of Metromail. The aggregate
amount of the adjustment has been allocated to database and production
costs, selling expenses and general and administrative expenses based on
the proportionate number of personnel in each area.
(3) Represents (i) the estimated amount of additional sales commissions of
$0.5 million payable by the Company to R.R. Donnelley pursuant to a
certain intercompany agreement relating to sales to clients of the Company
that are also clients of R.R. Donnelley and (ii) decreased retiree medical
costs of $0.15 million, as discussed in note (2) above.
(4) Represents (i) the estimated amount of $1.8 million for senior management,
which includes amounts payable under employment agreements with new and
existing senior management, and for administrative support functions
associated with the Company being a public entity after the Offering and
(ii) decreased retiree medical costs of $0.08 million, as discussed in
note (2) above. See "Management--Employment Agreements."

(5) Represents (i) the elimination of related-party interest expense as a
result of the application of the assumed net proceeds of the Offering
together with, to the extent necessary, borrowings under a bank credit
facility to repay the debt and advances owed to R.R. Donnelley and its
subsidiaries at January 1, 1995 and (ii) additional interest expense of
$1.2 million related to borrowings under such facility described in clause
(i) and to finance 1995 operating and investing activities. Interest
expenses of $1.2 million reflects an interest rate of 8.75% on estimated
weighted average borrowings of $13 million, primarily due to the
acquisition of ICD in May 1995. See "Use of Proceeds."

(6) Taxes are provided on income at the appropriate statutory rates as
follows: (i) 33.0% (the U.K. statutory rate) on the sum of the following
ICD operating adjustments: (a) pretax income and (b) goodwill amortization
expense of approximately $0.13 million, which is non-deductible for tax
purposes; and (ii) 40.4%, the combined statutory federal and state rate on
operating and capital structure adjustments.

(7) Pro forma net income per share is computed by dividing pro forma net
income by the pro forma weighted average shares outstanding during 1995 of
20,600,000.

23
<PAGE>

UNAUDITED PRO FORMA CONSOLIDATED AND COMBINED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1996
----------------------------------------------
OPERATING CAPITAL
STRUCTURE STRUCTURE AS
ACTUAL ADJUSTMENTS ADJUSTMENTS ADJUSTED
------- ----------- ----------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Direct marketing sales.... $41,894 $ -- $ -- $41,894
Reference sales........... 12,475 -- -- 12,475
------- ----- ------ -------
Total net sales......... 54,369 -- -- 54,369
Database and production
costs.................... 33,606 (293)(1) -- 33,313
Amortization of goodwill.. 1,889 -- -- 1,889
Selling expenses.......... 11,821 88 (2) -- 11,909
General and administrative
expenses................. 4,909 480 (3) -- 5,389
Provisions for doubtful
accounts................. 419 -- -- 419
Provision for litigation
expense.................. 1,500(4) -- -- 1,500(4)
------- ----- ------ -------
Earnings (loss) from
operations............. 225 (275) -- (50)
Interest expense--related
party.................... 5,345 -- (5,345)(5) --
Interest expense.......... 60 -- 556 (5) 616
Other expense (income)--
net...................... (5) -- -- (5)
------- ----- ------ -------
Loss before income
taxes.................. (5,175) (275) 4,789 (661)
Income taxes.............. (1,394) (111)(6) 1,935(6) 430
------- ----- ------ -------
Net loss ............... $(3,781) $(164) $2,854 $(1,091)
======= ===== ====== =======
Pro forma net loss per
share ................. $ (.05)(7)
=======
</TABLE>
- --------

(1) Represents (i) the estimated amount of decreased database and production
costs of $175 resulting from the increased charges for computer services
to be provided by Metromail to R.R. Donnelley after the Offering pursuant
to a certain intercompany agreement and (ii) decreased retiree medical
costs of $118 as a result of the prospective assumption by R.R. Donnelley
of the liabilities and expenses associated with 122 retired and 93 current
employees of Metromail who met the eligibility requirements (55 years of
age and 10 years of service) for those benefits. The costs of retiree
medical benefits for all Metromail employees were reported in Metromail's
historical results of operations. The Company has recorded a liability in
its historical financial statements to R.R. Donnelley for that portion of
the liability to be assumed by R.R. Donnelley for periods subsequent to
the Offering. This liability will be extinguished through payment of a
portion of the net proceeds of the Offering to R.R. Donnelley. See "Use of
Proceeds" and Notes to Consolidated and Combined Financial Statements of
Metromail. The aggregate amount of the adjustment has been allocated to
database and production costs, selling expenses and general and
administrative expenses based on the proportionate number of personnel in
each area.

(2) Represents (i) the estimated amount of additional sales commissions of
$125 payable by the Company to R.R. Donnelley pursuant to a certain
intercompany agreement relating to sales to clients of the Company that
are also clients of R.R. Donnelley and (ii) decreased retiree medical
costs of $37, as discussed in note (1) above.

(3) Represents (i) the estimated amount of $450 for senior management, which
includes amounts payable under employment agreements with new and existing
senior management, and for administrative support functions associated
with the Company being a public entity after the Offering; (ii) increased
amortization expense of $50 due to the acceleration of a non-compete
agreement with a retired executive concurrent with the closing of the
Offering; and (iii) decreased retiree medical costs of $20, as discussed
in note (1) above. See "Management--Employment Agreements" and "--
Agreement with Retired Executive."

(4) Reflects an accrual for anticipated litigation costs in respect of a
purported class action filed against the Company, R.R. Donnelley and
certain other defendants in April 1996. Because R.R. Donnelley has agreed
to pay the legal fees and expenses incurred by the Company in defending
this action, such expenses will not affect the cash flows of the Company;
however, applicable accounting principles require the Company to recognize
such expenses and apply all R.R. Donnelley payments in respect of such
expenses to additional paid-in capital. Excluding the effect of this
accrual, (i) earnings from operations, loss before income taxes and net
loss would have been $1.725 million, $3.675 million and $2.887 million for
the three months ended March 31, 1996, respectively, and (ii) earnings
from operations, earnings before income taxes, net loss and pro forma net
loss per share for the three months ended March 31, 1996, as adjusted,
would have been $1.450 million, $0.839 million, $0.197 million and $.01,
respectively. See "Risk Factors--Litigation and Government Inquiries with
Respect to Use of Data" and Note 15 of Notes to Consolidated and Combined
Financial Statements of Metromail.

(5) Represents (i) the elimination of related-party interest expense as a
result of the application of the assumed net proceeds of the Offering
together with, to the extent necessary, borrowings under a bank credit
facility to repay the debt and advances owed to R.R. Donnelley and its
subsidiaries at January 1, 1996 and (ii) additional interest expense of
$556 related to borrowings under such facility described in clause (c) and
to finance operating and investing activities for the three months ended
March 31, 1996. Interest expense of $616 reflects an interest rate of 8.5%
on estimated weighted average borrowings of $29,000. See "Use of
Proceeds."

(6) Taxes are provided on income at the appropriate statutory rate of 40.4%,
the combined statutory federal and state rate on operating and capital
structure adjustments.

(7) Pro forma net loss per share is computed by dividing pro forma net income
by the pro forma weighted average shares outstanding during the three
months ended March 31, 1996 of 20,600,000.

24
<PAGE>

UNAUDITED PRO FORMA CONSOLIDATED AND COMBINED BALANCE SHEET

<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
----------------------------------------------------
DEBT AS
ACTUAL OFFERING(1) REPAYMENT(2) OTHER(3) ADJUSTED
-------- -------- --------- ----- --------
(IN THOUSANDS)
ASSETS
<S> <C> <C> <C> <C> <C>
Cash and equivalents.... $ -- $219,630 $(219,630) $ -- $ --
Receivables, less sales
allowances and
allowances for doubtful
accounts of $3,984..... 59,398 -- -- -- 59,398
Inventories............. 7,067 -- -- -- 7,067
Prepaid expenses........ 8,538 -- -- -- 8,538
Current deferred income
taxes.................. 625 -- -- -- 625
-------- -------- --------- ----- --------
Total current
assets............. 75,628 219,630 (219,630) -- 75,628
Net property, plant and
equipment, at cost,
less accumulated
depreciation of
$45,133................ 37,712 -- -- -- 37,712
Goodwill and other
intangibles, net of
accumulated
amortization of
$69,472................ 254,782 -- -- -- 254,782
Deferred income taxes... 149 -- -- -- 149
Other assets............ 7,407 -- -- -- 7,407
-------- -------- --------- ----- --------
Total assets........ $375,678 $219,630 $(219,630) $ -- $375,678
======== ======== ========= ===== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C> <C> <C> <C>
Accounts payable........ $ 4,882 $ -- $ -- $ -- $ 4,882
Accrued compensation.... 4,801 -- -- (100) 4,701
Short-term debt......... 3,840 -- (3,840) -- --
Short-term debt and
payables--due to
related parties........ 248,844 -- (248,844) -- --
Deferred revenue........ 5,436 -- -- -- 5,436
Other accrued
liabilities............ 20,306 -- -- -- 20,306
-------- -------- --------- ----- --------
Total current
liabilities........ 288,109 -- (252,684) (100) 35,325
Long-term debt.......... -- -- 33,054 562 33,616
Other noncurrent
liabilities............ 5,860 -- -- (462) 5,398
Shareholders' equity
Common stock--
Metromail............ 86 120 -- -- 206
Additional paid-in
capital.............. 111,779 219,510 -- -- 331,289
Retained deficit
(includes cumulative
adjustment for
currency translation
of $(139))........... (30,156) -- -- -- (30,156)
-------- -------- --------- ----- --------
Total shareholders'
equity............. 81,709 219,630 -- -- 301,339
-------- -------- --------- ----- --------
Total liabilities
and shareholders'
equity............. $375,678 $219,630 $(219,630) $ -- $375,678
======== ======== ========= ===== ========
</TABLE>
- --------
(1) Represents the assumed net proceeds of the Offering. See "Use of
Proceeds."

(2) Represents payment of the debt and advances owed to R.R. Donnelley and its
subsidiaries on March 31, 1996. The Company expects to establish a $45
million bank credit facility upon the consummation of the Offering, which
the Company expects to use to pay the debt and advances due to R.R.
Donnelley and its subsidiaries and any other short-term debt remaining
after the application of the assumed net proceeds of the Offering. See
"Use of Proceeds."

(3) Represents the payment of a non-compete agreement with a retired executive
accelerated as a result of the change in control concurrent with the
closing of the Offering. See "Management--Agreement with Retired
Executive."

25
<PAGE>

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

GENERAL

Overview

Metromail is a leading provider of services to organizations engaged in
direct mail, telephone and target marketing and also provides reference and
information services. The Company was acquired by R.R. Donnelley in 1987 and
is wholly owned by R.R. Donnelley.

The Company provides direct marketing services to clients that include
consumer goods manufacturers, credit card companies, financial institutions,
insurance companies, magazine and book publishers, mail order houses and
catalogers, pharmaceutical companies and retailers. Direct marketing services
accounted for 78.0%, 80.2% and 80.0% of the Company's total net sales in the
years ended December 31, 1993, 1994 and 1995, respectively. The direct
marketing services provided by the Company include list development, list
enhancement, marketing database and personalization printing and lettershop
services. See "Business."

The Company's reference services comprised 22.0%, 19.8% and 20.0% of total
net sales in 1993, 1994 and 1995, respectively. The reference services
provided by the Company include a National Directory Assistance ("NDA")
database for on-line or operator-assistance providers; an on-line look-
up/skip-locate service for collection agencies, consumer finance companies and
credit card issuers; and the Cole directories, which list households in
sequence, by telephone number or address, in approximately 150 markets in the
United States and Canada, delivered in printed form or on CD-ROM. See
"Business."

The Company's business is based on long-standing client relationships.
Although sales are not guaranteed under long-term contracts, a substantial
portion of the Company's net sales is derived from clients that the Company
has served for many years. The Company has had a continuing business
relationship with each of its top 25 clients in 1995 for five or more years.
Net sales to the top 25 clients amounted to $57.2 million in 1993, $65.9
million in 1994 and $68.6 million in 1995. Net sales to the top 25 clients
accounted for 34.9%, 33.7% and 28.9% of total net sales in 1993, 1994 and
1995, respectively, as the Company expanded into new products and services
across all operations. No single client accounted for more than 10% of total
net sales in any of these years. The Company's business is somewhat seasonal.
See "--Quarterly Results" and "Risk Factors--Absence of Long-Term Contracts;
Lack of Predictability of Sales; Fluctuations in Operating Results."

The Company's operating results are affected by certain trends and
occurrences in the economy and its industry environment. Economic cycles which
affect consumer demand are generally reflected in the Company's sales as
direct marketing clients reduce the extent of their activities. The effect of
economic cycles on the Company's profits may be pronounced because a
significant portion of the Company's expenses is fixed. The direct marketing
activity of the Company's clients can be affected by postal rate changes,
especially postal rate increases that are imposed without sufficient notice to
allow clients to adjust their marketing budgets. Increases in postal rates may
lead to fewer mailings of direct marketing materials or to mailings to fewer
addresses or to mailings by a client only to its previous customers and not to
a list of prospects, with a corresponding decline in the need for certain of
the direct marketing services of the type provided by the Company. Increased
rates can also lead to pressure on the Company to reduce prices for its
products and services to offset the postal rate increase. However, increased
mailing costs can cause direct marketers to desire to target their mailings
more carefully, which can result in increased demand for list development and
list enhancement services of the type provided by the Company.

Relationship with R.R. Donnelley

In 1987, R.R. Donnelley acquired the Company in a business combination
accounted for using the purchase method, resulting in the restatement of
Metromail's assets and liabilities to their estimated fair values at the date
of acquisition. The excess of the purchase price over the fair value of the
net assets of the Company was recorded

26
<PAGE>

as goodwill of $242.2 million and is being amortized on a straight-line basis
over its estimated useful life of 40 years.

As of March 31, 1996, the Company had debt and advances payable to R.R.
Donnelley and its subsidiaries totalling approximately $248.8 million, of
which approximately $185.0 million was incurred in connection with R.R.
Donnelley's acquisition of the Company. The debt payable to R.R. Donnelley as
of March 31, 1996 consisted of a Grid Note in the principal amount, together
with accrued interest, of approximately $54.5 million and a Fixed Note in the
principal amount of $160.0 million. The advances payable to R.R. Donnelley and
its subsidiaries, which were approximately $34.4 million as of March 31, 1996,
represent advances from R.R. Donnelley and its subsidiaries to fund operating
and investing activities, net of cash advanced to R.R. Donnelley from
operating cash flows generated by the Company and receivables resulting from
certain sales through R.R. Donnelley. Such advances are periodically
transferred by R.R. Donnelley into the Grid Note. See Note 11 of Notes to
Consolidated and Combined Financial Statements of Metromail.

Since the acquisition, the Company has operated as a separate business
within R.R. Donnelley. The Company has relied on R.R. Donnelley for its
financing needs (see further discussion under "Liquidity and Capital
Resources"), preparation of income tax returns, administration of employee
welfare benefit plans and certain legal and administrative support services.
The Company has maintained its own operating support functions, including
strategic management, accounting, payroll and incentive compensation
functions.

The consolidated and combined financial statements discussed below reflect
the results of operations, financial position and cash flows of the Company
and its subsidiaries on a carve-out basis; that is, the financial statements
have been adjusted to reflect certain expenses and liabilities incurred by
R.R. Donnelley on behalf of the Company. The Company believes that the
assumptions underlying all such adjustments are reasonable; however, the
consolidated and combined financial statements do not necessarily reflect the
results of operations, financial position and cash flows of the Company and
its subsidiaries had the Company operated as a separate entity during the
periods presented.

The Company has obtained a substantial portion of its working capital and
financing needs through amounts borrowed from a subsidiary of R.R. Donnelley.
All of the net proceeds of the Offering, together with, to the extent
necessary, borrowings under a bank credit facility to be entered into by the
Company upon consummation of the Offering, will be used to repay these
amounts. Interest expense recorded in the consolidated and combined financial
statements primarily reflects interest incurred on borrowings from a
subsidiary of R.R. Donnelley. Income taxes reflected in the consolidated and
combined financial statements were determined as if the Company had filed a
separate return.

Acquisitions

In June 1994, the Company acquired CIC, a company that developed PC-based
marketing oriented database solutions, for approximately $20.0 million. As of
May 1995, the common stock of ICD, a compiler of lists in the United Kingdom
primarily through the use of surveys, was purchased for approximately $15.3
million to expand database coverage to include the United Kingdom. The
acquisitions of CIC and ICD were each accounted for as a purchase with the
results of operations included in the Company's consolidated and combined
financial statements from the acquisition date. Goodwill resulting from the
CIC and ICD acquisitions was $16.8 million and $14.7 million, respectively,
and is being amortized over their estimated useful life of 15 and 40 years,
respectively.

RESULTS OF OPERATIONS

The following table sets forth certain items from the Company's consolidated
and combined statements of operations as a percentage of total net sales for
the periods indicated.

27
<PAGE>

<TABLE>
<CAPTION>
THREE
MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
-------------------- -------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Direct marketing sales............ 78.0% 80.2% 80.0% 78.0% 77.1%
Reference sales................... 22.0 19.8 20.0 22.0 22.9
----- ----- ----- ----- -----
Total net sales................. 100.0 100.0 100.0 100.0 100.0
Database and production costs..... 58.0 55.7 56.7 60.8 61.8
Amortization of goodwill.......... 3.7 3.4 3.1 3.6 3.5
Selling expenses.................. 18.1 19.0 19.4 20.8 21.7
General and administrative
expenses......................... 7.6 7.4 7.0 7.8 9.0
Provisions for doubtful accounts.. 1.2 0.9 0.9 0.9 0.8
Provision for litigation expense.. -- -- -- -- 2.8
----- ----- ----- ----- -----
Total operating expenses........ 88.6 86.4 87.1 93.8 99.6
----- ----- ----- ----- -----
Earnings from operations...... 11.4 13.6 12.9 6.2 0.4
----- ----- ----- ----- -----
Interest and other expense, net... 13.4 9.7 9.0 9.9 9.9
----- ----- ----- ----- -----
Earnings (loss) before income
taxes........................ (2.0) 3.9 3.9 (3.7) (9.5)
Income taxes...................... 0.7 2.9 2.7 (0.2) (2.5)
----- ----- ----- ----- -----
Net income (loss) from
operations before cumulative
effect of accounting change.. (2.7)% 1.0% 1.2% (3.5)% (7.0)%
===== ===== ===== ===== =====
</TABLE>

Three Months ended March 31, 1996 compared to three months ended March 31,
1995

Total net sales increased 9.2% to $54.4 million for the first three months
of 1996 from $49.8 million for the first three months of 1995. This $4.6
million increase was comprised of a $3.0 million, or 7.7%, increase in direct
marketing sales and a $1.6 million, or 14.5%, increase in reference sales.
Direct marketing sales growth resulted primarily from increased sales of
marketing database software and the BehaviorBank list product and the
inclusion in 1996 of the net sales of ICD, which was acquired in May 1995.
Marketing database software sales grew $0.9 million, or 33.7%, over the first
quarter of 1995 due to growing demand for the AnalytiX product. The inclusion
of ICD added net sales of $1.4 million. BehaviorBank list product sales grew
$0.7 million, or 70.1%, reflecting growth in the size of the database and
strong demand. List development sales were flat reflecting a 12% increase in
small business sales offset by a decrease in list sales to national accounts
due primarily to clients shifting their work to later in the year. The growth
in reference sales was principally due to growth of 34.7% in the Company's
MetroNet and NDA on-line services, while directory publishing services grew
3.8% from increased sales of CD-ROM products.

Database and production costs primarily represent expenses incurred to
maintain the Company's database and customize data for client use, including
salaries and wages, amortization of capitalized data costs, facility costs and
depreciation of equipment. Database and production costs increased for the
first three months of 1996 to $33.6 million, or 61.8% as a percentage of total
net sales, from $30.3 million for the first three months of 1995, or 60.8% as
a percentage of total net sales, primarily due to increased expenses related
to an upgrade of computer capacity and growth in the NDA service, addition of
ICD expenses and increased survey data amortization expense.

Amortization of goodwill increased 5.5% to $1.9 million for the first three
months of 1996. This increase reflected the increased goodwill related to the
acquisition of ICD.

Selling expenses increased $1.5 million, or 14.6%, from the first three
months of 1995 and as a percentage of total net sales to 21.7% for the first
three months of 1996 from 20.8% for the first three months of 1995. The
increase in selling expenses as a percentage of total net sales resulted
primarily from the acquisition of ICD and

28
<PAGE>

increased costs due to sales increases in the marketing database software,
survey and small business operations where selling expenses as a percentage of
net sales is higher than for the Company's other operations.

General and administrative expenses grew $1.0 million, or 25.6%, from the
first three months of 1995, an increase as a percentage of total net sales
from 7.8% to 9.0% for the first three months of 1996. The increase in these
expenses resulted from the acquisition of ICD and increased staff costs and
outside services.

Provisions for doubtful accounts were substantially unchanged from the first
three months of 1995, but decreased to 0.8% as a percentage of total net sales
for the first three months of 1996.

The Company recorded a provision of $1.5 million ($0.9 million after tax) in
the three months ended March 31, 1996 for anticipated litigation costs related
to a lawsuit filed against it and others on April 18, 1996. See "Risk
Factors--Litigation and Government Inquiries with Respect to Use of Data."
Because this lawsuit is in its early stages, it is not possible for the
Company to make a meaningful determination of the ultimate outcome or to make
an estimate of the loss, if any, should the outcome be unfavorable. The charge
recorded by the Company is based on management's preliminary estimate of the
cost of litigating the case. Because R.R. Donnelley has agreed to pay the
legal fees and expenses incurred by the Company in defending this case, such
expenses will not affect the cash flows of the Company; however, applicable
accounting principles require the Company to recognize such expenses and apply
all R.R. Donnelley payments in respect of such expenses to additional paid-in
capital.

Interest expense, primarily paid to a subsidiary of R.R. Donnelley,
increased by $0.4 million because the Company had higher average outstanding
debt levels for the first three months of 1996. The higher debt levels were
required to acquire ICD and provide additional short-term working capital
funding.

The Company's tax benefit increased to $1.4 million for the first three
months of 1996 from $0.1 million for the first three months of 1995. The
increase in the benefit for the first three months of 1996 reflects the
increased loss before income taxes.

Net income decreased $2.1 million to a loss of $3.8 million for the first
three months of 1996 as a result of the foregoing factors.

1995 compared to 1994

Total net sales increased 21.3% to $237.2 million in 1995 from $195.5
million in 1994. This $41.7 million increase was comprised of a $32.9 million,
or 21.0%, increase in direct marketing sales and a $8.8 million, or 22.8%,
increase in reference sales. Direct marketing sales growth resulted primarily
from strong demand for list development and lettershop services and marketing
database software. List development sales increased $10.2 million, which was
due to growth of 8.1% in sales to national list accounts, growth of 16.1% in
sales to small business accounts and growth of 51.9% in sales of the
BehaviorBank list product. Marketing database software sales grew $9.5 million
reflecting a full year's sales after the June 1994 acquisition of CIC along
with volume growth of 35.8% over comparable full year 1994 sales. Lettershop
sales increased $4.2 million due to increased sales efforts to utilize
available capacity. Direct marketing sales were also increased by $7.1 million
due to the inclusion of ICD's sales following the acquisition of ICD in May
1995. The increase in reference sales reflects in large part the strong growth
in on-line services, including the NDA and MetroNet services.

Database and production costs increased in 1995 to $134.4 million, or 56.7%
as a percentage of total net sales, from $108.8 million in 1994, or 55.7% as a
percentage of total net sales, primarily due to the start-up of the NDA
service, along with increased expenses to upgrade computers resulting in
increased capacity.

Amortization of goodwill increased 12.7% to $7.4 million in 1995. This
increase reflected the inclusion of a full year of amortization of goodwill
resulting from the CIC acquisition and additional goodwill resulting from the
ICD acquisition.

Selling expenses increased $8.8 million, or 23.7%, from 1994 and as a
percentage of total net sales to 19.4% in 1995 from 19.0% in 1994. The
increase in selling expenses was due to the inclusion of CIC for a full year
($3.1 million), the acquisition of ICD ($1.5 million) and growth in the on-
line services sales staff ($0.7 million),

29
<PAGE>

as well as increased commissions and support costs across all businesses due
to increased sales. The increase in selling expenses as a percentage of total
net sales resulted primarily from the fact that selling expenses of CIC and
ICD as a percentage of their total net sales was higher than for the Company's
other operations.

General and administrative expenses grew $2.2 million, or 15.5%, from 1994,
but decreased as a percentage of total net sales from 7.4% to 7.0% in 1995.
The increase in these expenses resulted from the acquisition of ICD ($1.4
million), the settlement agreement with Aristotle Industries, Inc. described
under "Business--Litigation; Government Inquiries" ($0.7 million) and the
inclusion of CIC for a full year ($0.6 million), as well as increased expenses
across the Company's other operations.

Provisions for doubtful accounts increased $0.3 million, or 18.0%, from
1994, but remained the same as a percentage of total net sales at 0.9%.

Interest expense, primarily paid to a subsidiary of R.R. Donnelley,
increased by $2.3 million because the Company had higher average outstanding
debt levels in 1995. The higher debt levels were required to fund capital
expenditures, the ICD acquisition and increased working capital requirements
to support sales increases.

The Company's effective income tax rate decreased to 70.7% in 1995 from
74.1% in 1994. The effective tax rate exceeds the U.S. federal statutory rate
due to the effect of nondeductible goodwill amortization and of state and
foreign taxes. The decrease in the effective tax rate in 1995 reflects the
increase in pretax income, which reduces the relative effect of the
nondeductible items.

Net income increased $0.7 million, or 37.6%, to $2.7 million in 1995 as a
result of the foregoing factors.

1994 compared to 1993

Total net sales increased 19.4% to $195.5 million in 1994 from $163.7
million in 1993. This $31.8 million increase was comprised of a $29.1 million,
or 22.8%, increase in direct marketing sales and a $2.6 million, or 7.3%,
increase in reference sales. Direct marketing sales growth resulted primarily
from the June 1994 acquisition of CIC ($8.5 million) and higher sales for
lettershop services ($5.5 million), list development services ($10.0 million,
due to growth of 13.3% in small business sales, growth of 26.7% in national
list accounts and growth of 77.2% in sales of the BehaviorBank list product)
and list enhancement services ($5.2 million). The increase in reference sales
reflected increased demand for the Company's on-line services, primarily
represented by the MetroNet service.

Database and production costs increased in 1994 to $108.8 million, but
decreased as a percentage of total net sales to 55.7%, from $95.0 million in
1993, or 58.0% as a percentage of total net sales, primarily due to total net
sales increasing at a greater rate than production costs, as well as the
inclusion in 1994 of CIC's higher-margin business.

Amortization of goodwill increased 9.2% to $6.6 million due to the
acquisition of CIC in June 1994.

Selling expenses increased $7.5 million, or 25.3%, from 1993 and grew as a
percentage of total net sales from 18.1% to 19.0% in 1994. The increase
largely resulted from the addition of selling expenses associated with CIC
($2.6 million), increased selling staff and support for on-line services ($1.8
million) and increased sales force and marketing support relating to the
Company's small business list development clients ($1.3 million). The increase
in selling expenses as a percentage of total net sales over 1993 was primarily
due to the increase in the on-line sales force.

General and administrative expenses increased $1.9 million, or 13.4%, from
1993 but decreased as a percentage of total net sales to 8.3% compared to 8.8%
in 1993. The increase resulted from $0.9 million of administrative expenses
added with the acquisition of CIC and general cost increases across the
balance of the Company's operations.

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<PAGE>

Provisions for doubtful accounts decreased $0.1 million, or 5.7%, from 1994
and decreased as a percentage of total net sales to 0.9% from 1.2% in 1993.
The expense decreased as the amount of write-offs of accounts decreased from
1993 levels.

Interest expense, primarily paid to a subsidiary of R.R. Donnelley,
decreased by $3.1 million due to lower debt levels in 1994, resulting from
positive operating cash flows.

The Company's effective income tax rate was 74.1% in 1994. The effective tax
rate exceeds the U.S. federal statutory rate due to the effect of
nondeductible goodwill amortization and of state taxes. In 1993, the Company
recorded income tax expense due to these items despite its consolidated pretax
loss.

Net income from operations before cumulative effect of accounting change
increased $6.5 million from a loss of $4.5 million to a profit of $2.0 million
in 1994 as a result of the foregoing factors.

