<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C.  20549

                                   FORM 10-K
                                        
  [X]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
          OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the fiscal year ended December 31, 1996

                                       OR

  [_]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                          Commission File No. 0-25746

                          RENAISSANCE SOLUTIONS, INC.
             (Exact name of registrant as specified in its charter)
     
                           ------------------------

             Delaware                                   04-3150009
    (State or other jurisdiction of                 (I.R.S. Employer
    incorporation or organization)                  Identification No.)

          Lincoln North
       55 Old Bedford Road
     Lincoln, Massachusetts                               01773
     (Address of principal                             (Zip Code)
       executive offices)

       Registrant's telephone number, including area code: (617) 259-8833

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

       Securities registered pursuant to Section 12(b) of the Act:  None

          Securities registered pursuant to Section 12(g) of the Act:
                         Common Stock, $.0001 par value
                                (Title of class)

      Indicate by check mark whether the registrant:  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.    Yes  X   No 
                                                 ---     --- 

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [_]

      As of February 14, 1997, the approximate aggregate market value of the
voting stock held by non-affiliates of the registrant was $199,507,284, based on
the last reported sale price of the registrant's Common Stock on the Nasdaq
National Market as of the close of business on February 14, 1997.  There were
9,430,483 shares of Common Stock outstanding as of February 14, 1997.

--------------------------------------------------------------------------------
<PAGE>
 
      In December 1996, the Renaissance Solutions, Inc. ("Renaissance" or the
"Company") completed an acquisition (the "Acquisition") of International Systems
Services Corporation ("ISS"). The Acquisition has been accounted for as a
pooling of interests, and therefore the consolidated financial statements and
other financial information and data for all periods prior to the Acquisition
contained in this Annual Report on Form 10-K have been restated to include the
accounts and operations of ISS with those of the Company.

                                     PART I
ITEM 1.    BUSINESS

      Renaissance provides management consulting and client/server systems
integration services, primarily for large corporations. The Company's offerings
fall into three categories, Strategic Services, Performance Solutions Services
and Technology Services, all of which can incorporate both consulting services
and technology implementation.

      Strategic Services consist primarily of management consulting services,
and include the Company's Strategic Management Systems practice and its Strategy
Development practice. The Strategic Management Systems practice is designed to
assist senior executives in strategy implementation, and includes management
consulting services using the "Balanced Scorecard" concept described in three
Harvard Business Review articles and in The Balanced Scorecard, a recently
published book, all of which were co-authored by one of the Company's founders,
and the design, development and implementation of software-based executive
information systems. Strategy Development involves working directly with
executive level clients on industry analysis, strategy formulation and strategic
planning for the development and implementation of intermediate and long-range
competitive strategies.

      The Company's Performance Solutions Services consist primarily of
consulting services designed to assist companies in the design and
implementation of key business processes.  The Company's Performance Solutions
Services Group also assists companies in increasing the efficiency and output of
these processes to maximize corporate performance.

      The Company's Technology Services are provided by its Technology Services
Group, and focus on the design, development and implementation of desktop
applications using client/server architecture to support decision-making,
coordination, information sharing and skill development by knowledge workers.
These applications are designed to support both the strategic management process
and key business processes, with an emphasis on product development, sales,
order 
<PAGE>
 
fulfillment and customer service. The Company believes that by bridging
management consulting and systems integration capabilities it can help its
customers effectively use technology to satisfy their strategic objectives.


The Renaissance Solution

      Renaissance combines its expertise in management consulting and
client/server systems integration to assist customers in developing innovative
solutions to their business needs. The Company believes that the combination of
defining an organization's strategy clearly, framing it in terms of measurable
objectives and goals, and implementing information systems in support of these
goals differentiates Renaissance from its competitors.  Renaissance focuses on
engagements that are intended to have a significant effect on a customer's
future profitability or competitive market position.

      Renaissance's service offerings are designed to support both the strategic
and operational processes of large corporations, as follows:

 .  At the strategic level, the Company provides management consulting services
    and technology support that are intended to analyze and define corporate
    competitive strategy, and translate that strategy into strategic corporate
    objectives and targets. In addition, the Company designs, develops and
    implements software-based executive information systems, or "Strategic
    Feedback Systems" ("SFS"), that provide desktop information and
    communications tools for use by senior executives in achieving these
    objectives. In addition, SFS systems allow senior executives to access
    information to measure corporate performance.

 .   At the business process level, the Company assists its clients in leveraging
    best practices to produce higher levels of individual and organizational
    performance. The Company's efforts in this area typically focus on
    redesigning key business processes, including product development, sales,
    order fulfillment and customer service. The Company then designs, develops
    and implements desktop applications using client/server architecture to
    support the redesigned processes. These applications are designed to assist
    knowledge workers in increasing performance using the new or redesigned work
    processes.

 .  At the technological level, the Company develops information infrastructure
    that supports newly designed management systems or redesigned business
    processes. The Company also designs and develops technological
    infrastructure that supports cross-functional and cross-divisional
    collaboration, enables faster execution of corporate transformation
    programs, and provides greater access to organizational knowledge.

                                      -2-
<PAGE>
 
Strategy

      Renaissance's goal is to be a leading provider of management consulting
and client/server systems integration services to corporations seeking major
performance improvements. The Company is pursuing the following strategies to
achieve this goal.

 .  Employ a Multidisciplinary Approach. The Company believes that a key factor
    differentiating Renaissance's service offerings is the combination of its
    expertise in management consulting and client/server systems integration.
    The Company believes that by bridging management consulting and systems
    integration capabilities it can help its customers effectively use
    technology to satisfy their strategic objectives.

 .  Provide Tailored Solutions Using Proprietary Methodologies and Reusable
    Software Components. The Company is investing in proprietary methodologies
    and reusable software components for all of its service offerings. Although
    the Company individually tailors solutions for each customer, it leverages
    its capabilities through the use of these proprietary methodologies and
    software components in order to take full advantage of its best practices
    and case experiences. The Company believes that this approach reduces
    development time and project costs, enhances project quality, permits rapid
    expansion of the Company's professional staff and differentiates the
    Company's services from those of its competitors.

 .  Emphasize Cross-Selling Activities and Coordinated Account Development. The
    Company believes a key element of growth is the coordinated development of
    existing and new accounts. The Company focuses its marketing and business
    development activities on targeted new clients, improving services to
    existing clients and actively cross-selling its service offerings to extend
    the life of existing client relationships.

