Investment Highlights

           Superior Core Competency in IT Staffing

               Market Leader in Year 2000 Solution

World-Class Outsourcing and Solutions Capabilities

                   Best-of-Breed Software Products

    Long-Term Client Relationships--Repeat Business

                    Growing International Presence

    An Impressive Record of Growth, Profitability,
                            and Market Development

            Experienced and Stable Management Team




                              Background                                    
                                                                            
                              Founded in 1969                               
                                                                            
                              26th Year as a Public Company                 
                                                                            
                              1997 Revenues--$335 million                   
                                                                            
                              3,600 Employees--3,100 Billable Consultants   
                                                                            
                              Over 450 Consulting Service Clients           
                                                                            
                              47 Offices Worldwide                          
                                                                            
                              International and Offshore Capabilities       
                                                                            
                              Provider of Enterprise-Wide Software Products 

                                                                               1
<PAGE>                                                                      
SHAREHOLDERS' SUMMARY INFORMATION

Market  Capitalization:  The market  capitalization  of our Company  exceeded $1
billion at the end of 1997 for the first  time in our  history.  The  individual
value of a share of CHC stock at  December  31,  1997 was almost 80% higher than
the value at the end of 1996.  This  increase in value to our  shareholders  was
more than three times that  experienced by the Dow Jones index.  The chart below
depicts the growth in our market capitalization over the past five years.








[GRAPHIC-PIE CHART OF INDUSTRY PROFILE OF CLIENTS]


Industry Profile of Clients:  The above chart shows the diversity of our revenue
across broad industry lines, with the Telecommunications  industry providing the
largest percentage of our revenue, followed by the Insurance,  Manufacturing and
Banking and Finance  groups.  These  industry  segments  tend to have very large
needs for IT  professionals,  services and products because of their high volume
of transactions,  complicated business systems and regulatory environments.  CHC
has served these industries and their respective leaders for more than 25 years.


[GRAPHIC-CHART OF MARKET CAPITALIZATION]
<PAGE>


Revenues:  Revenues during the past five years have grown at a compounded annual
rate of 26%. More  importantly,  the percentage of our revenue  derived from our
Solutions services has expanded.  In 1993,  Solutions revenue was $15 million or
11% of total  revenue,  whereas in 1997 our Solutions  revenue was $110 million,
accounting for 33% of our total business.

[GRAPHIC-GRAPH OF EARNINGS PER SHARE]
[GRAPHIC-GRAPH OF REVENUES]
[GRAPHIC-GRAPH OF OPERATING INCOME (MARGINS)]

Operating Income (Margins):  The growth in our operating income (margins) during
the past five years has been at a  compounded  annual rate of 51%,  nearly twice
the compounded rate of our revenue growth. In 1997, our operating income doubled
and our margins expanded to 11.9%, excluding merger-related expenses.

EPS: Earnings per share-diluted has increased at a compounded annual rate of 50%
during  the past five  years;  more  than 80% in 1997.  Our  number of  weighted
average  shares  increased  in 1997 as a result of the  additional  2.5  million
shares sold at the end of our third quarter.
<PAGE>

[GRAPHIC- PHOTO OF JOHN J. CASESE CHAIRMLAN OF THE BOARD AND PRESIDENT]


To Our Shareholders, Employees and Clients:

1997 was truly a landmark year for Computer  Horizons.  Financially,  we had our
best year ever with revenues increasing 34% to $335 million,  while net earnings
increased 91% to $22.6 million.  For the first time,  our market  capitalization
exceeded $1  billion at year-end, primarily resulting from a nearly 80% increase
in stock price. At the close of 1997, we had approximately  3,600 employees,  of
which 3,100 were billable consultants.

Even  more  important  than  our  financial  success  is our  position  with the
investment  community and IT industry,  where Computer Horizons is now a leading
provider of services and products.  The New Jersey  Technology  Council formally
recognized us in 1997 as "Large Company of the Year." Additionally,  our Midwest
Regional headquarters was awarded ISO 9002 certification and we became ITAA Year
2000 certified.  These  accomplishments would not have been possible without the
hard work and dedication of our employees.

Clearly, our strong growth and expanding operating margins are being enhanced by
our Year 2000 practice. We are a major force in assisting large organizations in
their challenge to become Year 2000  compliant.  The experience of our people in
managing and fixing this problem,  together with our proprietary  tools, puts us
in a category that is second to none. In our Millennium  Refurbishment  Centers,
we continue to process massive amounts of code efficiently and accurately.

We look at 1997 not as the peak,  but as the  foundation  from which we can move
this  company  to new  heights.  In  September,  we  completed  the  sale  of an
additional 2.5 million  shares of stock,  raising $84 million of new capital and
doubling the equity of our company.  This was done to  financially  position our
company to achieve our goal of becoming a billion-dollar  enterprise. As we move
into 1998, our financial condition is looking more like a billion-dollar service
company than would be expected of a $500 million entity.  We are well positioned
to take advantage of investment opportunities.

2
<PAGE>
In 1992,  senior  management set certain  long-range  goals, one of which was to
become  more of a  solutions  company.  As we close 1997,  it is  satisfying  to
realize that we have in essence achieved this target. More than one-third of our
business is derived from solutions  services.  Our challenge today is to embrace
the strategic  initiatives we have established for the next three to five years.
The management team in place today is eagerly pursuing this challenge.


Computer Horizons was founded on one premise:  to provide  value-added  services
and products to all our  customers in all of our service and product  offerings.
Twenty-eight  years later,  this is still our credo.  Our great  clients are our
franchise to our future success and  prosperity.  The high  percentage of repeat
business with our clients is a statistic of which we are particularly proud.

           [GRAPHIC-PHOTO OF WILLIAM J. MURPHY EXECUTIVE VICE PRESIDENT AND CEO]



As we look to 1998 and beyond,  we are confident that our strategic  initiatives
will be achieved. We continually meet with our clients to discuss the challenges
they face and earnestly  work to provide the necessary  solution,  whether it be
staff augmentation of technical  professionals,  project  management,  Year 2000
services and products,  training,  application  development,  client server,  or
network management.


No  professional  services  company  prospers  without a dedicated  and talented
workforce. We are proud of our people and their accomplishments.  We welcome the
more than 350 employees who joined  Computer  Horizons as a result of the recent
acquisitions  of  CG  Computer  Services,  Millennium  Computer  Technology  and
Princeton  Softech.  We thank our  employees and clients for a terrific year and
look forward to 1998.


Sincerely,


/s/John J. Cassese
------------------
John J. Cassese
Chairman of the Board and President


/s/William J. Murphy
--------------------
William J. Murphy
Executive Vice President and CFO


                                                                               3
<PAGE>
[GRAPHIC-FOUR PHOTOS OF INDIVIDUALS]

During 1997,  Computer Horizons continued to advance its status as a world-class
Information  Technology  (IT)  solutions and services  firm.  To carry  Computer
Horizons well into the next millennium, our service offerings were expanded; our
marketplace was enlarged;  our infrastructure  was fortified;  praise and awards
for performance  were bestowed;  quality in everything we do was instilled;  and
strategic growth plans were put in place.

The IT marketplace  continued to expand in 1997,  driven largely by the need for
corporate America and the world to deal with the costly problems associated with
maintaining  accurate  computing  during and after the century change.  The Year
2000 problem,  now commonly known as the  "millennium  bug," continues to plague
our customers and virtually all computer  users.  New estimates of the price tag
could well exceed the previous plateau of $600 billion worldwide.  But with huge
problems come great  opportunities,  and Computer  Horizons'  Signature 2000(TM)
continues to be the solution  chosen by many of the most  significant  companies
around the world.

This Year 2000-related expansion of opportunity is also furthering a shortage of
experienced  data  processing  professionals,  as  greater  numbers of staff are
needed to participate  in the millennium  solution.  Computer  Horizons'  highly
experienced  staffing  services  are now being sought after by a growing list of
Fortune  500  companies  that  must fill the  resource  gap.  Further,  the Giga
Information  Group  estimates  that as many as 40% of Fortune 500 companies have
not yet even begun to address the problem.

As a  client-driven  firm,  we continue to seek advice from our  customers as we
ready  new  services  and  products  to meet  emerging  needs.  As has  been our
practice,  each client is viewed as a franchise.  Therefore, as clients select a
CHC offering, we strive to introduce each client to all our services,  expanding
our partnership and our value.  We invite you, our  shareholders,  to survey our
vision for progress using the accomplishments of 1997 as the starting point.

Financially,  1997  was an  historic,  record-breaking  year  for  our  company.
Shareholders  for the full  year saw the  value of their  holdings  increase  by
nearly 80%. Our stock  outperformed  the Dow Jones and the Nasdaq by a factor of
three.  The confidence shown


4               
<PAGE>



                            International Expansion

<PAGE>



                            Partnerships for Growth



<PAGE>
by our investors was rewarded with record  revenues,  record earnings and record
returns. By the end of 1997, our market capitalization broke through the billion
dollar level, where it has remained.

                                            [GRAPHIC-FOUR PHOTOS OF INDIVIDUALS]

The  investment  community is taking  increasing  interest in our  company.  The
number of firms whose analysts are covering Computer Horizons has risen to nine.
Our  company  was  included  in  reports  appearing  in  most  major  investment
magazines,  cable  outlets  and  on-line  services.  As a result  of our  strong
performance,  high investor  recognition  and confidence,  our follow-on  common
stock offering was a success.  An investment  banking group led by BT Alex Brown
raised $84,000,000 in our September 26th offering.

Late in 1997,  we completed  our first two  acquisitions  as part of a strategic
expansion  plan. On December 19, 1997,  Computer  Horizons  acquired CG Computer
Services,  a Los  Angeles-headquartered  IT provisioning and staffing  solutions
company,  in a transaction  accounted  for as a pooling of  interests.  Although
primarily  serving West  Coast-based  Fortune 500 customers,  CG had expanded in
recent years by adding offices and clients in Chicago, IL and Parsippany, NJ. On
December  31st,  we  completed  our  second  acquisition,   Millennium  Computer
Technology, a Chattanooga, TN-based IT staffing and solutions company.

In the  fourth  quarter  of 1997,  our  Solutions  Division  received  ITAA*2000
Certification   from  the   Information   Technology   Association  of  America.
Certification is the IT industry's evaluation program which examines the process
and methods used by member companies to perform Year 2000 software  conversions.
This stamp of approval from a neutral and objective third party is a significant
indicator of the quality incorporated into the services we proudly perform.