Quarterly operating results

The following table sets forth selected unaudited consolidated and combined
statement of operations information for the Company on a quarterly basis for
the years ended December 31, 1993, 1994 and 1995 and for the three months
ended March 31, 1996.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------------------------------------------
1993 1994 1995 1996
------------------------------- ------------------------------- ------------------------------- -------
MAR. 31 JUN. 30 SEP. 30 DEC. 31 MAR. 31 JUN. 30 SEP. 30 DEC. 31 MAR. 31 JUN. 30 SEP. 30 DEC. 31 MAR. 31
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Direct marketing
sales........... $26.9 $27.3 $37.3 $36.2 $31.8 $34.5 $42.0 $48.5 $38.9 $44.8 $48.0 $58.0 $41.9
Reference sales.. 8.7 8.8 8.8 9.7 9.6 9.5 9.6 10.0 10.9 11.5 13.1 12.0 12.5
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total net sales. 35.6 36.1 46.1 45.9 41.4 44.0 51.6 58.5 49.8 56.3 61.1 70.0 54.4
Operating
expenses........ 33.3 34.8 39.9 37.0 38.5 39.0 42.9 48.4 46.7 45.8 53.7 60.4 54.2
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Earnings from
operations..... 2.3 1.3 6.2 8.9 2.9 5.0 8.7 10.1 3.1 10.5 7.4 9.6 0.2
Interest and
other expense... 5.5 5.5 5.5 5.5 4.6 4.6 4.9 4.9 5.0 5.1 5.6 5.6 5.4
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Earnings (loss)
before income
taxes.......... (3.2) (4.2) .7 3.4 (1.7) .4 3.8 5.2 (1.9) 5.4 1.8 4.0 (5.2)
Income taxes..... (0.7) (1.2) 1.0 2.1 (0.1) 0.8 2.2 2.8 (0.1) 3.0 1.4 2.3 (1.4)
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net income
(loss) from
operations
before
cumulative
effect of
accounting
change......... $(2.5) $(3.0) $(0.3) $ 1.3 $(1.6) $(0.4) $ 1.6 $ 2.4 $(1.8) $ 2.4 $ 0.4 $ 1.7 $(3.8)
===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>

The Company's business is somewhat seasonal, particularly in the direct
marketing business. Direct marketing volume is driven in large part by
consumer demand, with direct marketers increasing their marketing efforts just
ahead of and during the traditional holiday buying season. Sales of direct
marketing products by the Company, therefore, are generally stronger in the
second half of each fiscal year. The timing of acquisitions and the
recognition of expenses have affected quarterly operating results. Software
sales by CIC are also seasonal. In 1995, approximately 42.3% of CIC's annual
total net sales occurred in the fourth quarter.

LIQUIDITY AND CAPITAL RESOURCES

Since its acquisition by R.R. Donnelley in 1987, the Company has funded its
operations, capital expenditures and acquisitions through cash flows from
operations and amounts borrowed from a subsidiary of R.R. Donnelley. Cash
flows from operations increased 18.3% in 1995 to $9.7 million compared to $8.2
million in 1994 and $7.6 million in 1993. Capital expenditures increased $18.6
million to $28.5 million in 1995 from $9.9 million in 1994 due to the
Company's new and ongoing investment initiatives. In 1995, the Company had
high levels of spending associated with data acquisition (primarily for survey
data), the implementation of the NDA service, the redesign of the Company's
database file structure and upgrades to its AnalytiX software product, as well
as expenditures for efficiency improvements. For a further discussion of
accounting policies with respect to database development costs, see Note 2 of
Notes to Consolidated and Combined Financial Statements of Metromail.

31
<PAGE>

In 1995, the Company paid $2.7 million to settle a dispute regarding voter
data supplied by Aristotle Industries, Inc., of which $0.7 million was
recorded as a settlement expense and $2.0 million, which was paid in
consideration for the acquisition of voter data, was recorded as an intangible
asset to be amortized over three years. The $2.0 million was reflected in the
Consolidated and Combined Statements of Cash Flows for 1995 as a capital
expenditure. See "Business--Litigation; Government Inquiries."

For the three months ended March 31, 1996, $7.9 million of capital
expenditures were funded by $5.6 million of operating cash flow and $2.3
million of cash provided by financing activities. The Company's capital
expenditures primarily consisted of spending to acquire survey data and other
data acquisition costs. For the remainder of 1996, the Company anticipates
spending approximately $21.0 million to improve the processing efficiency of
its list enhancement services, continue investments to expand its proprietary
database and complete the database redesign, pay for the computer installed in
the Lombard facility in 1995, and continue to invest in the NDA and AnalytiX
products.

Debt owed to a subsidiary of R.R. Donnelley at March 31, 1996 is payable on
demand or becomes due and payable immediately upon completion of the Offering.
The net proceeds of the Offering together with, to the extent necessary,
borrowings under a $45 million bank credit facility to be entered into by the
Company upon consummation of the Offering will be used to repay such debt and
advances from a subsidiary of R.R. Donnelley. If, however, the net proceeds of
the Offering are sufficient to pay such debt and advances, any remaining net
proceeds will be used to repay debt owed by ICD under a revolving credit
agreement and, to the extent that debt is extinguished, for general corporate
purposes, including working capital.

The Company believes that, subsequent to the Offering, cash flows from
operations will be sufficient to fund its ongoing operations on a long-term
basis and continued growth and investment. The Company expects the bank credit
facility described above to be available for seasonal cash needs and
acquisitions to the extent not used to refund indebtedness.

32
<PAGE>

BUSINESS

Metromail is a leading provider of marketing-oriented consumer information
and reference services which it supplies primarily by accessing its
proprietary database. The Company maintains and continually updates a large
proprietary database, which contains geographic, demographic, individual and
other marketing information on over 143 million individuals and over 90% of
the households in the United States. The Company provides its information and
information services to a wide variety of organizations engaged in direct
mail, telephone and target marketing, as well as to clients who desire
specific reference and information services. The Company's clients include
large Fortune 500 companies, as well as numerous small businesses.

Metromail provides direct marketing services to clients that include
consumer goods manufacturers, credit card companies, financial institutions,
insurance companies, magazine and book publishers, mail order houses and
catalogers, pharmaceutical companies and retailers. The direct marketing
services provided by Metromail include:

List Development--The Company assists clients in implementing cost-
effective direct marketing strategies by creating for its clients lists of
those individuals and households in the client's trade area having the
characteristics that fit the marketing strategy and are most likely to
respond favorably to the client's marketing efforts.

List Enhancement--The Company improves the quality of lists or databases
provided by its clients by eliminating duplicate names, correcting
addresses and zip codes and appending additional information, such as
telephone numbers or other marketing-related characteristics, to the lists
or databases.

Marketing Database--The Company uses its proprietary software to assist
its clients in creating a database from information that the client
possesses and licenses software to clients that permits its clients to
manage and analyze that database.

Personalization Printing and Lettershop--The Company provides processing
and mailing services to direct mail clients, most of which are clients that
purchase list development or enhancement services from the Company.

Metromail provides reference services to a broad base of clients. The
reference services provided by the Company include:

On-Line--The Company offers National Directory Assistance to telephone
companies and other operator service providers and other organizations with
high-volume directory assistance needs. This service provides operators
employed by subscribers to the service with on-line access to a database
consisting of more than 108 million residential, business and government
listings, as well as on-line access to electronic directory assistance
databases maintained by the regional Bell operating companies. The Company
also provides users of its MetroNet service with on-line or electronic
access to the Company's MetroNet Master file (a subset of the Company's
database), proprietary change of address files, American Business
Information business listings and regional Bell operating companies'
electronic directory assistance databases. This service is marketed
primarily to consumer finance companies and credit card issuers.

Directory Publishing--The Company publishes the Cole directories, which
list households and businesses arranged in street address and telephone
number sequence in approximately 150 markets in the United States and
Canada, delivered in printed form or on CD-ROM. The Company also provides
National Look-Up Subscriber and 900 Service, an operator-based, directory
assistance service that provides users with name, address, telephone and
neighbor information.

MARKET OVERVIEW

Direct Marketing Industry

Direct marketing is used by both large and small companies to promote and
sell a wide variety of goods and services by direct mail, telephone or
personal contact, bypassing traditional marketing avenues such as retail
outlets. In contrast to most mass media, direct marketing is used by
commercial and other organizations to sell

33
<PAGE>

products directly to consumers identified by name, address and probable
purchase behavior in their homes or places of business, and to motivate an
immediate consumer response.

Direct mail and telephone marketing provides a convenient and cost-effective
means of allowing organizations to market directly to selected segments of the
population. A direct mail promotion can range from small mailings of less than
100 pieces to a mass mailing of millions of pieces. These mailings usually
take the form of letters, promotional brochures, catalogs, samples or coupons.
Careful screening of the mailing list to eliminate duplicate names, correct
incorrect addresses or avoid mailing to persons unlikely to respond favorably
to the mailing can significantly reduce the total costs of mailing and
increase the rate of response to the mailing.

Direct marketing has continued to grow in virtually every category of goods
and services, including consumer goods and services, business-to-business
marketing, fund raising and direct marketing by government agencies. According
to a 1995 study by the WEFA Group commissioned by the DMA, total direct
marketing advertising expenditures in the United States in 1995 were estimated
to be $134 billion, up from $101 billion in 1990. Of the total for 1995,
direct mail expenditures were estimated to be approximately $31 billion, up
from $23 billion in 1990, and telephone marketing expenditures were estimated
to be approximately $54 billion, up from $40 billion in 1990. In addition,
expenditures in the United States in 1995 for list, list processing and
mailing services were estimated by the WEFA Group and Marketing Logistics to
be approximately $6.2 billion.

The Company believes the growth in the use of direct marketing and in the
value of merchandise sold in this manner is generally attributable to social
and economic changes and to the increased acceptance and cost-effectiveness of
direct marketing techniques. Growth in the number of people in the most active
segments of the purchasing population, increasing numbers of two-career
families that have more disposable income and less time to shop in stores and
increasing availability and use of credit cards have all helped to enhance the
consumer's responsiveness to this purchasing medium. Rising costs of
establishing and maintaining traditional retail distribution channels have
also contributed to the increased use of direct marketing.

Metromail believes that the growth in the use of direct marketing will
continue because of:

. the ongoing shift from "mass" marketing to "information-driven" target
marketing;

. increased access to data; and

. growth in several existing end markets and industries, as well as the
emergence of new end markets.

Marketers that traditionally relied on mass marketing techniques, such as
mass media advertising and newspaper coupons, to deliver their marketing
communications continue to shift to "information-driven" target marketing,
where marketers maintain a database on individual customers and measure actual
response to each direct marketing message. Information-driven marketing allows
organizations to improve the efficiency of their marketing activities by
leveraging information about their best customers to create and deliver highly
targeted marketing messages.

Increased use of information-driven marketing is made possible because of
the increased amount of data generated as a by-product of transactions and
because of dramatic improvements in information processing technology, coupled
with decreased costs of such technology. Sophisticated computer technology now
allows the storage and analysis of very large quantities of data on individual
customers, enhancing the effectiveness of direct marketing techniques. In
addition, the Company believes that technological advances in the printing
industry, which permit economical customization of publications and direct
mail to individual consumers, will enable marketers to leverage investments in
marketing databases by communicating to customers and prospects individually.

The Company also believes that recent growth of direct marketing has been,
and future growth will be, driven by increased use of direct marketing in
certain end markets and industries. Pharmaceutical companies have become major
users of direct marketing in the last several years. While in the past most
marketing dollars were spent on direct sales efforts toward physicians, drug
companies are now making significant investments in

34
<PAGE>

direct-to-consumer campaigns. The Company believes the increasing changes in
drug classifications from prescription-only to over-the-counter are likely to
increase the use of direct marketing. The Company believes that the growth in
new consumer technology products and services, including computers, wireless
communications and on-line services, will lead to increased new product
launches and a need to market these products. The entertainment industry has
also increased its overall marketing expenditures, driven by factors including
new revenue distribution channels. While motion picture studios once relied
primarily on theater distribution, they now have opportunities to market
direct to consumers through video sales, video rental and merchandise. The
Company also believes that small businesses have become and will continue to
be more frequent users of direct marketing, as less-expensive PC-based
marketing database technology becomes available and the costs of non-targeted
mass media advertising increases.

Although direct marketing activity can be adversely affected by general
economic factors, such as postal rate changes and the price of paper, the
Company believes that direct marketing can be an especially cost-effective
means of introducing new products, determining and testing promising new
markets or expanding current markets.

Reference Services

The market for reference services is driven by the need for, and the
availability of, information as to a specific individual or business. The
reference services market is undergoing a transformation accompanied by
significant growth. This transformation is caused, in part, by changing
technology, which enables easier and less expensive information distribution,
and legislation, which enables a wider range of participants to offer more and
varied types of data and services. An important product attribute in this
market is the medium on which the data resides, starting with paper products,
progressing through floppy disks and CD-ROM and ending with real time on-line
access to databases that are updated daily.

Two identified markets for on-line reference services offered by the Company
are: skip-tracing and verification of credit applications. The skip tracing
market developed because of the need to locate individuals or businesses that
are difficult to find. Users of this service include collection agencies,
credit grantors and law enforcement agencies. The on-line services offered by
the Company in the credit application area have developed as credit grantors
have sought a low-cost alternative to obtaining a complete credit history of
an applicant for credit. Where the amount of credit being approved is
relatively small, credit grantors may not require a complete credit history
but might still want to verify certain basic demographic information, such as
name, address and telephone number, primarily as a means of reducing fraud.
Competition in this area comes largely from credit bureaus and credit grantors
who manage their own in-house credit application screening programs.

Changes in the telecommunications industry have created a new market for
directory assistance reference services, such as the Company's National
Directory Assistance service. These changes include the recent enactment of
the federal Telecommunications Act of 1996, the shift from phone-based
services to computer-based services and the regional Bell operating companies'
ability to offer long distance services. The Company believes that increased
competition in the telecommunications industry will add to the demand for
national directory assistance services. The market size for national directory
assistance services is relative to the number of directory assistance calls
placed in the United States each year, which according to Simba Information
Inc. was approximately 7 billion calls for "white pages" directory assistance
in 1995, of which the Company estimates approximately 1.4 billion calls were
for long distance directory assistance.

Directories such as the Company's Cole directories, in printed and CD-ROM
form, are used by businesses to market products or services to prospects or to
identify individuals at specific addresses or telephone numbers within a
specific geographic area by using the "reverse" nature of the directories,
which contain listings arranged by telephone number and street address. The
primary users of these products are insurance companies, real estate agents,
financial institutions and service industries such as lawn care and home
repair companies. These printed directories are generally leased by users on
an annual subscription basis for prices ranging from less than $100 to several
hundred dollars, depending on the size of the area covered by the directory.

35
<PAGE>

COMPETITIVE STRENGTHS

Metromail's comprehensive proprietary database and expertise in gathering
data

The Company maintains and continually updates a large proprietary database
which contains geographic, demographic, individual and other marketing
information on over 143 million individuals and over 90% of the households in
the United States. In addition to name, address and telephone number, this
database contains numerous characteristics relating to the individuals and
households reflected in the database, such as age, length of residence at a
particular address, dwelling unit type, gender of the head of household,
families with children, estimated household income and home ownership.
Management believes that its processes of gathering data from numerous sources
and modifying and updating its database represent significant competitive
advantages for the Company. The Company derives the data included in its
database from a wide variety of publicly available and proprietary, third-
party sources. The Company also collects data directly from consumers in
response to surveys, which solicit information from the recipients such as
standard demographic information, product preference, purchasing habits,
activities, hobbies and interest, brand awareness and medical ailments. See
"Business--Metromail's Database."

Metromail's ability to leverage its database into a wide range of information
products and services

Metromail has successfully leveraged its database to create new information
products and services, which it has marketed to existing clients and used to
attract new clients. The Company has packaged the information in its database
in new ways to meet the changing demands of its clients. For example, the
Company has responded to the continuing trend from "mass" marketing to
"information-driven" targeted marketing by creating the BehaviorBank direct
marketing product, which enhances a client's ability to target its marketing
efforts based on consumers' historical purchases and lifestyle profiles. In
response to changes which the Company had anticipated in the
telecommunications industry, it has created the National Directory Assistance
service, which is used by on-line and directory assistance providers as an
alternative to creating their own in-house national database directories.
Also, the Company believes its ability to leverage its database into new
products and services will increase upon completion of the process of
integrating its database into a single file on an open architectural systems
platform. See "Business--Products and Services" and "Business--Technology."

Metromail's large base of established clients and comprehensive network of
sales channels

The Company's business benefits from long-standing relationships with many
of its clients. The Company has had a continuing business relationship with
each of its top 25 clients for five or more years. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

The Company markets its products and services through a combination of
channels, including a sales force that the Company believes to be the largest
direct sales force in its industry, telemarketing, direct mail, third-party
brokers and referrals from R.R. Donnelley sales representatives. This network
of sales channels and the Company's practice of assigning its sales personnel
to target specific industries allow the Company to service its existing client
base with representatives knowledgeable of both the client's industry and
direct marketing needs and to expand its marketing efforts into new markets.
See "Business--Sales and Marketing."

Metromail's advanced technological capabilities in database management and
software development

Metromail has invested in data centers and proprietary database management
software that provide advanced processing capabilities and flexibility to meet
the Company's and its clients' changing needs while containing costs. In 1994,
the Company commenced an advanced technology initiative to consolidate all of
its

36
<PAGE>

existing databases into a single file that is intended to reduce the costs and
time of adding newly acquired data to the database, permit concurrent
processing of a numbers of separate jobs and reduce processing times. This
redesign is in the test phase and is expected to be completed in the second
quarter of 1996. See "Business--Technology."

Metromail offers expertise in PC-based database marketing products and
services. These products and services give clients that possess a large amount
of internal and external data a tool to assemble and analyze that data from
many different perspectives to determine their appropriate marketing
initiatives. The Company's products and services allow its clients the
flexibility of using DOS-based or Windows-based software applications and
housing their data in-house or on the Company's mainframe computer. See
"Business--Products and Services."

Metromail's experienced management team and employees

The Company has been successful in attracting and retaining highly qualified
personnel, especially its management, sales and software and technical
personnel. The Company's senior operating management has extensive experience
in the direct marketing industry. The Company's sales force maintains long-
standing relationships with the Company's national clients and brings to those
clients knowledge of the relevant industry and of the Company's products and
services. The Company's group of over 200 technical employees (programmers,
system engineers and system analysts) has enabled it to develop proprietary
database management software for internal use, as well as software
applications for sale to clients for their own marketing database analysis.
The ability to develop new and enhanced existing software applications has
enabled the Company to differentiate itself from its competitors in terms of
the service the Company offers to its clients and its efficiency in fulfilling
client orders. See "Management" and "Business--Sales and Marketing."

STRATEGY

Metromail's principal strategy is to capitalize on its competitive strengths
to provide high value-added information and information services to an
expanding universe of clients. The Company believes that it provides value to
its clients by converting raw data into information which is more useful to
its clients. Key elements of the Company's strategy include:

Maintaining, integrating and expanding Metromail's proprietary database

Metromail believes that its database is the key strategic asset of the
Company that distinguishes it from its competition. The Company believes that
its consumer-oriented database is one of the most complete and up-to-date
direct marketing databases in the United States. The Company has been
accumulating data for almost 50 years through a wide variety of publicly
available and proprietary sources and acquired databases. The Company accesses
over a thousand sources to both expand and update its database.

The Company is currently in the process of integrating all of its databases
into a single file on an open architectural systems platform. This integration
will enhance the Company's ability to maintain and update efficiently the
Company's database as well as better apply this integrated data in providing
information products to its clients. Quality of information continues to be a
key determinant of the Company's ability to compete in the marketplace and
service its clients effectively. To maintain the quality and currency of its
database, the Company continually updates and verifies its data using a
variety of frequently reported public sources, self-reported data and
proprietary sources.

The Company also seeks to find new and more efficient sources of data to
expand its database. The Company intends to expand its efforts to collect data
directly from consumers in response to surveys, which, to date, the Company
has used to create the BehaviorBank product for its direct marketing clients.
In addition, the Company expects that it will benefit from the increased
automation of transactions and the related digitization of the information
created thereby, which will lower its cost of obtaining, and create new
sources of, such data.

37
<PAGE>

Developing new products and services and targeting new markets

Metromail plans to continue to develop new products and services from its
database and market such products and services to its existing and new
clients. The Company expects that its ability to create new products and
services will increase as its database grows through new sources of data and
the Company's ability to customize that data increases as a result of the
integration of its database into a single file. The Company has been
successful in effecting this strategy in the past by creating new products for
its existing clients, such as BehaviorBank, which enhances a client's ability
to target its marketing efforts based on consumers' historical purchases and
lifestyle profiles; accessing new clients for its existing products, such as
the CD-ROM version of its Cole directories; and developing new products and
services for new markets, such as its National Directory Assistance service
that is utilized by telecommunications providers.

The Company intends to expand its base of clients to new, non-traditional
direct marketers as the availability of consumer information increases and the
effectiveness and acceptance of direct marketing improves. The Company has
successfully introduced its products and services to retailers, who
increasingly use direct mail campaigns to offer highly targeted promotions to
individual customers based on historical purchase patterns. The Company
intends to target the sale of its products and services to other new direct
marketers, such as pharmaceutical companies, consumer technology companies and
small businesses.

Developing technologies to analyze, package and distribute information more
efficiently

Metromail intends to use its technological expertise to create new products
and services and distribute these and its current product offerings to its
clients more efficiently. The Company seeks to develop new software
applications, in addition to its AnalytiX software products, that will allow
clients to access and analyze data from their desktops. Such software
applications are intended to give clients added flexibility in using their own
customer data and data provided by the Company. The Company plans to expand
its on-line reference service business to enable clients to access information
in the Company's database more rapidly.

The Company intends to explore new methods to distribute its information
products and services. The Company believes that the increased digitization of
data and the growth in computer networks such as the Internet will create new,
more efficient channels for the access and distribution of its products and
services. The Company believes exploiting these new distribution channels will
lower its distribution costs.

Selectively acquiring data, distribution channels and businesses available as
a result of ongoing consolidation in the industry

Metromail plans to take advantage of the highly fragmented nature of its
industry by continuing to explore selective acquisitions that provide
additional scale, customer relationships or new products or services. The
Company has made several recent acquisitions, including the acquisition in
1994 of CIC and the acquisition in 1995 of ICD. The Company believes that its
industry is consolidating and that this trend will continue primarily because
scale is a significant competitive factor.

METROMAIL'S DATABASE

Metromail maintains and continually updates a large proprietary database
which contains geographic, demographic, individual and other marketing
information on over 143 million individuals and over 90% of the households in
the United States. The Company believes that its database is one of the most
complete and up-to-date direct marketing databases in the United States and is
a principal reason that clients use the Company's list development and
enhancement services. This database contains numerous characteristics relating
to the individuals and households reflected in the database in addition to
name, address and telephone number. Examples of these characteristics include
age, length of residence at a particular address, dwelling unit type, gender
of the head of household, families with children, estimated household income
and home ownership.

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The Company has been accumulating data for almost 50 years, and management
believes that its processes of gathering data from numerous sources and
modifying and updating its database represent a significant competitive
advantage for the Company. Management believes that it would be difficult and
costly for a new entrant to replicate the database maintained by the Company.

Metromail derives the data included in its database from a wide variety of
publicly available sources and proprietary, third-party providers. With the
exception of self-reported data which the Company obtains primarily through
the use of consumer surveys, the Company does not collect data directly from
consumers. Among the publicly available sources used by the Company are the
"white pages" (which have been judicially determined to be in the public
domain and are the Company's primary source of names, addresses and telephone
numbers), public records of driver's license registrations, real estate
transactions and U.S. census data. The Company has arrangements with numerous
third parties that provide proprietary data to the Company. These providers
include certain of the Company's clients that provide the Company with data
relating to their recent direct marketing experiences.

In 1993, the Company began collecting data directly from consumers in
response to surveys. The Company distributes to consumers, primarily through
co-op mailings, package inserts and magazine inserts, questionnaires in
various forms. These questionnaires solicit information from the recipients
such as standard demographic information, product preferences, purchasing
habits, activities, hobbies and interests, brand awareness and medical
ailments. Questionnaires can be tailored to address specific marketing
concerns of the Company's clients by developing specific survey questions
which seek the desired information. To induce recipients to complete and
return questionnaires the Company states that upon doing so respondents become
eligible to receive offers of coupons, samples and information from
manufacturers, pharmaceutical companies, financial institutions and other
service providers. In addition to allowing a degree of flexibility not
feasible in the Company's traditional data gathering methods, the survey
method of obtaining data mitigates any privacy concerns, because consumers who
return completed questionnaires voluntarily do so and grant permission to the
Company to use the data included in the questionnaires for direct marketing
and other purposes. The Company expects to continue to expand its use of
surveys as a data collection method. As indicated below under "International
Operations," the Company is using the survey method as a means to develop its
database in the United Kingdom.

The Company is dedicated to being a leader in ethical management of consumer
data. It has developed fair information practices, consistent with the DMA's
guidelines for direct marketers, applicable to its direct marketing services
and its reference services. The Company believes that responsible data
management includes collecting, using and disseminating information by fair,
ethical and lawful means and respecting the requests of individuals for
information the Company possesses about them and any requests that their names
be removed from the Company's database.

PRODUCTS AND SERVICES

Metromail provides two general categories of products and services to its
clients: direct marketing services (including list development, list
enhancement, marketing database and personalization printing and lettershop)
and reference services (including on-line services, such as National Directory
Assistance, and directory publishing). In 1995, direct marketing services
produced $189.7 million in net sales and reference services produced $47.5
million in net sales.

Direct Marketing Services

List Development Services. Metromail provides customized list development
services to two primary groups of clients: sales promotion and mail order
organizations. Sales promotion clients generally have determined the
characteristics of their target customers and provide the Company with a trade
area definition and a customer profile. The Company then uses its computer
software and database to identify the individuals and households in the
customer's trade area who have the characteristics that the client has
specified and compiles a list of those individuals and households.

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Mail order clients use the Company's marketing services and statistical
software to identify the geographic, demographic and other marketing
characteristics in the Company's database that singly and in combination
describe the best prospects for the client's direct marketing campaign. The
Company reviews the client's customer files and direct marketing experience,
as well as syndicated research, publicly available marketing data, and
relevant historical information and marketing research in the Company's
database. In addition, the Company may design, conduct and analyze market
surveys or test mailings. From this research and testing the Company defines
relevant market segments and their respective sizes and ranks these segments
according to their relative potential value to the client.

The Company also provides clients with a number of standard products derived
from its database which contain lists of individuals and households that have
commonly requested characteristics. Among these list products are its
BehaviorBank list, which contains lifestyle, product consumption and
psychographic and demographic information on more than 26 million households
in the United States obtained from voluntarily completed consumer surveys; its
Families with Children list, which contains information on more than 17
million families with 26 million children; and various databases with
information concerning homeowners, such as the Realty list, which contains
more than 28 million homeowners, and the New Homeowners list, which contains
information on more than two million new owners of homes.

The Company provides lists to approximately 15,000 clients annually. The
Company generates most of its list sales from sales to consumer goods
manufacturers, financial institutions, magazine publishers, mail order houses
and not-for-profit organizations. These lists are used primarily for mass
mailings, telephone marketing campaigns and statistical samplings. Except for
test mailings, these list orders range in size from 500 to 20 million
households and prices generally range from $7 to $250 per thousand names,
although certain information can be priced as high as $1,000 per thousand
names. Lists are generally delivered in the form of computer tape or mailing
labels. See "--Personalization Printing and Lettershop Services."

The Company provides its list development services from its facilities in
Lincoln, Nebraska.

List Enhancement Services. Metromail's list enhancement services enable a
client to process information utilized in direct mail campaigns. These
processes help the Company's clients to identify persons on lists supplied by
the client who are likely to respond favorably to the client's mailing,
improve deliverability of the items mailed and reduce the postage costs of a
direct mail campaign. Typically, a client sends to the Company hundreds of
lists, aggregating millions of names, which have been rented from list brokers
or other sources, and the client's current customers list. Using its computer
resources and proprietary software, the Company consolidates these lists,
corrects addresses and zip codes and eliminates duplicate names (the
merge/purge process) and the client's current customers. A client usually
further enhances this consolidated list by incorporating certain of the
characteristics contained in the Company's database.

The Company's database is then used to identify names on the consolidated
list who are less likely to respond favorably to the client's mailing. For
example, individual information regarding dwelling unit size will be used to
assure that a producer of garden products does not mail to an apartment house.
Elimination of less-responsive names results in substantial cost savings to
the client without significantly compromising the productivity of the mailing.

The Company also uses its database to enhance a client's proprietary
customer list and to make that list more deliverable. The Company has non-
exclusive licenses from the United States Postal Service for certain services,
such as National Change of Address, Delivery Sequence File and Locatable
Address Conversion System, to facilitate these processes. These enhancements
usually include adding information from the Company's database, eliminating
undeliverable addresses and verifying households at a particular address. Zip
codes and addresses on a proprietary list can be corrected and telephone
numbers can be added. In addition, the Company saves its clients money on the
mailing of these enhanced lists by carrier route coding, zip code presorting
and overlaying 9-digit zip codes.

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The Company provides list enhancement services to approximately 400 clients
annually, most of whom are involved in continuity marketing, financial
services, insurance, magazine and book publishing, mail order and catalog
merchandising, or retail.

The Company provides these services primarily from its facilities in
Lombard, Illinois.

Marketing Database. Metromail, through its CIC subsidiary, provides PC-based
database marketing products and services to clients that possess a large
amount of internal and external data and need a way to assemble and analyze
the data from many different perspectives to determine their appropriate
marketing initiatives. The Company provides the client the option of creating
a database at the client site or CIC's data center, utilizing the Company's
proprietary ONDESK or Import database creation software. Once the database is
created the customer then uses one of the Company's proprietary access
software products, either Customer Insight System or AnalytiX, to access,
analyze, manipulate, track, report and control the database information.
Customer Insight and ONDESK systems are DOS-based and AnalytiX and Import are
the Company's newer products, which are Windows-based systems. The Company's
software products are designed to enable its client to maintain its database
on its own personal computer for quick desktop access to information.
Alternatively, the client can choose to have the Company house the client's
database on the mainframe computer in the Company's Lombard data center and,
with the use of the Company's proprietary MetroBase software loaded on the
client's personal computers, analyze the files contained in the client's
database and generate desired reports through on-line access.

The Company targets a variety of industries for these software products,
focusing on the financial services, telecommunications, catalog, publishing,
cable television, transportation, entertainment and travel-related services
industries. The Company currently supports over 1,400 installations of these
products at over 300 client sites. Approximately 37% of the installations are
AnalytiX/Import and 63% are Customer Insight/ONDESK systems.

The Company's software products are licensed to clients, generally for a
three-year period. A substantial portion of the license fee is paid at the
time the license agreement is entered into with the balance due upon
completion of installation. In addition, the Company collects an annual
license and maintenance fee that is approximately 20% of the initial license
fee. In connection with some installations, the Company, as a service,
purchases and re-sells to the client certain computer equipment such as
storage devices and other peripherals.