 .  Broaden Customer Base Through Targeted Industry Marketing, Geographic
    Expansion and Alliances. The Company plans to continue to expand its
    marketing initiatives and capabilities. The Company is expanding its
    professional staff through the addition of personnel with consulting
    expertise in targeted industry sectors and is increasing its sector-specific
    customer marketing efforts and practice initiatives, including publications
    and executive seminars. The Company is also seeking marketing alliances with
    consulting and technology providers who offer products or services that
    complement the Company's service offerings.

                                      -3-
<PAGE>
 
 .  Build Renaissance Brand Name. The Renaissance name is closely associated
    with the Balanced Scorecard management consulting methodology. The Balanced
    Scorecard concept was described in three articles appearing in the Harvard
    Business Review in 1992, 1993 and 1996 and in The Balanced Scorecard, a
    recently published book, all of which were co-authored by one of the
    Company's founders. The Company seeks to promote its name association with
    the Balanced Scorecard through additional publications, speaking engagements
    and other marketing activities. By building name recognition for both
    Renaissance and the Balanced Scorecard, the Company believes it can
    differentiate Renaissance from its competitors.

 .  Diversify Service Offerings and Markets Through Internal Development and
    Acquisitions of Complementary Businesses. The Company's strategy includes
    the development and marketing of an integrated portfolio of service
    offerings that address the needs of senior executives in various industry
    sectors. The Company seeks to implement this goal through a combination of
    innovative internal development and strategic acquisitions designed to
    expand it service offerings and targeted markets. For example, in December
    1996 the Company acquired ISS to augment the Company's process design
    services and systems development capabilities and enhance its client base in
    the financial services and telecommunications sectors. In addition, in
    February 1997 the Company acquired Coba Consulting Limited ("COBA-UK"),
    which offers strategic consulting services to the telecommunications,
    financial services, utilities and retail sectors in the United Kingdom, and
    C.M. Management Services Ltd. Inc. ("COBA-Boston"), which provides strategic
    consulting services to the telecommunications sector in the United States.

Services

      Renaissance's offerings are delivered through three service groups, the
Strategic Services Group, the Performance Solutions Group and the Technology
Services Group.

 Strategic Services Group

      The Company's Strategic Services Group assists clients in strategy
development and designs strategic management systems. Strategy development
involves working directly with executive level clients on industry analysis,
strategy formulation and strategic planning for the development and
implementation of intermediate and long-range competitive strategies. This work
may include strategy audits, industry trend analyses, competitor assessment,
internal and external benchmarking and strategy design. The Company also assists
clients with analysis and due diligence in conjunction with acquisitions.

                                      -4-
<PAGE>
 
      The Company's strategic services also include consulting using the
Company's Balanced Scorecard methodology, complementary consulting services and
the design and development of desktop applications to assist senior executives
in measuring strategy implementation. The goal of the Balanced Scorecard
methodology is to provide senior managers with a framework to translate the
corporate strategy into measurable objectives, measures and targets. The
Balanced Scorecard methodology is designed to consolidate measurement of many of
the disparate elements of the company's competitive agenda, such as becoming
customer oriented, improving quality, accelerating financial performance,
reducing time to market for new products, and managing for the long term.

      Fees for services provided by the Company's Strategic Services Group
typically are based on the project schedule, Renaissance staffing requirements,
the level of customer involvement and the scope of the project as agreed upon
with the customer at the project's inception. The Company generally seeks to
obtain an adjustment in its fees in the event of any significant change in any
of the assumptions upon which the original estimate was based. Fees for the
Company's Balanced Scorecard engagements vary significantly depending on the
size and complexity of the customer's business and the scope of the engagement,
but have ranged from under $100,000 to in excess of $1,000,000. Since its
inception in 1992, the Company has completed over 110 strategy analyses and
development engagements, and has delivered approximately 165 Balanced
Scorecards for different business units within over 50 organizations.

      The Company also offers complementary services related to the Strategic
Management Solutions practice. In 1994 the Company developed the Strategic
Feedback System, which is an executive information system that provides
senior
                                 -5-
<PAGE>
 
executives with desktop access to strategic information presented in the form of
performance measurements derived from the Balanced Scorecard. Fees for SFS
engagements have ranged from approximately $100,000 to approximately $1,000,000.
Since its introduction in 1994, the Company has completed six SFS engagements
for five different organizations. The Company offers SFS services to existing
customers for which it has provided Balanced Scorecard services and to new
customers as an integral part of future Balanced Scorecard services.

  Performance Solutions Group

      The Company's Performance Solutions Group focuses on the business and
process-based redesign of key business processes or activities that drive a
customer's business. The Company focuses its performance solutions services on
five key business processes -- customer acquisition, customer service, new
product development, knowledge management and information technology ("I/T").

      A typical performance solutions engagement may begin with a diagnostic
analysis of corporate performance, and the identification and assessment of
those processes that offer the most significant opportunities for performance
improvement. The Company then uses the results of this assessment to develop a
business case quantifying the performance opportunities.

      Working with the client's management, the Company's Performance Solutions
Group then focuses on redefining and redesigning one or more of the business
processes that offer opportunities for performance improvements. The redesign
typically seeks to leverage internal/corporate best practices, including the
insights and skills of best performers, and external/industry best practices.

      The resulting processes are then analyzed and translated by Renaissance
into performance specifications for the client's I/T infrastructure in order to
provide desktop support to employees charged with managing and implementing the
redesigned processes. The Company works with the client to define these
performance specifications, and create a resulting development plan. Working
with its Technology Services Group, the Company converts these requirements into
functional prototypes, pilots and production systems.

      Fees for services provided by the Company's Performance Solutions Group
typically are based on the project schedule, Renaissance staffing requirements,
the level of customer involvement, and the scope of the project as agreed at the
project inception.  The Company generally seeks to obtain an adjustment in its
fees in the event of any significant change in any of the assumptions upon which
the original estimate was based.  Fees vary significantly depending upon the
size and complexity of the customer's business and the scope of the engagement,
but have ranged from 

                                      -6-
<PAGE>
 
$100,000 for a diagnostic business case development project to in excess of
$3,000,000 for a process redesign engagements involving the development of a
large-scale system.

   Technology Services Group

      The Company's Technology Services Group designs, develops and assists in
implementing desktop applications using client/server architecture to support
key business processes, such as new product development, sales, order
fulfillment and customer service. These systems, which are often developed in
connection with the Company's Strategic Services Group or Performance Solutions
Group, are designed to enable customers to reduce costs, speed time to market
and improve coordination among knowledge workers.

      The Company designs and develops desktop applications focused on
supporting the strategic management process. These engagements are performed
both independent of and as follow-ons to Balanced Scorecard engagements. In
situations in which Renaissance has not previously prepared a Balanced Scorecard
for the customer, Renaissance typically prepares an abbreviated Balanced
Scorecard to assess the strategic objectives to be addressed as part of the
design and development of the desktop application.