In 1995,  we reported to you that quality was a primary  objective in everything
your  company  does.  To  further  that goal,  we  created a Quality  Management
initiative to develop a Total Quality  program.  In 1996, we received the highly
coveted "Q1" Quality  Award from the Ford Motor Company  after  exceeding  their
rigorous  quality  standard.  In 1997,  we once again  advanced in our quest for
excellence when our Midwest Regional  headquarters was awarded the important ISO
9002 status,  passing the quality  examination  on the first try.  These initial
rewards  are  reflective  of our  company's  ongoing  commitment  to the highest
quality standards.  We will now go 

7
<PAGE>
[GRAPHIC-PHOTOS OF FOUR INDIVIDUALS]

forward with a program to have other areas of our company certified as well.

During the past few years,  Computer  Horizons  has taken its first steps toward
international expansion.  This year we truly became an international IT company.
In North  America,  we  established  a Canadian  subsidiary,  Computer  Horizons
(Canada)  Corp.,  based in  Toronto.  By the end of 1997 we  added a  Millennium
Refurbishment  Center  (MRC) in Toronto  to  facilitate  Year 2000  outsourcing.
Although this full-service facility will handle Canadian and Year 2000 computing
demands,  it is part of the  broader  international  expansion  plan to position
Computer Horizons to win outsourcing contracts worldwide.

In Europe, CHC International Limited was created and based in London. During the
year,  CHC staff were  working on several  projects in European  countries.  The
expansion into Europe was rewarded quickly when our company received a Year 2000
solutions  contract from Norwich  Union,  Ireland,  one of the United  Kingdom's
largest  insurance and financial  services  companies.  Internationally,  we are
today providing a growing clientele with a myriad of solutions that include full
lifecycle  Year 2000  services  and  various  other IT  solutions  and  staffing
services.  These strong  initial  steps in expanding  outside the United  States
place Computer Horizons firmly on the path to the globalization of our company.

This past year also brought  strategic  changes and  additions to the  company's
infrastructure,  organization  and management  team, as well as  enhancements to
several  of our  service  offerings.  We  added  strategically  to our  off-site
outsourcing  capabilities  by building two new  facilities in Toronto and in New
Jersey. Our network of 47 offices worldwide enables us to offer our products and
services in new and broader geographies.

In our continuing  effort to enable clients to avail themselves of all we offer,
two of our solutions business units,  Enterprise Management and Document Imaging
groups,  were  consolidated  into the  existing  Solutions  Division as separate
practices  or "Centers of  Excellence."  This unified  image in the  marketplace
enables us to leverage all our contacts and expand each other's  existing client
base.  It will also enable new clients to better  understand  the breadth of our
offerings as we move beyond the century change.

8
<PAGE>


                             Solutions Capabilities
<PAGE>



                               Market Leadership


<PAGE>
                                            [GRAPHIC-PHOTOS OF FIVE INDIVIDUALS]


During  1997,  we  introduced  several new or  enhanced  solution  and  staffing
products and services to fill out our offerings.  In the Year 2000 area, two new
components  were  successfully  introduced into our industry  leading  solution,
Signature  2000.  Computer  Horizons was the first major  solutions  provider to
introduce a comprehensive  service to bring Distributed (or "Desktop") computing
environments  into Year 2000  compliance.  With an estimated  100 million PCs in
existence and the proliferation of open systems,  companies must bring hardware,
software, operating systems, communications software, spreadsheets and databases
into compliance, representing a significant opportunity for Computer Horizons.

At the core of every Year 2000 project which  Computer  Horizons  manages is our
internally  developed  proprietary  Signature 2000 toolset.  During the year, we
announced that our toolset is available on a licensed basis,  independent of our
services. The toolset has clearly proven its functionality and robustness by the
successful assessment of hundreds of millions of lines of code to date. A client
purchasing this proven toolset is able to support a full  lifecycle,  end-to-end
solution  using  almost  any  remediation   strategy.  As  the  time  to  repair
"mission-critical"  systems  shortens,  it  becomes  essential  to test  growing
inventories of remediated code.  Computer  Horizons  recently  introduced a full
testing  solution  that  reduces  the total  work  effort  required  to test the
corrected applications.  Our comprehensive,  risk-driven testing process focuses
on business and technical  risks while reducing the total work effort  required.
These enhancements,  coupled with the doubling of our off-site capacity,  insure
that the Computer  Horizons'  Signature  2000  solution  will continue to be the
choice of many of the largest companies on the Fortune 500 list.


In the Enterprise  Management  area,  our newly  introduced  Momentum  series is
allowing clients to quickly implement Help Desk, Network Management/  Monitoring
and Systems  Management  solutions.  The Momentum series combines  best-in-class
vendor products with Computer  Horizons project  management,  methodologies  and
resources.  CHC's Momentum  series allows clients to rapidly  improve control of
their environment,  while also setting the foundation for ongoing  improvements.
Most companies  realize almost immediate  savings and a positive return on their
investments.

                                                                              11
<PAGE>
During  1997,  Computer  Horizons  and its  management  received  praise,  media
attention and awards for quality,  financial performance,  growth, offerings and
its contribution to expanding opportunity and employment.  We are proud to share
this  sampling  with our  shareholders.  After  several  preliminary  rounds and
eliminations,  John Cassese,  CEO, received the coveted New Jersey "Entrepreneur
of the Year" award, in the Masters category,  from a prestigious group headed by
Ernst and Young LLP. Computer Horizons' long commitment to New Jersey,  where we
now employ  almost 1000 of our  professionals,  and to technical  excellence  by
instilling  quality  in  everything  we do,  was  recognized  by the New  Jersey
Technology Council as the "Large Company of the Year."

Management  of  Computer  Horizons  has a strong  vision  for the future of your
company that is being propelled by past accomplishments and lessons learned over
our 28-year history.  We will evolve Computer Horizons into becoming the leading
provider  of  comprehensive   IT  solutions  and  staffing   services  to  major
corporations  around  the  globe.  To  achieve  this  status,  we will offer the
matchless combination of methodology,  leading-edge  technology-based  products,
comprehensive  and  flexible  solutions,  and  a  world-class  cadre  of  proven
resources.

The following are the key strategies we will employ to achieve our goals:

  o  Leverage  Customer  Relationships and Expand the Client Base 
  o  Maintain Our  Leadership  Position in Staffing
  o  Expand Year 2000  Offerings and Business 
  o  Grow and  Enhance  Our  Solutions  Business 
  o  Expand  Our Geographic Presence 
  o  Enhance Our Product and Service Offerings

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

At Computer Horizons, our most important asset continues to be our people.


Page 4; Clockwise:  Thomas Culmone,  Lisa  Matkowski,  John Paul Cassese,  Craig
Barbret.

Page  7;  Clockwise:  Arlene  Brady,  Thimmaiah  Biddanda,  Donna  Smiley,  Sean
O'Donnell.

Page 8; Clockwise:  Mary Clementi,  Brian  Soderholm,  Janet-Lee  Hatt,  William
Barlow, Robert Farrell.

Page 11;  Clockwise:  Robi Scheidt,  Edward  Stengel,  Kim Heinz,  Thomas Geist,
Michael Gange.


12
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA

                                                         Year Ended December 31,
                                      1997          1996          1995          1994          1993
---------------------------------------------------------------------------------------------------------------------------
                                              (dollars in thousands, except per share data)
<S>                                <C>          <C>            <C>           <C>          <C>
Revenues                             $334,729     $249,152       $213,165      $163,987     $131,936
Costs and expenses:
  Direct costs                        224,123      172,734        148,530       115,835       94,719
  Selling, general and
    administrative                     70,741       56,903         46,156        36,724       29,635
  Merger-related expenses                 976
Income from operations                 38,889       19,515         18,479        11,428        7,582
Other income (expense):
  Interest income                       1,543          307            266            53          235
  Interest expense                       (263)        (480)          (642)         (710)        (840)
  Equity in net earnings of
    joint venture                          13          885            361
Income before income taxes             40,182       20,227         18,464        10,771        6,977
  Income taxes                         17,538        8,363          8,039         4,852        3,228
---------------------------------------------------------------------------------------------------------------------------

Net Income                           $ 22,644     $ 11,864       $ 10,425       $ 5,919      $ 3,749
===========================================================================================================================

Earnings per share:
  Basic                                  $.88         $.48           $.46          $.29         $.17
===========================================================================================================================

  Diluted                                $.84         $.46           $.44          $.27         $.17
===========================================================================================================================

Weighted average number 
of shares outstanding:
  Basic                            25,680,000   24,493,000     22,425,000    20,559,000   22,160,000
===========================================================================================================================

  Diluted                          27,102,000   26,028,000     23,931,000    21,962,000   23,074,000
===========================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                <C>          <C>            <C>           <C>          <C>
Analysis (%)
Revenues                                  100.0%       100.0%         100.0%        100.0%       100.0%
  Gross margin                             33.0         30.7           30.3          29.4         28.2
  Selling, general and
    administrative                         21.1         22.9           21.6          22.4         22.4
  Merger-related expenses                    .3
Income from operations                     11.6          7.8            8.7           7.0          5.8
  Interest income/(expense), net             .4          (.1)           (.2)          (.4)         (.5)
  Equity in net earnings of
    joint venture                          --             .4             .2
Income before income taxes                 12.0          8.1            8.7           6.6          5.3
  Income taxes                              5.2          3.3            3.8           3.0          2.4

Net Income                                  6.8          4.8            4.9           3.6          2.9
Revenue growth YOY                         34.3         16.9           30.0          24.3         18.1
Net income growth YOY                      90.9         13.8           76.1          57.9         71.9
Return on equity, average                  17.9         18.7           24.0          20.6         11.5
Effective tax rate                         43.6         41.3           43.5          45.0         46.3

At year-end
Total assets                         $211,601      $91,760        $78,794       $51,103      $42,347
Working capital                       157,413       52,761         40,779        21,558       18,522
Long-term debt                             --        1,432          3,299         4,288        6,093
Shareholders' equity                  182,532       70,993         55,814        30,947       26,504

Stock price                            $45.50       $25.67         $16.89         $4.00        $2.32
P/E multiple                               52           53             37            14           14

Employees*                              3,630        3,102          2,668         2,289        1,749
Clients (during year)*                    499          508            492           501          493
Offices (worldwide)                        47           47             43            37           34
===========================================================================================================================
</TABLE>

*Does  not  include  Birla  Horizons   International  and  Millennium   Computer
Technology, Inc.