The Company's experience with respect to renewal of licenses of its DOS-
based products has been excellent. In 1995, approximately 90% of the licenses
of the DOS-based products that expired were renewed. The Company's Windows-
based products were introduced in March 1994 and, because most of the licenses
have three-year terms, the Company has had very little experience with
renewals of expired licenses.

The Company provides these services primarily from its facilities in the
Denver, Colorado area.

Personalization Printing and Lettershop Services. Metromail's
personalization printing and lettershop services frequently are used in
conjunction with list development and enhancement services provided by the
Company. In 1995, 19 of the Company's top 25 list development and enhancement
clients used these services in addition to its list services. The Company
provides processing and mailing services to direct mail advertisers from
facilities located in Mt. Pleasant, Iowa; Rutland, Vermont; and Seward,
Nebraska.

Personalization printing involves applying addresses and variable text to
direct mail pieces. Lettershop services consist of forms trimming, folding,
affixing special items (such as coins, medallion or cards), inserting
materials into envelopes, polywrapping, applying address labels and mailing.
In connection with these services, the Company uses both addresses generated
from its own database and addresses provided by its customers. Lettershop
services are typically contracted for on an individual mailing basis.
Contracts range in size from relatively small test mailings and statistical
samplings to major promotions of up to 25 million pieces.

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The Company is one of the largest providers of lettershop services in the
United States. At its three lettershop facilities, the Company has the
capacity to insert material in more than 6.5 million envelopes per day,
package 10 million product samples per month and polywrap 26 million packages
per month. The Company has installed and improved special equipment in its
production facilities which permits production of a high volume of polywrapped
advertising materials. The Company has also established an integrated
computerized system of scheduling, production and inventory control.

The Company's lettershop services processed over 1.1 billion pieces of mail
in 1995. To expedite mailing of materials, United States Postal Service
personnel have been permanently assigned to each of the lettershop facilities.

Reference Services

On-Line Services. Metromail offers a number of services that involve the
need for immediate electronic access to information contained in the Company's
database. The most important of these services are the Company's National
Directory Assistance service and its MetroNet service.

The Company's National Directory Assistance service provides operators
employed by subscribers to the service with on-line access to a database
consisting of more than 108 million residential, business and government
listings, as well as on-line access to the electronic directory assistance
databases maintained by the regional Bell operating companies. The Company,
which commenced this service in 1995, markets this service to telephone
companies and other operator service providers and other organizations with
high-volume directory assistance needs. To date the Company has entered into
contracts for this service with approximately 15 clients. The Company is in
various stages of testing with most of these clients and is currently
invoicing approximately nine clients for services being provided by the
Company. The Company believes that the market for national directory
assistance will grow significantly because of the recently enacted
telecommunications bill, which permits local telephone companies to provide
long-distance service and long-distance carriers to provide local telephone
service, and that the various telephone companies will choose to outsource
directory assistance to companies such as the Company that are not competitors
in the telephone business.

The Company's MetroNet service provides users with on-line or electronic
access to the Company's MetroNet Master file (a subset of the Company's
database), change of address files, American Business Information business
listings and regional Bell operating companies' electronic directory
assistance databases. These services are marketed primarily to collection
agencies, consumer finance companies and credit card issuers. This service is
used by many of the Company's clients to confirm certain information that is
contained on credit applications submitted to them (such as name and address,
but not credit history).

Directory Publishing Services. Metromail publishes the Cole directories,
local "reverse" directories covering 150 urban and suburban areas in the
United States and Canada, including New York, Boston, Philadelphia, Dallas and
Houston. These directories, which contain approximately 32 million residential
and business listings, are available either in printed form or on CD-ROM. The
directories are derived from the Company's database and contain listings
arranged by street address and telephone number. Many of the directories also
include census demographic data on a neighborhood basis and historical data,
such as duration of residence.

The Company has approximately 48,000 clients annually for the printed Cole
directories and approximately 3,000 clients for its Cole and MetroSearch CD-
ROM products. The clients for these products are principally collection
agencies, financial institutions, government agencies, insurance brokers and
agents, local merchants such as home improvement businesses, and real estate
brokers. The Cole directories are primarily used by clients to market products
or services to prospects or to identify individuals at specific addresses or
telephone numbers within a specific geographic area. The Cole directories are
leased on an annual subscription basis for prices ranging from $75 to over
$600, depending on the size of the market. In 1995, approximately 77% of
leases for Cole directories were renewed.

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The Company publishes, prints and binds the Cole directories at its Lincoln,
Nebraska facility. In addition, the Company provides certain printing and
binding services for other publishers of short-run directories.

The Company also provides the National Look-Up Subscriber and 900 Service,
an operator-based, directory assistance service that provides users with name,
address, telephone number and neighbor information. The Company's operators
provide this service through on-line access to the MetroNet Data Base.
Information may be requested in a number of ways, including "street address
look-up" (furnishing a street address and obtaining the occupant's name,
telephone number, length of residence, dwelling type and similar information
concerning three of the closest neighbors); "telephone number look-up"
(furnishing a telephone number and obtaining the name and address of the
occupant); and "national name look-up" (furnishing a full name and geographic
area and obtaining the address, telephone number, length of residence and
dwelling type for all possible matches).

INTERNATIONAL OPERATIONS

Metromail's international operations currently consist primarily of its
operations in the United Kingdom of ICD, a compiler of lists primarily through
the use of surveys, and Data by Design, a provider of database marketing
consulting services. ICD has been distributing consumer lifestyle surveys in
the United Kingdom since 1988 and is the largest distributor of mailed
consumer lifestyle surveys in the United Kingdom. The proprietary database
compiled by ICD through these surveys consists of approximately five million
names, one million of which have been added in the past year. ICD sells
information derived from this database to over 700 clients, primarily clients
involved in fast-moving consumer goods, mail order and financial services. It
also generates sales by including in its surveys specific questions of
interest to a particular client.

The Company is exploring opportunities to develop consumer lifestyle
databases in Europe. Any expansion outside the United Kingdom would likely be
done, if at all, in a joint venture with a strategic partner that has
credibility and resources in the particular market and would likely involve
development of databases through use of surveys. Any such joint venture could
involve a contribution of the Company's U.K. operations to the joint venture.

COMPETITION

The markets in which Metromail competes are highly competitive and
fragmented. While a number of large companies and many smaller competitors
provide certain of the direct marketing and reference services provided by the
Company, the Company believes that it provides the broadest range of these
types of services of any company in the direct marketing and reference service
industries. Nevertheless, some competitors have, and potential competitors may
have, materially greater financial, technical and marketing resources than the
Company that would allow them to compete effectively with the Company in
respect of some or all of its direct marketing and reference services.

Direct Marketing Services

List Development Services. Metromail's list development services compete
with several large national companies, smaller regional providers and other
forms of media. The Company's national competitors include Acxiom Corporation
("Acxiom"), Database America Information Services Inc., Donnelley Marketing,
Inc., a privately held company that is unaffiliated with R.R. Donnelley
("Donnelley Marketing"), R.L. Polk and Company ("Polk") and TRW Information
Systems and Services. Many of the Company's national competitors specialize in
the development of national lists focused on a particular type of information,
such as automobile or real estate purchasers. The Company's regional
competitors specialize in the development of lists that focus primarily on a
particular type of information targeted to a defined region of the United
States. In addition, the Company's list development services may experience
competition from other forms of media during periods when its clients'
marketing budgets are reduced. This competition may come in the form of
broadcast and print media, which may be used by larger, national clients, or
in the form of less sophisticated direct marketing, such as coupons and
mailbox inserts used by smaller regional clients.

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List Enhancement Services. The Company's list enhancement services compete
with some of the national competitors described above, such as Acxiom and
Donnelley Marketing, and with Advo, Inc., Direct Marketing Technology Inc.,
Harte-Hanks Communications, Inc. ("Harte-Hanks"), May & Speh, Inc. and
Neodata, Inc., in respect of targeted groups of clients. The Company believes,
however, that it provides list enhancement services to a broader range of
clients than do such competitors.

Marketing Database Services. The Company's marketing database services
compete with some of the national competitors described above, such as Acxiom
and Harte-Hanks, who also have the ability to provide other direct marketing
services to their clients, and with smaller software and computer service
bureau companies, such as Okra Marketing Corporation and Red Brick Systems,
Inc., which do not offer other direct marketing services to their clients.

Lettershop Services. The Company's lettershop services compete with the
internal capabilities of its clients, and with Donnelley Marketing, Jetson
Mailers, Inc., Mailman, Inc. and United Mailing Services, as well as numerous
smaller companies. The Company believes that its lettershop services are
important competitive adjuncts to its other direct marketing services.

Competitive Factors. In its list development and list enhancement services,
Metromail competes on the basis of the quality, accuracy and completeness of
its database, its market analysis and segmentation capabilities and the other
list enhancement services it offers. The Company competes in its marketing
database services on the basis of the quality of its software products. The
Company competes in lettershop services on the basis of the capabilities and
efficiencies of its equipment and employees, which enable it to handle large
and complicated orders in a timely manner. Price is also a competitive factor
for all the direct marketing services the Company provides. Although the
Company believes that its competitive strengths enable it to compete
effectively with its current competitors in the direct marketing services
industry, there can be no assurance that other companies, some of which may
have greater resources or better sources of data than the Company, will not
begin competing with respect to one or more of the direct marketing services
provided by the Company.

Reference Services

On-line Services. The Company's National Directory Assistance service
competes with Acxiom and Pro-CD, Inc. and local telephone companies in the
regions where such companies provide local telephone service. The Company's
MetroNet service competes with CDB Infotek Inc., Computer Graphics and First
Data Corporation.

Directory Publishing Services. The Company's Cole directories publishing
service competes with Polk in many of the geographic areas for which the
Company publishes directories and with other smaller, regional publishers in
certain geographic areas. Metromail also competes with several smaller
companies, such as Acxiom, in respect of the Company's national consumer white
pages directories offered in CD-ROM form.

Competitive Factors. In its reference services, Metromail competes on the
basis of the quality, accuracy and scope of the information contained in its
database, the quality of its customer service and price. With respect to its
on-line services, two critical competitive factors are the ability to be
contacted by the user and the response time. Although the Company believes
that it is well positioned to compete on these bases, there can be no
assurance that other companies, some of which may offer reference services
superior to, or cheaper than, those provided by the Company will not begin
competing with the reference services offered by the Company.

SALES AND MARKETING

Metromail markets its products through a combination of sales channels,
which include national account sales representatives, regional sales
representatives, telemarketing, direct mail, third-party brokers and resellers
and referrals through sales representatives of R.R. Donnelley. The Company
believes its sales and marketing efforts have been successful, in part,
because of its ability to use the appropriate sales channel to reach a
prospective group of clients.

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Direct Marketing Services

The Company has marketed its direct marketing services through its national
account sales representatives, telemarketing, direct mail, third-party brokers
and resellers and referrals through sales representatives of R.R. Donnelley.
The Company has over 60 national account sales representatives, located
primarily in New York and Chicago, who service the Company's largest direct
marketing clients. The Company's national account sales representatives, each
of whom has particular knowledge of his or her clients' industries, offer to
these larger direct marketing clients a high level of customer service and
overall knowledge of the Company's products. Historically, the Company has
targeted the sales of its direct marketing services to small and mid-size
businesses through telemarketing and direct mailings. The Company has expanded
these marketing efforts by using the regional sales representatives that
currently market the Company's directory publishing services.

Reference Services

The Company has a seven person sales force that markets the Company's on-
line reference services to potential clients. Sales representatives in the
Company's regional sales offices market the Company's directory publishing
services, and the Company also uses telemarketing to expand its market for
these services. The Company has successfully used its regional sales force to
market new products to its directory publishing service clients, such as the
use of CD-ROM versions of the Cole directories, and uses that sales force to
market list products and services of the Company to small and mid-size
businesses.

REGULATION

Metromail is not currently subject to direct regulation by any government
agency, other than regulations applicable to businesses generally, including
regulations concerning the environment.

In response to growing concerns about individual privacy and the collection,
distribution and use of information about individuals, the Direct Marketing
Association, which is the leading trade association of direct marketers (the
"DMA"), has established certain guidelines for fair information practices
which it recommends be followed by participants in the direct marketing
industry. The Company was actively involved in the formulation of the DMA's
guidelines, and many of the Company's significant direct marketing clients
have adopted and implemented such guidelines. In addition, the Company has
adopted and is implementing fair information practices, principles and
procedures which supplement those of the DMA. See "Business--Metromail's
Database." One of the guidelines suggested by the DMA is that direct marketers
refrain from soliciting by mail or telephone those individuals who have
contacted the DMA and have asked that they not be the subject of unrequested
solicitations. To make compliance with this guideline possible, the DMA
maintains the Mail Preference Service and the Telephone Preference Service,
consisting of lists of those individuals who have notified the DMA that they
wish to "opt out" of receiving mail or telephone solicitations. The DMA makes
these lists available to participants in the direct marketing industry who
subscribe to these services. The Company is a subscriber and receives updated
lists from the DMA monthly and promptly removes from its database all
information concerning the individuals who appear on the DMA lists.

Growing privacy concerns have also led to increased federal and state
regulation of the collection, use and transfer of information about
individuals and of direct marketers and their activities. Examples of laws
regulating the use of information include laws adopted by a number of states
precluding the use of voter registration and driver's license information and
the federal Driver's Privacy Protection Act of 1994, which becomes effective
in 1997. Under this act, each state will be prohibited from disclosing
personal information contained in motor vehicle department records for bulk
use in surveys, marketing or solicitations, unless the state has implemented a
procedure whereby each driver has the opportunity to prohibit such use of
information about such driver. Examples of laws regulating direct marketers
and their activities include: state laws requiring telemarketers to be bonded
or registered; a Federal Trade Commission regulation prohibiting telemarketers
from making a call to a person who previously has stated that he or she does
not wish to receive a call made by or on behalf of the seller whose goods or
services are being offered; and federal and state restrictions on the use by
telemarketers of automatic dialing and artificial voices or prerecorded
messages.

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PROPRIETARY INFORMATION

Metromail's success is in large part dependent upon its proprietary
information and technology. The Company relies on a combination of copyright,
trade secret and contract protection to establish and protect its proprietary
rights in its products and technology. The Company generally enters into
confidentiality agreements with its management and programming staff and
limits access to and distribution of its proprietary information. The Company
also has implemented a number of procedures and controls designed to prohibit
unauthorized access to the Company's computerized databases. There can be no
assurance that the steps taken by the Company in this regard will be adequate
to deter misappropriation of its proprietary rights or information or
independent third party development of substantially similar products and
technology. Although the Company believes that its products and technology do
not infringe any proprietary rights of others, the growing use of copyrights
and patents to protect proprietary rights has increased the risk that third
parties will increasingly assert claims of infringement in the future.

LITIGATION; GOVERNMENT INQUIRIES

The Company is subject to various claims and legal actions which arise in
the ordinary course of business. The Company believes such claims and legal
actions, individually and in the aggregate, will not have a material adverse
effect on the business or financial condition of the Company.

On April 18, 1996, a purported class action seeking restitution, actual and
exemplary damages in an unspecified amount and injunctive relief was filed in
Texas state court against the Company, R.R. Donnelley, CIDS, the Texas
Department of Criminal Justice, the executive director of the Texas Department
of Criminal Justice and the chairman of the Texas Board of Criminal Justice
alleging, among other things, that the collection by the Company of certain
consumer survey information was fraudulently undertaken and that the
processing of surveys by Texas prisoners on behalf of the Company was
negligent and in violation of privacy rights. The Company believes that there
are several bases for challenging certification of the class and that if such
challenge is successful, this litigation would not have a material adverse
effect on the Company. Further, the Company believes that there are a number
of valid defenses to the claims alleged, and the Company intends to defend
vigorously this suit. However, because this litigation is in its early stages,
it is not possible to make a meaningful determination of the ultimate outcome
or to make an estimate of the loss, if any, should the outcome be unfavorable.
The Company has made a preliminary estimate of its costs of litigating the
case and has accrued $1.5 million in its financial statements for the three
months ended March 31, 1996. R.R. Donnelley has agreed to pay the legal fees
and expenses incurred by the Company in defending the case. No assurances can
be given that such accrual will be adequate or that this litigation will not
result in a material adverse effect on the Company's business, operating
results or financial condition. See "Risk Factors--Litigation and Government
Inquiries with Respect to Use of Data" and Note 15 of Notes to Consolidated
and Combined Financial Statements of Metromail.

In 1995, the Company settled two lawsuits filed against it which involved
allegations that it had used certain voter registration information in
violation of laws. One lawsuit involved a complaint filed against the Company
in 1992 by Aristotle Industries, Inc., a company that publishes and sells
political and election-related information products ("Aristotle"). This
complaint arose from a contract entered into by the Company and Aristotle in
1990 pursuant to which the Company agreed to perform certain list enhancement
services for Aristotle in connection with lists of registered voters in
certain jurisdictions to be supplied by Aristotle. In its complaint, Aristotle
alleged that the Company had failed to perform the enhancement services
properly, prematurely terminated the contract and used certain of the voter
data supplied by Aristotle in violation of the contract and of law. The
Company denied these allegations and counter-claimed for amounts owed by
Aristotle to the Company. The parties entered into a settlement agreement in
February, 1995, pursuant to which the Company paid an aggregate of $2.7
million ($2.0 million of which was in consideration for the acquisition of
voter data from 16 states) to Aristotle, John Aristotle Phillips, the founder
and President of Aristotle ("Phillips"), and Dean Aristotle Phillips and
released all claims against them; Aristotle delivered to the Company a
database containing voter records from certain jurisdictions; and Aristotle
and the two individuals released all claims against the Company, except
Phillips did not release the Company or its affiliates from any claim he may
have to enforce any rights of R.R. Donnelley solely in his capacity as a
shareholder of R.R. Donnelley.

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The second lawsuit was a purported class action seeking compensatory and
punitive damages filed against the Company in California state court in
December, 1994 alleging, among other things, that inclusion of California
voter registration data in the Company's databases resulted in invasions of
privacy in violation of laws. Following removal of the case from state court
to federal court, in March, 1995, the court dismissed the lawsuit on the joint
motion of the parties. The court found, among other things, that the action
was not legally maintainable as a class action. Under the terms of the
settlement agreement pursuant to which the joint motion was brought, the
Company paid the plaintiffs $40,000, representing attorneys' fees and costs
incurred by them in the action, and agreed (without admitting that it had
engaged in any illegal or wrongful activity) that it will not obtain or
utilize California voter registration records for any unlawful purpose and to
delete from its database age information, if any, obtained improperly from
California voter registration data.

During the last two years, the Company has held discussions with several
federal and state government agencies concerning its alleged misuse of voter
registration data and its use of telephone surveys to confirm certain
information derived from such voter registration data. With respect to the
telephone surveys, the Company discussed with the Federal Trade Commission a
1971 Consent Order entered into against Metromedia, Inc., a prior owner of
certain of the Company's assets. The Company informed the FTC of its belief
that the Company was not an entity that was subject to the Consent Order and
that, even if it were, the telephone surveys in question did not come within
the scope of the Consent Order. In July 1995, the FTC advised R.R. Donnelley
that it had closed its investigation into this matter and would not be taking
any action against the Company. No action has been taken against the Company
by any government agency with respect to alleged misuse of voter registration
data or telephone surveys, and the Company currently has no reason to believe
that any such actions will be taken against it.

TECHNOLOGY

Computer Operations

The Company's data centers run on computer systems designed to provide
advanced processing capabilities, provide flexibility to meet the Company's
and its clients' changing needs and contain costs. The Company's mainframe
computer system consists of two IBM ES9000 computers, one located at the
Lombard data center and one located at the Lincoln data center. The IBM ES9000
computer located at the Lincoln data center has 173 MIPS (millions of
instructions per second) of processing power and the IBM ES9000 located at the
Lombard data center has 223 MIPS of processing power. The ES9000 platform
allows for expansion of processing capacity to approximately 3,000 MIPS,
without significant infrastructure changes. Other data center components
include robotic tape subsystems, DASD and high-speed laser, LED and compact
printers. The Company also supports alternate platforms from IBM, Hewlett
Packard and Sequent, which have approximately a terabyte of DASD attached to
them.

The Company expects to complete in the second quarter of 1996 a major
redesign of the file structure of its database. This redesign, which commenced
in 1994 and is currently in a test phase, takes advantage of new relational
software and parallel processing hardware technology. The new database
structure is expected to reduce the costs and time of adding newly acquired
data to the database, permit concurrent processing of a number of separate
jobs and reduce processing times.

Disaster Recovery

The Company has in place extensive plans in the event either of its data
centers is damaged by fire, power loss, telecommunications failure or similar
event. The Company has an agreement with Comdisco Disaster Recovery Services,
Inc. ("CDRS"), pursuant to which CDRS will provide both immediate mainframe
computer support at a CDRS "hot site" to run one of the Company's data centers
if it is temporarily unavailable (less than six weeks) and long-term
facilities sufficient to house computer equipment at a CDRS "cold site" in the
event the Lombard data center is unavailable for an extended period of time
(from six weeks to one year). The Company believes it would be able to have
operations from an affected data center moved to a CDRS "hot site"

47
<PAGE>

and operational within 24 hours. In addition, the Company has an agreement
with Comdisco, Inc., CDRS's parent, a leading provider of leased high
technology equipment, pursuant to which the Company may access inventory and
services of Comdisco, Inc., to minimize the recovery time for the Lombard data
center while its operations are being processed through one of the CDRS "hot
sites."

The Company has taken other measures to protect its computer equipment,
stored information and its operating capabilities, which include off-site
storage of back-up data at three separate locations, the use of redundant
power supplies at each of its data centers and a Halon fire suppression system
which is designed to extinguish a fire without damaging computer equipment.
The Company conducts recovery exercises several times per year and encourages
its clients to join in this process.

FACILITIES

The Company's principal executive offices and one of the Company's data
centers are located in Lombard, Illinois, where the Company leases a 115,000
square foot facility pursuant to a lease expiring in 2001 and a 19,000 square
foot facility pursuant to a lease expiring in 2000. The Company also owns a
233,000 square foot facility in Lincoln, Nebraska, which includes the
Company's second data center, and lettershop facilities in Mt.
Pleasant, Iowa (211,000 square feet); Seward, Nebraska (161,000 square feet);
and Rutland, Vermont (113,000 square feet). The Company leases its 31 regional
sales offices, pursuant to leases that in general have three-year terms. The
Company's marketing database services operate from offices in the Denver,
Colorado area, where the Company is moving into a 54,000 square foot leased
facility in May.

EMPLOYEES

As of March 31, 1996, the Company had approximately 3,155 employees, of whom
approximately 3,065 were located in the United States and 90 were located in
the United Kingdom. The domestic employees included approximately 270 officers
and managerial employees, 275 employees engaged in sales or sales support and
210 programmers, system engineers and systems analysts. The domestic employees
also include approximately 1,500 hourly employees, most of whom are engaged in
providing lettershop services. The Company employs part-time workers as
needed, primarily in lettershop services.

None of the Company's employees is covered by a collective bargaining
agreement. The Company believes that its relations with its employees are
good.

48
<PAGE>

MANAGEMENT

DIRECTORS

The Board of Directors currently consists of four members elected by R.R.
Donnelley. The Board of Directors is divided into three classes serving
staggered terms as follows: Class I, comprised of one person and serving for a
term expiring at the 1997 Annual Meeting of Stockholders; Class II, comprised
of one person and serving for a term expiring at the 1998 Annual Meeting of
Stockholders; and Class III, comprised of two persons and serving for a term
expiring at the 1999 Annual Meeting of Stockholders. Following the expiration
of the initial term, directors will serve for three year terms. The Company
expects that two independent directors will be added to the Board following
the consummation of the Offering, and that such directors will serve on the
Audit Committee and the Compensation Committee of the Board of Directors. No
individuals have currently been identified to serve as such independent
directors. Information with respect to those individuals who currently serve
as directors of the Company is set forth below.

<TABLE>
<CAPTION>
INITIAL
TERM
NAME AGE EXPIRES POSITION
---- --- ------- --------
<S> <C> <C> <C>
Barton L. Faber 49 1999 Chairman and Director
Susan L. Henricks 45 1998 President and Chief Executive
Officer and Director
Peter F. Murphy 40 1999 Director
Jonathan P. Ward 42 1997 Director
</TABLE>

Barton L. Faber has been Chairman of the Company since January 1996. He has
served as President, Information Resources of R.R. Donnelley from January 1995
to the present, with the senior management of the Company reporting to him. He
will resign from that position with R.R. Donnelley upon completion of the
Offering. From September 1989 until January 1995, he was President,
Information Services of R.R. Donnelley. Prior to that time, he was Vice
President and Director, Information Services of R.R. Donnelley in 1989, Vice
President, Corporate Development of R.R. Donnelley from April 1985 until 1989,
and Group Manager, Business Development and Analysis of R.R. Donnelley from
the time he joined R.R. Donnelley in January 1985 until April 1985. Prior to
joining R.R. Donnelley, he held various positions with Mobil Oil Corporation
and Ramada Europe. Mr. Faber has been a director of the Company since July
1995. He is also a member of the board of directors of Alphagraphics, Inc.,
Dataware Technologies, Inc., GeoSystems Global Corporation and Xeikon N.V.

Susan L. Henricks has been President and Chief Executive Officer of the
Company since July 1995. She was President of the Company from May 1995 until
July 1995. Ms. Henricks joined the Company in 1986 and served as Reference and
Information Services Division President from 1990 to May, 1995, Senior Vice
President, Information Services in 1989, Vice President, Data Processing in
1988 and Vice President of Production from 1986 to 1988. Prior to joining the
Company, she held various positions with CNA Insurance Company, Centerre Bank,
N.A. and The Signature Group. Ms. Henricks has been a director of the Company
since January 1996.

Peter F. Murphy has been Vice President and Corporate Controller of R.R.
Donnelley since April 1995. From 1994 until April 1995 Mr. Murphy was
Director, Financial Reporting of R.R. Donnelley. Prior to joining R.R.
Donnelley, he was with Kraft General Foods, Inc. where he served as Assistant
Controller--International from May 1992 until May 1994 and Assistant Corporate
Controller from 1989 until 1992, and was general practice manager with Coopers
& Lybrand from 1983 until 1989. Mr. Murphy has been director of the Company
since February 1996. He is also a member of the board of directors of Test
Drive Corporation.

Jonathan P. Ward has been Executive Vice President and Sector President,
Commercial Print Sector of R.R. Donnelley since January 1995. Mr. Ward joined
R.R. Donnelley in 1977 and has held a number of positions, including Sector
President, Commercial Print Sector of R.R. Donnelley in 1994, President,
Merchandise Media of R.R. Donnelley from 1992 to 1994 and President, Financial
Services of R.R. Donnelley in 1991. Mr. Ward has been a director of the
Company since February 1996. He is also a member of the board of directors of
Siegwerk, Inc.

49
<PAGE>

COMMITTEES OF THE BOARD OF DIRECTORS

The Audit Committee will be responsible for reviewing with management the
financial controls, accounting and audit and reporting activities of the
Company. The Committee will review the qualifications of the Company's
independent auditors, make recommendations to the Board of Directors as to the
selection of independent auditors, review the scope, fees and results of any
audit and review non-audit services and related fees provided by the
independent auditors. The members of the Audit Committee have not yet been
appointed. The Company intends to appoint the two independent directors to
this committee.

The Compensation Committee will be responsible for the administration of all
salary and incentive compensation plans for the officers and key employees of
the Company, including bonuses. The Committee will also administer the
Company's 1996 Stock Incentive Plan. The members of the Compensation Committee
have not yet been appointed. The Company intends to appoint the two
independent directors to this committee.

The Board of Directors does not have a nominating committee. The selection
of nominees for the Board of Directors will be made by the entire Board of
Directors.

EXECUTIVE OFFICERS

Information with respect to those individuals who currently serve as
executive officers of the Company is set forth below, except that information
with respect to Mr. Faber and Ms. Henricks is set forth above under
"Management--Directors." Executive officers of the Company are appointed
annually by the Board of Directors and serve until their successors have been
duly elected and qualified.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Barton L. Faber 49 Chairman and Director
Susan L. Henricks 45 President and Chief Executive Officer and Director
Philip H. Bonello 44 Senior Vice President and General Manager, On-Line Services
Ronald G. Eidell 52 Senior Vice President and Chief Financial Officer
Tery R. Larrew 42 President, Customer Insight Company
Thomas J. Quarles 46 Senior Vice President, General Counsel and Chief Administrative Officer
and Secretary
Michael T. Reynolds 46 Senior Vice President and General Manager, Enhancement Services
Mac E. Rodgers 37 Senior Vice President and General Manager, List and Cole Services
</TABLE>

Philip H. Bonello has served as Senior Vice President and General Manager,
On-Line Services of the Company since July 1995. Since joining the Company in
1986, he was Vice President, Electronic Services and Vice President, Marketing
Research from 1993 to 1995, Director of Marketing from 1992 to 1993 and
Director of Corporate Planning from 1986 to 1992. Prior to joining the
Company, he held various positions with Coopers & Lybrand from 1984 to 1986
and DePaul University from 1980 to 1994.

Ronald G. Eidell has been Senior Vice President and Chief Financial Officer
of the Company since February 1996. He has served as Senior Vice President,
Finance of R.R. Donnelley from January 1996 to the present. He will resign
from that position upon completion of the Offering. From 1991 until January
1996, he was Senior Vice President and Treasurer of R.R. Donnelley. Prior to
that time, he was Vice President and Treasurer of R.R. Donnelley from 1988 to
1991, Treasurer of R.R. Donnelley in 1988 and Controller of R.R. Donnelley
from 1982 to 1986. From February 1987 until rejoining R.R. Donnelley in 1988,
he was Vice President--Chief Financial Officer and Treasurer of Advanced
Systems, Inc.