      The Company's desktop applications are typically used to access,
consolidate, analyze and disseminate information not readily accessible from
existing legacy systems, including:

 .  Reference Data: explanations and supporting documentation on products,
    processes and customers, such as product specifications for use in
    responding to customer inquiries.

 .  Procedural Data: decision support in the form of "if/then" rules,
    interpretations and best practice information, such as a checklist of
    remedial steps to be taken following the discovery of a billing error.

 .  Performance Data: feedback measurements regarding individual and process
    performance, such as proposal to sales ratios used by an organization's
    sales force.

The Company believes that the availability of this type of data is critical to
improving knowledge worker productivity and decision making.

      In developing such desktop applications, the Company uses rapid
prototyping techniques, standard database and groupware software, application
development tools and reusable software components. In addition, the Company has
developed customizable templates and tools for use in system design. These
techniques, tools

                                      -7-
<PAGE>
 
and components are intended to reduce development time and project costs and
increase the productivity of the Company's professionals.

      Fees for services provided by the Company's Technology Services Group
typically are based on the project schedule, Renaissance staffing requirements,
the level of customer involvement and the scope of the project as agreed upon
with the customer at the project's inception. The Company generally seeks to
obtain an adjustment in its fees in the event of any significant change in any
of the assumptions upon which the original estimate was based. Fees for the
Company's desktop application engagements vary significantly depending on the
size and complexity of the customer's business and the scope of the engagement,
but have ranged from under $500,000 for a pilot system to in excess of
$3,000,000 for a large multi-application engagement. Since its inception in
1992, the Company has performed 48 engagements involving the design and
development of desktop applications for 23 organizations.


Marketing, Sales and Customers

      The Company markets its services to senior executives of large
corporations both directly and through various marketing alliances, including
its collaboration with Gemini Consulting, Inc. ("Gemini"). The Company markets
its services in the United States through its Lincoln, Massachusetts
headquarters and its Atlanta, Georgia, Boston, Massachusetts, Chicago, Illinois,
San Francisco, California, Stamford, Connecticut and Washington, D.C. offices
and in Europe through its London offices. See Note 10 of Notes to Consolidated
Financial Statements.

      The Company continues to expand its direct marketing capabilities by
hiring industry sector specialists to undertake business development initiatives
in the following industry sectors: financial services and insurance; oil, gas
and utilities; computing and communications; healthcare and pharmaceuticals; and
retail and diversified. The Company is seeking marketing alliances with
technology and service providers who offer products or services that complement
the Company's service offerings in these sectors.

      The Company employs a variety of business development and marketing
techniques to communicate directly with current and prospective customers,
including authoring of articles and other publications regarding the Company's
methodologies, regular newsletters and direct mail initiatives and executive
seminars featuring presentations by senior officers of key customers. A
significant portion of Renaissance's marketing activities is carried out by
senior Renaissance executives.

                                      -8-
<PAGE>
 
      The following table sets forth a list of selected customers for which the
Company, either directly or in collaboration with Gemini, has provided services
in 1994, 1995 or 1996:

 
                Financial                       Oil, Gas and Utilities
                ---------                       ----------------------
                Services/Insurance                   
                ------------------             
                                               
                Barclays Bank PLC               Mobil Corporation
                                               
                Chemical Bank                   Nova Chemical Sales
                                               
                Federal National Mortgage       Nova Gas
                Association
            
                CIGNA Corporation
            
                North American Life
                Assurance Company

                Mercantile & General

 
                Computing and                   Retail and
                -------------                   ----------
                Communications                  Diversified        
                --------------                  -----------        
 
                AT&T Corp.                      The Limited, Inc.  

                British Telecom Inc.
 

      An important component of the Company's marketing strategy is to offer
additional services to existing customers through coordinated cross-selling
efforts. For example, the Company's Balanced Scorecard services often result in
follow-on projects for other business units within the customer organization. In
1996, the Company provided services to 32 of the 75 customers for whom the
Company provided services in 1995.

      In 1996, revenues from services and other amounts billable to Gemini
accounted for approximately 21% of the Company's total revenues, and revenues
from services billable to divisions of AT&T Corp. ("AT&T") accounted for
approximately 26% of the Company's total revenues in 1996. See Note 11 of Notes
to Consolidated Financial Statements.

                                      -9-
<PAGE>
 
Relationship with Gemini

      Since 1993 the Company has been a party to a Teaming Agreement (the
"Teaming Agreement") with Gemini pursuant to which the Company and Gemini have
agreed to perform on a collaborative basis certain service offerings obtained as
a result of Gemini marketing efforts or joint Gemini/Renaissance marketing
efforts. These joint service offerings include Balanced Scorecard and desktop
application design, development and implementation engagements.

      Gemini is a worldwide consulting firm that provides business and system
transformation services which are complementary to Renaissance's service
offerings. The Company believes that its relationship with Gemini currently
provides the Company with access to potential customers that the Company would
not otherwise be able to obtain. Approximately 44%, 34% and 31% of the Company's
revenues in 1994, 1995 and 1996, respectively, resulted from its relationship
with Gemini; approximately 36%, 15% and 21%, respectively, of revenues were from
services and other amounts billable to Gemini and approximately 8%, 19% and 10%,
respectively, of revenues were from services billable directly to third parties.
In many of these engagements, the Company provided services as a subcontractor
to Gemini.

      In November 1996, the Company and Gemini entered into a Restated Teaming
Agreement (the "Restated Teaming Agreement"). The following is a summary of the
material terms of the Restated Teaming Agreement.

      The Restated Teaming Agreement has a term ending on November 1, 1999. It
is subject to termination by Gemini as a result of, among other things, the
occurrence of a change in control of Renaissance, which is defined generally to
mean (i) the sale or other disposition of all or substantially all of the assets
of the Company, (ii) the consummation of a transaction pursuant to which any
person (other than an existing stockholder or a Gemini competitor, as defined in
the Restated Teaming Agreement) becomes the beneficial owner of securities
representing more than 40% of the combined voting power of the Company, (iii)
the consummation of a transaction pursuant to which a Gemini competitor becomes
the beneficial owner of securities representing more than 25% of the combined
voting power of the Company, or (iv) a merger or consolidation of the Company
with any other entity resulting in the holders of Renaissance Common Stock
immediately prior to such transaction ceasing to hold at least 50% of the
combined voting power of Renaissance or the surviving entity after such
transaction. In the event that the Restated Teaming Agreement is validly
terminated by either party prior to its expiration, Renaissance is required to
pay a termination fee to Gemini in an amount declining from $1.6 million in the
event of a termination prior to November 1, 1996 to $250,000 in the event of a
termination prior to November 1, 1999. In addition, in such event, various
payment obligations contained in the Restated Teaming Agreement will terminate
on the termination date.