                                                                              13
<PAGE>
MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS

Results of Operations
The  following  table sets  forth  certain  operating  data as a  percentage  of
consolidated  revenues for the periods  indicated.  All percentages  include the
operations of CG Computer  Services Corp.,  acquired by Computer  Horizons Corp.
("the Company") on December 19, 1997. This acquisition has been accounted for as
a pooling  of  interests.  Comparisons  with prior  years are based on  restated
combined results:
<TABLE>
<CAPTION>


                                                                           Year Ended December 31,
                                                                     1997            1996            1995
---------------------------------------------------------------------------------------------------------
<S>                                                                 <C>             <C>            <C>
     Revenues                                                       100.0%          100.0%         100.0%
     Costs and expenses:
       Direct costs                                                  67.0            69.3           69.7
       Selling, general and administrative                           21.1            22.9           21.6
       Merger-related expenses                                        0.3
     Income from operations                                          11.6             7.8            8.7
     Other income (expense):
       Interest income/(expense), net                                 0.4            (0.1)          (0.2)
       Equity in net earnings of joint venture                         --             0.4            0.2
     Income before income taxes                                      12.0             8.1            8.7
     Income taxes:
       Current                                                        5.5             3.5            4.0
       Deferred                                                      (0.3)           (0.2)          (0.2)
     Net income                                                       6.8             4.8            4.9
---------------------------------------------------------------------------------------------------------- 
</TABLE>

Year Ended December 31, 
1997 Compared to        
Year Ended              
December 31, 1996       
                        
Revenues

Revenues  increased to $334.7  million in the year ended  December 31, 1997 from
$249.2  million  in the year ended  December  31,  1996,  an  increase  of $85.5
million, or 34%. Staffing revenues increased to $224.5 million in the year ended
December 31, 1997 from $186.0  million in the year ended  December 31, 1996,  an
increase of $38.5 million or 21%.  Revenues from the  acquisition of CG Computer
Services Corp. amounted to approximately $17.4 million in 1997 and $15.3 million
in 1996. Solutions revenues,  including Year 2000 services,  increased to $110.3
million in the year ended December 31, 1997 from $63.2 million in the year ended
December  31,  1996,  an increase of $47.1  million or 75%.  Year 2000  services
revenues  increased to $72.1  million in the year ended  December  31, 1997,  an
increase of $61.7  million  from $10.4  million in the year ended  December  31,
1996. The Company's Year 2000 business  accounted for approximately 22% of total
revenues in the year ended  December 31, 1997 versus  approximately  4% of total
revenues in 1996. Solutions revenues, excluding Year 2000 services, decreased to
$38.1  million for the year ended  December 31, 1997 from $52.7  million for the
year ended  December 31, 1996, a decrease of $14.6 million or 28%. The Company's
solutions  revenues  were  impacted by a shift in client  demand,  the Company's
increased focus on its Year 2000 business, as well as the unexpected termination
of a large contract in the second quarter of 1996.
<PAGE>
Direct Costs

Direct  costs  increased to $224.1  million in the year ended  December 31, 1997
from $172.7 million in the year ended December 31, 1996.  Gross margin increased
to 33.0% in the year  ended  December  31,  1997  from  30.7% in the year  ended
December 31, 1996.  The  increase in gross  margin was  primarily  due to stable
margins in the  Company's  staffing  business  and an increase in the  Company's
higher margin Year 2000 business.


Selling, General and Administrative

Selling, general and administrative expenses (excluding merger-related expenses)
increased  to $70.7  million  in the year  ended  December  31,  1997 from $56.9
million in the year ended  December  31, 1996,  an increase of $13.8  million or
24.2%. As a percentage of revenues, selling, general and administrative expenses
decreased to 21.1% of revenues in the year ended December 31, 1997 from 22.9% of
revenues in the year ended December 31, 1996.  The increase in selling,  general
and  administrative  expenses  in  absolute  dollars  was  primarily a result of
salaries and

14
<PAGE>
commissions  for  additional  sales and  recruiting  personnel  and, to a lesser
extent,  growth in  Computer  Horizons'  administrative  infrastructure.  In the
fourth  quarter  of  1997,  the  Company  incurred  merger-related  expenses  of
approximately $1.0 million or 0.3% of revenues.


Income from Operations

Operating  margins  increased to 11.6% in the year ended  December 31, 1997 from
7.8% in the year ended December 31, 1996.  This increase was primarily due to an
increase in the Company's  higher  margin Year 2000 business and lower  selling,
general and  administrative  expenses as a percentage of revenue.  The Company's
business is labor-intensive  and, as such, is sensitive to inflationary  trends.
This sensitivity applies to client billing rates, as well as to payroll costs.


Other Income

Other income  increased to $1.3 million in the year ended December 31, 1997 from
$0.7 million in the year ended December 31, 1996, an increase of $0.6 million or
82%.  This  increase  was  primarily  the result of  increased  interest  income
resulting from the follow-on  offering of approximately $84 million completed in
the third quarter of 1997.  This increase was partially  offset by a decrease in
earnings from the Company's  Birla Horizons Joint Venture.  The Joint  Venture's
decreased  earnings in the year ended  December 31, 1997 were  primarily  due to
costs associated with increased headcount, particularly in marketing and project
management personnel as it expanded its solutions business.


Provision for Income Taxes

The effective  tax rate for Federal,  state and local income taxes was 43.6% and
41.3% in the years ended December 31, 1997 and 1996, respectively.  The increase
in the 1997  effective  tax rate was  partially  due to  certain  non-deductible
merger-related  expenses  incurred in the fourth  quarter of 1997. The 1997 rate
also reflects a decrease in  undistributed  earnings of the Joint  Venture,  for
which taxes were not provided.


Net Income

Net income  increased to $22.6 million in the year ended  December 31, 1997 from
$11.9 million in the year ended December 31, 1996, an increase of $10.7 million,
or 90%.  Net income  per share  (diluted)  increased  to $0.84 in the year ended
December  31,  1997 from $0.46 in the year  ended  December  31,  1996 on higher
weighted average shares outstanding (27.1 million in 1997 versus 26.0 million in
1996). The effect of merger-related expenses amounted to $.03 per share in 1997.
All net  income  per share and share  amounts  have been  adjusted  to reflect a
three-for-two  common  stock  split,  effected  as  a  50%  stock  distribution,
distributed on June 9, 1997.

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

Year Ended December 31,
1996 Compared to       
Year Ended             
December 31, 1995      

Revenues

Revenues  increased to $249.2  million in the year ended  December 31, 1996 from
$213.2  million  in the year ended  December  31,  1995,  an  increase  of $36.0
million, or 17%. Staffing revenues increased to $186.0 million in the year ended
December 31, 1996 from $154.0  million in the year ended  December 31, 1995,  an
increase of $32.0 million or 21%.  Revenues from the  acquisition of CG Computer
Services Corp. amounted to approximately $15.3 million in 1996 and $13.1 million
in 1995.  Solutions revenues,  including Year 2000 services,  increased to $63.2
million in the year ended December 31, 1996 from $59.1 million in the year ended
December  31,  1995,  an  increase  of $4.1  million or 7%.  Year 2000  revenues
increased to $10.4  million in the year ended  December 31, 1996 from nil in the
year ended December 31, 1995. Solutions revenues,  excluding Year 2000 services,
decreased  to $52.7  million  in the year  ended  December  31,  1996 from $59.1
million in the year ended  December 31, 1995, a decrease of $6.4 million or 11%.
The decrease in solutions revenues,  excluding Year 2000 services, was primarily
related to the unexpected  termination of a large contract in the second quarter
of 1996.


                                                                              15
<PAGE>
Direct Costs

Direct  costs  increased to $172.7  million in the year ended  December 31, 1996
from $148.5 million in the year ended December 31, 1995.  Gross margin increased
to 30.7% in the year  ended  December  31,  1996  from  30.3% in the year  ended
December 31, 1995.  The  increase in gross  margin was  primarily  due to stable
margins in the Company's staffing business and an increase in Computer Horizons'
higher  margin  Year  2000  business.  The  Company's  margins  are  subject  to
fluctuation due to a number of factors,  including the level of salary and other
compensation-related   expenses   necessary  to  attract  and  retain  qualified
technical personnel and the mix of staffing versus solutions business during the
year.


Selling, General and Administrative

Selling,  general and administrative  expenses increased to $56.9 million in the
year ended  December 31, 1996 from $46.2 million in the year ended  December 31,
1995,  an increase  of $10.7  million or 23.2%.  As a  percentage  of  revenues,
selling,  general and  administrative  expenses  increased  to 22.9% in the year
ended  December 31, 1996,  from 21.6% in the year ended  December 31, 1995.  The
increase in selling, general and administrative expenses in 1996 was primarily a
result of salaries and  commissions  for  additional  personnel,  infrastructure
necessary to pursue large,  high-profile  opportunities,  and marketing expenses
incurred to raise the Company's visibility through public relations, trade shows
and conferences.


Income from Operations

Income from operations increased to $19.5 million in the year ended December 31,
1996 from $18.5 million in the year ended December 31, 1995, an increase of $1.0
million or 5.4%.  Operating margins decreased to 7.8% in the year ended December
31, 1996 from 8.7% in the year ended December 31, 1995. The increase in absolute
dollars was  attributable  to increased  revenues and  improved  gross  margins,
offset by the impact of the  unexpected  termination  of a large contract in the
second quarter of 1996 and the increase in selling,  general and  administrative
expenses in 1996.  The Company's  business is  labor-intensive  and, as such, is
sensitive to inflationary  trends.  This  sensitivity  applies to client billing
rates, as well as to payroll costs.


Other Income

Other income  increased to $0.7 million in the year ended December 31, 1996 from
nil in the year ended December 31, 1995. This increase was primarily a result of
reduced interest expense as Computer  Horizons reduced its outstanding debt with
a portion of the net proceeds from its June 1995  follow-on  offering and by the
increased earnings of the Joint Venture.


Provision for Income Taxes

The effective  tax rate for Federal,  state and local income taxes was 41.3% and
43.5% in the years ended December 31, 1996 and 1995, respectively. The 1996 rate
reflects an increase in  undistributed  earnings of the Joint  Venture for which
taxes have not been provided.
<PAGE> 
Net Income

Net income  increased to $11.9 million in the year ended  December 31, 1996 from
$10.4  million in the year ended  December 31, 1995, an increase of $1.5 million
or 14.4%.  Net income  increased to $0.46 per share  (diluted) in the year ended
December 31, 1996 from $0.44 per share  (diluted) in the year ended December 31,
1995. All net income per share and share amounts have been adjusted to reflect a
three-for-two  common  stock  split,  effected  as  a  50%  stock  distribution,
distributed on June 9, 1997.