Tery R. Larrew has served as President, Customer Insight Company since 1989.
Prior to that time, he was a Principal at Pinnacle Management Corporation and
held various positions at First Financial Management Corporation.

50
<PAGE>

Thomas J. Quarles has been Senior Vice President, General Counsel and Chief
Administrative Officer of the Company since February 1996 and Secretary of the
Company since April 1996. He has served as Senior Vice President and General
Counsel of R.R. Donnelley from February 1996 to the present. He will resign
from that position upon completion of the Offering. From February 1995 to
February 1996, he was Senior Vice President and General Counsel, Law,
Environmental and Government Affairs of R.R. Donnelley. From January 1991
until February 1995, he was Vice President and Associate General Counsel of
Ameritech Corporation. From April 1985 until December 1990 he was Vice
President and General Counsel of Ameritech Publishing, Inc. and from 1979
until March 1985, he was general attorney for Michigan Bell Telephone Company.

Michael T. Reynolds has served as Senior Vice President and General Manager,
Enhancement Services of the Company since July 1995. From 1992 to 1995, he was
Vice President, Small Business/Alternate Channels of the Company and from 1990
to 1992 he was Vice President, Sales of the Company. Prior to joining the
Company, he was Director of Sales and Marketing at Acxiom Corporation from
1986 to 1990 and held various positions with Systematics from 1984 to 1986 and
IBM from 1976 to 1983.

Mac E. Rodgers has served as Senior Vice President and General Manager, List
and Cole Services of the Company since July 1995. Mr. Rodgers joined the
Company in 1984 and served as Vice President, Sales from 1993 to July 1995 and
Vice President and Plant Manager from 1990 to 1993, along with various
production and managerial assignments.

COMPENSATION OF DIRECTORS

Directors do not currently receive an annual retainer or other compensation
for serving as directors. It is anticipated that, following completion of the
Offering, directors who do not receive compensation as officers or employees
of the Company will be compensated for serving as directors, including an
annual retainer fee and a fee for each meeting of the Board of Directors that
they attend.

51
<PAGE>

EXECUTIVE COMPENSATION

The following table sets forth compensation information for the Company's
Chairman, the other four most highly compensated executive officers of the
Company serving as such on December 31, 1995, the Company's former Chairman,
and one former executive officer who would have been among the four most
highly compensated executive officers on December 31, 1995 had she not ceased
employment prior to such date. The compensation of Mr. Faber reflected in the
table was paid by R.R. Donnelley. The restricted stock and stock options
reflected in the table represent shares of restricted common stock, par value
$1.25 per share, of R.R. Donnelley ("R.R. Donnelley Common Stock") and options
to purchase shares of R.R. Donnelley Common Stock, respectively.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------- --------------------- -------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) OPTIONS/ PAYOUTS COMPEN-
POSITION YEAR ($) ($) ($)(1) ($)(2) SARS (#) ($)(3) SATION ($)
- ------------------ ---- ------- ------- ------------ ---------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Barton L. Faber......... 1995 275,000 100,047 10,016 286,875 13,500 220,559 4,665(4)
Chairman
Susan L. Henricks....... 1995 216,233 70,420 6,716 286,875 12,000 -- --
President and Chief
Executive Officer
Tery R. Larrew.......... 1995 147,710 109,008 2,583 -- 6,000 -- --
President, Customer
Insight Company
Michael T. Reynolds..... 1995 169,400 40,168 700 -- 7,500 -- --
Senior Vice President
and General
Manager, Enhancement
Services
Mac E. Rodgers.......... 1995 175,550 53,653 6,010 -- 7,500 -- --
Senior Vice President
and General
Manager, List and Cole
Services
James D. McQuaid........ 1995 280,008 114,233 9,320 -- -- 244,028 1,176,187(5)
Former Chairman and
Chief Executive Officer
Marjorie L. Schaffner... 1995 207,200 36,115 -- -- -- -- --
Former Division
President,
List Enhancement
Division
</TABLE>
- --------
(1) Included in this column is the amount of the 50% employer matched
contribution under the R.R. Donnelley Stock Purchase Plan. Under this
Plan, officers, selected managers and key staff employees are permitted to
contribute up to 5% of their gross annual salary and bonus from the prior
year toward the purchase during the first quarter of the next year of R.R.
Donnelley Common Stock. An additional 50% of the amount contributed by the
employee is contributed toward the purchase of R.R. Donnelley Common Stock
for the employee's account, and another 20% of the amount the employee
contributes is paid in cash to the employee to assist in the payment of
taxes owed by the employee as a result of the matched contribution. This
20% cash payment is also included in this column.
(2) Values of Restricted Stock Awards shown in the Summary Compensation Table
are based on the closing price of R.R. Donnelley Common Stock on the date
of grant. As of December 31, 1995, B.L. Faber held 17,100 shares of
restricted R.R. Donnelley Common Stock, valued at $673,313 in the
aggregate; S. L. Henricks held 7,500 shares of restricted R.R. Donnelley
Common Stock, valued at $295,313 in the aggregate; and none of the other
individuals named above held any shares of restricted R.R. Donnelley
Common Stock. Values as of December 31, 1995 of restricted R.R. Donnelley
Common Stock are based on the closing price of R.R. Donnelley Common Stock
on December 29, 1995. Dividends are paid on restricted R.R. Donnelley
Common Stock at the same rate and at the same time as on the R.R.
Donnelley Common Stock. All restricted R.R. Donnelley Common Stock vests
on the fifth anniversary of the date of grant.
(3) Dollar value of payouts on long-term performance awards granted in 1993.
(4) Premiums paid by R.R. Donnelley in connection with whole life insurance
policies which are owned by Mr. Faber.
(5) Consists of $9,187 in premiums paid by the Company in connection with
whole life insurance policies which are owned by Mr. McQuaid, $567,000 to
be paid by R.R. Donnelley in annual installments beginning on January 1,
2000 and $150,000 payable annually by R.R. Donnelley for each of the years
1996 through 1999. For more information concerning Mr. McQuaid's
retirement agreement, see "--Agreement with Retired Executive."

52
<PAGE>

OPTION/SAR GRANTS IN 1995

The following table sets forth information for the individuals named in the
Summary Compensation Table regarding grants in 1995 of options to purchase
R.R. Donnelley Common Stock.

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL
UNDERLYING OPTIONS EXERCISE
OPTIONS/SARS GRANTED OR BASE GRANT DATE
GRANTED TO EMPLOYEES PRICE EXPIRATION PRESENT VALUE
NAME (#)(1) IN 1995(2) ($/SH) DATE ($)(3)
- ---- ------------ ------------ -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Barton L. Faber......... 13,500 0.27 38.0625 12/14/2005 175,365
Susan L. Henricks....... 12,000 0.24 38.0625 12/14/2005 155,880
Tery R. Larrew.......... 6,000 0.12 38.0625 12/14/2005 77,940
Michael T. Reynolds..... 7,500 0.15 38.0625 12/14/2005 97,425
Mac E. Rodgers.......... 7,500 0.15 38.0625 12/14/2005 97,425
James D. McQuaid........ -- -- -- -- --
Marjorie L. Schaffner... -- -- -- -- --
</TABLE>
- --------
(1) Options become exercisable (at fair market value on the date of grant)
over a four year period, with 20% of the shares becoming exercisable at
the beginning of each of the second, third and fourth years following the
date of grant and with the remaining portion of the option becoming
exercisable at the end of the fourth year, unless the vesting schedule is
accelerated to become fully exercisable upon death, retirement, disability
or a change in control as defined in R.R. Donnelley's 1995 Stock Incentive
Plan.
(2) Represents the percent of total options to purchase R.R. Donnelley Common
Stock granted in 1995 to employees of R.R. Donnelley and its subsidiaries.
(3) The Black-Scholes option pricing method has been used to calculate present
value as of date of grant, December 15, 1995. The present value as of the
date of grant, calculated using the Black-Scholes method, is based on
assumptions about future interest rates, stock price volatility and
dividend yield. The Black-Scholes model is a complicated mathematical
formula widely used to value exchange traded options. However, stock
options granted by R.R. Donnelley to its officers and those of its
subsidiaries differ from exchange traded options in three key respects:
options granted by R.R. Donnelley to its officers and those of its
subsidiaries are long-term, non-transferable and subject to vesting
restrictions while exchange traded options are short-term and can be
exercised or sold immediately in a liquid market. The Black-Scholes model
relies on several key assumptions to estimate the present value of
options, including the volatility of and dividend yield on the security
underlying the option, the risk-free rate of return on the date of grant
and the term of the option. In calculating the grant date present values
set forth in the table, a factor of 21.177% has been assigned to the
volatility of the Common Stock; based on daily stock market quotations for
the twelve months preceding the date of grant, the yield on the R.R.
Donnelley Common Stock has been set at 1.89%; and based upon its annual
dividend rate of $.72 per share at the date of grant, the risk-free rate
of return has been fixed at 5.71%, the rate for a ten year U.S. Treasury
Note on the date of grant as reported in the Federal Reserve Statistical
Release, and the exercise of the options has been assumed to occur at the
end of the actual option term of ten years. There is no assurance that
these assumptions will prove to be true in the future. Consequently, the
grant date present values set forth in the table are only theoretical
values and may not accurately determine present value. The actual value,
if any, that may be realized by each individual will depend on the market
price of R.R. Donnelley Common Stock on the date of exercise.

53
<PAGE>

AGGREGATED OPTION/SAR EXERCISES IN 1995 AND YEAR-END OPTION/SAR VALUES

The following table sets forth certain information for the individuals named
in the Summary Compensation Table regarding the exercise in 1995 of options to
purchase R.R. Donnelley Common Stock and their holdings of unexercised options
to purchase R.R. Donnelley Common Stock as of December 31, 1995.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS OPTIONS/SARS
ACQUIRED VALUE AT 12/31/95 (#) AT 12/31/95 ($)(2)
ON EXERCISE REALIZED ------------------------- -------------------------
NAME (#) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Barton L. Faber......... 4,000 78,938 87,400/49,100 1,440,559/364,175
Susan L. Henricks....... -- -- 30,050/26,950 447,369/157,788
Tery R. Larrew.......... -- -- 2,000/14,000 20,700/89,550
Michael T. Reynolds..... -- -- 9,800/14,700 130,563/76,938
Mac E. Rodgers.......... -- -- 7,200/14,700 84,200/76,938
James D. McQuaid........ -- -- 56,100/24,900 851,625/235,875
Marjorie L. Schaffner... 19,000 404,375 53,400/15,100 923,394/145,638
</TABLE>
- --------
(1) The value realized equals the aggregate amount of the excess of the fair
market value on the date of exercise (the average of the high and low
prices of R.R. Donnelley Common Stock as reported in the New York Stock
Exchange Composite Transactions report for the exercise date) over the
relevant exercise price(s).
(2) The value is calculated based on the aggregate amount of the excess of the
average of the high and low prices of R.R. Donnelley Common Stock as
reported in the New York Stock Exchange Composite Transactions Report for
December 29, 1995 over the relevant exercise price(s).

54
<PAGE>

LONG-TERM INCENTIVE PLANS--AWARDS IN 1995

The following table describes the Long-Term Performance Awards granted under
the R.R. Donnelley 1995 Stock Incentive Plan in 1995 to the individuals named
in the Summary Compensation Table. Each of the awards will vest at the end of
the performance period which extends from January 1, 1995 to December 31,
1997. Payout with respect to the award to Mr. Faber is based on (i) R.R.
Donnelley performance during this period, measured by the return on average
stockholders' equity, with the potential for increased payout if net asset
growth is also achieved, (ii) the performance of the information services
sector of the business of R.R. Donnelley, measured by revenue and earnings,
and (iii) business development. Payout with respect to the awards to Ms.
Henricks and Mr. McQuaid is based on R.R. Donnelley performance during the
period January 1, 1995 to December 31, 1997, measured by the return on average
stockholders' equity, with the potential for increased payout if net asset
growth is also achieved, and the performance of the information services
sector of the business of R.R. Donnelley, measured by cumulative earnings and
return on net assets. The R.R. Donnelley performance factor is weighted 50% in
the total calculation for each award and the information services sector
performance factors are weighted 50% in the aggregate in the total calculation
for each award. The awards are to be paid in cash or R.R. Donnelley Common
Stock or a combination of both, in the discretion of the Human Resources
Committee of the Board of Directors of R.R. Donnelley. The Human Resources
Committee has the discretion to adjust the aggregate amount payable under any
award to reflect special circumstances. The dollar amounts listed in the table
below assume payment is made entirely in cash. Maximum net asset growth has
been assumed in the calculation of the estimated future payouts at the target
and maximum levels and no net asset growth has been assumed in the calculation
of the estimated future payouts at the threshold level.

<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
PERFORMANCE UNDER NON-STOCK
NUMBER OF OR OTHER PRICE-BASED PLANS
SHARES, UNITS PERIOD UNIT ---------------------------------
OR OTHER MATURATION OR THRESHOLD TARGET MAXIMUM
NAME RIGHTS(#) PAYOUT ($ OR #) ($ OR #) ($ OR #)
- ---- ------------- ------------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Barton L.
Faber........ -- 1995-1997 $96,250(1) $256,667(1) $ 385,000(1)
Susan L.
Henricks..... -- 1995-1997 $98,438(1) $262,500(1) $ 393,750(1)
Tery R.
Larrew....... -- -- -- -- --
Michael T.
Reynolds..... -- -- -- -- --
Mac E.
Rodgers...... -- -- -- -- --
James D.
McQuaid...... -- 1995-1997 $98,000(2) $261,333(2) $ 392,000(2)
Marjorie L.
Schaffner.... -- -- -- -- --
</TABLE>
- --------
(1) Payout, if any, will be made by R.R. Donnelley and will be pro rated from
January 31, 1995 through the date of the completion of the Offering.
(2) In January, 1998, Mr. McQuaid will be paid by R.R. Donnelley one-third of
the payment, if any, that would have been paid to him. See "--Agreement
with Retired Executive."

RETIREMENT BENEFIT PLAN

Under the Company's Retirement Benefit Plan, employees who met the
eligibility requirements accrued in 1995 an annual retirement benefit computed
at the rate of 1.5% on compensation up to "covered compensation," and 2% on
compensation in excess of "covered compensation" but not in excess of $150,000
(the maximum amount of compensation for 1995 on which benefits can accrue
under current law). The compensation covered by the Plan includes wages and
salaries, supplementary compensation and commissions. An employee's "covered
compensation" for a year is the average of the Social Security wage bases for
the 35-year period ending with such year. Benefits are paid monthly after
retirement for the life of the participant (straight life annuity amount) or,
if the participant is married or has elected an optional benefit form, in an
actuarially reduced amount for the life of the participant and the
participant's surviving spouse or other surviving person named as a contingent
member. Benefits under the Retirement Benefit Plan are limited to the extent
required by provisions of the Internal Revenue Code and the Employee
Retirement Income Security Act of 1974. If payment of actual retirement
benefits is limited by such provisions, an amount equal to any reduction in
retirement benefits will be paid as a supplemental benefit under the Unfunded
Supplemental Benefit Plan adopted by the Board of Directors in 1995.

55
<PAGE>

The following table contains information concerning annual benefits payable
pursuant to the Retirement Benefit Plan on a straight life annuity basis upon
retirement at age 65 for the individuals named in the Summary Compensation
Table. These benefits include the annual benefits to be paid at age 65
computed on service through December 31, 1995, estimated additional annual
benefits which may be earned in the future, assuming the individuals, other
than Mr. McQuaid and Ms. Schaffner, continue in the Company's employ to age 65
and current compensation levels remain unchanged, and total estimated annual
benefits on retirement at age 65.

<TABLE>
<CAPTION>
ESTIMATED ADDITIONAL ANNUAL TOTAL ESTIMATED ANNUAL
ANNUAL BENEFITS BENEFITS ON RETIREMENT BENEFITS COMPUTED
TO BE PAID AT AGE 65 AT AGE 65 ON SERVICE THROUGH
ON THE BASIS OF FOR SERVICE AFTER 1995 DECEMBER 31, 1995
SERVICE THROUGH ASSUMING CONTINUATION OF PLUS BENEFITS WHICH MAY
INDIVIDUAL DECEMBER 31, 1995 ($) EMPLOYMENT UNTIL AGE 65 ($) BE EARNED IN FUTURE ($)
- ---------- --------------------- --------------------------- -----------------------
<S> <C> <C> <C>
Barton L. Faber......... 49,993 119,345 169,338
Susan L. Henricks....... 26,685 96,970 123,655
Tery R. Larrew.......... -- (1) -- (1) -- (1)
Michael T. Reynolds..... 17,317 77,633 94,980
Mac E. Rodgers.......... 16,521 125,967 147,488
James D. McQuaid........ -- (2) -- (2) -- (2)
Marjorie L. Schaffner... 57,068 77,593 134,661
</TABLE>
- --------
(1) Not covered by the Company's Retirement Benefit Plan.
(2) Mr. McQuaid retired as Chairman and Chief Executive Officer as of December
31, 1995. Commencing 1996, Mr. McQuaid will receive an annual benefit of
$45,387 to be paid until the later of his or his spouse's death.

EMPLOYMENT AGREEMENTS

Mr. Faber has entered into a four-year employment agreement with the Company
commencing on the closing of the Offering. The agreement provides for an
annual base salary of $310,000 with a pro-rated bonus opportunity for 1996 to
earn up to 100% of base salary if certain pre-established net income criteria
are met by the Company. Bonus opportunities for 1997 and later years will be
determined by the Board of Directors of the Company or a committee of the
Board. Mr. Faber will be granted, subject to the closing of the Offering, ten-
year options to purchase 170,000 shares of Common Stock at a purchase price
equal to the initial public offering price and 17,000 shares of Common Stock
in the form of restricted stock. See "--Stock Plans."

Ms. Henricks has also entered into a four-year employment agreement with the
Company commencing on the closing of the Offering. The agreement provides for
an annual base salary of $255,000 with a pro-rated bonus opportunity for 1996
to earn up to 90% of base salary if certain pre-established net income
criteria are met by the Company. Bonus opportunities for 1997 and later years
will be determined by the Board of Directors of the Company or a committee of
the Board. Ms. Henricks will be granted, subject to the closing of the
Offering, ten-year options to purchase 170,000 shares of Common Stock at a
purchase price equal to the initial public offering price and 17,000 shares of
Common Stock in the form of restricted stock. See "--Stock Plans."

Each of Mr. Faber's and Ms. Henricks' employment agreement provides for a
severance payment equal to (i) one and one-half times base salary minus the
amount of any disability benefits where termination is by reason of disability
or (ii) one and one-half times base salary where termination is by the Company
for any reason other than for cause or by the executive upon breach by the
Company of the agreement or for good reason. A severance payment will not be
payable where termination is by the Company for cause, by the executive for
any reason other than upon breach by the Company of the agreement or for good
reason, or by reason of the executive's retirement or death. Each agreement
also contains customary provisions providing for the non-disclosure of
confidential information and an agreement not to compete with the Company for
a period of 18 months after the termination of the agreement.

56
<PAGE>

Mr. Larrew entered into an employment agreement with CIC in connection with
the Company's acquisition of CIC in 1994. The agreement provides for Mr.
Larrew's employment by CIC as its President and a director through December
31, 1997. The agreement provides Mr. Larrew with a minimum annual salary of
$136,260 and the opportunity to earn a pro-rated bonus up to 100% of his
annual salary upon satisfaction of certain revenue, profit, customer
satisfaction and pre-determined operations objectives relative to CIC. In
addition, the agreement requires CIC to pay Mr. Larrew a retention bonus equal
to $300,000 if Mr. Larrew is employed by CIC on the third anniversary of CIC's
acquisition by the Company. Pursuant to the agreement, R.R. Donnelley granted
Mr. Larrew stock options for 8,000 shares of R.R. Donnelley Common Stock.
Pursuant to the agreement, Mr. Larrew agreed not to compete with CIC or any
affiliate of CIC within North America and Europe during the term of the
agreement and, upon the prior written notice from CIC and the payment of
$100,000 in four quarterly installments, for one year after the termination of
the agreement.

AGREEMENT WITH RETIRED EXECUTIVE

James D. McQuaid retired as Chairman and Chief Executive Officer of the
Company effective December 31, 1995. Pursuant to an agreement dated July 26,
1995 between Mr. McQuaid and R.R. Donnelley and its affiliates, the aggregate
principal amount of $567,000 was credited on December 31, 1995 to a
hypothetical account (the "Account") maintained for Mr. McQuaid by R.R.
Donnelley. Interest is credited to the outstanding principal amount,
commencing January 1, 1996 at a rate equal to Moody's Aaa corporate bond rate.
The sum of $150,000 is to be paid out and charged to such account on January
1, 2000 and on each January 1 thereafter (or in the case of the last such
installment, such lesser amount as shall remain in the Account) until the
first to occur of the death of Mr. McQuaid or depletion of the Account by
reason of the charges to the Account for such distributions. Any amount
remaining in the Account at the time of Mr. McQuaid's death will be paid to a
beneficiary designated by Mr. McQuaid or, if such designation has not been
made, to his estate. Mr. McQuaid has agreed not to engage in activities that
compete with the business of the Company for a period ending on the earlier of
(i) December 31, 2001 or (ii) two years following a "change of control" of the
Company, which will occur upon the consummation of the Offering. In
consideration for such agreement, the Company has agreed to pay Mr. McQuaid
$12,500 per month commencing January, 1996 and ending December, 1999; provided
that, prior to the occurrence of a change of control, the Company may extend
such noncompetition period upon payment of $125,000 per year and provided that
the Company has agreed to pay Mr. McQuaid on the effective date of a change of
control all amounts that would otherwise be due to Mr. McQuaid under the
agreement for the balance of the term of the agreement had the change of
control not occurred. In consideration of Mr. McQuaid's agreement to make
himself available for up to 200 days per year for consulting services during
the period commencing January 1, 1996 and ending December 31, 1997, the
Company has agreed to pay Mr. McQuaid $8,333 per month. For the period January
1, 1998 through December 31, 1999, Mr. McQuaid will be paid $2,000 for each
day during which his consulting services are requested by the Company and made
available by Mr. McQuaid. These amounts are payable in addition to such
amounts as Mr. McQuaid is entitled to receive under R.R. Donnelley's plans for
retired employees and pursuant to stock awards and short- and long-term
incentive awards previously granted to Mr. McQuaid.

STOCK PLANS

In connection with the Offering, the Board of Directors of the Company has
adopted, and R.R. Donnelley as the Company's sole stockholder has approved,
the Company's 1996 Stock Incentive Plan and the Company's 1996 Broad-Based
Employee Stock Plan. The Company has reserved for issuance under the 1996
Stock Incentive Plan and the 1996 Broad-Based Employee Stock Plan an aggregate
of 1,600,000 shares of Common Stock. Options to purchase Common Stock have
been granted under the 1996 Stock Incentive Plan, subject to closing of the
Offering, as follows: 170,000 options to Barton L. Faber; 170,000 options to
Susan L. Henricks; 50,000 options to Tery R. Larrew; 50,000 options to Michael
T. Reynolds; 50,000 options to Mac E. Rodgers; and 653,000 options to other
employees of the Company; and shares of restricted Common Stock have been
granted under the 1996 Stock Incentive Plan, subject to the closing of the
Offering, as follows: 17,000 shares to Barton

57
<PAGE>

L. Faber and 17,000 shares to Susan L. Henricks. Each such option will have an
exercise price equal to the initial public offering price, will have a 10-year
term and will become exercisable with respect to one-quarter of the shares of
Common Stock subject to the option on each of the first four anniversaries of
the closing of the Offering. The shares of restricted Common Stock will vest
with respect to one-quarter of the shares on each of the first four
anniversaries of the closing of the Offering. The Company expects to grant an
aggregate of approximately 155,000 shares of Common Stock under the 1996
Broad-Based Employee Stock Plan upon closing of the Offering through the grant
of options to purchase 50 shares of Common Stock to each employee of the
Company (other than officers and certain U.K. employees) as of the date of
closing. Each such option will have an exercise price equal to the initial
public offering price, will have a 10-year term and will become exercisable on
the third anniversary of the closing of the Offering.

OWNERSHIP OF CAPITAL STOCK

SECURITY OWNERSHIP OF COMPANY BY MANAGEMENT

Prior to the completion of the Offering, no director or executive officer of
the Company beneficially owns any equity securities of the Company. The
Company has granted, subject to the completion of the Offering, to certain
executive officers and other key employees of the Company, restricted shares
of Common Stock and options to purchase Common Stock under the 1996 Stock
Incentive Plan. See "Management--Employment Agreements" and "--Stock Plans."

SOLE STOCKHOLDER OF THE COMPANY

The following table sets forth certain information regarding the beneficial
ownership by R.R. Donnelley of the Common Stock (i) immediately prior to the
Offering and (ii) as adjusted to reflect the sale of the shares of Common
Stock offered hereby (assuming the U.S. Underwriters' over-allotment option is
not exercised). R.R. Donnelley has or will have sole voting and investment
power with respect to all shares indicated as beneficially owned by R.R.
Donnelley.

<TABLE>
<CAPTION>
PRIOR TO OFFERING AFTER OFFERING
-------------------- --------------------
PERCENT OF PERCENT OF
NAME AND ADDRESS NUMBER CLASS NUMBER CLASS
---------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
R. R. Donnelley & Sons Company
77 West Wacker Drive
Chicago, Illinois 60601........ 8,600,000 100% 8,600,000 41.7%
</TABLE>

PRINCIPAL STOCKHOLDERS OF R.R. DONNELLEY

The following table lists the beneficial ownership of R.R. Donnelley Common
Stock with respect to all persons known to the Company to be the beneficial
owner of more than 5% of R.R. Donnelley Common Stock. The information shown
was furnished by Northern Trust Corporation. The percentage of outstanding
R.R. Donnelley Common Stock owned by Northern Trust Corporation is based on
outstanding shares of R.R. Donnelley Common Stock as of December 31, 1995.

<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT
NAME AND ADDRESS BENEFICIAL OF
OF BENEFICIAL OWNER OWNERSHIP CLASS
------------------- ---------- -------
<S> <C> <C>
Northern Trust Corporation
50 South LaSalle Street
Chicago, Illinois 60675............................ 16,454,020(1) 10.69%
</TABLE>
- --------
(1) Northern Trust Corporation is the parent holding company for The Northern
Trust Company and other affiliates and files one Schedule 13G to report
beneficial ownership by all such entities of R.R. Donnelley Common Stock.
Includes shares as to which Northern Trust Corporation has or shares
investment and voting power as follows: sole investment power, 5,143,910
shares (3.34%); shared investment power, 9,735,909 shares (6.32%); sole
voting power, 10,100,383 shares (6.56%); shared voting power, 2,576,123
shares (1.67%).

58
<PAGE>

BENEFICIAL OWNERSHIP OF R.R. DONNELLEY COMMON STOCK BY DIRECTORS AND EXECUTIVE
OFFICERS OF THE COMPANY

The following table sets forth, as of December 31, 1995, the number of
shares of R.R. Donnelley Common Stock beneficially owned by each director of
the Company, each of the individuals named in the Summary Compensation Table
and all directors and executive officers of the Company as a group. Unless
otherwise indicated, the beneficial owner has sole voting and investment power
with respect to the indicated shares. The aggregate amount of all R.R.
Donnelley Common Stock beneficially owned by such directors and executive
officers represents less than one percent of the outstanding R.R. Donnelley
Common Stock.

<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL
NAME OF BENEFICIAL OWNER OWNERSHIP(1)
------------------------ ----------
<S> <C>
Barton L. Faber.............................................. 113,065
Susan L. Henricks............................................ 39,253(2)
Tery R. Larrew............................................... 2,159
Peter F. Murphy.............................................. 3,840
Michael T. Reynolds.......................................... 10,214
Mac E. Rodgers............................................... 8,363
Jonathan P. Ward............................................. 136,197
James D. McQuaid............................................. 16,878
Marjorie L. Schaffner........................................ --
Directors and seven executive officers as a group............ 380,148
</TABLE>
- --------
(1) Includes shares which could be acquired by exercise of stock options as
follows: Mr. Faber, 87,400 shares; Ms. Henricks, 29,900 shares; Mr.
Larrew, 2,000 shares; Mr. Murphy, 1,000 shares; Mr. Reynolds, 9,800
shares; Mr. Rodgers, 7,200 shares; Mr. Ward, 94,700 shares; and all
directors and seven executive officers as a group, 276,870 shares.
(2) Includes 291 shares owned by spouse and 120 shares which could be acquired
by exercise of stock options held by spouse.

59
<PAGE>

RELATIONSHIP WITH R.R. DONNELLEY

GENERAL

Prior to the Offering, the Company was a wholly owned subsidiary of R.R.
Donnelley. R.R. Donnelley is a world leader in managing, reproducing and
distributing print and digital information for the publishing, retailing,
merchandising and information-technology markets and specializes in the
production of catalogs, inserts, magazines, book, directories, and financial
and computer documentation.

Upon completion of the Offering, R.R. Donnelley will own 8,600,000 shares of
Common Stock, representing approximately 41.7% of the outstanding shares of
Common Stock (approximately 38.4%, if the U.S. Underwriters exercise their
over-allotment option in full), and will be the Company's largest stockholder.
Consequently, R.R. Donnelley will be able to significantly influence such
actions as the election of directors of the Company, the approval of matters
submitted for stockholder approval or preventing a potential takeover.
Currently, three of the four members of the Board of Directors of the Company
are officers of R.R. Donnelley, one of whom will cease being an officer of
R.R. Donnelley upon completion of the Offering. The Company anticipates that,
following the Offering, the Board of Directors will be increased to six
members and two additional directors who are not affiliated with R.R.
Donnelley or the Company will be elected by the Board of Directors to fill the
vacancies.