                                      -10-
<PAGE>
 
      During the term of the Restated Teaming Agreement, the Company and Gemini
have agreed to staff jointly engagements for their collaborative service
offerings. Final staffing decisions are made by the party with primary
responsibility for the customer.

      Under the Restated Teaming Agreement, the Company has agreed to train
Gemini in use of the Company's Balanced Scorecard, desktop application and
certain other methodologies prior to November 1, 1998, to perpetually license
these methodologies, to the extent developed prior to November 1, 1998, to
Gemini on a non-exclusive basis and agreed to perform certain services for
Gemini in 1996. In exchange, Gemini has agreed to pay the Company an annual fee
of $2.0 million in each of the years during the three year period ending October
31, 1997. Revenue for these services will be recognized by the Company as the
services are performed pursuant to the terms of the Restated Teaming Agreement.
The license of methodologies by Renaissance to Gemini expressly excludes any
software created by Renaissance. The Company is obligated to pay Gemini an
annual fee of $400,000 in each of the years during the three year period ending
October 31, 1997 for certain training services provided by Gemini to Renaissance
personnel.

      As part of the Restated Teaming Agreement, Gemini has committed to provide
the Company with certain levels of bookings. The minimum bookings commitments
total $12.0 million in the twelve month period ending October 31, 1997 and $12.5
million in each of the twelve month periods ending October 31, 1998 and 1999. As
described below, these commitments represent a 50% reduction in Gemini's minimum
bookings commitments under the Teaming Agreement. For the twelve month period
ended October 31, 1995, bookings attributable to Gemini under the Teaming
Agreement (without regard to the application of bookings attributable to prior
period deficiencies) totalled approximately $8.7 million. For the twelve month
period ending October 31, 1996, such bookings (without regard to application of
bookings to prior period deficiencies) totalled approximately $9.9 million.

      In the event that during any of the six month periods during the term of
the Restated Teaming Agreement bookings obtained by Renaissance from Gemini
customers or customers of joint service offerings by Renaissance and Gemini are
less than the specified minimum bookings, Gemini may retain the services of
Renaissance for a fee equal to the amount of the deficiency. If at the end of
twelve months a bookings deficiency still remains, Gemini is required to make a
compensating payment to Renaissance of 25% of the remaining deficiency in full
satisfaction of the bookings deficiency. In no event will Gemini be obligated to
make a payment with respect to any bookings deficiency in an amount in excess of
25% of such deficiency.

      The Company monitors Gemini's progress in meeting its bookings commitments
through regular conference calls and meetings with Gemini marketing
representatives. Under the Restated Teaming Agreement, "bookings" are
generally

                                      -11-
<PAGE>
 
defined as gross fees (excluding expense reimbursements) committed to
Renaissance as a result of the relationship with Gemini during the applicable
six month period for services to be provided within twelve months of the
commitment, as evidenced by a written agreement between the Company and the
customer, plus any such fees actually collected by the Company during such
period which are not evidenced by a written agreement. Gemini generally is
treated as having satisfied its bookings commitment regardless of whether
revenues are recognized by Renaissance with respect to a particular engagement.
For example, under the Restated Teaming Agreement, 50% of the fees attributable
to a cancelled contract count towards Gemini's bookings commitment if such
cancellation is not primarily attributable to the actions or omissions of
Gemini. In accordance with industry practice, nearly all of the Company's
contracts are terminable by either the customer or the Company on short or no
notice and without penalty. In addition, Gemini does not guarantee the
collectibility of any receivables resulting from customer engagements under the
Restated Teaming Agreement.

      The amount of Gemini's bookings commitment is subject to adjustment as a
result of, among other things, any failure by Renaissance to make available to
Gemini such quantities of marketing and sales resources and such number of staff
for joint service offerings as may from time to time be mutually agreed upon by
the parties. In addition, Gemini's minimum bookings commitment terminates in the
event that any of Messrs. Harry M. Lasker, David A. Lubin or David P. Norton,
the founders of the Company, ceases for any reason to be employed by the Company
on a full time basis. In such event, the parties have agreed to negotiate in
good faith to establish new commitments for the remainder of the term of the
Restated Teaming Agreement.

      The Restated Teaming Agreement superseded a prior agreement entered into
between the Company and Gemini in October 1994, as amended through March 1996.
In general, the Restated Teaming Agreement provides for a reduction by 50% in
Gemini's minimum bookings commitments for the twelve month periods ended October
31, 1997, 1998 and 1999 and the elimination of various contractual covenants in
favor of Gemini, including non-competition restrictions, rights of first
refusal, rights of first offer and limitations on issuances and transfers of
securities by the Company and the founders of the Company and certain of their
affiliates, which were previously set forth in the Teaming Agreement. The
Restated Teaming Agreement also provides for a reduction in the termination fee
payable by Renaissance in the event of a valid termination of the agreement by
either party and also provides for the payment of certain license fees by Gemini
to Renaissance in five equal installments of $1.0 million during the period
commencing on November 18, 1996 and ending on November 1, 1998.

                                      -12-
<PAGE>
 
Development of Service Offerings

     A significant element of Renaissance's strategy is the continuous
improvement of existing service offerings and the development of new and related
services. To implement this strategy, Renaissance seeks to identify new and
enhanced methodologies developed in the course of customer engagements and to
disseminate these developments as "best practices" through internal training
programs. In addition, the Company undertakes internal development activities to
create new practice offerings and related methodologies and enhance and extend
its methodologies with technology. The Company has organized a team of
professionals whose primary responsibility is the management of the Company's
practice development efforts. This group has developed an internal knowledge
management system that provides rapid access to new developments and support
materials to all of the Company's employees.

Recent Developments

     On December 31, 1996 the Company acquired all of the outstanding capital
stock of ISS in exchange for 1,310,000 shares of Common Stock of the Company
(the "ISS Acquisition"). The ISS Acquisition was accounted for as a pooling of
interests. See Note 2 of Notes to Consolidated Financial Statements.

    ISS provides business planning, process design, change management and system
integration services to Fortune 500 companies. The Company believes that ISS'
service offerings complement the capabilities of Renaissance's Performance
Solutions Group and its Technology Services Group. The ISS Acquisition also
provided the Company with additional experience in process design, new skills in
the area of information technology processes and 25 additional project managers.
In addition, the ISS Acquisition expanded the Company's skill base for system
specification prototyping and development.