--------------------------------------------------------------------------------
Liquidity  and         
Capital  Resources 

Since 1995, Computer Horizons has financed its operations primarily through cash
generated from  operations and the public sale of its common stock.  At December
31, 1997,  the Company had $157.4  million in working  capital,  of which $101.8
million was cash, cash equivalents and short-term  investments  (including $83.7
million of net  proceeds of its public  offering of common  stock  completed  on
September 23, 1997). There were no borrowings under its bank lines of credit.

16
<PAGE>
Net cash provided by operating  activities was $14.2  million,  $5.3 million and
$2.2  million,   for  the  years  ended  December  31,  1997,   1996  and  1995,
respectively,  consisting primarily of net income, offset in part by an increase
in accounts receivable.

Net cash used in investing  activities was $22.0 million,  $2.5 million and $6.2
million in the years ended December 31, 1997, 1996 and 1995,  respectively.  Net
cash used in investing activities in 1997 consisted primarily of the purchase of
short-term investments.  In addition, on December 31, 1997, the Company acquired
the assets of Millennium Computer Technology ("Millennium"), a Chattanooga-based
IT services provider,  for approximately $5 million.  Net cash used in investing
activities in the year ended December 31, 1996 consisted  primarily of purchases
of  furniture  and  equipment.  Net cash used in  investing  activities  in 1995
consisted  primarily  of  approximately  $3.0  million  of  additional  goodwill
resulting  from  earn-out  provisions  in  connection  with  Computer  Horizons'
acquisition  of  Unified  Systems  Solutions,  Inc.  and  Strategic  Outsourcing
Services, Inc., the purchase of furniture and equipment and the establishment of
client-specific outsourcing centers.

Net cash provided by financing activities was $84.4 million and $11.1 million in
the  years  ended  December  31,  1997  and  December  31,  1995,  respectively,
consisting primarily of $83.7 million and $13.3 million in net proceeds from the
Company's  public  offerings of common  stock,  offset in part by the  repayment
following the offering of outstanding bank debt of $6.0 million in 1995. For the
year ended  December 31, 1996,  net cash used in financing  activities  was $0.7
million, resulting primarily from the scheduled repayment of long-term debt.

At December 31, 1997,  the Company had a current ratio  position of 6.9 to 1, no
long-term   debt  and  no  outstanding   borrowings   under  its  two  unsecured
discretionary  lines of credit of $15.0  million  and  $10.0  million.  Computer
Horizons  also has  outstanding  two notes,  each bearing  interest at a rate of
9.55%. As of December 31, 1997,  approximately $1.4 million remained outstanding
under the notes and will become due on April 15, 1998.

The  Company's  accounts  receivable  were $79.5  million  and $56.4  million at
December 31, 1997 and December 31, 1996,  respectively.  Days sales  outstanding
were 75 days at December  31, 1997 and 77 days at December  31,  1996,  based on
fourth quarter sales.

The Company is  currently  implementing  a new  firmwide  accounting/information
system.  In addition to being Year 2000  compliant,  the system will support the
Company's future growth.  The implementation is expected to be completed in late
1998,  and the related  cost is not  expected  to have a material  impact on the
Company's financial condition or results of operations.

The  Company  believes  that  its  cash  and  cash  equivalents  and  short-term
investments,  lines of credit and internally  generated funds will be sufficient
to meet its working capital needs through 1998.


                                                                              17
<PAGE>
AUDITORS' REPORT


Report of
Independent            [Grant Thornton - logo]
Certified Public
Accountants



Board of Directors and Shareholders
Computer Horizons Corp.


We have  audited  the  accompanying  consolidated  balance  sheets  of  Computer
Horizons  Corp.  and  Subsidiaries  as of December  31,  1997 and 1996,  and the
related consolidated  statements of income,  shareholders' equity and cash flows
for each of the  three  years in the  period  ended  December  31,  1997.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the consolidated financial position of Computer Horizons
Corp.  and  Subsidiaries  as of December 31, 1997 and 1996 and the  consolidated
results of their  operations and their  consolidated  cash flows for each of the
three years in the period ended December 31, 1997, in conformity  with generally
accepted accounting principles.





/s/GRANT THORNTON LLP
---------------------
GRANT THORNTON LLP


Parsippany, New Jersey
January 29, 1998
(except for Note 2, as to which
the date is February 27, 1998)

18
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
                                                                    Year Ended December 31,
                                                             1997             1996             1995
---------------------------------------------------------------------------------------------------------------------------
                                                         (dollars in thousands, except per share data)
<S>                                                         <C>              <C>              <C>
Revenues                                                    $334,729         $249,152         $213,165
---------------------------------------------------------------------------------------------------------------------------

Costs and expenses:
  Direct costs                                               224,123          172,734          148,530
  Selling, general and administrative                         70,741           56,903           46,156
  Merger-related expenses                                        976
---------------------------------------------------------------------------------------------------------------------------
                                                             295,840          229,637          194,686
---------------------------------------------------------------------------------------------------------------------------

Income from operations                                        38,889           19,515           18,479
---------------------------------------------------------------------------------------------------------------------------
Other income (expense):
  Interest income                                              1,543              307              266
  Interest expense                                              (263)            (480)            (642)
  Equity in net earnings of joint venture (Note 4)                13              885              361
---------------------------------------------------------------------------------------------------------------------------
                                                               1,293              712              (15)
---------------------------------------------------------------------------------------------------------------------------

Income before income taxes                                    40,182           20,227           18,464
---------------------------------------------------------------------------------------------------------------------------

Income taxes (Notes 1 and 7):
  Current                                                     18,485            8,737            8,533
  Deferred                                                      (947)            (374)            (494)
---------------------------------------------------------------------------------------------------------------------------
                                                              17,538            8,363            8,039
---------------------------------------------------------------------------------------------------------------------------

Net Income                                                  $ 22,644         $ 11,864         $ 10,425
===========================================================================================================================

Earnings per share (Notes 1 and 8):
  Basic                                                         $.88             $.48             $.46
===========================================================================================================================

  Diluted                                                       $.84             $.46             $.44
===========================================================================================================================

Weighted average number of shares outstanding:
  Basic                                                   25,680,000       24,493,000       22,425,000
===========================================================================================================================

  Diluted                                                 27,102,000       26,028,000       23,931,000
===========================================================================================================================
</TABLE>

The accompanying notes are an integral part of these statements.

                                                                              19
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS

                                                                                                             December 31,
                                                                                                          1997          1996
-------------------------------------------------------------------------------------------------------------------------------
                                                                                                        (dollars in thousands)
<S>                     <C>                                                                             <C>            <C>
Assets                  Current assets:
                           Cash and cash equivalents                                                    $ 88,633       $11,993
                           Short-term investments (Note 1)                                                13,165            --
                           Accounts receivable (Note 3)                                                   79,526        56,378
                           Deferred income tax benefit (Note 7)                                            1,818         1,119
                           Other                                                                           1,087           979
-------------------------------------------------------------------------------------------------------------------------------
                                 Total current assets                                                    184,229        70,469
-------------------------------------------------------------------------------------------------------------------------------


                        Property and equipment:
                           Furniture, equipment and other                                                 12,479         9,685
                           Less accumulated depreciation                                                   7,101         5,389
-------------------------------------------------------------------------------------------------------------------------------
                                                                                                           5,378         4,296
-------------------------------------------------------------------------------------------------------------------------------


                        Other assets - net:
                           Goodwill (Note 1)                                                              17,090        13,322
                           Deferred income tax benefit (Note 7)                                              816           568
                           Other (Note 4)                                                                  4,088         3,105
------------------------------------------------------------------------------------------------------------------------------
                                                                                                          21,994        16,995
------------------------------------------------------------------------------------------------------------------------------
                                 Total Assets                                                           $211,601       $91,760
==============================================================================================================================
</TABLE>

The accompanying notes are an integral part of these statements.

20
<PAGE>
<TABLE>
<CAPTION>
                                                                                                             December 31,
                                                                                                          1997         1996
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                       (dollars in thousands)
<S>                     <C>                                                                              <C>          <C>
Liabilities and         Current liabilities:
Shareholders'              Current portion of long-term debt (Note 5)                                    $ 1,432      $ 1,867
Equity                     Accrued payroll, payroll taxes and benefits                                    17,526       12,775
                           Accounts payable                                                                1,830        1,217
                           Income taxes payable                                                            3,394        1,100
                           Other accrued expenses                                                          2,634          749
-----------------------------------------------------------------------------------------------------------------------------
                                 Total current liabilities                                                26,816       17,708
-----------------------------------------------------------------------------------------------------------------------------
                        Long-term debt (Note 5)                                                               --        1,432
-----------------------------------------------------------------------------------------------------------------------------
                        Other liabilities (Note 9)                                                         2,253        1,627
-----------------------------------------------------------------------------------------------------------------------------
                        Commitments (Note 10)
-----------------------------------------------------------------------------------------------------------------------------

                        Shareholders' equity:
                           Preferred stock,  $.10 par;  authorized and unissued,
                             200,000 shares, including 50,000 Series A
                           Common stock, $.10 par; authorized, 60,000,000
                             shares; issued 29,360,069 shares and 26,485,029
                             shares at December 31, 1997 and 1996, respectively                            2,936        2,648
                           Additional paid-in capital                                                    117,718       29,887
                           Retained earnings                                                              75,750       53,106
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                         196,404       85,641
                           Less shares held in treasury, at cost; 1,692,253 shares and
                             1,786,883 shares at December 31, 1997 and 1996, respectively                (13,872)     (14,648)
-----------------------------------------------------------------------------------------------------------------------------
                                 Total shareholders' equity                                              182,532       70,993
-----------------------------------------------------------------------------------------------------------------------------
                                 Total Liabilities and Shareholders' Equity                             $211,601     $ 91,760
=============================================================================================================================

</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

                                                                                
                                                          Common stock          Additional                  Treasury stock
                                                        -------------------      paid-in    Retained      ------------------
                                                        Shares       Amount      capital    earnings      Shares      Amount
-----------------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 1997, 1996 and 1995                                   (dollars in thousands)
<S>                                                     <C>          <C>        <C>           <C>         <C>         <C>
Balance, December 31, 1994,
  as previously reported                                 7,739,576   $   774    $  13,940     $29,851     1,786,883   $14,648