Since its acquisition by R.R. Donnelley, the Company funded its operations,
capital expenditures and acquisitions in part through borrowings from a
subsidiary of R.R. Donnelley. The net proceeds of the Offering will be used to
repay amounts owed to R.R. Donnelley and its subsidiaries. See "Use of
Proceeds" and Notes to Consolidated and Combined Financial Statements of
Metromail.

The following summary description of the agreements to be entered into
between its Company and R.R. Donnelley does not purport to be complete and is
qualified in its entirety by reference to the agreements, copies of which are
filed as exhibits to the Registration Statement of which this Prospectus is a
part.

TRANSITION SERVICES AGREEMENT

R.R. Donnelley currently provides certain administrative services to the
Company. Charges for these services have been allocated by R.R. Donnelley to
the Company based on various formulas which reasonably approximate the actual
costs incurred. The expenses recorded by the Company for these allocations
were approximately $1.1 million, $1.4 million, $1.8 million and $0.4 million
for the years ended December 31, 1993, 1994 and 1995 and the three months
ended March 31, 1996, respectively. See Note 3 of Notes to Consolidated and
Combined Financial Statements of Metromail.

Prior to completion of the Offering, the Company and R.R. Donnelley will
enter into the Transition Services Agreement, pursuant to which R.R. Donnelley
or its affiliates will agree to perform certain legal, environmental, real
estate, risk management and tax services for the Company, and the Company will
agree to furnish R.R. Donnelley certain financial information. The Company
will be charged fees and expenses for such services that the Company believes
are at least as favorable to it as could be obtained from unaffiliated parties
for comparable services or arrangements. No assurances can be made, however,
that the Company could not obtain such services at lower prices from a third
party. The Transition Services Agreement will be in effect for the period
commencing upon closing of the Offering and ending on December 31, 1996,
except with respect to tax services, the provision of which will end on
January 31, 1997. In addition, the Company may request an extension of the
term of the Agreement as it relates to tax services for a period of twelve
months by giving written notice to R.R. Donnelley by November 1, 1996,
although R.R. Donnelley is not required to agree to such request.

60
<PAGE>

SALES AGREEMENT

The Company sells products and services to clients who are also customers of
R.R. Donnelley. For certain of these sales, primarily involving sales to
catalogers and retailers, the Company's clients are billed by R.R. Donnelley,
with R.R. Donnelley then allocating to the Company the portion of the net
sales attributable to the services performed by the Company, as agreed by the
Company and its client. The net sales of the Company billed in this manner
totalled approximately $22.8 million, $20.9 million, $22.7 million and $5.3
million for the years ended December 31, 1993, 1994 and 1995 and the three
months ended March 31, 1996, respectively.

Prior to completion of the Offering, the Company and R.R. Donnelley will
enter into the Sales Agreement, pursuant to which R.R. Donnelley will agree
that if it identifies certain opportunities for sales of services of the type
that the Company provides from among R.R. Donnelley's current and prospective
customers, it will obtain detailed requirements regarding the sales
opportunity and, prior to soliciting any competitor of the Company to provide
the services, request a quotation from the Company for the Company's terms of
providing the services. If the Company furnishes a quotation and if R.R.
Donnelley successfully sells the services of the Company to the customer, R.R.
Donnelley will, following performance of the services, invoice and seek to
collect the amounts owed from the customer for the services provided by the
Company. Upon collection of such amounts from the customer, R.R. Donnelley
will pay over the collected amount less two percent. The initial term of the
Sales Agreement will end on December 31, 1998.

BENEFIT ADMINISTRATION SERVICES AGREEMENT

The Company currently participates in various employee benefit plans which
are sponsored by R.R. Donnelley. These programs include medical, dental and
life insurance and workers compensation. The Company has reimbursed R.R.
Donnelley for its proportionate cost of these programs based on historical
experience and relative headcount. The Company recorded expense related to the
reimbursement of these costs of approximately $6.2 million, $7.3 million, $8.8
million and $3.2 million in the years ended December 31, 1993, 1994 and 1995
and the three months ended March 31, 1996, respectively. See Note 3 of Notes
to Consolidated and Combined Financial Statements of Metromail.

The Company also participates in a stock purchase plan for selected managers
and key employees sponsored by R.R. Donnelley. Under the plan, the Company is
required to contribute an amount equal to 70% of participants' contributions
(which are limited to 5% of compensation considered for plan purposes), of
which 50% is applied to the purchase of R.R. Donnelley Common Stock and 20% is
paid in cash. Amounts charged to expense by the Company for this plan were
$0.4 million, $0.6 million, $0.3 million and $0.1 million for the years ended
December 31, 1993, 1994 and 1995 and the three months ended March 31, 1996,
respectively. See Note 3 of Notes to Consolidated and Combined Financial
Statements of Metromail

Prior to completion of the Offering, the Company and R.R. Donnelley will
enter into the Benefit Administration Services Agreement. Under this
agreement, (i) R.R. Donnelley will permit the Company to continue to
participate in the welfare plans of R.R. Donnelley until the Company has
established its own welfare plans, which it will do as soon as practicable
after the completion of the Offering; (ii) the Company will assume the
liability to provide retiree medical and life insurance benefits with respect
to active employees who have not yet satisfied the age and service eligibility
requirements to receive such benefits, with R.R. Donnelley retaining the
liability to provide retiree benefits to all active and terminated employees
who have met the age and service requirements for eligibility as of the
completion of the Offering; and (iii) the Company will cease being a
participant in the R.R. Donnelley stock purchase plan.

61
<PAGE>

The Benefit Administration Services Agreement will also provide that the
Company will reimburse R.R. Donnelley for (1) the actual cost of benefits
provided under R.R. Donnelley's employee benefit plans for Company employees
during the period in which the Company continues to participate in such plans
following the Offering and (2) the Company's pro rata share of administration
and plan asset management expenses incurred in the operation of these plans
during such period.

DATA CENTER SERVICES AGREEMENT

The Company is currently providing computer processing services for R.R.
Donnelley and its subsidiaries. The costs reimbursed by R.R. Donnelley for
these services (reflected as a reduction in costs of sales) totalled
approximately $2.8 million, $3.1 million, $3.5 million and $0.9 million for
the years ended December 31, 1993, 1994 and 1995 and the three months ended
March 31, 1996, respectively. See Note 3 of Notes to Consolidated and Combined
Financial Statements of Metromail. Prior to the completion of the Offering,
the Company will enter into a Data Center Services Agreement with R.R.
Donnelley. Under the Data Center Services Agreement, the Company will provide
to R.R. Donnelley general computer and data processing services, including
mainframe processing and technical software systems support and data
processing for R.R. Donnelley's internal business purposes. The Data Center
Services Agreement will be in effect for the period commencing on the closing
of the Offering and ending on December 31, 1998. After December 31, 1998, the
Data Center Services Agreement will automatically renew unless terminated by
either party upon six months' notice. R.R. Donnelley will pay the Company an
annualized fee of $4.3 million for the Company's services under the agreement
during the period ending on December 31, 1996 and, thereafter, the yearly fee
will be adjusted according to changes in R.R. Donnelley's service needs and
increased by an amount equal to the average published consumer price index
increase for the preceding 12 months, measured at September 30 of each year,
provided that such increases shall not exceed six percent per year.

TAX ALLOCATION AND INDEMNIFICATION AGREEMENT

The Company is currently included in the consolidated federal income tax
return of R.R. Donnelley and files on a combined basis with R.R. Donnelley in
certain states. Thus, rather than paying income taxes directly in these
jurisdictions, the Company currently makes tax sharing payments to R.R.
Donnelley pursuant to R.R. Donnelley's tax allocation policy. In general, R.R.
Donnelley's tax allocation policy provides that the consolidated or combined
tax liability is allocated among the entities in the consolidated or combined
group based principally upon taxable income, credits, preferences and other
amounts directly related to each entity. Upon completion of the Offering, the
Company will no longer be permitted to be included in such consolidated and
combined tax returns. Instead, it will file its own federal, state and local
income tax returns and pay its own taxes on a separate company basis. Pursuant
to a Tax Allocation and Indemnification Agreement to be entered into by the
Company and R.R. Donnelley prior to completion of the Offering, however, the
Company will remain obligated to pay to R.R. Donnelley any income taxes shown
on such consolidated and combined tax returns, generally to the extent
attributable to the Company, for calendar year 1995 and for the tax period
(the "Interim Period") beginning on January 1, 1996 and ending on the date of
the consummation of the Offering (to the extent that it has not previously
paid such amounts to R.R. Donnelley). In addition, if the income tax liability
shown on any such consolidated or combined tax return for the Interim Period
and attributable to the Company is adjusted as a result of an action of a
taxing authority or a court, then the Company will pay to R.R. Donnelley the
full amount of any increase in such tax liability (together with any
applicable interest and penalties). Under federal regulations, the Company
will be subject to several liability for the consolidated federal income taxes
for any tax year (including the Interim Period) in which it was a member of
the R.R. Donnelley federal consolidated group (whether or not such taxes are
attributable to the Company). R.R. Donnelley has agreed to indemnify the
Company against such liability and any similar liability under state and local
law. R.R. Donnelley has also agreed to indemnify the Company against any
increase in the Company's income taxes (whether or not related to taxes paid
on a consolidated or combined basis) for periods prior to January 1, 1996 that
results from an action of a taxing authority or a court (except to the extent
such increase provides tax benefits to the Company for periods beginning on or
after January 1, 1996, in which case the sum of such tax benefits will be
retained by R.R. Donnelley or paid by the Company to R.R. Donnelley).

62
<PAGE>

DESCRIPTION OF CAPITAL STOCK AND CORPORATE CHARTER

The authorized capital stock of the Company consists of 75,000,000 shares of
Common Stock, par value $.01 per share, and 20,000,000 shares of Preferred
Stock, par value $.01 per share (the "Preferred Stock"). The following summary
description of the capital stock, Restated Certificate of Incorporation and
By-laws of the Company does not purport to be complete and is qualified in its
entirety by reference to the Company's Restated Certificate of Incorporation
and By-laws, copies of which are filed as exhibits to the Registration
Statement of which this Prospectus is a part (see "Available Information"),
and to the Delaware General Corporation Law ("DGCL").

COMMON STOCK

Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared by the Board of Directors out of
funds legally available therefor, subject to any preferential dividend rights
of outstanding Preferred Stock. See "Dividend Policy." Upon the liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to receive ratably the net assets of the Company available after the
payment of all debts and other liabilities and subject to the prior rights of
holders of any outstanding Preferred Stock. Holders of Common Stock have no
preemptive, subscription, redemption or conversion rights. The outstanding
shares of Common Stock are, and the shares offered by the Company in the
Offering will be, when issued and paid for, fully paid and nonassessable. The
rights, preferences and privileges of holders of Common Stock are subject to,
and may be adversely affected by, the rights of the holders of shares of any
series of Preferred Stock which the Company may designate and issue in the
future.

PREFERRED STOCK

The Board of Directors has the authority, subject to certain limitations
prescribed by law, without further vote or action by the stockholders, to
issue from time to time the Preferred Stock in one or more classes or series
and to fix or alter the designations, powers, preferences, rights and any
qualifications, limitations or restrictions of the shares of each such class
or series thereof, including the dividend rates, conversion rights, voting
rights, terms of redemption (including sinking fund provisions), liquidation
preferences and the number of shares constituting each such class or series.
The issuance of Preferred Stock, while providing flexibility in connection
with possible acquisitions or other corporate purposes, may have the effect of
delaying, deferring or preventing a change of control of the Company. The
Company has no present plans to issue any shares of Preferred Stock.

CERTAIN CHARTER AND BY-LAW PROVISIONS

Certain provisions of the Company's Restated Certificate of Incorporation
and By-laws, summarized in the following paragraphs, may be considered to have
an anti-takeover effect and may delay, deter or prevent a tender offer, proxy
contest or other takeover attempt that a stockholder might consider to be in
such stockholder's best interest, including such an attempt as might result in
payment of a premium over the market price for shares held by stockholders.

Classified Board of Directors

The Company's Restated Certificate of Incorporation provides for the Board
of Directors to be divided into three classes of directors serving staggered
three-year terms. As a result, approximately one-third of the Board of
Directors will be elected each year. Classification of the Board of Directors
expands the time required to change the composition of a majority of directors
and may tend to discourage a proxy contest or other takeover bid for the
Company. Moreover, under the DGCL, in the case of a corporation having a
classified board of

63
<PAGE>

directors, the stockholders may remove a director only for cause. These
provisions, when coupled with provisions of the Company's Restated Certificate
of Incorporation authorizing only the Board of Directors to fill vacant
directorships, will preclude stockholders of the Company from removing
incumbent directors without cause and simultaneously gaining control of the
Board of Directors by filling the vacancies with their own nominees.

Special Meetings of Stockholders

The Company's By-laws provide that special meetings of stockholders may be
called by the Chairman of the Board or the President and shall be called by
the President or the Secretary at the request in writing of a majority of the
Board of Directors of the Company.

Advance Notice Requirements for Stockholder Proposals and Director
Nominations

The Company's By-laws provide that stockholders seeking to bring business
before a meeting of stockholders, or to nominate candidates for election as
directors at a meeting of stockholders, must provide timely notice thereof in
writing. To be timely, a stockholder's notice must be delivered to, or mailed
and received at, the principal executive office of the Company, not less than
60 days nor more than 90 days prior to the scheduled meeting (or, if a special
meeting, not later than the close of business on the tenth day following the
earlier of (i) the day on which such notice of the date of the meeting was
mailed, or (ii) the day on which public disclosure of the date of the special
meeting was made). The By-laws also specify certain requirements pertaining to
the form and substance of a stockholder's notice. These provisions may
preclude some stockholders from making nominations for directors at an annual
or special meeting or from bringing other matters before the stockholders at a
meeting.

No Action by Written Consent of the Stockholders

The Company's Restated Certificate of Incorporation does not allow the
stockholders of the Company to take action by written consent.

Delaware Takeover Statute

Section 203 of the DGCL ("Section 203") prohibits a public Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which such person became an interested stockholder unless: (i) prior to such
date, the Board of Directors approved either the business combination or the
transaction which resulted in the stockholder becoming an interested
stockholder; or (ii) upon becoming an interested stockholder, the stockholder
then owned at least 85% of the voting stock, as defined in Section 203; or
(iii) subsequent to such date, the business combination is approved by both
the Board of Directors and by holders of at least 66 2/3% of the corporation's
outstanding voting stock, excluding shares owned by the interested
stockholder. For these purposes, the term "business combination" includes
mergers, asset sales and other similar transactions with an "interested
stockholder." An "interested stockholder" is a person who, together with
affiliates and associates, owns (or, within the prior three years, did own)
15% or more of the corporation's voting stock. Pursuant to the Restated
Certificate of Incorporation, the Company has expressly elected not to be
governed by Section 203; provided that this election does not become effective
until March 5, 1997 and will not apply to a business combination with R.R.
Donnelley.

Limitations of Liability

The Company's Restated Certificate of Incorporation contains a provision
that is designed to limit the directors' liability to the extent permitted by
the DGCL and any amendments thereto. Specifically, directors will not be held
liable to the Company or its stockholders for an act or omission in such
capacity as a director, except for liability as a result of: (i) a breach of
the duty of loyalty to the Company or its stockholders, (ii) actions or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) payment

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<PAGE>

of an improper dividend or improper repurchase of the Company's stock under
Section 174 of the DGCL, or (iv) actions or omissions pursuant to which the
director will receive an improper personal benefit. The principal effect of
the limitation of liability provision is that a stockholder is unable to
prosecute an action for monetary damages against a director of the Company
unless the stockholder can demonstrate one of the specified bases for
liability. This provision, however, does not eliminate or limit director
liability arising in connection with causes of action brought under the
federal securities laws. The Company's Restated Certificate of Incorporation
does not eliminate its directors' duty of care. The inclusion of this
provision in the Company's Restated Certificate of Incorporation may, however,
discourage or deter stockholders or management from bringing a lawsuit against
directors for a breach of their fiduciary duties, even though such an action,
if successful, might otherwise have benefited the Company and its
stockholders. This provision should not affect the availability of equitable
remedies such as injunction or rescission based upon a director's breach of
the duty of care.

Indemnification

The Company's By-laws also provide that the Company will indemnify its
directors and officers to the fullest extent permitted by Delaware law. The
Company is generally required to indemnify its directors and officers for all
judgments, fines, settlements, legal fees and other expenses incurred in
connection with pending or threatened legal proceedings because of the
director's or officer's position with the Company or another entity that the
director or officer serves at the Company's request, subject to certain
conditions, and to advance funds to its directors and officers to enable them
to defend against such proceedings. To receive indemnification, the director
or officer must have been successful in the legal proceedings or acted in good
faith and in what was reasonably believed to be a lawful manner in the
Company's best interest.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have outstanding
20,600,000 shares of Common Stock (22,400,000 shares if the over-allotment
option granted to the U.S. Underwriters is exercised in full). Of these
shares, the 12,000,000 shares to be sold in the Offering (13,800,000 shares if
such over-allotment option is exercised in full) will be freely tradeable
without restrictions or further registration under the Securities Act of 1933,
as amended (the "Securities Act"), except for any shares purchased by an
"affiliate" of the Company which will be subject to the resale limitations of
Rule 144 ("Rule 144") under the Securities Act of 1933, as amended (the
"Securities Act"). The remaining 8,600,000 outstanding shares of Common Stock,
which were acquired for purposes of Rule 144 by R.R. Donnelley in 1987, are
deemed "restricted securities" within the meaning of Rule 144. These
"restricted securities" may not be sold in the absence of registration under
the Securities Act other than in accordance with Rule 144 or another exemption
from registration.

In general, under Rule 144 as currently in effect, a person (including an
"affiliate" (as that term is defined under the Securities Act)) who
beneficially owns shares that are "restricted securities" as to which at least
two years have elapsed since the later of the date of acquisition of such
securities from the issuer or from an affiliate of the issuer, and any
affiliate who owns shares that are not "restricted securities," is entitled to
sell, within any three-month period, a number of shares that does not exceed
the greater of one percent of the then outstanding shares of Common Stock
(206,000 shares following completion of the Offering assuming the over-
allotment option granted to the U.S. Underwriters is not exercised) or the
average weekly trading volume in the Common Stock in composite trading on all
exchanges during the four calendar weeks preceding such sale. A person (or
persons whose shares are aggregated) who is not deemed an "affiliate" of the
Company and who has beneficially owned restricted securities as to which at
least three years have elapsed since the later of the date of the acquisition
of such securities from the issuer or from an affiliate of the issuer is
entitled to sell such shares under Rule 144 without regard to the volume
limitations described above. The foregoing summary of Rule 144 is not intended
to be a complete description thereof.

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<PAGE>

Prior to the Offering, there has been no public market for the Common Stock,
and no prediction can be made as to the effect, if any, that market sales of
share of Common Stock, or the availability of such shares for sale, will have
on the market price of the Common Stock prevailing from time to time.
Nevertheless, sales of substantial amounts of Common Stock in the public
market, or the perception that such sales could occur, could adversely affect
prevailing market prices for the Common Stock. Although R.R. Donnelley in the
future may effect sales or other dispositions of Common Stock that would
reduce its ownership interest in the Company, R.R. Donnelley has advised the
Company it has no plans to do so. See "Relationship with R.R. Donnelley." In
connection with the Offering, subject to certain exceptions, the Company and
R.R. Donnelley have agreed not to offer, pledge, sell or otherwise dispose of,
directly or indirectly, any shares of Common Stock (or any security
convertible into or exercisable or exchangeable for Common Stock) for a period
of 180 days after the date of this Prospectus without the prior written
consent of Morgan Stanley & Co. Incorporated. See "Underwriters."

STOCK OPTIONS AND RESTRICTED STOCK

In connection with the Offering, the Company expects to grant certain
employees 34,000 shares of restricted Common Stock and options to acquire up
to an aggregate 1,300,000 shares of Common Stock at the initial public
offering price set forth on the cover page of this Prospectus. An additional
266,000 shares of Common Stock would be available for future grants under the
Company's 1996 Stock Incentive Plan and 1996 Broad-Based Employee Stock Plan.
See "Management--Stock Plans."

The Company intends to file one or more registration statements on Form S-8
under the Securities Act to register all shares of Common Stock issuable under
the Company's 1996 Stock Incentive Plan and 1996 Broad-Based Employee Stock
Plan, and such registration statements are expected to become effective upon
filing. Shares covered by these registration statements will thereupon be
eligible for sale in the public markets.

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF COMMON STOCK

The following is a general discussion of certain United States federal
income and estate tax consequences of the ownership and disposition of Common
Stock applicable to "Non-United States Holders." A "Non-United States Holder"
is any beneficial owner of Common Stock that, for United States federal income
or estate tax purposes, as the case may be, is a non-resident alien
individual, a foreign corporation, a foreign partnership or a foreign estate
or trust as such terms are defined in the Internal Revenue Code of 1986, as
amended (the "Code"). This discussion is based on the Code and administrative
and judicial interpretations as of the date hereof, all of which are subject
to change either retroactively or prospectively. This discussion does not
address all aspects of United States federal income and estate taxation that
may be relevant to Non-United States Holders in light of their particular
circumstances and does not address any tax consequences arising under the laws
of any state, local or foreign taxing jurisdiction or the application of a
particular tax treaty. Prospective investors are urged to
consult their tax advisors regarding the United States federal, state and
local income and other tax consequences, and the non-United States tax
consequences, of owning and disposing of Common Stock.

Proposed United States Treasury Regulations were issued on April 15, 1996
(the "Proposed Regulations") which, if adopted, could affect the United States
taxation of dividends on Common Stock paid to a Non-United States Holder. The
Proposed Regulations are generally proposed to be effective with respect to
dividends paid after December 31, 1997, subject to certain transition rules.
It cannot be predicted at this time whether the Proposed Regulations will be
effective as proposed or what modifications, if any, may be made to them. The
discussion below is not intended to include a complete discussion of the
provisions of the Proposed Regulations, and prospective investors are urged to
consult their tax advisors with respect to the effect the Proposed Regulations
may have if adopted.

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DIVIDENDS

Subject to the discussion below, any dividend paid to a Non-United States
Holder generally will be subject to United States withholding tax either at a
rate of 30% of the gross amount of the dividend or such lower rate as may be
specified by an applicable tax treaty. For purposes of determining whether tax
is to be withheld at a 30% rate or at a reduced rate as specified by an
applicable tax treaty, under current United States Treasury Regulations the
Company ordinarily will presume that dividends paid to an address in a foreign
country are paid to a resident of such country absent knowledge that such
presumption is not warranted. Under such Regulations, dividends paid to a
holder with an address within the United States generally will be presumed to
be paid to a holder who is not a Non-United States Holder and will not be
subject to the 30% withholding tax, unless the Company has actual knowledge
that the holder is a Non-United States Holder.

The Proposed Regulations would provide for certain presumptions (which
differ from those described above) upon which the Company may generally rely
to determine whether, in the absence of certain documentation, a holder should
be treated as a Non-United States Holder for purposes of the 30% withholding
tax described above. The presumptions would not apply for purposes of granting
a reduced rate of withholding under a treaty. Under the Proposed Regulations,
to obtain a reduced rate of withholding under a treaty a Non-United States
Holder would generally be required to provide an Internal Revenue Service Form
W-8 certifying such Non-United States Holder's entitlement to benefits under a
treaty together with, in certain circumstances, additional information. The
Proposed Regulations also would provide special rules to determine whether,
for purposes of determining the applicability of a tax treaty and for purposes
of the 30% withholding tax described above, dividends paid to a Non-United
States Holder that is an entity should be treated as paid to the entity or
those holding an interest in that entity.

Dividends received by a Non-United States Holder that are effectively
connected with a United States trade or business conducted by such Non-United
States Holder are exempt from withholding tax. However, such effectively
connected dividends are subject to regular United States income tax in the
same manner as if the Non-United States Holder were a United States person for
federal income tax purposes. A Non-United States Holder may claim exemption
from withholding under the effectively connected income exception by filing
Internal Revenue Service Form 4224 (Statement Claiming Exemption from
Withholding of Tax on Income Effectively Connected With the Conduct of
Business in the United States) each year with the Company or its paying agent
prior to the payment of the dividends for such year. The Proposed Regulations
would replace Form 4224 with Form W-8 and certain additional information.
Effectively connected dividends received by a corporate Non-United States
Holder may be subject to an additional "branch profits tax" at a rate of 30%
(or such lower rate as may be specified by an applicable tax treaty) of such
corporate Non-United States Holder's effectively connected earnings and
profits, subject to certain adjustments.

A Non-United States Holder eligible for a reduced rate of United States
withholding tax pursuant to a tax treaty may obtain a refund of any excess
amounts currently withheld by filing an appropriate claim for refund with the
United States Internal Revenue Service.

GAIN ON DISPOSITION OF COMMON STOCK

A Non-United States Holder generally will not be subject to United States
federal income tax with respect to gain realized upon the sale or other
disposition of Common Stock unless (i) such gain is effectively connected with
a United States trade or business of the Non-United States Holder; (ii) the
Non-United States Holder is a non-resident alien individual who holds the
Common Stock as a capital asset, is present in the United States for a period
or periods aggregating 183 days or more during the calendar year in which such
sale or disposition occurs, and either the non-resident alien individual has a
"tax home" in the United States or the sale is attributable to an office or
other fixed place of business maintained by the non-resident alien individual
in the United States; or (iii) the Company is or has been a "United States
real property holding corporation" for federal income tax purposes at any time
within the shorter of the five-year period preceding such disposition or such
holder's holding period and certain other conditions are met. The Company has
determined that it is not and has

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<PAGE>

never been, and the Company does not believe that it will become, a "United
States real property holding corporation" for federal income tax purposes.
Non-United States Holders should consult applicable tax treaties, which might
result in United States federal income tax treatment on the sale or other
disposition of Common Stock different than as described above.

BACKUP WITHHOLDING AND INFORMATION REPORTING

Generally, the Company must report to the IRS the amount of dividends paid,
the name and address of the recipient, and the amount, if any, of tax
withheld. A similar report is sent to the holder. Pursuant to tax treaties or
other agreements, the IRS may make its reports available to tax authorities in
the recipient's country of residence.

Unless the Company has actual knowledge that a holder is a Non-United States
Holder, dividends paid to a holder at an address within the United States may
be subject to backup withholding at a rate of 31% if the holder is not an
"exempt recipient" as defined in Treasury Regulations (which includes
corporations) and fails to provide a correct taxpayer identification number
and other information to the Company. Backup withholding will generally not
apply to dividends paid to holders at an address outside the United States
(unless the Company has knowledge that the holder is a United States person).

Proceeds from the disposition of Common Stock by a Non-United States Holder
effected by or through a United States office of a broker will be subject to
information reporting and to backup withholding at a rate of 31% of the gross
proceeds unless such Non-United States Holder certifies under penalties of
perjury as to its name, address and status as a Non-United States Holder or
otherwise establishes an exemption. Generally, United States information
reporting and backup withholding will not apply to a payment of disposition
proceeds if the transaction is effected outside the United States by or
through a non-United States office of a broker. However, United States
information reporting requirements (but not backup withholding) will apply to
a payment of disposition proceeds where the transaction is effected outside
the United States if (a) the disposition is made through an office outside the
United States of a broker that is either (i) a United States person for United
States federal income tax purposes, (ii) a "controlled foreign corporation"
for United States federal income tax purposes or (iii) a foreign person which
derives 50% or more of its gross income for certain periods from the conduct
of a United States trade or business and (b) the broker fails to maintain
documentary evidence in its files that the holder is a Non-United States
Holder and that certain conditions are met or that the holder otherwise is
entitled to an exemption.

The Proposed Regulations would, if adopted, alter the foregoing rules in
certain respects. Among other things, the Proposed Regulations would provide
certain presumptions and other rules under which Non-United States Holders may
be subject to backup withholding in the absence of required certifications and
would modify the definition of an "exempt recipient" in the case of a
corporation.

Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If backup withholding results in an overpayment of United States
income taxes, a refund may be obtained, provided that the required documents
are filed with the IRS.

ESTATE TAX

An individual Non-United States Holder who is treated as the owner of Common
Stock at the time of such individual's death or has made certain lifetime
transfers of an interest in Common Stock will be required to include the value
of such Common Stock in such individual's gross estate for United States
federal estate tax purposes and may be subject to United States federal estate
tax, unless an applicable tax treaty provides otherwise.

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UNDERWRITERS

Under the terms and subject to conditions contained in an Underwriting
Agreement dated the date hereof, the U.S. Underwriters named below, for whom
Morgan Stanley & Co. Incorporated and Lehman Brothers Inc. are serving as U.S.
Representatives, have severally agreed to purchase, and the Company has agreed
to sell to them, and the International Underwriters named below, for whom
Morgan Stanley & Co. International Limited, Lehman Brothers International
(Europe) and Cazenove & Co. are serving as International Representatives, have
severally agreed to purchase, and the Company has agreed to sell to them, the
respective number of shares of Common Stock set forth opposite the name of
such Underwriters below:

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ----------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated............................
Lehman Brothers Inc..........................................
----------
Subtotal................................................... 9,600,000
----------
International Underwriters:
Morgan Stanley & Co. International Limited...................
Lehman Brothers International (Europe).......................
Cazenove & Co................................................
----------
Subtotal................................................... 2,400,000
----------
Total...................................................... 12,000,000
==========
</TABLE>

The U.S. Underwriters and the International Underwriters are collectively
referred to as the "Underwriters" and the U.S. Representatives and the
International Representatives are collectively referred to as the
"Representatives." The Underwriting Agreement provides that the obligations of
the several Underwriters to pay for and accept delivery of the shares of
Common Stock offered hereby are subject to the approval of certain legal
matters by counsel and to certain other conditions, including the conditions
that no stop order suspending the effectiveness of the Registration Statement
of which this Prospectus is a part is in effect and no proceedings for such
purpose are pending before or threatened by the Securities and Exchange
Commission and that there has been no material adverse change or any
development involving a prospective material adverse change in the business,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, from that set forth in such Registration
Statement. The Underwriters are obligated to take and pay for all of the
shares of Common Stock offered hereby (other than those covered by the over-
allotment option described below) if any are taken.