                                      -13-
<PAGE>
 
     On February 3, 1997 the Company acquired all of the ordinary shares (the
"COBA-UK Common Stock") of COBA-UK for the sum of approximately $11,900,000 and
the issuance of 163,160 shares of Common Stock of the Company.  In connection
with this transaction,  the Company entered into an option agreement (the
"Option Agreement") with COBA-UK and the holders of the deferred convertible
non-voting stock of COBA-UK (the "Deferred Stock") pursuant to which the holders
of the Deferred Stock granted the Company an option to acquire all of the
Deferred Stock in 1998 and 1999.  The Company will acquire the Deferred Stock in
1998 and 1999 at a purchase price to be determined based on the financial
performance of COBA-UK in 1997 and 1998. The maximum possible purchase price for
the Deferred Stock under the Option Agreement is $12,600,000, part of which may
be paid by the issuance of shares of Common Stock of the Company. See Note 13 of
Notes to Consolidated Financial Statements.

     COBA-UK provides strategy formulation, research and analysis, acquisition
assessment and strategy implementation services. The Company believes that the
COBA-UK acquisition expanded its Strategic Services practice and enlarged its
customer base in the United Kingdom. A majority of COBA-UK revenues in 1996 were
derived from clients in four of the Company's key sectors -- computing and
communications, financial services/insurance, oil, gas and utilities and retail
and diversified sectors. The Company intends to integrate these service
offerings within its Strategic Services Group.

     On February 13, 1997 the Company acquired all of the outstanding capital
stock of COBA-Boston for an aggregate purchase price of $9,250,000 and an earn-
out of cash (or, in the Company's discretion, cash and stock) based on COBA-
Boston's 1997 and 1998 performance. See Note 13 of Notes to Consolidated 
Financial Statements.

     Services offered by COBA-Boston include strategy formulation, market and
competitor assessment, strategy implementation and enterprise transformation. A
majority of the COBA-Boston customers in 1996 were in the computing and
communications industry in the United States and Canada.

     Prior to their acquisition by Renaissance, both COBA-UK and COBA-Boston 
were parties to a joint marketing arrangement with a network of consulting firms
in Europe and Asia (the "COBA Network"). No stockholder, director or officer of 
COBA-UK was also a stockholder, director or officer of COBA-Boston. 
Renaissance anticipates that both COBA-UK and COBA-Boston will continue to 
participate in the COBA Network as subsidiaries of the Company.

Competition

     The management consulting and client/server systems integration markets
(which include the markets for the Company's strategic, performance innovation
and technology solutions services) are comprised of a large number of
participants, are subject to rapid change and are highly competitive. Primary
competitors include general management consulting firms and the consulting
practices of the ''Big Six'' accounting firms; systems consulting and
integration firms; and the professional service groups of computer equipment
companies. In addition, customers may elect to increase their

                                      -14-





<PAGE>
 
internal strategic planning and information systems resources to satisfy their
needs for strategic and performance innovation solutions. The Company may also
face competition from Gemini following the termination of the Restated Teaming
Agreement in light of the methodology license set forth therein.

     Many participants in the management consulting and client/server systems
integration markets have significantly greater financial, technical and
marketing resources, greater name recognition and generate greater consulting
and systems integration revenues than does Renaissance. In addition, the
management consulting and client/server systems integration markets are highly
fragmented and served by numerous firms, many of which serve only their
respective local markets. The Company believes that the strong linkage between
its management consulting services and client/server systems integration
capabilities distinguishes it from its competitors.

     The Company believes that the principal competitive factors in the
management consulting and client/server systems integration industries include
the nature of the service offering, quality of service, responsiveness to
customer needs, experience, technical expertise and price. The Company believes
that it competes favorably with respect to these factors.

Human Resources

     As of December 31, 1996, the Company had a total staff of 220 full-time
equivalent employees, comprised of 207 full-time salaried employees, two part-
time salaried employees and 12 full- or part-time independent contractors. The
Company's total staff of 209 employees as of December 31, 1996 was comprised of
161 professionals and 48 administrative employees.

Intellectual Property

     The Company's success is dependent in part upon its proprietary
methodologies and tools and other proprietary intellectual rights. A significant
portion of the Company's management consulting services are based on the
Balanced Scorecard concept described in three Harvard Business Review articles
and in The Balanced Scorecard, a recently published book, all of which were co-
authored by one of the Company's founders. The Company believes that the
Balanced Scorecard name is in the public domain. As a result, third parties may
provide services using the Balanced Scorecard name which are competitive with
the services offered by the Company.

     The Company relies upon a combination of trade secret, non-disclosure and
other contractual arrangements, and copyright and trademark laws, to protect its

                                      -15-
<PAGE>
 
proprietary rights. The Company holds no patents or registered copyrights or
trademarks. The Company generally enters into confidentiality agreements with
its employees, consultants, customers and potential customers and limits access
to and distribution of its proprietary information. There can be no assurance
that the steps taken by the Company in this regard will be adequate to deter
misappropriation of its proprietary information or that the Company will be able
to detect unauthorized use and take appropriate steps to enforce its
intellectual property rights.

     The Company's business includes the development of custom software
applications in connection with specific customer engagements. Ownership of such
software is generally assigned to the customer. In addition, the Company also
develops object-oriented software components that can be reused in software
application development and certain foundation and application software
products, or software ''tools,'' most of which remain the property of the
Company.

     Although the Company believes that its services and products do not
infringe on the intellectual property rights of others, there can be no
assurance that such a claim will not be asserted against the Company in the
future.

ITEM 2.   PROPERTIES

     The Company's headquarters and principal administrative, sales and
marketing, and system development operations are located in approximately 40,000
square feet of leased space in Lincoln, Massachusetts. The Company occupies
these premises under a lease expiring in August 1999. The Company also occupies
office space in Atlanta, Georgia; Boston, Massachusetts; Chicago, Illinois; San
Francisco, California; Stamford, Connecticut; Washington, D.C.; and London,
England. The Company anticipates that additional space will be required as
business expands and believes that it will be able to obtain suitable space as
needed.

ITEM 3.   LEGAL PROCEEDINGS

     The Company is not a party to any litigation that it believes could have a
material adverse effect on the Company or its business.

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

     The Company held a Special Meeting of Stockholders (the "Special Meeting")
on November 15, 1996. At the Special Meeting, stockholders holding 4,908,758
shares of Common Stock voted for the approval of an amendment to the Company's
1995 

                                      -16-
<PAGE>
 
Equity Incentive Plan increasing the number of shares reserved for issuance
under the Plan from 1,100,000 to 2,100,000. Stockholders holding 1,807,500
shares voted against such proposal. Stockholders holding 38,700 shares abstained
from voting on such proposal. No "broker non-votes" were recorded at the Special
Meeting.