  Pooling of interests with
    CG Computer Services
    Corporation                                            167,901        17           46         966
-----------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1994, as restated                  7,907,477       791       13,986      30,817     1,786,883    14,648

  Three-for-two stock split declared:
    April 1995                                           3,086,949       309         (309)
    December 1995                                        5,332,803       533         (533)

  Stock options exercised                                  318,063        32        1,138

  Sale of common stock, net of expenses                  1,140,000       114       13,159

  Net income for the year                                                                      10,425
-----------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1995                              17,785,292     1,779       27,441      41,242     1,786,883    14,648

  Stock options exercised                                  467,022        46        1,680

  Tax benefits related to stock option plans                                        1,589

  Net income for the year                                                                      11,864
-----------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1996                              18,252,314     1,825       30,710      53,106     1,786,883    14,648

  Three-for-two stock split declared May 1997            8,232,715       823         (823)

  Stock options exercised                                  375,040        38        1,759                   (94,630)     (776)

  Tax benefits related to stock option plans                                        2,610

  Sale of common stock, net of expenses                  2,500,000       250       83,462

  Net income for the year                                                                      22,644
-----------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1997                              29,360,069    $2,936     $117,718     $75,750     1,692,253   $13,872
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of this statement.
22
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                         Year Ended December 31,
                                                                   1997           1996          1995
---------------------------------------------------------------------------------------------------------------------------
                                                                             (in thousands)
<S>                                                               <C>             <C>          <C>
Cash flows from operating activities
  Net income                                                      $ 22,644        $11,864      $10,425
  Adjustments to reconcile net income to net cash
    provided by operating activities:
      Deferred taxes                                                  (947)          (374)        (494)
      Depreciation                                                   1,711          1,216          704
      Amortization of intangibles                                      602            587          505
      Provision for bad debts                                          575             54          170
  Changes in assets and liabilities, net of acquisitions:
      Accounts receivable                                          (22,829)        (9,869)     (14,768)
      Other current assets                                            (108)            13         (519)
      Accrued payroll, payroll taxes and benefits                    4,751          1,555        3,266
      Accounts payable                                                 371           (582)       1,198
      Income taxes payable                                           4,904            959          725
      Other accrued expenses                                         1,885           (637)         578
      Other liabilities                                                626            465          424
---------------------------------------------------------------------------------------------------------------------------

        Net cash provided by operating activities                   14,185          5,251        2,214
---------------------------------------------------------------------------------------------------------------------------

Cash flows from investing activities
  Purchases of furniture and equipment                              (2,363)        (1,373)      (1,521)
  Acquisitions, net of cash                                         (5,467)          (363)      (2,966)
  Change in other assets                                              (968)          (761)      (1,673)
  Purchases of short-term investments                              (13,165)
---------------------------------------------------------------------------------------------------------------------------

        Net cash used in investing activities                      (21,963)        (2,497)      (6,160)
---------------------------------------------------------------------------------------------------------------------------

Cash flows from financing activities
  Notes payable--banks, net                                                                      (3,200)
  Long-term debt                                                    (1,867)        (2,385)        (168)
  Stock options exercised                                            2,573          1,727        1,170
  Proceeds from issuance of stock                                   83,712                      13,273
---------------------------------------------------------------------------------------------------------------------------

        Net cash provided by (used in) financing activities         84,418           (658)      11,075
---------------------------------------------------------------------------------------------------------------------------

        Net increase in cash and cash equivalents                   76,640          2,096        7,129
Cash and cash equivalents at beginning of year                      11,993          9,897        2,768
---------------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents at end of year                          $ 88,633        $11,993      $ 9,897
===========================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                                               <C>             <C>          <C>
Supplemental disclosures of cash flow information:
  Cash paid during the year for:
    Interest                                                       $   236         $  443       $  608
    Income taxes                                                    12,950          7,592        6,840
===========================================================================================================================

Details of Acquisition:
  Fair value of assets                                            $  5,590
  Liabilities                                                          242
---------------------------------------------------------------------------------------------------------------------------

  Cash paid for acquisition                                       $  5,348
===========================================================================================================================
</TABLE>

The accompanying notes are an integral part of these statements.
                                                                              23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1
Summary of
Significant
Accounting
Policies

December 31, 1997, 1996 and 1995

Description of Business

Computer Horizons Corp. is a diversified information technology services company
that  provides  clients  with  resource  augmentation  and  advanced  technology
solutions to business problems through applications  development,  client/server
migration,  network  management,   emerging  technologies,  and  legacy  systems
maintenance,  including  its  solution to the  millennium  date-change  problem,
Computer Horizons' Signature 2000(TM).

Principles of Consolidation

The consolidated  financial statements include the accounts of Computer Horizons
Corp.  and  its  wholly-owned   subsidiaries  (the  "Company").   The  Company's
investment  in a joint venture (Note 4) is accounted for under the equity method
of accounting.  All material  intercompany  accounts and transactions  have been
eliminated.

Revenue Recognition

The Company recognizes revenues as professional services are performed. On fixed
fee  engagements,  revenue  and gross  profit  adjustments  are made to  reflect
revisions in estimated  total costs and contract  values.  Estimated  losses are
recorded when identified.

Recruitment Costs

Recruitment costs are charged to operations as incurred.

Cash and Cash Equivalents

Cash and cash equivalents  include all highly liquid instruments with a maturity
of three months or less at the time of purchase and consist of the  following at
December 31:
<TABLE>
<CAPTION>
                                                                                                           1997         1996
------------------------------------------------------------------------------------------------------------------------------
                                                                                                            (in thousands)
<S>                                                                                                       <C>          <C>

                        Cash                                                                              $ 3,448      $ 2,053
                        Money market funds                                                                 45,460        5,926
                        Commercial paper                                                                   21,924        1,247
                        Demand obligations                                                                 17,801        2,767
------------------------------------------------------------------------------------------------------------------------------
                                                                                                          $88,633      $11,993
==============================================================================================================================
</TABLE>
<PAGE>
Short-term Investments

The Company classifies  investments with an original maturity of more than three
months at the time of purchase as short-term investments. Short-term investments
are classified as  held-for-sale  and carried at cost, which  approximates  fair
value.  At December 31, 1997,  short-term  investments  maturing within one year
consist of:
<TABLE>
<CAPTION>
                                                                                                                        Fair
                                                                                                           Cost         value
------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                       <C>          <C>
                                                                                                            (in thousands)
                        Commercial paper                                                                  $ 8,711      $ 8,711
                        Corporate bonds                                                                     2,452        2,450
                        Government bonds                                                                    2,002        2,000
------------------------------------------------------------------------------------------------------------------------------
                                                                                                          $13,165      $13,161
==============================================================================================================================
</TABLE>
24
<PAGE>
Concentrations of Credit Risk

Financial  instruments,  which potentially subject the Company to concentrations
of credit risk,  regardless of the degree of such risk,  consist  principally of
cash and cash equivalents, short-term investments and trade accounts receivable.
The Company  invests the  majority  of its excess  cash in money  market  funds,
commercial paper and demand obligations of high-credit,  high-quality  financial
institutions or companies, with certain limitations as to the amount that can be
invested in any one entity.

The  Company  maintains  its  cash  balances   principally  in  three  financial
institutions located in New York, New Jersey and California.  These balances are
insured by the Federal  Deposit  Insurance  Corporation  up to $100,000 for each
entity at each  institution.  At December  31, 1997,  uninsured  amounts held at
these financial institutions total approximately $7,312,000.

The Company's customers are generally very large,  Fortune 500 companies in many
industries and with wide geographic  dispersion.  The Company's largest customer
accounts for  approximately  4% of billed  accounts  receivable  at December 31,
1997.  The Company  establishes  an allowance for doubtful  accounts  based upon
factors  surrounding the credit risk of specific  customers,  historical trends,
and other information.

The Company's largest client accounted for 11.7%,  9.2% and 7.3%,  respectively,
of the Company's  consolidated  revenues in 1997, 1996 and 1995. No other client
accounted for more than 8% in those years.

Fair Value of Financial Instruments

The carrying value of financial instruments  (principally consisting of cash and
cash equivalents,  short-term  investments,  accounts receivable and payable and
long-term debt)  approximates  fair value because of the short maturities or, as
to long-term debt, the rates currently offered to the Company.

Property and Equipment and Depreciation

Property and equipment are stated at cost.  Depreciation  is computed  using the
straight-line method over the estimated useful lives of the assets.

Goodwill

Goodwill, the cost in excess of the net assets of acquired businesses,  is being
amortized by the straight-line method,  primarily over thirty years. Accumulated
amortization  is  $4,523,000  and  $3,921,000  at  December  31,  1997 and 1996,
respectively.  On  an  ongoing  basis,  management  reviews  the  valuation  and
amortization  of goodwill.  As part of this review,  the Company  estimates  the
value and future benefits of income  generated,  to determine that no impairment
has occurred.

Income Taxes

The Company and its domestic subsidiaries file a consolidated Federal income tax
return. The foreign subsidiaries file in each of their local jurisdictions.

Deferred income taxes result from temporary  differences between income reported
for  financial  and income tax  purposes.  These  temporary  differences  result
primarily from the allowance for doubtful accounts provision and certain accrued
expenses which are deductible, for tax purposes, only when paid.
<PAGE>

Tax benefits from early  disposition of the stock by optionees  under  incentive
stock  options  and from  exercise  of  non-qualified  options  are  credited to
additional paid-in capital.

The Company intends to permanently  reinvest the unremitted earnings at December
31, 1997 from its foreign  corporate  joint  venture and,  accordingly,  has not
provided  deferred  taxes on these  amounts.  The Company's  Canadian and United
Kingdom subsidiaries have no unremitted earnings at December 31, 1997.


                                                                              25
<PAGE>
Earnings Per Share

In 1997, the Company adopted SFAS No. 128,  "Earnings Per Share," which requires
public companies to present basic earnings per share and, if applicable, diluted
earnings per share.  In accordance  with SFAS No. 128, all  comparative  periods
have been  restated as of December 31, 1997.  Basic EPS is based on the weighted
average  number of common shares  outstanding  without  consideration  of common
stock  equivalents.  Diluted earnings per share is based on the weighted average
number of common and common equivalent shares outstanding. The calculation takes
into  account  the shares that may be issued  upon  exercise  of stock  options,
reduced by the shares that may be  repurchased  with the funds received from the
exercise, based on the average price during the year.