Pursuant to the Agreement Between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions: (i)
it is not purchasing any U.S. Shares (as defined below) for the account of
anyone other than a United States or Canadian Person (as defined below) and
(ii) it has not offered or sold, and will not offer or sell, directly or
indirectly, any U.S. Shares or distribute any prospectus relating to the U.S.
Shares outside the United States or Canada or to anyone other than a United
States or Canadian Person. Pursuant to the Agreement Between U.S. and
International Underwriters, each International Underwriter has represented and
agreed that, with certain exceptions: (i) it is not purchasing any
International Shares (as defined below) for the account of any United States
or Canadian Person and (ii) it has not offered or sold, and will not offer or
sell, directly or indirectly, any International Shares or distribute any
prospectus relating

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<PAGE>

to the International Shares within the United States or Canada or to any
United States or Canadian Person. The foregoing limitations do not apply to
stabilization transactions or to certain other transactions specified in the
Agreement Between U.S. and International Underwriters. As used herein, "United
States or Canadian Person" means any national or resident of the United States
or Canada, or any corporation, pension, profit-sharing or other trust or other
entity organized under the laws of the United States or Canada or of any
political subdivision thereof (other than a branch located outside the United
States and Canada of any United States or Canadian Person) and includes any
United States or Canadian branch of a person who is otherwise not a United
States or Canadian Person. All shares of Common Stock to be purchased by the
U.S. Underwriters and the International Underwriters are referred to herein as
the "U.S. Shares" and the "International Shares," respectively.

Pursuant to the Agreement Between U.S. and International Underwriters, sales
may be made between the U.S. Underwriters and International Underwriters of
any number of shares of Common Stock to be purchased pursuant to the
Underwriting Agreement as may be mutually agreed. The per share price of any
shares sold shall be the Price to Public set forth on the cover page hereof,
in United States dollars, less an amount not greater than the per share amount
of the concession to dealers set forth below.

Pursuant to the Agreement Between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has
agreed not to offer or sell, any shares of Common Stock, directly or
indirectly, in any province or territory of Canada in contravention of the
securities laws thereof and has represented that any offer or sale of Common
Stock in Canada will be made only pursuant to an exemption from the
requirement to file a prospectus in the province or territory of Canada in
which such offer or sale is made. Each U.S. Underwriter has further agreed to
send to any dealer who purchases from it any shares of Common Stock a notice
stating in substance, by purchasing such Common Stock, such dealer represents
and agrees that it has not offered or sold, and will not offer or sell,
directly or indirectly, any of such Common Stock in any province or territory
of Canada or to, or for the benefit of, any resident of any province or
territory of Canada in contravention of the securities laws thereof and that
any offer or sale of Common Stock in Canada will be made only pursuant to an
exemption from the requirement to file a prospectus in the province or
territory of Canada in which such offer or sale is made, and that such dealer
will deliver to any other dealer to whom it sells any of such Common Stock a
notice to the foregoing effect.

Pursuant to the Agreement Between U.S. and International Underwriters, each
International Underwriter has represented and agreed that: (i) it has not
offered or sold and will not offer or sell any shares of Common Stock to
persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995 (the "Regulations"); (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 and
the Regulations with respect to anything done by it in relation to the shares
of Common Stock offered hereby in, from or otherwise involving the United
Kingdom; and (iii) it has only issued or passed on and will only issue or pass
on to any person in the United Kingdom any document received by it in
connection with the issue of the shares of Common Stock if that person is of a
kind described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1995 or is a person to whom such document
may otherwise lawfully be issued or passed on.

The Underwriters propose to offer part of the shares of Common Stock offered
hereby directly to the public at the public offering price set forth on the
cover page hereof and part to certain dealers at a price which represents a
concession not in excess of $ per share under the public offering price. Any
Underwriter may allow, and such dealers may re-allow, a concession not in
excess of $ per share to other Underwriters or to certain other dealers.

Pursuant to the Underwriting Agreement, the Company has granted to the U.S.
Underwriters an option, exercisable for 30 days from the date of this
Prospectus, to purchase up to an additional 1,800,000 shares of Common Stock
at the public offering price set forth on the cover page hereof, less
underwriting discounts and

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<PAGE>

commissions. The U.S. Underwriters may exercise such option to purchase solely
for the purpose of covering over-allotments, if any, incurred in the sale of
the shares of Common Stock offered hereby. To the extent such option is
exercised, each U.S. Underwriter will become obligated, subject to certain
conditions, to purchase approximately the same percentage of such additional
shares as the number set forth next to such Underwriter's name in the
preceding table bears to the total number of shares of Common Stock offered by
the U.S. Underwriters hereby.

The Underwriters have informed the Company that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
Common Stock offered by them.

The Company and R.R. Donnelley, on the one hand, and the Underwriters, on
the other hand, have agreed to indemnify each other against certain
liabilities, including liabilities under the Securities Act. The Underwriters
have agreed to reimburse the Company and R.R. Donnelley for certain expenses
incurred in connection with the Offering.

The Company and R.R. Donnelley each has agreed in the Underwriting Agreement
that it will not, without the prior written consent of Morgan Stanley & Co.
Incorporated, 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, or otherwise transfer or dispose of,
directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or enter into
any swap or other arrangement that transfers to another, in whole on in part,
any of the economic consequences of ownership of the Common Stock, for a
period of 180 days after the date of this Prospectus, except under certain
circumstances.

At the request of the Company, the Underwriters have reserved up to 250,000
shares of the shares of Common Stock offered hereby for sale at the public
offering price to certain directors, officers and employees of the Company.
The number of shares of Common Stock available for sale to the general public
will be reduced to the extent such persons purchase such reserved shares. Any
reserved shares not so purchased will be offered by the Underwriters to the
general public on the same basis as the other shares offered hereby. All
purchasers of the shares of Common Stock reserved pursuant to this paragraph
who are also directors or senior officers of either the Company or R.R.
Donnelley will be required to enter into agreements identical to those
described in the immediately preceding paragraph restricting the
transferability of such shares for a period of 180 days after the date of this
Prospectus.

PRICING OF THE OFFERING

Prior to the Offering, there has been no public market for the Company's
Common Stock. The initial public offering price was determined by negotiation
between the Company and the Representatives. Among the factors considered in
determining the initial public offering price were the future prospects of the
Company and its industry in general, sales, earnings and certain other
financial and operating information of the Company in recent periods, and the
price-earnings ratios, price-sales ratios, market prices of securities and
certain financial and operating information of companies engaged in activities
similar to those of the Company. The estimated initial public offering price
range set forth on the cover page of this preliminary Prospectus is subject to
change as a result of market conditions and other factors.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Sidley & Austin, Chicago, Illinois. H. Blair White,
Counsel to Sidley & Austin, is a director of R.R. Donnelley, currently the
sole stockholder of the Company. Mr. White beneficially owns 31,600 shares of
R.R. Donnelley Common Stock. Certain legal matters in connection with this
Offering will be passed upon for the Underwriters by Winston & Strawn,
Chicago, Illinois.

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EXPERTS

The consolidated and combined financial statements and financial statement
schedule of the Company as of December 31, 1994 and 1995 and for each of the
three years in the period ended December 31, 1995, appearing in this
Prospectus and in the Registration Statement mentioned below have been audited
by Arthur Andersen LLP, independent public accountants, as set forth in their
reports thereon appearing elsewhere in this Prospectus and in the Registration
Statement, and are included in reliance upon such reports given upon the
authority of such firm as experts in auditing and accounting.

The financial statements of International Communication & Data Plc for the
year ended May 31, 1994 have been included herein in reliance upon the report
of BDO Stoy Hayward, independent auditors, appearing elsewhere herein, and
upon authority of said firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (the "Registration
Statement," which term shall include all amendments, exhibits and schedules
thereto), pursuant to the Securities Act and the rules and regulations
promulgated thereunder, with respect to the Common Stock offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all the information set forth in the Registration Statement, certain
parts of which are omitted from the Prospectus in accordance with the rules
and regulations of the Commission, and to which reference is hereby made.

After consummation of the Offering, the Company will be subject to the
information and reporting requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and, in accordance therewith, will be
required to file proxy statements, reports and other information with the
Commission. The Registration Statement, as well as any such report, proxy
statement and other information filed by the Company with the Commission, may
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the regional offices of the Commission located at 7 World
Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can be obtained from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Upon
listing of the Common Stock on the New York Stock Exchange, Inc. (the "NYSE"),
reports, proxy statements and other information concerning the Company may be
inspected at the offices of the NYSE, 20 Broad Street, New York, New York
10005.

Statements made in this Prospectus concerning the provisions of any
contract, agreement or other document referred to herein are not necessarily
complete. With respect to each such statement concerning a contract, agreement
or other document filed as an exhibit to the Registration Statement or
otherwise filed with the Commission, reference is made to such exhibit or
other filing for a more complete description of the matter involved, and each
such statement is qualified in its entirety by such reference.

EXCHANGE RATES

The following table sets forth, as of the relevant dates within the
Consolidated Financial Statements of ICD contained elsewhere in this
Prospectus (or the last business date prior thereto), the exchange rate for
the translation of one British pound (GBP) into United States dollars ($)
based on the noon buying rate for cable transfers in British pounds as
reported by the Federal Reserve Bank of New York.

<TABLE>
<CAPTION>
$/GBP
------
<S> <C>
June 1, 1993....................................................... 1.5510
April 29, 1994..................................................... 1.5118
May 31, 1994....................................................... 1.5120
April 28, 1995..................................................... 1.6091
</TABLE>

72
<PAGE>

METROMAIL CORPORATION

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consolidated and Combined Financial Statements of Metromail Corporation:
Report of Independent Public Accountants................................. F-2
Consolidated and Combined Balance Sheets as of December 31, 1994 and 1995
and unaudited as of March 31, 1996...................................... F-3
Consolidated and Combined Statements of Operations for the Years Ended
December 31, 1993, 1994 and 1995 and unaudited for the Three Months
Ended March 31, 1995 and 1996........................................... F-4
Consolidated and Combined Statements of Changes in Shareholder's Equity
for the Years Ended December 31, 1993, 1994 and 1995 and unaudited for
the Three Months Ended March 31, 1996................................... F-5
Consolidated and Combined Statements of Cash Flows for the Years Ended
December 31, 1993, 1994 and 1995 and unaudited for the Three Months
Ended March 31, 1995 and 1996........................................... F-6
Notes to Consolidated and Combined Financial Statements.................. F-7
Financial Statements of Completed Acquisition:
International Communication & Data Plc:
Report of the Auditors.................................................. F-19
Consolidated Balance Sheet as of 31 May 1994 and 30 April 1995.......... F-20
Consolidated Statements of Income for the Year Ended 31 May 1994, the
Eleven Months Ended
30 April 1994 and the Eleven Months Ended 30 April 1995................ F-21
Consolidated Statements of Shareholders' Equity for the Year Ended 31
May 1994 and the Eleven Months Ended 30 April 1995..................... F-22
Statements of Consolidated Cash Flows for the Year Ended 31 May 1994,
the Eleven Months Ended 30 April 1994 and the Eleven Months Ended 30
April 1995............................................................. F-23
Notes to Consolidated Financial Statements.............................. F-24
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the shareholder of Metromail
Corporation and Affiliates:

We have audited the accompanying consolidated and combined balance sheets of
Metromail Corporation and Affiliates as of December 31, 1995 and 1994, and the
related consolidated and combined statements of operations, changes in
shareholder's equity and cash flows for each of the three years ended December
31, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Metromail Corporation and
Affiliates as of December 31, 1995 and 1994 and the results of its operations
and cash flows for each of the three years ended December 31, 1995, in
conformity with generally accepted accounting principles.

As discussed more thoroughly in Note 3 to the financial statements,
effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standard No. 106--Employer's Accounting for Post-Retirement
Benefits Other than Pensions.

Arthur Andersen LLP

Chicago, Illinois
January 19, 1996
(except for the matters
discussed in Note 15 as
to which the date is
May 9, 1996)

F-2
<PAGE>

METROMAIL CORPORATION AND AFFILIATES

CONSOLIDATED AND COMBINED BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------ -----------
1994 1995 1996
-------- -------- -----------
(UNAUDITED)
ASSETS
<S> <C> <C> <C>
Cash and equivalents........................... $ -- $ -- $ --
Receivables, less sales allowances and
allowances for doubtful accounts of $3,586 in
1994, $3,965 in 1995 and $3,984 in 1996....... 56,340 68,438 59,398
Inventories.................................... 4,414 5,658 7,067
Prepaid expenses............................... 2,904 7,449 8,538
Current deferred income taxes.................. 1,185 625 625
-------- -------- --------
Total current assets....................... 64,843 82,170 75,628
Net property, plant and equipment, at cost,
less accumulated depreciation of $39,565 in
1994, $43,392 in 1995 and $45,133 in 1996..... 32,594 37,545 37,712
Goodwill and other intangibles, net of
accumulated amortization of $52,263 in 1994,
$66,614 in 1995 and $69,472 in 1996........... 228,106 252,526 254,782
Deferred income taxes.......................... -- 149 149
Other assets................................... 3,225 6,331 7,407
-------- -------- --------
Total assets............................... $328,768 $378,721 $375,678
======== ======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDER'S EQUITY
<S> <C> <C> <C>
Accounts payable............................... $ 3,323 $ 5,742 $ 4,882
Accrued compensation........................... 5,922 6,073 4,801
Short-term debt................................ 100 1,884 3,840
Short-term debt and advances--due to related
party......................................... 59,637 248,492 248,844
Deferred revenue............................... 5,564 6,721 5,436
Other accrued liabilities...................... 7,420 19,206 20,306
-------- -------- --------
Total current liabilities.................. 81,966 288,118 288,109
Long-term debt--due to related party........... 160,000 -- --
Deferred income taxes.......................... 2,829 -- --
Other noncurrent liabilities................... 5,014 5,211 5,860
-------- -------- --------
Total noncurrent liabilities............... 167,843 5,211 5,860
Shareholder's equity:
Common stock--Metromail, $.01 par value,
75,000,000 authorized shares; 8,600,000
issued and outstanding at December 31, 1994
and 1995 and at March 31, 1996.............. 86 86 86
Additional paid-in capital................... 107,844 111,779 111,779
Retained deficit (includes cumulative
adjustment for currency translation of $0 in
1994, $(237) in 1995 and $(139) in 1996).... (28,971) (26,473) (30,156)
-------- -------- --------
Total shareholder's equity................. 78,959 85,392 81,709
-------- -------- --------
Total liabilities and shareholder's equity. $328,768 $378,721 $375,678
======== ======== ========
</TABLE>

See accompanying Notes to Consolidated and Combined Financial Statements.

F-3
<PAGE>

METROMAIL CORPORATION AND AFFILIATES

CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------- ----------------
1993 1994 1995 1995 1996
-------- -------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Direct marketing sales.......... $127,683 $156,806 $189,713 $38,860 $41,894
Reference sales................. 36,032 38,665 47,474 10,972 12,475
-------- -------- -------- ------- -------
Total net sales............... 163,715 195,471 237,187 49,832 54,369
Database and production costs... 95,016 108,806 134,361 30,279 33,606
Amortization of goodwill........ 6,054 6,608 7,446 1,790 1,889
Selling expenses................ 29,625 37,107 45,913 10,345 11,821
General and administrative
expenses....................... 12,372 14,408 16,645 3,898 4,909
Provisions for doubtful
accounts....................... 1,959 1,848 2,180 425 419
Provision for litigation
expense........................ -- -- -- -- 1,500
-------- -------- -------- ------- -------
Earnings from operations...... 18,689 26,694 30,642 3,095 225
Interest expense--related party. 22,112 18,999 21,329 4,968 5,345
Interest expense................ -- -- 80 -- 60
Other expense (income)--net..... (138) 24 (87) (10) (5)
-------- -------- -------- ------- -------
Earnings (loss) before income
taxes........................ (3,285) 7,671 9,320 (1,863) (5,175)
Income taxes.................... 1,181 5,684 6,585 (130) (1,394)
-------- -------- -------- ------- -------
Net income (loss) from
operations before cumulative
effect of accounting change.. (4,466) 1,987 2,735 (1,733) (3,781)
Cumulative after-tax effect of
change in accounting for post
retirement benefits other than
pensions....................... 4,388 -- -- -- --
-------- -------- -------- ------- -------
Net income (loss)........... $ (8,854) $ 1,987 $ 2,735 $(1,733) $(3,781)
======== ======== ======== ======= =======
</TABLE>

See accompanying Notes to Consolidated and Combined Financial Statements.

F-4
<PAGE>

METROMAIL CORPORATION AND AFFILIATES

CONSOLIDATED AND COMBINED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED SHAREHOLDER'S
STOCK CAPITAL DEFICIT EQUITY
------ ---------- -------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1992......... $86 $107,844 $(22,104) $85,826
Current year loss.................. -- -- (8,854) (8,854)
--- -------- -------- -------
Balance at December 31, 1993......... 86 107,844 (30,958) 76,972
Current year earnings.............. -- -- 1,987 1,987
--- -------- -------- -------
Balance at December 31, 1994......... 86 107,844 (28,971) 78,959
Current year earnings.............. -- -- 2,735 2,735
Currency translation............... -- -- (237) (237)
ICD stock acquired................. -- 3,935 -- 3,935
--- -------- -------- -------
Balance at December 31, 1995......... 86 111,779 (26,473) 85,392
Current year loss (unaudited)...... -- -- (3,781) (3,781)
Currency translation (unaudited)... -- -- 98 98
Balance at March 31, 1996
(unaudited)......................... $86 $111,779 $(30,156) $81,709
=== ======== ======== =======
</TABLE>

See accompanying Notes to Consolidated and Combined Financial Statements.

F-5
<PAGE>

METROMAIL CORPORATION AND AFFILIATES

CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------- ----------------
1993 1994 1995 1995 1996
-------- -------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED
IN) OPERATING ACTIVITIES:
Net income (loss) from
operations.................. $ (8,854) $ 1,987 $ 2,735 $(1,733) $(3,781)
Cumulative effect of change
in accounting for post
retirement benefits other
than pensions............... 4,388 -- -- -- --
Provision for litigation
expense..................... -- -- -- -- 1,500
Depreciation and amortization
of intangibles.............. 7,089 8,174 13,405 3,008 3,538
Amortization of goodwill..... 6,054 6,607 7,446 1,766 1,899
Other--net................... 4 121 (236) -- 98
Net change in assets and
liabilities................. (1,095) (8,685) (13,651) 7,843 2,298
-------- -------- -------- ------- -------
Net cash provided by
operating activities...... 7,586 8,204 9,699 10,884 5,552
CASH FLOWS USED FOR INVESTING
ACTIVITIES:
Capital expenditures......... (13,426) (9,940) (28,459) (6,877) (7,860)
Other investments including
acquisitions, net of cash... -- (19,987) (15,330) -- --
-------- -------- -------- ------- -------
Net cash used for investing
activities................ (13,426) (29,927) (43,789) (6,877) (7,860)
CASH FLOWS PROVIDED BY (USED
FOR) FINANCING ACTIVITIES:
Borrowings and advances from
related parties............. 193,756 253,396 325,381 72,196 74,783
Repayments of borrowings and
advances from related
parties..................... (187,916) (231,673) (296,526) (76,203) (74,431)
Increase in short-term
borrowings.................. -- -- 1,300 -- 1,956
Capital contribution from
R.R. Donnelley.............. -- -- 3,935 -- --
-------- -------- -------- ------- -------
Net cash provided by (used
for) financing activities. 5,840 21,723 34,090 (4,007) 2,308
Net increase in cash and
equivalents................... -- -- -- -- --
Cash and equivalents at
beginning of year........... -- -- -- -- --
-------- -------- -------- ------- -------
Cash and equivalents at end
of year..................... $ -- $ -- $ -- $ -- $ --
======== ======== ======== ======= =======
The changes in assets and
liabilities, net of balances
assumed through acquisitions,
were as follows:
DECREASE (INCREASE) IN
ASSETS:
Receivables--net........... $ (2,250) $(12,418) $ (8,470) $ 8,096 $ 9,040
Inventories--net........... 47 (829) (1,244) 1,139 (1,409)
Prepaid expenses........... (1) 432 (4,545) 1,288 (1,089)
Current deferred income
taxes..................... (908) (486) 560 -- --
Deferred income taxes...... -- -- (149) -- --
Other assets............... (1,000) (1,602) (3,106) -- (1,076)
INCREASE (DECREASE) IN
LIABILITIES:
Accounts payable........... 1,000 246 (1,954) (1,775) (860)
Accrued compensation....... (1,096) 2,299 151 (2,063) (1,272)
Deferred revenue........... -- 2,924 1,157 (564) (1,285)
Other accrued liabilities.. 12 (2,034) 4,873 1,722 (400)
Deferred income taxes...... 842 28 (1,121) -- --
Other noncurrent
liabilities............... 2,259 2,755 197 -- 649
-------- -------- -------- ------- -------
Net change in assets and
liabilities............. $ (1,095) $ (8,685) $(13,651) $ 7,843 $ 2,298
======== ======== ======== ======= =======
</TABLE>

See accompanying Notes to Consolidated and Combined Financial Statements.

F-6
<PAGE>

METROMAIL CORPORATION AND AFFILIATES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

1. ORGANIZATION AND NATURE OF OPERATIONS

Metromail Corporation ("Metromail") is a wholly owned subsidiary of R. R.
Donnelley & Sons Company ("R.R. Donnelley"). Metromail was acquired by R.R.
Donnelley in 1987 in a business combination accounted for as a purchase. On
the date of acquisition, the financial position of Metromail was adjusted to
the fair value of the assets acquired and liabilities assumed by R.R.
Donnelley. All adjustments to Metromail's financial position by R.R. Donnelley
at the date of acquisition have been pushed down to Metromail's financial
statements. The accompanying consolidated and combined financial statements
include the accounts of Metromail and subsidiaries, International
Communication & Data Plc ("ICD") and Data by Design ("DBD"). ICD is an
affiliate of Metromail and an indirect wholly owned subsidiary of R.R.
Donnelley located in the United Kingdom. DBD is a division of a wholly owned
subsidiary of R.R. Donnelley located in the United Kingdom, which was acquired
by R.R. Donnelley in August 1994. The accompanying financial statements have
been restated to reflect the combination of entities under common control by
R.R. Donnelley at December 31, 1995. ICD and DBD are included in the results
of operations of the accompanying consolidated and combined financial
statements from the date of original acquisition by R.R. Donnelley in May 1995
and August 1994, respectively. As discussed in Note 15, ICD was contributed to
Metromail by R.R. Donnelley in February 1996. Subsequent to this contribution,
ICD purchased all of the assets of DBD. Metromail, its wholly owned
subsidiaries, ICD and DBD are collectively referred to hereinafter as the
"Company".

The Company is a leading provider of marketing-oriented consumer information
and reference services which it supplies to a wide variety of organizations
engaged in direct mail, telephone and target marketing, as well as to clients
who need specific reference and information services. In providing these
information services the Company utilizes its proprietary database, which it
believes is one of the most comprehensive and accurate databases in the United
States, containing geographic, demographic, individual and other marketing
information on over 143 million individuals and over 90% of the households in
the United States. The Company has assembled this database over almost 50
years from a wide variety of publicly available and proprietary sources.

The Company operates entirely within the information services industry
segment. Within this segment, the Company offers two general categories of
products and services: direct marketing services and reference services. The
Company provides direct marketing services to clients that include consumer
goods manufacturers, credit card companies, financial institutions, insurance
companies, magazine and book publishers, mail order houses and catalogers,
pharmaceutical companies and retailers. To its direct marketing clients the
Company provides: (i) targeted lists of potential customers; (ii) value-added
enhancements of pre-existing customer lists; (iii) processing and mail
services; and (iv) proprietary marketing database software for personal
computers used to access marketing data from a client's customer database. The
Company's reference services include: (i) a National Directory Assistance
("NDA") database for on-line or operator-assistance providers; (ii) a look-
up/skip-locate service for collection agencies, consumer finance companies and
credit card issuers; and (iii) the Cole directories, in printed form and CD-
ROM, which list households in sequence, by telephone number or address, in
approximately 150 markets in the United States and Canada.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation and Combination

The consolidated and combined financial statements include all accounts of
the Company. All material intercompany balances and transactions are
eliminated in consolidation and combination.

Unaudited Financial Statements

The unaudited consolidated and combined statements of operations and cash
flows for the three months ended March 31, 1995 and 1996, the unaudited
consolidated and combined balance sheet as of March 31, 1996

F-7
<PAGE>

METROMAIL CORPORATION AND AFFILIATES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
and the unaudited consolidated and combined statements of changes in
shareholder's equity for the three months ended March 31, 1996, include, in
the opinion of management, all adjustments necessary to present fairly the
Company's consolidated and combined financial position, results of operations
and cash flows. In the opinion of management, all these adjustments are of a
normal and recurring nature. Operating results for the three months ended
March 31, 1996 are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 1996.

Revenue Recognition and Deferred Revenues

The Company recognizes revenues for direct marketing services at the time
the services are provided. Revenues for reference services are recognized at
the time the service is provided or the product is delivered. The Company's
proprietary database software is generally licensed for three years, and
results in an initial license fee, subsequent annual license and maintenance
fees and customer support service fees. Revenues are recognized when delivery
of the software has occurred, collectibility is probable and the Company
retains no significant obligations under the licensing agreements. Revenues
from customer support services are recognized in the period in which the
support services are performed by the Company.

The Company provides sales allowances for sales credits issued to clients in
the normal course of business. The allowances are recorded as reductions of
sales and are included in net sales in the accompanying statement of
operations. The reductions included in net sales were $4.1 million, $3.6
million and $5.1 million for the years ended 1993, 1994 and 1995,
respectively.

Inventories

Inventories include materials, labor and production overhead and are carried
at weighted average cost.

Foreign Currency Translation

The financial statements of ICD are translated into U.S. dollars using
exchange rates in effect at the end of the period for assets and liabilities
and average exchange rates for results of operations during the period of
inclusion in the Company's Financial Statements. Gains and losses arising from
translation are reflected as a separate component of Retained Deficit and are
not included in results of operations.

Property, Plant and Equipment--Capitalization and Depreciation

Property, plant and equipment are stated at cost. Depreciation is computed
using the straight-line method based on useful lives of up to 30 years for
buildings and three to 10 years for machinery, equipment and computer
hardware. Maintenance and repair costs are charged to expense as incurred.
When properties are retired or disposed, the costs and related depreciation
reserves are eliminated and the resulting profit or loss is recognized in
income.

Intangible Assets--Capitalization and Amortization

Intangible assets primarily consist of databases and data, internal software
costs, software development costs and goodwill.

Goodwill primarily consists of the excess of purchase price over the fair
market value of net assets acquired by R.R. Donnelley as a result of its
acquisition of Metromail in 1987. Goodwill also includes the excess of
purchase price over the fair market value of net assets for businesses the
Company has acquired and accounted for as a purchase. These costs are
amortized over their estimated useful lives of primarily 40 years.

F-8
<PAGE>

METROMAIL CORPORATION AND AFFILIATES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Databases and data are stated at cost and are amortized over their estimated
useful life of three years. These assets represent costs incurred to acquire
databases, significantly enhance existing databases, acquire lists and acquire
data through Company-generated surveys. Costs incurred for routine maintenance
and updating of databases are expensed as incurred.

Internal software represents costs incurred to purchase externally developed
software, external consulting costs and direct internal costs incurred in the
development of various production and administrative applications. Intangible
assets as of December 31, 1995 included $5.4 million related to a major
redesign of the file structure of the Company's database. This new database
structure will support the delivery of the Company's information service
offerings. The costs related to this redesign will be amortized, commencing
when the file structure becomes operational, over its expected period of
benefit of five years. All other internal software is amortized over three
years.

Software development costs represent costs incurred to develop database
software which is licensed to clients. The Company capitalizes software
development costs when the technological feasibility of the product has been
assured, through the time at which the product is available for licensing to
its clients, in accordance with Statement of Financial Accounting Standards
No. 86. These costs are amortized over their estimated useful life of three
years. All development costs incurred prior to achieving technological
feasibility are expensed as incurred.

Impairment of Long-lived Assets

The Company periodically assesses whether events or circumstances have
occurred that may indicate the carrying value of its long-lived assets may not
be recoverable. When such events or circumstances indicate the carrying value
of an asset may be impaired, the Company uses an estimate of the future
undiscounted cash flows to be derived from the asset over the remaining useful
life of the asset to assess whether or not the asset is recoverable. If the
future undiscounted cash flows to be derived over the life of the asset do not
exceed the asset's net book value, the Company recognizes an impairment loss
for the amount by which the net book value of the asset exceeds its estimated
fair market value. The Company has not recognized any material impairment
losses for the years ended December 31, 1993, 1994 and 1995. Management does
not believe any material impairment of long-lived assets exists as of December
31, 1995.

Income Taxes

Metromail and its wholly owned subsidiaries are included in the consolidated
federal income tax return of R.R. Donnelley. DBD and ICD have historically
been included in the consolidated tax return of R.R. Donnelley's wholly owned
United Kingdom subsidiaries. The consolidated and combined tax provision is
presented as if the Company filed separate tax returns. Deferred taxes are
provided when tax laws and financial accounting standards differ with respect
to the amount of income calculated in a given year and the bases of assets and
liabilities, in accordance with Statement of Financial Accounting Standards
No. 109. Income taxes are paid by R.R. Donnelley on behalf of Metromail.

Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109--Accounting for Income Taxes. The impact of the
adoption was not material to the Company's financial position or results of
operations.

Use of Estimates and Assumptions

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

F-9
<PAGE>

METROMAIL CORPORATION AND AFFILIATES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)

3. TRANSACTIONS WITH R. R. DONNELLEY & SONS COMPANY

Related party transactions with R.R. Donnelley not disclosed elsewhere in
the financial statements are as follows:

Employee Benefit Programs

The Company participates in various employee benefit programs which are
sponsored by R.R. Donnelley. These programs include medical, dental and life
insurance and workers compensation. The Company reimburses R.R. Donnelley for
its proportionate cost of these programs based on historical experience and
relative headcount. The costs reimbursed to R.R. Donnelley include costs for
reported claims as well as incurred but not reported claims. The Company
recorded expense related to the reimbursement of these costs of approximately
$6.2 million, $7.3 million and $8.8 million in the years ended December 31,
1993, 1994 and 1995, respectively. The costs are charged to database and
production costs, selling expense and general and administrative expense based
on the number of employees in each of these categories. The Company believes
its allocation of the proportionate cost is reasonable and, in all material
respects, approximates what would have been incurred had the Company operated
on a stand-alone basis. R.R. Donnelley is liable for all payments under these
programs and, thus, no liability for these benefits has been reflected on the
accompanying balance sheet.

Post Retirement Medical and Life Insurance Benefits

The Company also participates in a post retirement benefit program sponsored
by R.R. Donnelley which provides certain post retirement medical and life
insurance benefits. The Company reimburses R.R. Donnelley for its
proportionate cost of these programs based on an actuarial estimation of the
proportionate costs attributable to all of the Company's employees. The
Company recorded expense related to the reimbursement of these costs of
approximately $1.3 million, $1.4 million and $1.2 million in the years ended
December 31, 1993, 1994 and 1995, respectively. The Company is liable for
payments for post retirement benefits for certain groups of employees. R.R.
Donnelley is liable for payments of post retirement benefits for all other
employees of the Company not specifically included in the groups for which the
Company retains liability. The liability related to the portion of post
retirement benefits which will be paid by the Company has been reflected in
other noncurrent liabilities in the accompanying financial statements in the
amounts of $3.6 million and $4.8 million as of December 31, 1994 and 1995,
respectively. The liability related to the portion of post retirement
liability retained by R.R. Donnelley, net of associated deferred taxes
receivable from R.R. Donnelley, has been reflected in short-term debt and
advances due to related parties in the accompanying financial statements.

Effective January 1, 1993, R.R. Donnelley adopted Statement of Financial
Accounting Standard No. 106--Employers' Accounting for Post-retirement
Benefits Other than Pensions. SFAS 106 requires companies to charge to expense
the expected cost of post retirement benefits during the years that employees
render the service. R.R. Donnelley elected to recognize immediately the
transition obligation for future benefits to be paid related to past employee
services. The Company recorded expense of $7.3 million before income tax
benefits of $2.9 million ($4.4 million after tax) for their estimated
proportionate share of the cumulative effect of the adoption of this
accounting principle in 1993.

Corporate Services

R.R. Donnelley provides certain support services to the Company including
legal, tax, treasury, benefits administration, real estate, audit and
corporate development services. These charges are allocated by R.R. Donnelley
to the Company based on various formulas which reasonably approximate the
actual costs incurred. The expenses recorded by the Company for these
allocations were approximately $1.1 million, $1.4 million and $1.8 million for
the years ended December 31, 1993, 1994 and 1995, respectively, and are
included in general

F-10
<PAGE>

METROMAIL CORPORATION AND AFFILIATES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
and administrative expenses in the accompanying income statement. The amounts
allocated by R.R. Donnelley are not necessarily indicative of the actual costs
which may have been incurred had the Company operated as an entity
unaffiliated with R.R. Donnelley. However, the Company believes that the
allocation is reasonable and in accordance with the Securities and Exchange
Commission's Staff Accounting Bulletin No. 55.

Metromail Computer Processing Services

The Company provides computer processing services to R.R. Donnelley for most
of the corporate software applications used by R.R. Donnelley. The Company
charges R.R. Donnelley the estimated cost of providing these services. These
costs include hardware, software and labor costs associated with running the
various application programs used by R.R. Donnelley. The costs reimbursed by
R.R. Donnelley were approximately $2.8 million, $3.1 million and $3.5 million
for the years ended December 31, 1993, 1994 and 1995, respectively. These
amounts have been recorded as reductions of database and production costs in
the accompanying income statement. The Company believes the reimbursed costs
reasonably approximate the actual costs incurred by the Company.

Sales through R.R. Donnelley

The Company sells products and services to clients who are also clients of
R.R. Donnelley. For some of these sales, the Company's clients are billed by
R.R. Donnelley. R.R. Donnelley then allocates to the Company that portion of
the revenue attributable to the Company's performed services, as agreed upon
by the Company and its client. These sales approximated $22.8 million, $20.9
million and $22.7 million for the years ended December 31, 1993, 1994 and
1995, respectively. The receivables from the Company's clients related to
these sales are excluded from the Company's balance sheet as R.R. Donnelley
retains risk of loss with respect to collection. The receivables from R.R.
Donnelley related to these sales are included in short-term debt and advances
due to related party discussed in Note 11.

Stock Purchase Plan

The Company participates in a stock purchase plan for selected managers and
key staff employees which is sponsored by R.R. Donnelley. Under the plan, the
Company is required to contribute an amount equal to 70% of participants'
contributions, of which 50% is applied to the purchase of R.R. Donnelley
Common Stock and 20% is paid in cash. The number of shares required for the
plan for the year ended December 31, 1995 will depend upon the extent to which
eligible participants subscribe during the subscription period in the first
quarter of 1996 and the price of R.R. Donnelley's Common Stock on March 16,
1996. Amounts charged to expense by the Company for this plan were $0.4
million, $0.6 million and $0.3 million for the years ended December 31, 1993,
1994 and 1995, respectively.

Impact of Operating as a Stand Alone Entity

The accompanying financial statements reflect all of the Company's costs of
doing business, including all expenses incurred by R.R. Donnelley on the
Company's behalf in accordance with SEC Staff Accounting Bulletin No. 55.
However, the Company estimates it would have incurred increased expenses for
additional senior management and administrative support functions associated
with being a stand alone public entity. In addition, the Company estimates
that it would have incurred additional sales commission expense of
approximately $0.5 million for the year ended December 31, 1995 payable to
R.R. Donnelley related to sales to clients of the Company who are also clients
of R.R. Donnelley. These expenses would have been offset partially by reduced
database and production costs as a result of increased charges for computer
services to be provided by the Company to R.R. Donnelley and decreased retiree
medical costs as a result of the assumption by R.R. Donnelley of the
liabilities and expenses associated with retirees and current Metromail
employees who have

F-11
<PAGE>

METROMAIL CORPORATION AND AFFILIATES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)

met the eligibility requirements for those benefits. The estimated pro forma
impact of all of the above adjustments would have reduced pretax income by
approximately $0.9 million for the year ended December 31, 1995.

4. INVENTORIES:

The components of the Company's inventories were as follows:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------- 1996
1994 1995 (UNAUDITED)
------ ------ -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Raw materials................................... $ 802 $2,119 $2,768
Work in process................................. 3,612 3,539 4,299
------ ------ ------
Total....................................... $4,414 $5,658 $7,067
====== ====== ======
</TABLE>

Raw material inventories consist mainly of paper and other materials used in
the manufacturing of directories. Work in process inventories consist of costs
associated with jobs not completed for list, list enhancement, lettershop and
directories in process.

5. PROPERTY AND EQUIPMENT:

Property and equipment consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
---------------- 1996
1994 1995 (UNAUDITED)
------- ------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Land...................... $ 1,439 $ 1,439 $ 1,439
Buildings and
improvements............. 26,237 27,208 27,208
Machinery, equipment and
computer hardware........ 44,483 52,290 54,198
------- ------- -------
Total property and
equipment.............. 72,159 80,937 82,845
Accumulated depreciation.. (39,565) (43,392) (45,133)
------- ------- -------
Net property and
equipment.............. $32,594 $37,545 $37,712
======= ======= =======
</TABLE>

Depreciation expense included in the Consolidated and Combined Statements of
Operations was $4.9 million, $5.2 million and $6.5 million for the years ended
December 31, 1993, 1994 and 1995, respectively.

6. INTANGIBLE ASSETS

Intangible assets consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------ 1996
1994 1995 (UNAUDITED)
-------- -------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Databases and software development
costs.................................. $ 21,574 $ 44,811 $ 49,925
Goodwill................................ 258,795 274,329 274,329
-------- -------- --------
Total intangibles................... 280,369 319,140 324,254
Accumulated amortization................ (52,263) (66,614) (69,472)
-------- -------- --------
Total intangibles, net.............. $228,106 $252,526 $254,782
======== ======== ========
</TABLE>

Amortization expense included in the Consolidated and Combined Statements of
Operations was $8.2 million, $9.6 million and $14.4 million for the years
ended December 31, 1993, 1994 and 1995, respectively.

F-12
<PAGE>

METROMAIL CORPORATION AND AFFILIATES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)

7. OTHER ASSETS

Other assets include investment tax credits recorded in connection with an
investment and employment agreement between the Company and the state of
Nebraska. The credits recorded in other assets are approximately $3.2 million
and $4.0 million as of December 31, 1994 and 1995, respectively. Under the
terms of the agreement, the Company must maintain certain investments in plant
and equipment and the number of personnel in the state over a defined period
of time. The Company records the income derived from this agreement in the
period in which the required wage and capital expenditures are made. The
investment credits will be realized through reductions of sales, use and other
state taxes in future periods. Approximately $3.1 million of these tax credits
expire in the year 2003 and $0.9 million expire in the year 2010. The benefits
associated with these credits are recorded in earnings from operations in the
amount of $0.9 million, $1.0 million and $0.9, for the years ended December
31, 1993, 1994 and 1995, respectively. The credits are classified in database
and production costs, selling expense and general and administrative expense
based on a proration of the amount of wage and capital expenditures applicable
to each of the respective areas.

8. PENSION PLAN

The Company's pension plan (the "Plan") is a defined benefit pension plan
sponsored by the Company for its employees. All contributions to the Plan are
made by the Company. Employees are considered eligible when they reach 21
years of age. The Plan provides a normal retirement benefit equal to the sum
of the following:

. The benefit accrued as of December 31, 1990;

. 1.5% of covered earnings for each year of benefit services earned after
December 31, 1990, up to a maximum of 38 total years of benefit service
(including years of benefit service earned prior to 1991);

. 0.5% of covered earnings in excess of covered compensation for each year
of benefit services earned after December 31, 1990, up to a maximum of 38
total years of benefit service (including years of benefit service earned
prior to 1991); and

. 2.0% of covered earnings for each year of benefit service in excess of 38
years.

Participants are 100 percent vested upon the completion of five years of
vesting service; provided, however, that a participant who was employed by the
Company prior to 1995 will be vested upon attainment of age 55 regardless of
such participant's years of service. Plan participants are eligible for normal
benefits at age 65 but may elect early retirement after age 55. The
participants may also elect to continue working beyond age 65 and defer
retirement.

Net pension expenses (credits) included in operating results for the Plan
for the years ended December 31 were:

<TABLE>
<CAPTION>
1993 1994 1995
------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost.................................. $ 1,273 $1,602 $ 1,386
Interest cost on the projected benefit
obligation................................... 1,657 1,893 2,027
Actual (return) loss on plan assets........... (1,723) 625 (6,506)
Amortization of unrecognized prior service
costs and of net obligation at adoption of
SFAS No. 87 and deferrals.................... 242 (2,443) 4,542
------- ------ -------
Total expense............................. $ 1,449 $1,677 $ 1,449
======= ====== =======
</TABLE>

The actuarial computations that derived the above amounts assumed a discount
rate on the projected benefit obligations of 7.25% at December 31, 1995, 8.5%
at December 31, 1994 and 7.5% at December 31, 1993, an expected long-term rate
of return on Plan assets of 9.5% and annual salary increases of 4.0%.

F-13
<PAGE>

METROMAIL CORPORATION AND AFFILIATES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)

The Plan's assets include assets contributed by R.R. Donnelley for another
benefit plan of a wholly owned subsidiary of R.R. Donnelley not included in
these financial statements. Had these assets been excluded from plan assets,
pension expense would not have been materially impacted for the years ended
December 31, 1993, 1994 and 1995, respectively.

Plan assets are mainly invested in marketable securities valued at the last
quoted market price during the fiscal year. The funded status and prepaid
pension cost as of December 31 are as follows:

<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Fair value of Plan assets.............................. $21,706 $33,095
------- -------
Actuarial present value of benefit obligations:
Vested............................................... 15,624 22,756
Non-vested........................................... 1,175 1,709
------- -------
Total accumulated benefit obligations.................. 16,799 24,465
Additional amounts related to projected wage increases. 6,810 9,264
------- -------
Projected benefit obligations for services rendered to
date.................................................. 23,609 33,729
------- -------
Plan assets under projected benefit obligations........ (1,903) (634)
Unrecognized prior service cost........................ 690 867
Unrecognized net (gain) loss from experience........... (1,327) 1,157
Unrecognized portion of net transition obligation...... 1,090 920
------- -------
Prepaid (accrued) pension costs.................... $(1,450) $ 2,310
======= =======
</TABLE>

In the event of Plan termination, the Plan provides that no funds can revert
to the Company and any excess assets over Plan liabilities must be used to
fund retirement benefits.

9. LEASE OBLIGATIONS:

The Company leases office space and various office equipment. The leases are
mainly accounted for as operating leases. Rental costs under the operating
lease agreements approximated $8.0 million, $8.7 million and $9.4 million for
the years ended December 31, 1993, 1994 and 1995, respectively.

Minimum future lease obligations in effect at December 31, 1995 are:
<TABLE>
<CAPTION>
OBLIGATION
--------------
(IN THOUSANDS)
<S> <C>
Period ending December 31,
1996..................................................... $ 8,750
1997..................................................... 8,221
1998..................................................... 6,449
1999..................................................... 5,159
2000 and thereafter...................................... 4,196
-------
Total.................................................. $32,775
=======
</TABLE>

10. COMMITMENTS AND CONTINGENCIES

The Company is a party to certain litigation arising in the ordinary course
of business which, in the opinion of the Company, will not have a material
adverse effect on the operations or financial position of the Company. See
note 15 for a discussion of certain litigation against the Company, R.R.
Donnelley and other non-affiliated persons and entities.

F-14
<PAGE>

METROMAIL CORPORATION AND AFFILIATES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)

11. DEBT AND ADVANCES DUE TO A RELATED PARTY:

The Company's debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
----------------- -----------
1996
1994 1995 (UNAUDITED)
-------- -------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Notes payable and accrued interest
payable to Caslon Incorporated:
Grid Note, dated October 12, 1987...... $ 53,082 $ 57,934 $ 54,482
Fixed Note, 9.75%, dated August 13,
1987.................................. 160,000 160,000 160,000
Advance due R.R. Donnelley............... 6,555 30,558 34,362
-------- -------- --------
Total debt and accrued interest...... $219,637 $248,492 $248,844
======== ======== ========
</TABLE>

Caslon Incorporated ("Caslon") is a wholly owned subsidiary of R.R.
Donnelley. The Grid Note is payable on demand as determined by an officer or
other authorized agent of Caslon. The Grid Note funds operating and investing
activities of the Company's domestic operations. Interest on the Grid Note is
payable on the first day of each calendar quarter based on an interest rate
equal to the prime rate in the preceding calendar quarter as published in The
Wall Street Journal. As of December 31, 1994 and 1995 and March 31, 1996, the
interest rate on the Grid Note was 7.75%, 8.75% and 8.5%, respectively. The
Fixed Note is payable the earlier of September 1, 1997 or the date at which
the Company is no longer a wholly owned subsidiary of R.R. Donnelley. Interest
on the Fixed Note is payable on the first day of each calendar quarter based
on an interest rate equal to 9.75% per annum.

Total accrued interest payable included in the above amounts is $5.0
million, $5.2 million and $5.1 million as of December 31, 1994 and 1995 and
March 31, 1996, respectively.

The debt is classified on the accompanying balance sheet in accordance with
the above stated terms. The Grid Note is classified as short term at December
31, 1994 and 1995 and March 31, 1996. The Fixed Note is classified as long
term at December 31, 1994 and as short term at December 31, 1995 and March 31,
1996.

Advances due to related party represents advances from R.R. Donnelley to
fund operating and investing activities, net of cash advanced to R.R.
Donnelley from operating cash flows generated by the Company and receivables
resulting from sales through R.R. Donnelley discussed in Note 3. This payable
is periodically transferred by R.R. Donnelley into the Grid Note borrowings
discussed above.

12. DEBT

ICD has a $4.6 million revolving credit agreement. The amount outstanding
under this facility was $1.9 million and $3.8 million at December 31, 1995 and
March 31, 1996, respectively. The total amounts outstanding under the facility
are guaranteed by R.R. Donnelley.

13. INCOME TAXES:

The components of the provision for taxes for the years ended December 31
are as follows:

<TABLE>
<CAPTION>
1993 1994 1995
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal.............................................. $1,024 $4,929 $5,435
State................................................ 157 755 832
Foreign.............................................. -- -- 318
------ ------ ------
Total tax provision.............................. $1,181 $5,684 $6,585
====== ====== ======
</TABLE>

F-15
<PAGE>

METROMAIL CORPORATION AND AFFILIATES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)

The current and deferred portions of the income tax provision are as
follows:

<TABLE>
<CAPTION>
1993 1994 1995
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Current........................................... $1,247 $6,142 $7,295
Deferred.......................................... (66) (458) (710)
------ ------ ------
Total provision............................... $1,181 $5,684 $6,585
====== ====== ======
</TABLE>

A reconciliation of the effective tax rate from statutory U.S. federal
income tax rate of 35% for the years ended December 31 is as follows:

<TABLE>
<CAPTION>
1993 1994 1995
----- ---- ----
<S> <C> <C> <C>
Federal rate.......................................... 35.0 % 35.0% 35.0%
State taxes........................................... (4.8) 9.8 8.9
Foreign taxes......................................... -- -- 2.4
Goodwill amortization................................. (64.5) 27.7 23.0
Other................................................. (1.7) 1.6 1.4
----- ---- ----
Effective tax rate................................ (36.0)% 74.1% 70.7%
===== ==== ====
</TABLE>

As of December 31, 1994 and 1995, total current deferred tax assets and
total noncurrent deferred tax liabilities are as follows:

<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Allowance for doubtful accounts........................ $ 661 $ 594
Inventory.............................................. (1,257) (1,200)
Vacation liability..................................... 605 678
Payroll and related liabilities........................ 953 153
Miscellaneous, other................................... 223 400
------- -------
Total net current deferred tax asset............... 1,185 625
------- -------
Accumulated depreciation............................... (4,132) (3,006)
Goodwill and intangibles............................... 750 974
Other intangibles...................................... (933) 1,146
Pension accrual........................................ (26) (898)
Post retirement liabilities............................ 1,450 1,933
Miscellaneous, other................................... 62 --
------- -------
Total net noncurrent deferred tax (liability)
asset............................................. (2,829) 149
------- -------
Total.............................................. $(1,644) $ 774
======= =======
</TABLE>

The Company has not provided a valuation allowance for deferred tax assets
because, although realization is not assured, the Company believes it is more
likely than not that such tax assets will be recognized through reversals of
taxable timing differences and taxable income in future periods.

DBD recorded pretax losses during 1995 of $0.5 million. No tax benefit or
asset has been recorded for these losses because such losses reduce taxable
income of R.R. Donnelley's wholly owned United Kingdom subsidiary.

Taxes payable are included in debt and advances due to R.R. Donnelley and
its subsidiaries.

F-16
<PAGE>

METROMAIL CORPORATION AND AFFILIATES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)

14. ACQUISITIONS

The Company acquired Customer Insight Company, Inc. ("CIC") in June 1994 and
a wholly owned subsidiary of R.R. Donnelley acquired ICD in May 1995. Both
acquisitions were accounted for as purchases. These companies are wholly owned
subsidiaries of Metromail or R.R. Donnelley as of December 31, 1995.

CIC was purchased for approximately $20.0 million. The excess of the
purchase price over the fair market value of net assets acquired, including
identifiable intangible assets, has been allocated to goodwill in the amount
of approximately $16.8 million. The goodwill is being amortized over its
estimated useful life of 15 years.

ICD was purchased for approximately $15.3 million. The excess of the
purchase price over the fair market value of net assets acquired, including
identifiable intangible assets, has been allocated to goodwill in the amount
of $14.7 million. The goodwill is being amortized over its estimated useful
life of 40 years.

The following unaudited pro forma statements of operations were prepared to
illustrate the estimated effects of the acquisition of ICD as if it had
occurred on January 1, 1994.

The pro forma adjustments are based on the available information and upon
certain assumptions the Company believes are reasonable. The pro forma results
of operations do not purport to represent what the Company's results of
operations would actually have been if such transaction in fact had occurred
on January 1, 1994 or to project the Company's results of operations for any
future period.

The pro forma income statements presented below include adjustments to
reflect increased interest expense, amortization expense for goodwill and
other intangibles, as well as adjustments to the income tax provision to
reflect the tax effect of the aforementioned adjustments at the applicable
statutory rates. Adjustments related to interest expense are due to increased
pro forma related party debt to finance the acquisitions. Adjustments to
goodwill reflect the increased pro forma goodwill resulting from the
acquisition. Adjustments to other intangible amortization reflect the pro
forma change in capitalization and amortization policy in order to be
consistent with the accounting policies of the Company.

<TABLE>
<CAPTION>
1994 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Direct marketing sales................................. $168,948 $194,768
Reference sales........................................ 38,665 47,474
-------- --------
Total net sales...................................... 207,613 242,242
Database and production costs.......................... 112,972 135,897
Amortization of goodwill............................... 6,996 7,571
Selling expenses....................................... 39,619 46,907
General and administrative expenses.................... 19,452 20,664
-------- --------
Earnings from operations........................... 28,574 31,203
Interest expense--related party........................ 20,786 21,766
Other expense (income)--net............................ 24 (7)
-------- --------
Earnings before income taxes....................... 7,764 9,444
Income taxes........................................... 5,842 6,667
-------- --------
Net income......................................... $ 1,922 $ 2,777
======== ========
</TABLE>

The acquisition of DBD in 1994 discussed in Note 1 above was not material to
the Company's financial statements.

F-17
<PAGE>

METROMAIL CORPORATION AND AFFILIATES

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONCLUDED)

15. SUBSEQUENT EVENTS

In February 1996, a wholly owned subsidiary of R.R. Donnelley contributed
ICD to Metromail. Subsequent to the contribution, ICD purchased all of the net
assets of DBD. This contribution and purchase between entities under R.R.
Donnelley's common control resulted in the historical costs bases of ICD and
DBD (prior to their contribution and purchase) being carried over to Metromail
with no gain or loss recognized as a result of these transactions.

In March 1996, each outstanding share of Common Stock, par value $.40 per
share, was reclassified into 8,600 shares of Common Stock, par value $.01 per
share, the authorized number of shares of Common Stock was increased from
1,000 to 75,000,000 and 20,000,000 shares of Preferred Stock were authorized.
The reclassification of the Company's Common Stock has been retroactively
reflected in the accompanying financial statements.

In March 1996, the Company filed a registration statement with the
Securities and Exchange Commission for an initial public offering of the
Company's Common Stock.

The Company approved the issuance of 34,000 shares of restricted stock to
certain persons who are or will be employed by the Company upon the closing of
the Offering. The shares vest over a four-year period during which time the
restrictions will be removed and the stock delivered to the employees for no
additional consideration. The Company will record the fair value of the
restricted stock based upon the initial public offering price as compensation
expense over the period in which the restricted stock vest.

On April 18, 1996, a purported class action seeking restitution, actual and
exemplary damages in an unspecified amount and injunctive relief was filed in
Texas state court against the Company, R.R. Donnelley and other non-affiliated
persons and entities alleging, among other things, that the collection by the
Company of consumer survey information was fraudulently undertaken and that
the processing of surveys by Texas state prisoners on behalf of the Company
was negligent and in violation of privacy rights. Because the case is in its
early stages, it is not possible to make a meaningful determination of the
ultimate outcome or to make an estimate of the loss, if any, should the
outcome be unfavorable. The Company has made a preliminary estimate of its
costs of litigating the case and has accrued and expensed $1.5 million in the
March 31, 1996 financial statements. The Company intends to defend vigorously
this suit. R.R. Donnelley has agreed to pay the legal fees and expenses
incurred by the Company in defending this case. The Company would be
responsible for any other amounts payable by it as a result of this case.

F-18
<PAGE>

REPORT OF THE AUDITORS

To the Members of International Communication & Data PLC:

We audited the United Kingdom consolidated financial statements for the year
ended May 31 1994 and reported on those financial statements on October 31
1994.

We have now been engaged to report to you on the accompanying consolidated
balance sheet of International Communication & Data PLC as of May 31 1994 and
the consolidated statement of income, changes in shareholders' equity and cash
flows for the year ended May 31 1994, all expressed in pounds sterling, which
have been reformatted from UK to US format.

As described in the notes to the Consolidated Financial Statements, the
company's Directors are responsible for the preparation of the financial
statements. It is our responsibility to form an opinion, based on our audit,
on those statements and to report our opinion to you.

We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes an examination, on a test basis,
of evidence relevant to the amounts and disclosures in the financial
statements. It also includes an assessment of the significant estimates and
judgements made by the Directors in the preparation of the financial
statements, and of whether the accounting policies are appropriate to the
Company's circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or errors. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.

In our opinion, the financial statements referred to above, present fairly,
in all material respects, the consolidated financial position of International
Communication & Data PLC as of May 31 1994 and the consolidated results of
operations and cash flow for the year ended May 31 1994 in conformity with
generally accepted accounting principles in the United Kingdom (which differ
in certain respects from generally accepted accounting principles in the
United States).

BDO Stoy Hayward

Chartered Accountants and Registered
Auditors

London

May 10, 1996

F-19
<PAGE>

INTERNATIONAL COMMUNICATION & DATA PLC

CONSOLIDATED BALANCE SHEETS

(AMOUNTS IN BRITISH POUNDS)

<TABLE>
<CAPTION>
30 APRIL 1995
31 MAY 1994 (UNAUDITED)
----------------- -----------------
<S> <C> <C>
ASSETS:
Current assets
Cash................................... (Pounds) 265,943 (Pounds) 96,506
Accounts receivable, net of allowance
for doubtful accounts of
((Pounds)262,400 at 31 May 1994 and
268,346 at 30 April 1995)............. 2,023,937 1,336,633
Prepaid expenses....................... 92,114 993,317
----------------- -----------------
Total current assets................. 2,381,994 2,426,456
Property, plant and equipment (net)...... 5,073,385 5,081,520
Investments.............................. 150,001 150,001
----------------- -----------------
Total assets......................... 7,605,380 7,657,977
----------------- -----------------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities
Bank overdraft......................... 101 508,309
Accounts payable....................... 3,560,665 3,287,573
Accrued liabilities.................... 501,880 765,358
----------------- -----------------
Total current liabilities............ 4,062,646 4,561,240
Long-term debt........................... 268,352 291,419
----------------- -----------------
Total liabilities.................... 4,330,998 4,852,659
----------------- -----------------
Shareholders' equity:
Share capital.......................... 6,005,391 3,229,068
Accumulated deficit.................... (2,731,009) (423,750)
----------------- -----------------
Total shareholders' equity............. 3,274,382 2,805,318
----------------- -----------------
Total liabilities and shareholders'
equity.............................. (Pounds)7,605,380 (Pounds)7,657,977
================= =================
</TABLE>

The accompanying notes are an integral part of these consolidated balance
sheets.

F-20
<PAGE>

INTERNATIONAL COMMUNICATION & DATA PLC

CONSOLIDATED STATEMENTS OF INCOME

(AMOUNTS IN BRITISH POUNDS)

<TABLE>
<CAPTION>
YEAR 11 MONTHS ENDED 11 MONTHS ENDED
ENDED 30 APRIL 1994 30 APRIL 1995
31 MAY 1994 (UNAUDITED) (UNAUDITED)
------------------ ----------------- -----------------
<S> <C> <C> <C>
Revenue................. (Pounds) 7,504,234 (Pounds)6,015,950 (Pounds)5,307,800
Data and production
costs.................. (2,311,446) (2,303,070) (1,292,204)
Selling, general and
administration
expenses............... (1,937,306) (1,925,900) (2,897,760)
Depreciation and
amortisation credit
(expense).............. (1,881,324) (1,610,792) (1,502,806)
------------------ ----------------- -----------------
Operating (loss) income. 1,374,158 176,188 (384,970)
Fixed asset write-down
net of profit on
disposal of
discontinued
operations............. (169,300) 48,200 --
------------------ ----------------- -----------------
Loss (income) from
operations............. 1,204,858 224,388 (384,970)
Interest expense........ (115,558) (115,750) (84,094)
------------------ ----------------- -----------------
1,089,300 108,638 (469,064)
Income taxes............ (64,000) -- --
------------------ ----------------- -----------------
Net (loss) income... (Pounds) 1,025,300 (Pounds) 108,638 (Pounds) (469,064)
================== ================= =================
</TABLE>

The accompanying notes are an integral part of these consolidated statements of
income.