Executive Officers of the Company

     The information set forth in Item 10 of Part III is incorporated herein by
this reference.


                                    PART II

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

     The Company's Common Stock has been trading on the Nasdaq National Market
under the symbol "RENS" since the Company's initial public offering on April 4,
1995.  The following table sets forth for the fiscal periods indicated the high
and low sales prices per share of Common Stock as reported on the Nasdaq
National Market:
<TABLE>
<CAPTION>
                                  Fiscal 1995
                                  -----------
Quarter                         High        Low
-------                         ----        ---    
<S>                            <C>       <C>
Second (from April 4, 1995)    $15.750   $  9.500
Third                           26.750     13.000
Fourth                          24.750     13.000



<CAPTION>  
                                  Fiscal 1996
                                  -----------
Quarter                         High        Low
-------                         -----       ---             
<S>                            <C>        <C> 
First                          $30.000    $13.250
Second                          35.500     27.500
Third                           42.375     25.500
Fourth                          49.250     33.500
</TABLE>

                                      -17-
<PAGE>
 
     There were 39 stockholders of record of the Company's Common Stock as of
February 15, 1997.

     The Company currently intends to retain earnings, if any, to support its
growth strategy and does not anticipate paying cash dividends in the foreseeable
future.  Payment of future dividends, if any, will be at the discretion of the
Company's Board of Directors after taking into account various factors,
including the Company's financial condition, operating results, current and
anticipated cash needs and plans for expansion.

      On December 31, 1996 the Company issued 1,310,000 shares of Common Stock 
to Mr. O. Bruce Gupton, now a Director and Executive Vice President of the 
Company, in connection with the ISS Acquisition.  These securities were issued 
by the Company in reliance on Section 4(2) of the Securities Act of 1933, as 
amended, as the ISS Acquisition did not involve a public offering.

                                     -18-
<PAGE>
 
ITEM 6.   SELECTED CONSOLIDATED FINANCIAL DATA

  The following selected consolidated financial information with respect to the
Company's consolidated statements of operations for the period from March 23,
1992 (date of inception) through December 31, 1992, for the years ended December
31, 1993, 1994, 1995 and 1996, and with respect to the Company's consolidated
balance sheets as of December 31, 1992, 1993, 1994, 1995 and 1996 have been
derived from the Company's audited Consolidated Financial Statements. The
following selected consolidated financial information give retroactive effect to
the acquisition of International Systems Services Corporation by the Company,
which has been accounted for as a pooling-of-interests. This information should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and with the Consolidated Financial
Statements and the Notes thereto included elsewhere in this Form 10-K.

<TABLE>
<CAPTION>
                          Period from
                         March 23, 1992               Years Ended
                         (inception) to               December 31,
                                           ----------------------------------
                      December 31, 1992    1993      1994      1995      1996
                      -----------------    ----      ----      ----      ----  
                               (in thousands except per share data)
<S>                            <C>       <C>       <C>       <C>       <C>
Statement of Operations Data:

Revenues.....................   $9,706   $13,507   $22,988   $35,536   $52,450
                                ------   -------   -------   -------   -------
 
Costs and expenses:

   Professional personnel....    7,686    11,966    14,056    21,089    31,733

   Professional development
    and recruiting...........       57       408       894     1,895     2,045

   Marketing and sales........      87       258       482       810     1,624

   General and administrative.   1,467     2,598     4,274     6,442     9,217
   
   Acquisition costs.......         --        --        --        --     3,524
                                ------   -------   -------   -------   -------
    Total costs and expenses     9,297    15,230    19,706    30,236    48,143
                                ------   -------   -------   -------   -------
 

Income (loss) from operations      409    (1,723)    3,282     5,300     4,307

Interest expense.............       (6)      (43)     (126)      (40)     (139)

Interest income..............       26        26        21       469     1,693
                                ------   -------   -------   -------   -------
 
Interest (loss) before income
 taxes.......................      429    (1,740)    3,177     5,729     5,861

Provision for income  
 taxes (1)...................       --        --        --     1,894     4,091
                                ------   -------   -------   -------   -------
 
Net income (loss)............   $  429   $(1,740)  $ 3,177   $ 3,835     1,770
                                ======   =======   =======   =======   =======

Net income per share.........                      $   .51    $  .53   $   .20  
                                                   =======    ======   =======
</TABLE> 

                                      -19-
<PAGE>
 
<TABLE> 
<CAPTION> 
<S>                            <C>       <C>       <C>       <C>       <C> 
Pro Forma Data:  (2)

Historical income
 before pro forma
 adjustments.................                                          $ 5,861
                                                                        -------
Pro forma adjustment to
 (officer's salary) (2)......                                            2,100
                                                                        ------- 
Historical/pro forma   
 income (loss) before 
 income taxes................   $  429   $(1,740)  $ 3,177   $ 5,729   $ 7,961
                   
Historical income taxes......       --        --        --     1,894     4,091

Additional provision (credit) 
 for income taxes (3)........       87       (87)      744       403      (266)
                                ------   -------   -------   -------   -------

Pro forma income taxes.......       87       (87)      744     2,297     3,825
                                ------   -------   -------   -------   -------

Pro forma net income (loss)..   $  342   $(1,653)    2,433   $ 3,432   $ 4,136
                                ------   -------   -------   -------   -------

Pro forma net income
 per share...................                         $.39      $.48      $.47
                                                   =======   =======   =======
Pro forma weighted average
 number of common and common
 stock equivalent shares
 outstanding (4).............                        6,303     7,223   $ 8,804
                                                   =======   =======   =======
<CAPTION> 
 
                                                 December 31,
                               -----------------------------------------------
                                 1992      1993      1994      1995      1996
                               -------   -------   -------   -------   -------
                                                (in thousands)
<S>                            <C>       <C>       <C>       <C>       <C>  
Balance Sheet Data:

Cash and cash
 equivalents ................   $  162   $    94   $ 1,487   $ 6,159   $49,415

Working Capital..............    1,961     1,644     3,176    18,706    68,375

</TABLE> 

                                      -20-
<PAGE>
 
<TABLE> 
<S>                            <C>       <C>       <C>       <C>       <C> 
Total assets                     2,864     3,986     8,977    27,135    82,151

Short-term borrowings........      217       255       600     1,500       500

Current portion of long-
 term debt...................       --        --       667       180       782

Long-term debt (less current
 portion)....................       --     2,000     1,333       720        --
 
Stockholders' equity.........      214       160     3,338    21,056    71,641
 
</TABLE>
------------------------------------

(1) From its inception in 1992 through its reorganization in April 1995, the
    Company was either an S corporation or a limited partnership and prior to
    December 31, 1996, International Systems Services Corporation (ISS) was an S
    corporation.  Accordingly, the Company and ISS were not subject to federal
    and state income taxes.
(2) The pro forma adjustment to officer's salary have been computed based on
    the contractual reduction of ISS's officer compensation following the
    Company's acquisition of ISS.
(3) Income taxes represent the income taxes that would have been provided as if
    the Company and ISS were subject to federal and all applicable state
    corporate income taxes from inception, based on the statutory tax rates and
    the tax laws then in effect.  See "Management's Discussion and Analysis of
    Financial Condition and Results of Operations" and Notes 1 and 9 of Notes to
    Consolidated Financial Statements.
(4) Based on the weighted number of common shares and common share equivalents 
    outstanding.  See Note 1 of Notes to Consolidated Financial Statements.