Use of Estimates in Financial Statements

In  preparing  financial   statements  in  conformity  with  generally  accepted
accounting  principles,  management  makes estimates and assumptions that affect
the reported  amounts of assets and  liabilities  and  disclosures of contingent
assets and liabilities at the date of the financial  statements,  as well as the
reported  amounts of revenues and expenses during the reporting  period.  Actual
results could differ from those estimates.

New Accounting Pronouncements

The  Financial   Accounting   Standards  Board  issued  Statement  of  Financial
Accounting Standards No. 130 ("SFAS No. 130"), "Reporting Comprehensive Income,"
governing the reporting and display of comprehensive  income and its components,
and  Statement  of  Financial  Accounting  Standards  No. 131 ("SFAS No.  131"),
"Disclosures About Segments of an Enterprise and Related Information," requiring
that all public  businesses  report financial and descriptive  information about
their reportable  operating  segments.  Both statements are applicable to fiscal
years  beginning after December 15, 1997. The impact of adopting SFAS No. 130 is
not expected to be material to the consolidated financial statements or notes to
consolidated financial statements. Management is currently evaluating the effect
of SFAS No. 131 on consolidated financial statement disclosures.

--------------------------------------------------------------------------------
Note 2         
Acquisitions   

On December 31, 1997, the Company  acquired,  for approximately $5 million cash,
certain assets from  Millennium  Computer  Technology,  Inc.  ("Millennium"),  a
Chattanooga-based  IT services provider.  The acquisition was recorded under the
purchase  method of accounting.  Had the  acquisition of Millennium  occurred on
January  1,  1997,  the  effect  on  revenues  and net  income  would  have been
immaterial.

On December 19, 1997,  the Company  acquired all the common stock of CG Computer
Services  Corporation ("CG") in exchange for 566,666 shares of Computer Horizons
common stock. CG provides IT provisioning and staffing solutions with offices in
San  Francisco,  Los  Angeles,   Chicago,  and  Parsippany,   New  Jersey.  This
transaction  was accounted for as a pooling of interests and,  accordingly,  the
consolidated  financial  statements for the periods presented have been restated
to include the accounts of CG.


26
<PAGE>
The  reconciliation  below details the effects of the pooling noted above on the
previously reported revenues,  net income and earnings per share of the separate
companies for the periods preceding the acquisition:
<TABLE>
<CAPTION>
                                                                                 Nine months
                                                                                    ended
                                                                                September 27,      Year ended        Year ended
                                                                                    1997              1996              1995
-------------------------------------------------------------------------------------------------------------------------------
                                                                                  (dollars in thousands, except per share data)
<S>                                                                                <C>               <C>              <C>
                        Revenues
                          Computer Horizons Corp.                                  $226,846          $233,858         $200,050
                          CG                                                         12,820            15,294           13,115
-------------------------------------------------------------------------------------------------------------------------------
                          Combined                                                 $239,666          $249,152         $213,165
===============================================================================================================================

                        Net income
                          Computer Horizons Corp.                                  $ 14,903          $ 11,232          $ 9,907
                          CG                                                            468               632              518
------------------------------------------------------------------------------------------------------------------------------
                          Combined                                                 $ 15,371          $ 11,864         $ 10,425
============================================================================================================================== 

                        Earnings per share
                        Basic
                          Computer Horizons Corp.                                      $.61              $.47             $.45
                          CG                                                            .00               .01              .01
------------------------------------------------------------------------------------------------------------------------------
                          Combined                                                     $.61              $.48             $.46
==============================================================================================================================

                        Diluted
                          Computer Horizons Corp.                                      $.58              $.44             $.42
                          CG                                                            .00               .02              .02
------------------------------------------------------------------------------------------------------------------------------
                          Combined                                                     $.58              $.46             $.44
==============================================================================================================================
</TABLE>
In June 1994,  the  Company  acquired  the net assets of  Strategic  Outsourcing
Services, Inc. ("SOS"), a New Jersey-based provider of data processing services,
for  approximately   $250,000.  The  acquisition  agreement  also  provides  for
contingent  consideration  based on the future performance of SOS, through 1998.
The  acquisition  was accounted for as a purchase.  In 1997,  1996 and 1995, the
Company recorded contingent  consideration,  totalling  approximately  $119,000,
$137,000 and $202,000, respectively, as additional goodwill.

In January 1993, the Company acquired Unified Systems Solutions, Inc. ("USS"), a
New  Jersey-based  provider  of systems and network  integration  services,  for
approximately  $750,000.  The acquisition agreement also provided for contingent
consideration  based  on  the  future  performance  of  USS  through  1996.  The
acquisition  was accounted  for as a purchase.  The excess of cash over the fair
value of assets  acquired,  totalling  approximately  $509,000,  was recorded as
<PAGE>
goodwill  in  1994.  In  1995  and  1994,   the  Company   recorded   contingent
consideration,  totalling  approximately  $390,000 and  $245,000,  as additional
goodwill.  These  contingent  consideration  payments are not dependent upon the
continued  employment  of the former  shareholders.  Also in 1995,  the  Company
entered  into  an  agreement  with  the  former   shareholders  of  USS  to  pay
approximately  $2,396,000,  plus interest,  in lieu of any amounts that may have
been  due for the  remaining  contingent  period  ending  March  31,  1996.  The
$2,396,000 was also recorded as goodwill in 1995.


Subsequent Event

On February 27, 1998, the Company  acquired all of the common stock of Princeton
Softech, Inc.  ("Princeton") in exchange for 954,213 shares of Computer Horizons
common   stock.   Princeton   specializes   in   relational   databases,    data
synchronization,  intelligent  data migration and data management  tools, and is
based in  Princeton,  New Jersey.  This  transaction  will be accounted for as a
pooling of interests.

                                                                              27
<PAGE>
Note 3                 
Accounts Receivable

Accounts receivable consist of the following at December 31:
<TABLE>
<CAPTION>

                                                                                                         1997           1996
------------------------------------------------------------------------------------------------------------------------------
                                                                                                            (in thousands)
<S>                                                                                                      <C>           <C>
                        Billed                                                                           $58,253       $39,096
                        Unbilled                                                                          23,015        18,485
------------------------------------------------------------------------------------------------------------------------------
                                                                                                          81,268        57,581
                        Less allowance for doubtful accounts                                               1,742         1,203
------------------------------------------------------------------------------------------------------------------------------
                                                                                                         $79,526       $56,378
==============================================================================================================================
</TABLE>
 
Note 4
Investment in Joint Venture

In 1995,  the Company  entered into a software  development  and services  joint
venture  with the Birla Group,  a large  multinational  conglomerate  located in
India.  The  foreign  joint  venture,  known  Joint  Venture  as Birla  Horizons
International  ("BHI"),  is headquartered in New Delhi,  India and currently has
operations in India, the United States, the United Kingdom and Canada.

The  Company and the Birla Group each made cash  contributions  of $500,000  and
each  received a 50%  interest  in the joint  venture.  The Birla Group has also
contributed the net assets of its then existing  information  technology company
to the joint venture and the Company is providing  technological  and management
support.

The Company's  total  investment in BHI is $1,672,000 and $1,746,000 at December
31, 1997 and 1996,  respectively,  representing  the initial cost plus equity in
the  undistributed  net  earnings  since  formation,  and is  included  in other
noncurrent  assets.  BHI provided  consultants to the Company at a total cost of
$5,017,000,  $4,216,000  and  $2,686,000 in 1997,  1996 and 1995,  respectively.
Approximately $374,000 was included in accounts payable at December 31, 1997.

Note 5 
Long-Term Debt 
and Lines of Credit   

Long-term debt consists of the following at December 31:
<TABLE>
<CAPTION>
                                                                                                           1997           1996
------------------------------------------------------------------------------------------------------------------------------
                                                                                                             (in thousands)
<S>                                                                                                       <C>           <C>
                        9.55% senior notes                                                                $1,432        $2,860
                        Notes payable at prime                                                                             439
------------------------------------------------------------------------------------------------------------------------------
                                                                                                           1,432         3,299
                        Less current maturities                                                            1,432         1,867
------------------------------------------------------------------------------------------------------------------------------
                                                                                                            $  --       $1,432
==============================================================================================================================
</TABLE>
<PAGE>

In 1988, the Company  issued two senior notes  aggregating  $10,000,000  bearing
interest  at  9.55%,  payable  semiannually.  The notes  are  payable  in annual
installments of $1,428,000 from April 15, 1992 through 1997 with a final payment
of $1,432,000  due April 15, 1998, and are subject to the provisions of the loan
agreement, including, among other things, restrictions on additional borrowings,
prepayments, dividends and stock purchases (which were waived in connection with
certain purchases of treasury stock),  and maintenance of a minimum net worth of
$13,500,000.

The notes payable  consist of notes to the four former  shareholders  of USS. In
1995, an agreement was signed (Note 2) resulting in $957,000  being due in April
1996 and $439,000 in April 1997, with 8.75% imputed interest.

At December 31, 1997, the Company has two unused bank lines of credit  totalling
$25,000,000  at rates below the banks' prime  lending  rates.  During 1997,  the
Company had no borrowings against either line.


28
<PAGE>
Note 6 
Shareholders' Equity

Authorized  Shares 

On May 7, 1997, the Company  approved an amendment to the Company's  Certificate
of  Incorporation  increasing the  authorized  number of shares of the Company's
common stock from 30,000,000 to 60,000,000.


Stock Splits

The Board of Directors of the Company has  declared  three-for-two  common stock
splits in the form of 50% stock distributions as follows:
<TABLE>
<CAPTION>
                                                                    Shareholder of
                            Date declared                             record date                           Date payable
---------------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>                                      <C>
                        May 7, 1997                              May 22, 1997                             June 9, 1997
                        December 12, 1995                        December 22, 1995                        January 9, 1996
                        April 24, 1995                           May 9, 1995                              May 30, 1995
</TABLE>
Amounts equal to the $.10 par value of the common shares  distributed  have been
retroactively  transferred from additional  paid-in capital to common stock. All
references in the financial statements with regard to number of shares of common
stock,  common stock prices and per share  amounts have been restated to reflect
the above-mentioned stock splits.


Stock Options and SFAS No. 123 Pro Forma Disclosure

In 1994,  the  Company  adopted  a stock  option  plan  which  provides  for the
granting,  to  officers  and key  employees,  of options  for the  purchase of a
maximum  of  7,594,000  shares of common  stock  and stock  appreciation  rights
(SARs).  Options and SARs generally expire five years from the date of grant and
become  exercisable  in  specified  amounts  during  the life of the  respective
options.  No SARs have been granted as of December 31,  1997.  This plan,  which
replaces the Company's 1985 Plan,  will  terminate on June 15, 2004.  There were
5,555,000 shares available for option at December 31, 1997.