F-21
<PAGE>

INTERNATIONAL COMMUNICATION & DATA PLC

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(AMOUNTS IN BRITISH POUNDS)

<TABLE>
<CAPTION>
TOTAL
CONSOLIDATED
ACCUMULATED SHAREHOLDERS'
ORDINARY SHARES SHARE PREMIUM GOODWILL RESERVE DEFICIT EQUITY
----------------- ----------------- ---------------- ------------------ -----------------
<S> <C> <C> <C> <C> <C>
Balance 1 June 1993..... (Pounds)2,848,890 (Pounds)2,615,676 (Pounds)(216,490) (Pounds)(3,756,309) (Pounds)1,491,767
Share issue........... 380,178 160,647 -- -- 540,825
Current year earnings. -- -- -- 1,025,300 1,025,300
Transfer to P&L....... -- -- 216,490 -- 216,490
----------------- ----------------- ---------------- ------------------ -----------------
Balance 31 May 1994..... 3,229,068 2,776,323 -- (2,731,009) 3,274,382
Cancellation of share
premium (unaudited).. -- (2,776,323) -- 2,776,323 --
11 months earnings
(unaudited).......... -- -- -- (469,064) (469,064)
----------------- ----------------- ---------------- ------------------ -----------------
Balance 30 April 1995
(unaudited)............ (Pounds)3,229,068 (Pounds) -- (Pounds) -- (Pounds) (423,750) (Pounds)2,805,318
================= ================= ================ ================== =================
</TABLE>

The accompanying notes are an integral part of these consolidated statements of
shareholders' equity.

F-22
<PAGE>

INTERNATIONAL COMMUNICATION & DATA PLC

STATEMENTS OF CONSOLIDATED CASH FLOWS

(AMOUNTS IN BRITISH POUNDS)

<TABLE>
<CAPTION>
11 MONTHS ENDED 11 MONTHS ENDED
YEAR ENDED 30 APRIL 1994 30 APRIL 1995
31 MAY 1994 (UNAUDITED) (UNAUDITED)
----------------- ---------------- ----------------
<S> <C> <C> <C>
Cash flows from
operating activities
Operating (loss)
income............... (Pounds)1,374,158 (Pounds) 176,188 (Pounds)(384,970)
Adjustments to
reconcile operating
(loss) income to cash
flows on operating
activities
--depreciation and
amortisation......... 1,881,324 1,610,792 1,502,806
--elimination of net
book value of fixed
assets in respect of
subsidiary sold...... 172,990 172,990 --
Changes in assets and
liabilities
--decrease in
inventories.......... 13,901 13,901 --
--(increase) decrease
in accounts
receivable........... (343,876) 3,598 (213,899)
--increase (decrease)
in accounts payable
and other
liabilities.......... (667,976) (1,024,857) 136,003
----------------- ---------------- ----------------
Net cash (outflow)
inflow from operating
activities............. 2,430,521 952,612 1,039,940
Return on investment and
servicing of finance
Interest received..... 7,619 6,984 1,741
Interest paid......... (48,906) (44,831) (85,910)
----------------- ---------------- ----------------
Net cash flow from
return on investment
and servicing of
finance................ (41,287) (37,846) (84,169)
----------------- ---------------- ----------------
Cash flows from
investing activities
Purchase of property,
plant and equipment
and intangible fixed
assets............... (2,665,766) (1,858,820) (1,510,866)
Proceeds from sale of
subsidiary
undertaking.......... 264,690 264,690 --
----------------- ---------------- ----------------
Net cash used in
investing activities... (2,401,076) (1,594,130) (1,510,866)
----------------- ---------------- ----------------
Cash flows from
financing activities
Repayment of bank
loans................ (171,034) (168,946) (140,159)
Repayment of capital
element of finance
leases............... (35,491) (34,869) (5,458)
Issue of ordinary
share capital........ 540,825 540,825 --
New long term loans... -- -- 23,067
----------------- ---------------- ----------------
Net cash provided by
financing activities... 334,300 337,010 (122,550)
----------------- ---------------- ----------------
Net (decrease) increase
in cash and cash
equivalents............ 322,458 (342,354) (677,645)
Cash and cash
equivalents and bank
overdrafts at beginning
of year................ (56,616) (56,616) 265,842
----------------- ---------------- ----------------
Cash and cash
equivalents and bank
overdrafts at end of
year................... (Pounds) 265,842 (Pounds)(398,970) (Pounds)(411,803)
================= ================ ================
</TABLE>

The accompanying notes are an integral part of these statements of consolidated
cash flows.

F-23
<PAGE>

INTERNATIONAL COMMUNICATION & DATA PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(AMOUNTS IN BRITISH POUNDS)

1 ACCOUNTING POLICIES

A summary of the principal group accounting policies is set out below, all
of which have been applied consistently throughout the year.

The financial statements are prepared under the historical cost convention
as modified by the revaluation of freehold land and buildings, in accordance
with applicable accounting standards and on the going concern basis.

a) Basis of consolidation

The consolidated profit and loss account and balance sheet comprises the
financial statements of International Communication & Data Plc ("ICD") and its
subsidiary undertakings, ICD Marketing Services Limited and ICD Limited ("the
Group") made up to 31 May 1994. The Group uses the purchase method of
accounting to consolidate the results of subsidiary undertakings.

The Group disposed of 75.1% of its interest in The Database Group Limited on
18 June 1993. Trading of this former subsidiary has not been incorporated
within the current accounting period as the Directors consider that the
results during the 18 days of ownership would not be material.

b) Interim financial information

The unaudited consolidated statements of income and cash flows for the
eleven months ended 30 April 1995 and 30 April 1994, the unaudited
consolidated balance sheet of 30 April 1995, and the unaudited statement of
changes in shareholders' equity for the eleven months ended 30 April 1995 have
been prepared consistently with the accounting policies set out in this note 1
and include, in the opinion of management, all adjustments necessary to
present fairly the Group's financial position, results of operations and cash
flows. In the opinion of management, all these adjustments are of a normal
recurring nature.

c) Goodwill

Goodwill arising on consolidation as a result of the acquisition of
subsidiaries and goodwill arising on the purchase of businesses are taken
direct to reserves in the year in which they occur. On disposal of a business,
the goodwill previously taken to reserves is charged to the profit and loss
account. Where the directors believe that the purchased goodwill has suffered
a permanent diminution in value, a similar charge to the profit and loss
account is made.

d) Tangible fixed assets

Tangible fixed assets are stated at cost or valuation less accumulated
depreciation. Depreciation is calculated as follows:
<TABLE>
<CAPTION>
ANNUAL RATE
-----------
<S> <C>
Freehold buildings........................... 2% on cost or valuation
Leasehold premises........................... over the period of the lease
Furniture and equipment...................... 20% on cost
Databases.................................... 25% on net book value
</TABLE>

The cost of databases includes expenditure incurred in the collection of
additional data. Where income is received in the course of the collection of
such additional data, this income is credited to the profit and loss account.
Prior to 1 June 1993 and during the period when The Database Group was a
subsidiary of the company, its direct costs in the collection of additional
data were capitalised.

F-24
<PAGE>

INTERNATIONAL COMMUNICATION & DATA PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

e) Deferred tax

Provision is made for timing differences between the treatment of certain
items for taxation and accounting purposes to the extent that it is possible
that a liability or asset will crystallise.

f) Pension costs

Contributions to defined contribution pension schemes are charged to the
profit and loss account in the year in which they become payable.

g) Leases

Rentals paid under operating leases are charged to the profit and loss
account on a straight line basis over the lease terms.

Assets acquired under finance leases are capitalised as fixed assets at the
equivalent purchase price. Depreciation is provided over the shorter of the
useful life of the asset or the term of the lease. The interest element of the
lease charges is apportioned over the period of the lease on the basis of the
interest rate implicit in the lease.

h) Turnover

Turnover is stated net of value added tax and comprises the value of goods
sold and services provided. Income relating to the grant of licences for
access to the databases is recognised in full when invoiced except in the case
where licences are for a period in excess of 12 months when only 12 months'
licence fee is recognised.

2 SEGMENT INFORMATION

The Group operates principally within the United Kingdom. Turnover outside
the UK was not material. In 1994, all turnover and operating profit arose from
the Group's sole class of business of database services.

3 PROPERTY, PLANT AND EQUIPMENT (NET)
<TABLE>
<CAPTION>
1994
-----------------
<S> <C>
Cost
Freehold land and buildings........................... (Pounds) --
Leasehold improvements................................ 42,236
Office furniture, motor vehicles and computer
equipment............................................ 1,341,484
Databases............................................. 12,122,931
-----------------
13,506,651
Less: accumulated amortisation........................ (8,433,266)
-----------------
Property, plant and equipment (net)................... (Pounds)5,073,385
=================
</TABLE>

Freehold land and buildings were written-down at 31 May 1994 to an open
market value of (Pounds)150,000 by the directors. This property was formerly
the Group head office. It is no longer occupied by the Group and has been
reclassified as an investment property in accordance with Statement of
Standard Accounting Practice No. 19.

4 INVESTMENTS
<TABLE>
<CAPTION>
1994
---------------
<S> <C>
Investment property (refer to note 3)..................... (Pounds)150,000
The Database Group Limited................................ 1
---------------
(Pounds)150,001
===============
</TABLE>

F-25
<PAGE>

INTERNATIONAL COMMUNICATION & DATA PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

5 INCOME TAXES
<TABLE>
<CAPTION>
YEAR ENDED
31 MAY 1994
--------------
<S> <C>
Corporation tax charge at 33%.............................. (Pounds)64,000
--------------
</TABLE>

Under UK GAAP, no provision is made for potential deferred tax liabilities
which are not expected to crystallise in the foreseeable future. Deferred tax
assets in respect of operating losses are generally not recognised unless
realisation is assured beyond reasonable doubt. The Group has no liability to
deferred tax.

Under US GAAP, in accordance with SFAS 109 "Accounting for Income Taxes",
full provision is made for all deferred tax liabilities. Deferred tax assets
are recognised for deductible temporary differences, reduced by a valuation
allowance, to the extent that it is more likely than not that the benefit will
not be realised. The group would recognise no deferred tax balances under US
GAAP.

At 31 May 1994, the amount of unclaimed capital allowances on fixed assets
exceeded the accounts written down value of these assets by approximately
(Pounds)2 million which at 33% could potentially reduce the tax charge on
profits earned in future periods by approximately (Pounds)660,000.

The tax effects of temporary differences and carry forwards that give rise
to a deferred tax asset comprise the following:

<TABLE>
<CAPTION>
1994
---------------
<S> <C>
Deferred tax asset
Unclaimed capital allowances............................. (Pounds)660,000
Less: valuation allowances............................... (660,000)
---------------
Net deferred tax asset................................... (Pounds) --
===============
</TABLE>

Valuation allowances have been established for uncertainties in offsetting
the unclaimed capital allowances against profits earned in future periods.

6 COMMITMENTS AND CONTINGENCIES

At 31 May 1994, the Group had no contracted capital commitments.

7 SHARE CAPITAL

The share capital of ICD is described below.

<TABLE>
<CAPTION>
1994
-----------------
<S> <C>
Authorised
74,000,000 ordinary shares of 5p each................. (Pounds)3,700,000
Allotted, called up and fully paid
64,581,353 ordinary shares of 5p each................. (Pounds)3,229,068
=================
</TABLE>

On 30 November 1993, 653,900 ordinary shares of 5p each were issued
following the exercise of share options by Mr. G.N.D. Thain at subscription
prices between 8.07p and 10.5p each.

On 7 December 1993, 6,949,651 ordinary shares of 5p each were issued
following the exercise of share options by Continental Foods plc (formerly IMC
Industries plc) at a subscription price of 7p each.

F-26
<PAGE>

INTERNATIONAL COMMUNICATION & DATA PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

On 25 April 1994, the Company granted options in respect of 549,251 ordinary
shares of 5p each (of which 322,907 were granted to L. Thain) under The Share
Option Executive Scheme, at a subscription price of 12p per share.

On 31 May 1994, there were a total of 1,923,098 ordinary shares of the
Company subject to options granted to employees and Directors (D. Baker
90,610; L. Thain 627,199; D. Unger 55,364) pursuant to the terms of the
Executive and Incentive share option schemes. These options are exercisable at
prices between 8p and 54.27p per ordinary share between 20 February 1996 and
14 April 2003. In addition at 31 May 1994 subscription warrants had been
issued and were still outstanding in respect of a total of 2,628,765 ordinary
shares of 5p each to Directors and shareholders at prices between 6p and
10.35p. Subscription warrants for 2,307,110 shares were originally issued to
G. Thain who subsequently sold them to other shareholders during the year.

8 RELATED PARTIES

Included within administrative expenses are accountancy fees of
(Pounds)15,032 paid to Elman & Leigh in which R. Elman is an equity partner.
Dawnay Day & Co., Limited, of which D.E. Cicurel is a non-executive director,
received advisory fees of (Pounds)49,274 in the year.

9 DIFFERENCE BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED
KINGDOM AND THE UNITED STATES

The consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United Kingdom (UK GAAP),
which differ in certain significant respects from those generally accepted in
the United States (US GAAP). Differences relevant to the ICD Group are not
material to these consolidated financial statements.

The Statement of Consolidated Cash Flows has been prepared in accordance
with United Kingdom Financial Reporting Standard 1, "Cash Flow Statements"
("FRS 1"). The only differences between FRS 1 and SFAS 95, "Statement of Cash
Flows," relevant to the group are presentational matters. FRS 1 requires a
reconciliation between operating result and operating cash flows and an
analysis of interest and taxation payments and receipts, separately within the
statement; whereas SFAS 95 requires a reconciliation between net result and
operating cash flows with supplemental disclosures of interest and taxation
payments and receipts. The differences in the Group's cash flows resulting
from these presentational matters are not material. FRS 1 requires cash and
cash equivalents to be presented net of overdrafts; whereas SFAS 95 does not
allow such a presentation.

10 STATEMENT OF DIRECTORS' RESPONSIBILITIES

DIRECTORS' RESPONSIBILITIES

Company law requires the directors to prepare financial statements for each
financial year which give a true and fair view of the state of affairs of the
company and of the profit or loss of the company for that period. In preparing
those financial statements, the directors are required to:

. select suitable accounting policies and then apply them consistently;

. make judgments and estimates that are reasonable and prudent;

. state whether applicable accounting standards have been followed, subject
to any material departures disclosed and explained in the financial
statements; and

. prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the company will continue in business.

F-27
<PAGE>

INTERNATIONAL COMMUNICATION & DATA PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)

The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
company and to enable them to ensure that the financial statements comply with
the Companies Act 1985. They are also responsible for safeguarding the assets
of the company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.

F-28
<PAGE>

Issued May 16, 1996
12,000,000 Shares

LOGO METROMAIL
COMMON STOCK

-----------

OF THE 12,000,000 SHARES OF COMMON STOCK BEING OFFERED HEREBY BY METROMAIL
CORPORATION (THE "COMPANY" OR "METROMAIL"), 2,400,000 SHARES ARE BEING
OFFERED INITIALLY OUTSIDE THE UNITED STATES AND CANADA BY INTERNATIONAL
UNDERWRITERS AND 9,600,000 SHARES ARE BEING OFFERED INITIALLY IN THE UNITED
STATES AND CANADA BY THE U.S. UNDERWRITERS. SEE "UNDERWRITERS." ALL THE
SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY THE COMPANY.
PRIOR TO THIS OFFERING, ALL OF THE COMMON STOCK OF THE COMPANY WAS OWNED
BY R. R. DONNELLEY & SONS COMPANY ("R.R. DONNELLEY"). UPON COMPLETION
OF THIS OFFERING, R.R. DONNELLEY WILL OWN APPROXIMATELY 41.7% OF THE
OUTSTANDING COMMON STOCK OF THE COMPANY (APPROXIMATELY 38.4% IF THE
U.S. UNDERWRITERS EXERCISE THEIR OVER-ALLOTMENT OPTION IN FULL).
SUBSTANTIALLY ALL THE NET PROCEEDS OF THIS OFFERING WILL BE USED TO
REPAY AMOUNTS OWED TO R.R. DONNELLEY AND ITS SUBSIDIARIES. PRIOR
TO THIS OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE COMMON
STOCK OF THE COMPANY. IT IS CURRENTLY ESTIMATED THAT THE INITIAL
PUBLIC OFFERING PRICE WILL BE BETWEEN $18.50 AND $20.50 PER
SHARE. SEE "UNDERWRITERS" FOR A DISCUSSION OF THE FACTORS
CONSIDERED IN DETERMINING THE INITIAL PUBLIC OFFERING PRICE.

-----------

THE COMMON STOCK HAS BEEN APPROVED
FOR LISTING, SUBJECT TO
OFFICIAL NOTICE OF ISSUANCE,
ON THE NEW YORK STOCK
EXCHANGE, INC. UNDER THE
SYMBOL "ML."

-----------

SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF
THE COMMON STOCK.

-----------

PRICE $ A SHARE

-----------

(2) Before deducting expenses payable by the Company estimated at
$1,500,000.

-----------

MORGAN STANLEY & CO.
International
LEHMAN BROTHERS
CAZENOVE & CO.
, 1996
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The expenses (other than underwriting discounts and commissions) payable in
connection with the sale of the Common Stock offered hereby (including the
Common Stock which may be issued pursuant to an over-allotment option) are as
follows:

<TABLE>
<CAPTION>
AMOUNT
----------
<S> <C>
SEC registration fee......................................... $ 97,552
NASD filing fee.............................................. 28,790
NYSE fee..................................................... 123,100
Printing and engraving expenses.............................. 250,000*
Legal fees and expenses...................................... 400,000*
Accounting fees and expenses................................. 450,000*
Blue Sky fees and expenses (including legal fees and
expenses)................................................... 25,000*
Transfer agent and registrar fees and expenses............... 25,000*
Miscellaneous................................................ 100,558*
----------
Total.................................................... $1,500,000*
==========
</TABLE>
- --------
*Estimated.

The Registrant will bear all expenses shown above.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Reference is made to Section 145 ("Section 145") of General Corporation Law
of the State of Delaware (the "Delaware GCL") which provides for
indemnification of directors and officers in certain circumstances.

In accordance with Section 102(b)(7) of the Delaware GCL, the Registrant's
Restated Certificate of Incorporation provides that directors shall not be
personally liable for monetary damages for breaches of their fiduciary duty as
directors except for (i) breaches of their duty of loyalty to the Registrant
or its stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or knowing violations of law, (iii) certain
transactions under Section 174 of the Delaware GCL (unlawful payment of
dividends) or (iv) transactions from which a director derives an improper
personal benefit.

The Restated Certificate of Incorporation of the Registrant provides for
indemnification of directors and officers to the full extent provided by the
Delaware GCL, as amended from time to time. It states that the indemnification
provided therein shall not be deemed exclusive. The Registrant may maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the Registrant, or another corporation, partnership, joint
venture, trust or other enterprise against any expense, liability or loss,
whether or not the Registrant would have the power to indemnify such person
against such expense, liability or loss, under the provisions of the Delaware
GCL.

The underwriting agreement provides for indemnification of directors and
officers of the Registrant by the Underwriters against certain liabilities.

Pursuant to Section 145 and the Restated Certificate of Incorporation, the
Registrant maintains directors' and officers' liability insurance coverage.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

In the three years preceding the filing of this Registration Statement, the
Registrant has not issued any securities that were not registered under the
Securities Act of 1933, as amended. Upon the filing on March 4,

II-1
<PAGE>

1996 of the Third Restated Certificate of Incorporation of the Registrant with
the Delaware Secretary of State, each of the issued and outstanding shares of
Common Stock, par value $.40 per share, of the Registrant was reclassified
into 8,600 shares of Common Stock, par value $.01 per share, of the
Registrant.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) EXHIBITS:

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1.1* Form of U.S. Underwriting Agreement.
3.1* Third Restated Certificate of Incorporation of the Registrant.
3.2* By-laws of the Registrant.
5.1** Opinion of Sidley & Austin.
10.1** Form of Transition Services Agreement between the Registrant
and R.R. Donnelley.
10.2** Form of Sales Agreement between the Registrant and
R.R. Donnelley.
10.3** Form of Benefit Administration Services Agreement between the
Registrant and R.R. Donnelley.
10.4** Form of Data Center Services Agreement between the Registrant
and R.R. Donnelley.
10.5** Form of Tax Allocation and Indemnification Agreement between
the Registrant and R.R. Donnelley.
10.6* Employment Agreement between the Registrant and Barton L.
Faber.
10.7* Employment Agreement between the Registrant and Susan L.
Henricks.
10.8* Retirement, Consulting and Release Agreement dated as of July
26, 1995 among R.R. Donnelley, the Registrant and James D.
McQuaid.
10.9* Employment Agreement dated June 16, 1994 between Customer
Insight Corporation and Tery R. Larrew.
10.10** 1996 Stock Incentive Plan.
10.11** 1996 Broad-Based Employee Stock Plan.
21.1 Subsidiaries.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of BDO Stoy Hayward.
23.3** Consent of Sidley & Austin (included in Exhibit 5.1).
24.1* Powers of Attorney.
27.1 Financial Data Schedule.
</TABLE>
- --------
*Previously filed
**To be filed by amendment

(b) FINANCIAL STATEMENT SCHEDULES:

The following financial statement schedule is included as part of this
Registration Statement immediately following the signature page:

Schedule II--Valuation and Qualifying Accounts

All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been omitted.

II-2
<PAGE>

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
of 1993, as amended (the "Act"), may be permitted to directors, officers and
controlling persons of the Registrant pursuant to provisions described in Item
14 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 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 by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.

The undersigned Registrant hereby undertakes (1) to provide to the
underwriters at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser; (2) that for
purposes of determining any liability under the Act, the information omitted
from the form of prospectus filed as part of a registration statement in
reliance upon Rule 430A and contained in the form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act shall be
deemed to be part of this registration statement as of the time it was
declared effective; and (3) that for the purpose of determining any liability
under the 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-3
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT AMENDMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN CHICAGO, ILLINOIS ON
MAY 15, 1996.

Metromail Corporation

/s/ Barton L. Faber
By: _________________________________
Name: Barton L. Faber
Title: Chairman

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT AMENDMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED.

<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
--------- -------- ----

<S> <C> <C>
/s/ Barton L. Faber Chairman and Director May 15, 1996
____________________________________ (principal executive
Barton L. Faber officer)

* President and Chief May 15, 1996
____________________________________ Executive Officer and
Susan L. Henricks Director

* Senior Vice President and May 15, 1996
____________________________________ Chief Financial Officer
Ronald G. Eidell (principal financial
officer)

* Vice President, Finance May 15, 1996
____________________________________ (chief accounting officer)
Kenneth A. Glowacki

* Director May 15, 1996
____________________________________
Peter F. Murphy

* Director May 15, 1996
____________________________________
Jonathan P. Ward
</TABLE>

/s/ Barton L. Faber
*By ___________________________
Barton L. Faber
Attorney-in-Fact

II-4
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

We have audited in accordance with generally accepted auditing standards,
the consolidated and combined financial statements of Metromail Corporation
and Affiliates included in this registration statement and have issued our
report thereon dated January 19, 1996 (except for the matters discussed in
Note 15 as to which the date is May 9, 1996). Our audit was made for the
purpose of forming an opinion on the basic financial statements as a whole.
The schedules listed in the accompanying index above are presented for
purposes of complying with the Securities and Exchange Commissions rules and
are not part of the basic financial statements. These schedules have been
subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, fairly state in all material
respects the financial data required to be set forth therein in relation to
the basic financial statements taken as a whole.

Arthur Andersen LLP

Chicago, Illinois

May 9, 1996

II-5
<PAGE>

METROMAIL CORPORATION AND AFFILIATES

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

<TABLE>
<CAPTION>
DEDUCTIONS--
ADDITIONS WRITE-OFFS
BALANCE -------------------------------- OF TRADE
SALES ALLOWANCES AND AT THE CHARGES CHARGES CHARGES TO RECEIVABLES, BALANCE AT
ALLOWANCES FOR DOUBTFUL BEGINNING TO TO OTHER NET OF END OF
ACCOUNTS OF PERIOD SALES(1) EXPENSES(2) ACCOUNTS(3) RECOVERIES PERIOD
----------------------- --------- -------- ----------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
For the Year Ended
December 31, 1993...... 2,969 4,137 1,959 -- (5,574) 3,491
For the Year Ended
December 31, 1994...... 3,491 3,571 1,848 158 (5,482) 3,586
For the Year Ended
December 31, 1995...... 3,586 5,067 2,180 465 (7,333) 3,965
</TABLE>
- --------
(1) These amounts represent provisions for sales allowances that are included
in net sales.
(2) These amounts represent provisions for doubtful accounts that are included
in general and administrative expenses.
(3) These amounts represent additions to the reserve resulting from the
purchase of ICD in 1995 and of CIC in 1994.

S-1
<PAGE>

EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1.1* Form of U.S. Underwriting Agreement.
3.1* Third Restated Certificate of Incorporation of the Registrant.
3.2* By-laws of the Registrant.
5.1** Opinion of Sidley & Austin.
10.1** Form of Transition Services Agreement between the Registrant and
R.R. Donnelley.
10.2** Form of Sales Agreement between the Registrant and R.R. Donnelley.
10.3** Form of Benefit Administration Services Agreement between the
Registrant and R.R. Donnelley.
10.4** Form of Data Center Services Agreement between the Registrant and
R.R. Donnelley.
10.5** Form of Tax Allocation and Indemnification Agreement between the
Registrant and R.R. Donnelley.
10.6* Employment Agreement between the Registrant and Barton L. Faber.
10.7* Employment Agreement between the Registrant and Susan L. Henricks.
10.8* Retirement, Consulting and Release Agreement dated as of July 26,
1995 among R.R. Donnelley, the Registrant and James D. McQuaid.
10.9* Employment Agreement dated June 16, 1994 between Customer Insight
Company and Tery R. Larrew.
10.10** 1996 Stock Incentive Plan.
10.11** 1996 Broad-Based Employee Stock Plan.
21.1 Subsidiaries.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of BDO Stoy Hayward.
23.3** Consent of Sidley & Austin (included in Exhibit 5.1).
24.1* Powers of Attorney.
27.1 Financial Data Schedule.
</TABLE>
- --------
*Previously filed.
**To be filed by amendment.

<PAGE>

EXHIBIT 21.1

SUBSIDIARIES OF METROMAIL CORPORATION
AS OF MARCH 31, 1996

JURISDICTION
SUBSIDIARY OF INCORPORATION
- ---------- ----------------

Customer Insight Company Delaware

International Communication
& Data Plc United Kingdom

R.R. Donnelley Marketing
Services Group Limited United Kingdom

ICD Marketing Services Limited United Kingdom

As of March 31, 1996, Metromail Corporation's other subsidiaries, considered in
the aggregate as a single subsidiary, would not constitute a significant
subsidiary as defined in Rule 1-02(w) of Regulation S-X.

<PAGE>

ARTHUR ANDERSEN LLP

Exhibit 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
registration statement.

/S/ Arthur Andersen LLP

Chicago, Illinois
May 9, 1996

<PAGE>

Exhibit 23.2

[Letterhead of BDO Stoy Hayward]

10 May 1996

The Directors
Metromail Corporation
360 East 22nd Street
Lombard
Illinois 60148
USA

Dear Sirs,

Metromail Corporation Registration
Statement/Prospectus to be filed on or about 10 May 1996

As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of the above
registration statement.

Our audit was conducted in accordance with generally accepted auditing standards
in the United Kingdom.

Yours faithfully

/s/ BDO Stoy Hayward

BDO Stoy Hayward
Chartered Accountants and Registered Auditors

Enc.

<PAGE>

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 12-MOS 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1993 DEC-31-1994 DEC-31-1995 DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1993 JAN-01-1994 JAN-01-1995 JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1993 DEC-31-1994 DEC-31-1995 MAR-31-1995 MAR-31-1996
<CASH> 0 0 0 0 0
<SECURITIES> 0 0 0 0 0
<RECEIVABLES> 0 59,926 72,403 0 63,382
<ALLOWANCES> 0 (3,586) (3,965) 0 (3,984)
<INVENTORY> 0 4,414 5,658 0 7,067
<CURRENT-ASSETS> 0 68,932 90,244 0 84,831
<PP&E> 0 72,159 80,937 0 82,845
<DEPRECIATION> 0 (39,585) (43,392) 0 (45,133)
<TOTAL-ASSETS> 0 328,768 378,721 0 375,678
<CURRENT-LIABILITIES> 0 81,966 288,118 0 286,109
<BONDS> 0 0 379 0 379
<COMMON> 0 86 86 0 86
0 0 0 0 0
0 0 0 0 0
<OTHER-SE> 0 78,873 85,308 0 81,623
<TOTAL-LIABILITY-AND-EQUITY> 0 328,768 378,721 0 375,678
<SALES> 0 0 0 0 0
<TOTAL-REVENUES> 163,715 195,471 237,187 49,832 54,389
<CGS> 0 0 0 0 0
<TOTAL-COSTS> 143,067 166,929 204,365 46,312 53,725
<OTHER-EXPENSES> (138) 24 (87) (10) (5)
<LOSS-PROVISION> 1,959 1,848 2,180 425 419
<INTEREST-EXPENSE> 22,112 18,999 21,409 4,968 5,405
<INCOME-PRETAX> (3,285) 7,671 9,320 (1,863) (5,175)
<INCOME-TAX> 1,181 5,684 6,585 (130) (1,394)
<INCOME-CONTINUING> 0 0 0 0 0
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 4,388 0 0 0 0
<NET-INCOME> (8,854) 1,987 2,735 (1,733) (3,781)
<EPS-PRIMARY> (1.03) 0.23 0.32 (0.20) (0.44)
<EPS-DILUTED> (1.03) 0.23 0.32 (0.20) (0.44)

</TABLE>