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

Overview

     The Company derives substantially all of its revenues from management
consulting and client/server systems integration services. The Company markets
its services directly and through the Restated Teaming Agreement with Gemini.
Pursuant to the Restated Teaming Agreement, Renaissance and Gemini have agreed
to market and perform certain service offerings on a collaborative basis.
Approximately 44%, 34% and 31% of the Company's revenues in 1994, 1995 and 1996,
respectively, resulted from its relationship with Gemini; approximately 36%, 15%
and 21% of revenues were from services and other amounts billable to Gemini and
approximately 8%, 19% and 10% of revenues were from services billable directly
to third parties in 1994, 1995 and 1996, respectively.

                                      -21-
<PAGE>
 
     Fees for services provided by the Company typically are based on the
project schedule, Renaissance staffing requirements, the level of customer
involvement and the scope of the project as agreed upon with the customer at the
project's inception. The Company generally seeks to obtain an adjustment in its
fees in the event of any significant change in any of the assumptions upon which
the original estimate was based. The Company records revenues at estimated
realizable rates as labor hours are incurred. Provisions are made for estimated
unbillable and uncollectible amounts.

     This Annual Report on Form 10-K contains forward-looking statements. For
this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "believes," "anticipates," "plans," "expects" and
similar expressions are intended to identify forward-looking statements. There
are a number of important factors that could cause the Company's actual results
to differ materially from those indicated by such forward-looking statements.
These factors include, without limitation, those set forth below under the
caption "Certain Factors That May Affect Future Results."

Results of Operations

     The following table sets forth, for the periods indicated, the percentage
relationship to revenues of certain items in the Company's consolidated
statements of operations.
<TABLE>
<CAPTION>
                                                    Year Ended December 31,
                                                    ----------------------
                                                     1994    1995    1996
                                                    ------  ------  ------
<S>                                                 <C>     <C>     <C>
Statement of Operations Data:

Revenues....................................        100.0%  100.0%  100.0%
                                                    -----   -----   -----
Costs and expenses:

   Professional personnel...................         61.1    59.3    60.5
 
   Professional development     
     and recruiting.........................          3.9     5.3     3.9
                                                      
   Marketing and sales......................          2.1     2.3     3.1

   General and administrative...............         18.6    18.1    17.6

   Acquisition costs........................           --      --     6.7
                                                    -----   -----   -----

</TABLE> 

                                      -22-
<PAGE>
 
<TABLE> 
<S>                                                 <C>     <C>     <C>  
       Total costs and expenses.............         85.7    85.1    91.8
                                                    -----   -----   -----
Income from operations......................         14.3    14.9     8.2

Interest income (expense), net..............         (0.4)    1.2     2.9
                                                    -----   -----   -----
Income before income taxes..................         13.8    16.1    11.2

Provision for income taxes..................           --     5.3     7.8
                                                    -----   -----   -----
 
Net income..................................         13.8%   10.8%    3.4%
                                                    =====   =====   =====
 
Pro Forma Data:

Historical income before
    pro forma adjustments...................                         11.2%

Pro forma adjustment to
    officer's salary........................                          4.0

Historical/pro forma income
    before income taxes.....................         13.8%   16.1%   15.2%
                                                     -----   -----   -----
Historical income taxes.....................           --     5.3     7.8

Additional provision (credit) for
    income taxes............................          3.2     1.1    (0.5)  
                                                    -----   -----   -----  
Pro forma income taxes......................          3.2     6.4     7.3
                                                    -----   -----   -----
Pro forma net income........................         10.6%    9.7%    7.9%
                                                    =====   =====   =====
</TABLE>

 1996 Compared with 1995

     Revenues increased 47% to $52.5 million in 1996 from $35.6 million in 1995.
This increase in revenues was primarily attributable to the significantly
increased level of services performed for clients by each of the Strategic
Services Group, the Performance Solutions Group and the Technology Services
Group. Revenues attributable to the Company's relationship with Gemini
represented 31% and 34% of total revenues in 1996 and 1995, respectively.
The Company expects that revenues from Gemini will decrease as a percentage of
revenues in the future. Revenues from operating companies of AT&T represented,
in the aggregate, approximately 26% and 23% of the Company's revenues in 1996
and 1995, respectively. The Company anticipates that revenues attributable to
operating companies of AT&T will decrease in the future because several
engagements for this group of clients have been completed.

                                      -23-
<PAGE>
 
     In each of the four six month periods ended on October 31, 1996, Gemini's
actual bookings were lower than the minimum bookings provided for under the
Teaming Agreement. Gross bookings attributable to Gemini under the Teaming
Agreement (without regard to the application of bookings to prior period
deficiencies) for the six month periods ended April 30, 1995, October 31, 1995,
April 30, 1996 and October 31, 1996 were $6.8 million, $2.0 million, $5.3
million and $4.7 million, respectively.  Because bookings for the six month
period ended October 31, 1995 were substantially below the bookings commitment
for such period, bookings for the subsequent six month periods ended April 30,
1996 and October 31, 1996 were, in accordance with the Teaming Agreement, used
to satisfy prior period deficiencies.