In 1994,  the Company  amended the  non-qualified  Directors'  Stock Option Plan
increasing  the  maximum  number of shares of common  stock that may be acquired
pursuant  to the  exercise  of options  granted  under the plan from  379,000 to
844,000,  and  providing  that each new  director  of the  Company who is not an
employee of the Company (i) shall immediately receive options to purchase 75,938
shares of its common  stock and (ii) shall  receive up to five annual  grants to
purchase  10,125 shares of its common stock.  The plan expires on March 4, 2001.
There were 504,000 shares available for option at December 31, 1997.
<PAGE>

The exercise  price per share on all options and/or SARs granted may not be less
than  the  fair  value  at  the  date  of  the  option  grant.  Accordingly,  no
compensation  cost has been recognized for the plans. Had compensation  cost for
the plans been  determined  based on the fair value of the  options at the grant
dates  consistent  with the method of SFAS No. 123, the Company's net income and
earnings  per share would have been reduced to the pro forma  amounts  indicated
below:
<TABLE>
<CAPTION>
                                                                                  1997              1996              1995
---------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>                    <C>               <C>              <C>     
                        Net income                       As reported            $22,644,000       $11,864,000      $10,425,000
                                                         Pro forma               19,749,000         9,533,000        9,619,000

                        Earnings per share:
                          Basic                          As reported                   $.88              $.48             $.46
                                                         Pro forma                      .77               .39              .43

                          Diluted                        As reported                   $.84              $.46             $.44
                                                         Pro forma                      .73               .37              .40
</TABLE>
The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   options-pricing   model  with  the  following   weighted-average
assumptions  used for  grants  in 1997,  1996 and 1995,  respectively:  expected
volatility of 61%, 97% and 70%;  risk-free  interest  rates of 5.47%,  6.28% and
6.27%; and expected lives of 5.0, 4.9 and 4.5 years.

                                                                              29
<PAGE>
A summary of the status of the  Company's  stock option plans as of December 31,
1997,  1996 and 1995,  and  changes  during the years  ending on those  dates is
presented below:
<TABLE>
<CAPTION>
                                                                      1997                    1996                  1995
------------------------------------------------------------------------------------------------------------------------------
                                                                          Weighted               Weighted             Weighted
                                                                           average                average              average
                                                                          exercise               exercise             exercise
                                                                Shares      price      Shares      price     Shares     price
------------------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>           <C>      <C>        <C>         <C>       <C>

                                                                   (000)                  (000)                 (000)
                        Outstanding--January 1                    2,169        $ 6.87    2,214     $ 3.69      2,182     $2.03
                        Granted                                     328         23.55      885      14.65        783      6.01
                        Exercised                                  (462)         5.37     (678)      2.50       (749)     1.29
                        Canceled/forfeited                          (36)        13.36     (252)     17.95         (2)     6.78
------------------------------------------------------------------------------------------------------------------------------
                        Outstanding--December 31                  1,999        $ 9.84    2,169     $ 6.87      2,214     $3.69
==============================================================================================================================

                        Options exercisable--December 31            833        $ 7.10      764     $ 4.94        999     $2.42
==============================================================================================================================

                        Weighted average fair value of
                          options granted during the year                      $23.54              $11.65                $3.64

</TABLE>
The following information applies to options outstanding at December 31, 1997:
<TABLE>
<CAPTION>
                                                                       Options outstanding                Options exercisable
-----------------------------------------------------------------------------------------------------------------------------
                                                                            Weighted
                                                            Outstanding      average      Weighted      Exercisable   Weighted
                                                               as of        remaining      average         as of       average
                                                           December 31,    contractual    exercise     December 31,   exercise
                        Range of exercise prices               1997       life (years)      price          1997         price
------------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>            <C>          <C>             <C>         <C>    

                                                                (000)                                      (000)
                        $ 0.00-$14.99                          1,518          5.0          $ 6.13           708        $ 4.55
                         15.00- 29.99                            480          6.3           21.53           125         21.47
                         30.00 and over                            1          4.7           35.38            --            --
-----------------------------------------------------------------------------------------------------------------------------
                                                               1,999          5.3          $ 9.84           833        $ 7.10
=============================================================================================================================
</TABLE>

Certain  officers have the right to borrow from the Company against the exercise
price of options exercised.

The Company has issued  warrants to purchase  shares of its common  stock to two
outside business/ legal consulting firms.  Warrants for 8,625, 30,000 and 10,125
shares were granted, respectively, in 1997, 1996 and 1995. The exercise price is
the fair value at the date of grant.
<PAGE>


Shareholder Rights Plan

In July 1989, the Board of Directors  declared a dividend  distribution  of .131
preferred stock purchase right on each outstanding  share of common stock of the
Company.  The rights were amended on February 13, 1990.  Each right will,  under
certain circumstances,  entitle the holder to buy one one-hundredth (1/100) of a
share of  Series  A  preferred  stock at an  exercise  price of  $30.00  per one
one-hundredth  (1/100)  share,  subject to  adjustment.  Each one  one-hundredth
(1/100)  of a share  of  Series A  preferred  stock  has  voting,  dividend  and
liquidation  rights and  preferences  substantively  equivalent  to one share of
common stock.

The rights will be exercisable and transferable separately from the common stock
only if a person or group acquires 20% or more,  subject to certain  exceptions,
of the Company's outstanding common stock or announces a tender offer that would
result in the ownership of 20% or more of the common stock.  If a person becomes
the  owner  of at  least  20% of the  Company's  common  shares  (an  "Acquiring
Person"),  each holder of a right other than the  Acquiring  Person is entitled,
upon  payment  of the then  current  exercise  price  per right  (the  "Exercise
Price"),  to receive shares of common stock (or common stock equivalents) having
a market value equal to twice the Exercise Price.

Additionally,  if the Company subsequently engages in a merger or other business
combination  with the Acquiring Person in which the Company is not the surviving
corporation,  or in which the outstanding  shares of the Company's  common stock
are changed or exchanged, or if more 


30
<PAGE>
than 50% of the  Company's  assets or earning  power is sold or  transferred,  a
right  would  entitle a  Computer  Horizons  Corp.  shareholder,  other than the
Acquiring  Person and its  affiliates,  to purchase upon payment of the Exercise
Price,  shares  of the  Acquiring  Person  having  a market  value of twice  the
Exercise Price.  Prior to a person becoming an Acquiring Person,  the rights may
be redeemed at a redemption price of one cent per right,  subject to adjustment.
The rights are subject to amendment  by the Board.  No  shareholder  rights have
become exercisable. The rights will expire on July 16, 1999.

Note 7                 
Income Taxes 

The  provision  for income taxes  consists of the  following for the years ended
December 31: 
<TABLE>
<CAPTION>
                                                                                            1997           1996          1995
------------------------------------------------------------------------------------------------------------------------------
                                                                                                      (in thousands)
<S>                                                                                       <C>             <C>           <C>
                        Current:
                          Federal                                                         $13,927         $6,629        $6,180
                          State                                                             4,558          2,108         2,353
                        Deferred:
                          Federal                                                            (703)          (341)         (358)
                          State                                                              (244)           (33)         (136)
------------------------------------------------------------------------------------------------------------------------------
                                                                                          $17,538         $8,363        $8,039
==============================================================================================================================
</TABLE>

Deferred tax assets and liabilities consist of the following at December 31:
<TABLE>
<CAPTION>
                                                                                                          1997           1996
------------------------------------------------------------------------------------------------------------------------------
                                                                                                            (in thousands)
<S>                                                                                                       <C>           <C>
                        Deferred tax assets:
                          Accrued insurance                                                               $  588        $  291
                          Accrued payroll and benefits                                                     1,413         1,011
                          Deferred lease obligations                                                          48            72
                          Allowance for doubtful accounts                                                    469           249
                          Other                                                                              239            95
------------------------------------------------------------------------------------------------------------------------------
                                                                                                           2,757         1,718
                        Deferred tax liabilities:
                          Depreciation                                                                       123            31
------------------------------------------------------------------------------------------------------------------------------
                        Deferred tax assets, net                                                          $2,634        $1,687
==============================================================================================================================
</TABLE>
<PAGE>

A reconciliation  of income taxes, as reflected in the accompanying  statements,
with the statutory  Federal  income tax rate of 35% for the years ended December
31, 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
                                                                                           1997            1996          1995
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                      (in thousands)
<S>                                                                                       <C>             <C>           <C>
                        Statutory Federal income taxes                                    $14,064         $7,079        $6,462
                        State and local income taxes, net of Federal tax benefit            2,804          1,349         1,441
                        Amortization of goodwill                                              203            201           180
                        Equity in net earnings of joint venture                                             (310)         (126)
                        Other, net                                                            467             44            82
------------------------------------------------------------------------------------------------------------------------------
                                                                                          $17,538         $8,363        $8,039
==============================================================================================================================
</TABLE>
Deferred  income  taxes of  approximately  $413,000  have not been  provided  on
undistributed  earnings of a foreign joint venture in the amount of  $1,181,000,
as  the  earnings  at  December  31,  1997  are  considered  to  be  permanently
reinvested.


                                                                              31
<PAGE>
Note 8
Earnings per Share
Disclosures
<TABLE>
<CAPTION>
                                                                                                                         Per
                                                                              Income                Shares               share
                        For the year ended                                  (numerator)          (denominator)          amount
------------------------------------------------------------------------------------------------------------------------------
                                                                                (dollars in thousands, except per share data)
<S>                                                                           <C>                  <C>                   <C>
                        December 31, 1997
                          Net income                                          $22,644
==============================================================================================================================

                          Basic earnings per share
                            Income available to common shareholders           $22,644              25,680,000            $.88
                          Effect of diluted securities
                            Options                                                                 1,422,000
------------------------------------------------------------------------------------------------------------------------------
                          Diluted earnings per share
                            Income available to common shareholders
                              plus assumed conversions                        $22,644              27,102,000            $.84
=============================================================================================================================

                        December 31, 1996
                          Net income                                          $11,864
=============================================================================================================================

                          Basic earnings per share
                            Income available to common shareholders           $11,864              24,493,000            $.48
                          Effect of diluted securities
                            Options                                                                 1,535,000
-----------------------------------------------------------------------------------------------------------------------------
                          Diluted earnings per share
                            Income available to common shareholders
                              plus assumed conversions                        $11,864              26,028,000            $.46
=============================================================================================================================

                        December 31, 1995
                          Net income                                          $10,425
=============================================================================================================================

                          Basic earnings per share
                            Income available to common shareholders           $10,425              22,425,000            $.46
                          Effect of diluted securities
                            Options                                                                 1,506,000
-----------------------------------------------------------------------------------------------------------------------------
                          Diluted earnings per share
                            Income available to common shareholders
                              plus assumed conversions                        $10,425              23,931,000            $.44
=============================================================================================================================
</TABLE>
<PAGE>

Options to purchase  8,713 and 27,375  shares of common  stock in 1997 and 1996,
respectively, ranging from $25.67 to $35.58, and $18.00 to $33.33 per share were
outstanding  during 1997 and 1996,  respectively,  but were not  included in the
computation of diluted  earnings per share because the options'  exercise prices
were greater than the average market price of common  shares.  The options which
expire between  December 31, 2001 and January 1, 2007 were still  outstanding at
December 31, 1997. All options to purchase  shares of common stock were included
in the computation of diluted earnings per share in 1995.

32
<PAGE>
Note 9
Savings Plan and
Other  Retirement  Plans

The Company  maintains a defined  contribution  savings plan  covering  eligible
employees.  The  Company  makes  contributions  up to a specific  percentage  of
participants'  contributions.  The Company contributed  approximately  $469,000,
$345,000, and $246,000 in 1997, 1996 and 1995, respectively.

In 1995, the Company instituted a Supplemental Executive Retirement Plan whereby
key executives are entitled to receive  lump-sum  payments (or, if they elect, a
ten-year  payout)  upon  reaching  the age of 65 and being in the  employ of the
Company.  The maximum commitment if all plan members remain in the employ of the
Company until age 65 is  approximately  $9.7 million.  Benefits  accrue and vest
based on a formula which  includes  total years with the Company and total years
possible until age 65. The plan is non-qualified  and not formally funded.  Life
insurance  policies on the members are  purchased to assist in funding the cost.
The deferred  compensation expense is charged to operations during the remaining
service lives of the members and amounted to approximately $183,000, $97,000 and
$82,000 in 1997, 1996 and 1995, respectively.

In addition, the Company adopted a Deferred Compensation Plan for Key Executives
that permits the  individuals to defer a portion of their annual salary or bonus
for a period  of at  least  five  years.  There is no  effect  on the  Company's
operating  results  since  any  amounts  deferred  would  have  previously  been
expensed.  Amounts  deferred as of December 31, 1997 have been included in other
non-current liabilities.


--------------------------------------------------------------------------------
Note 10                
Commitments  

Leases

The Company  leases  office  space under  long-term  operating  leases  expiring
through 2006. As of December 31, 1997,  approximate  minimum rental  commitments
were as follows:
<TABLE>
<CAPTION>

                                       Year ending                                                (in thousands)
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                      <C>
                                       1998                                                              $ 3,833
                                       1999                                                                3,141
                                       2000                                                                1,286
                                       2001                                                                  976
                                       2002                                                                  700
                                       Thereafter                                                            729
---------------------------------------------------------------------------------------------------------------------------
                                                                                                         $10,665
===========================================================================================================================
</TABLE>
<PAGE>


Office  rentals are subject to  escalations  based on  increases  in real estate
taxes and  operating  expenses.  Aggregate  rent  expense for  operating  leases
approximated $3,610,000,  $2,799,000, and $2,176,000 in the years ended December
31, 1997, 1996 and 1995, respectively.


Other

In 1994, the Vice Chairman and Executive Vice President of the Company announced
his resignation effective February 15, 1995. The Company recorded  approximately
$400,000 of deferred  compensation  in 1994 which is to be paid beginning  March
1998 through  2005.  The Company also agreed to retain this former  officer as a
consultant  for a  three-year  period for  approximately  $75,000  each year and
entered into a noncompetition agreement for that period.


                                                                              33
<PAGE>
Note 11
Selected Quarterly   
Financial Data 
(Unaudited) 

For the years ended  December 31, 1997 and 1996,  selected  quarterly  financial
data is as follows:
<TABLE>
<CAPTION>
                                                                                               Quarters
------------------------------------------------------------------------------------------------------------------------------

                                                                            First        Second          Third        Fourth
------------------------------------------------------------------------------------------------------------------------------
                                                                                (in thousands, except per share data)
<S>                                                                       <C>            <C>            <C>           <C>
                        1997
                        Revenues                                          $73,940        $79,934        $85,792       $95,063
                        Direct costs                                       50,418         53,850         57,190        62,665
                        Selling, general and administrative                16,291         17,449         17,847        19,154
                        Merger-related costs                                                                              976
                        Income from operations                              7,231          8,635         10,755        12,268
                        Interest income/(expense), net                         32             (2)            74         1,176
                        Equity in net earnings of joint venture               150             63            (75)         (125)
                        Income before income taxes                          7,413          8,696         10,754        13,319
                        Income taxes                                        3,148          3,715          4,630         6,045
                        Net income                                        $ 4,265        $ 4,981        $ 6,124       $ 7,274
-----------------------------------------------------------------------------------------------------------------------------
                        Earnings per share:
                          Basic                                             $0.17          $0.20          $0.24         $0.26
                          Diluted                                            0.16           0.19           0.23          0.25
=============================================================================================================================

                        1996
                        Revenues                                          $60,648        $59,910        $61,092       $67,502
                        Direct costs                                       41,654         42,341         42,147        46,592
                        Selling, general and administrative                13,314         13,802         14,289        15,498
                        Income from operations                              5,680          3,767          4,656         5,412
                        Interest income/(expense), net                        (44)           (85)           (18)          (26)
                        Equity in net earnings of joint venture               213            230            200           242
                        Income before income taxes                          5,849          3,912          4,838         5,628
                        Income taxes                                        2,473          1,666          2,032         2,192
                        Net income                                        $ 3,376        $ 2,246        $ 2,806       $ 3,436
-----------------------------------------------------------------------------------------------------------------------------
                        Earnings per share:
                          Basic                                             $0.14          $0.09          $0.11        $0.14
                          Diluted                                            0.13           0.09           0.11         0.13
=============================================================================================================================
</TABLE>
<PAGE>

MARKET AND DIVIDEND INFORMATION

The Company's  common stock is quoted on the Nasdaq National  Market,  under the
symbol CHRZ. The range of high and low closing stock prices,  as reported by the
Nasdaq  National  Market,  for each of the quarters for the years ended December
31, 1997 and 1996,  retroactively  adjusted to reflect the three-for-two  common
stock split declared by the Board of Directors in May 1997, is as follows:
<TABLE>
<CAPTION>
                                                                          1997                                     1996
------------------------------------------------------------------------------------------------------------------------------
                        Quarter                                    High         Low                        High          Low
------------------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>         <C>                        <C>           <C>
                        First                                      $25.42      $16.83                     $25.67        $12.67
                        Second                                      38.88       19.67                      36.00         22.00
                        Third                                       44.13       32.13                      28.17         10.00
                        Fourth                                      45.50       27.00                      25.83         16.17
------------------------------------------------------------------------------------------------------------------------------
</TABLE>

The Company plans to reinvest its earnings in future growth  opportunities  and,
therefore,  does not anticipate paying cash dividends in the near future and has
not paid any to date. As of December 31, 1997,  there were  approximately  1,100
holders of record of common stock.

34
<PAGE>
CORPORATE INFORMATION


Board of Directors
John J. Cassese
Chairman and President
Thomas J. Berry
Retired--AT&T
Rocco J. Marano
Retired--Bellcore

Corporate
John J. Cassese
Chairman and President
William J. Murphy
Executive Vice President & CFO
David M. Reingold
Senior Vice President
Joseph DaLuz
Vice President--CIO
Michael J. Shea
Vice President & Controller
Mark W. Walztoni
Vice President--Human Resources

Field Organization
Charles J. McCourt
Senior Vice President
Barry D. Olson
Senior Vice President
Robert J. Palmieri
Senior Vice President
Terry C. Quinn
Senior Vice President

Solutions Divisions
Pamela A. Fredette
President--Solutions Division
Robert J. Farrell
Executive V.P.--Solutions Division
William D. Gargano
Executive V.P.--Solutions Division
Arthur V. Quinlan
Executive V.P.--Solutions Division
Steven J. Morgenthal
President--Enterprise
Management Division
Barry D. Olson
President--Education Division


<PAGE>



Wholly Owned Subsidiary
Princeton Softech, Inc.
Princeton, NJ
Joseph Allegra--President

Joint Venture
Birla Horizons International
New Delhi, India
London, England
Sunnyvale, CA
Iselin, NJ

Corporate and Financial Headquarters
49 Old Bloomfield Avenue
Mountain Lakes, NJ
07046-1495
973-299-4000

International Headquarters
Computer Horizons
(Canada) Corp.
Toronto, Canada

CHC International Limited
London, England

Millennium Refurbishment
Factories/Outsourcing Centers
Parsippany, NJ
Jersey City, NJ
Toronto, Canada

Corporate Counsel
Dennis M. DiVenuta, Esq.

General Counsel
Proskauer Rose LLP

Auditors
Grant Thornton LLP

Transfer Agent
Registrar & Transfer Company
Cranford, NJ

Shares Traded
Nasdaq National Market
Symbol--CHRZ

Options Traded
Chicago Board
Options Exchange
Symbol--ZQH



<PAGE>


Availability  of Form 10-K 

A copy of the  Company's  Annual  Report to the SEC on Form 10-K may be obtained
without charge by writing to:
Shareholder Relations
Computer Horizons Corp.
49 Old Bloomfield Avenue
Mountain Lakes, NJ 07046-1495

Annual Meeting

The Annual Meeting of Shareholders will be held at
The Hamilton Park Conference Center
Florham Park, NJ
May 6, 1998 at 10:00 A.M.

Website

http://www.computerhorizons.com

E-mail for Investor & General Information:

information@chc.fabrik.com

Statement Regarding Forward-Looking Information:

This Annual Report includes certain  forward-looking  statements for purposes of
the "safe harbor" provisions of the Private Securities  Litigation Reform Act of
1995 that involves  risks and  uncertainties  that could cause actual results to
differ  materially.   Such  statements  are  based  upon,  among  other  things,
assumptions  made  by,  and  information   currently  available  to  management,
including  management's  own knowledge and assessment of the Company's  industry
and competition.