     In particular, during the six month period commenced on May 1, 1995 and
ended October 31, 1995, Gemini's bookings commitment to the Company was $8.25
million. The actual bookings for such period, net of bookings applied to the
prior period deficiency, totalled approximately $1.9 million. Gemini satisfied
the resulting $6.3 million deficiency in the subsequent six month period through
a combination of revenues generated from client work referred to Renaissance by
Gemini, work performed by Renaissance as a subcontractor for Gemini, work
performed by Renaissance directly for Gemini and the acquisition by Gemini from
the Company for $2.2 million (included in revenue for the nine months ended
September 27, 1996) of certain Company program designs and related materials.
During the six month period commenced on November 1, 1995 and ended April 30,
1996, Gemini's bookings commitment to the Company was $7.0 million. The actual
bookings for the period, net of bookings applied to the prior period deficiency,
totalled approximately $1.2 million. Gemini issued to Renaissance a purchase
order for the deficiency of approximately $5.8 million. This purchase order was
satisfied by Gemini in the subsequent period through a combination of revenues
generated from client work referred to Renaissance by Gemini of approximately
$4.0 million and a cash payment by Gemini to Renaissance of $750,000 in the
third quarter of 1996 in satisfaction of the remaining $1.8 million purchase
order obligation. The Company's net income for the third fiscal quarter of 1996
was favorably affected by this cash payment which was included in revenues and
had no incremental cost associated with it.

     During the six month period commenced on May 1, 1996 and ended on October
31, 1996, Gemini's bookings commitment to the Company was $8.0 million.
Approximately $4.1 million in revenues generated from the $5.2 million in
bookings in this six month period were applied to satisfy the prior period
deficiency. Gemini satisfied the bookings deficiency for this period with a one
time payment by Gemini to Renaissance of approximately $1.5 million in
accordance with the terms of the Restated Teaming Agreement.

                                      -24-
<PAGE>
 
     Professional personnel costs increased 50% in 1996 to $31.7 million, or 60%
of revenues, from $21.1 million, or 59% of revenues, in 1995. The number of 
full-time equivalent professional employees increased to 208 at December 31,
1996 from 132 at December 31, 1995. The increase in personnel costs resulted
from the standardization of all employee compensation adjustments to January of
each year beginning in January 1996 and professional time investment in the
Company's technology services.

     Professional development and recruiting costs increased 8% in 1996 to $2.0
million, or 4% of revenues, from $1.9 million, or 5% of revenues, in 1995. This
increase in professional development and recruiting costs resulted primarily
from expansion in the number of professional employees retained by the Company.

     Marketing and sales expenses increased 100% in 1996 to $1.6 million, or
3.1% of revenues, from $810,000, or 2.3% of revenues, in 1995. This increase in
marketing and sales expenses reflected an increase in the level and scope of
marketing communications activities in 1996. The Company is expanding its
marketing and sales efforts and therefore expects related expenses to increase
as a percentage of revenues in the future.

     General and administrative expenses increased 43% in 1996 to $9.2 million,
or 18% of revenues, from $6.4 million, or 18% of revenues, in 1995. This
increase in general and administrative expenses resulted primarily from
additional costs necessary to support the growth in the Company's business and
professional staff during 1996 and included increases in salary costs for
administrative staff, increases in facilities and operating expenses and
investments in upgrading the Company's telecommunications (video and audio),
networks and systems.

     Interest expense increased 74% in 1996 to $139,000, or 0.3% of revenues,
from $80,000, or 0.2% of revenues, in 1995. This increase was primarily
attributable to payments made to Shawmut Bank under the Company's working
capital line of credit and the cost of borrowings by ISS for working capital
needs, offset in part by a reduction in interest payments to Gemini under a $2.0
million working capital loan from Gemini to the Company (the "Gemini Loan"),
which was repaid following the Company's initial public offering in April 1995.
Interest income increased 233% in 1996 to $1.7 million, or 3% of revenues, from
$509,000, or 1% of revenues, for 1995. This increase was primarily the result of
higher cash balances from cash generated by operations and the proceeds from the
Company's follow-on public offerings in May and November 1996. Interest income
consists of interest earned on the Company's cash, cash equivalents and
marketable securities.

     In 1996 the Company recorded a one time charge of $3.5 million for the 
acquisition of ISS. This charge includes investment banking, legal and 
accounting fees, consolidation of duplicate facilities, elimination of certain 
redundant assets, and costs associated with consolidating such operations, 
including severance and other related items.

     The pro forma tax provision in 1996 was $3.8 million or 48% of pro forma
pre-tax income as compared with a pro forma tax provision of $2.3 million or 40%
in 1995. Non-deductible acquisition costs increased the effective tax rate in
1996 by 8.3%. The 1995 and 1996 figures were computed as if the Company had been
taxable as a C corporation since its

                                      -25-

<PAGE>
 
inception. Prior to its reorganization in April 1995 (the "Reorganization"),
the Company was not subject to federal or state income taxes at the Company
level. Prior to the acquisition of ISS on December 31, 1996, ISS was not subject
to federal and state income taxes at the Company level.

       The pro forma data presented show the effect on 1996 of the contractual
reduction in ISS' officer's compensation following the ISS Acquisition of $2.1
million, included in professional personnel costs in 1996.

 1995 Compared with 1994

       Revenues increased 54% to $35.5 million in 1995 from $23.0 million in
1994. This increase in revenues was primarily attributable to the significantly
increased level of services performed for clients by both the Performance
Solutions Group and the Technology Services Group. Revenues from three operating
companies of AT&T represented, in the aggregate, approximately 23% of the
Company's revenues in 1995. Revenues attributable to the Company's relationship
with Gemini represented approximately 34% and 44% of the Company's total
revenues in 1995 and 1994, respectively.

       Professional personnel costs (which includes salaries and benefits and
costs associated with independent contractors) increased 50% in 1995 to $21.1
million, or 59% of revenues, from $14.1 million, or 61% of revenues, in 1994.
Professional personnel costs in 1995 reflect the election by the Company's Co-
Chairmen and Chief Executive Officer to permanently forego a total of $150,000
in compensation to which they were otherwise entitled in 1995. The number of
full-time equivalent professional employees increased to 132 at December 31,
1995, from 92 at December 31, 1994. This increase in personnel resulted from the
need to staff an increasing level of customer engagements.

        Professional development and recruiting costs increased 113% in 1995 to
$1.9 million, or 5% of revenues, from $894,000, or 4% or revenues, in 1994. This
increase in professional development and recruiting costs was primarily
attributable to the addition of significant numbers of professional personnel by
the Company in 1995.

       Marketing and sales expenses increased 68% in 1995 to $810,000, or 2% of
revenues, from $482,000, or 2% of revenues, in 1994. This increase in marketing
and sales expenses reflected increased public relations and other marketing
communications activities in 1995. The Company is expanding its marketing and
sales efforts and therefore expects related expenses to increase as a percentage
of revenues in the future.

       General and administrative expenses increased 49% in 1995 to $6.4
million, or 18% of revenues, from $4.3 million, or 19% of revenues, in 1994.
This increase in general and administrative expenses resulted primarily from
additional costs necessary to support the growth in the Company's business and
professional staff during 1995 and included increases in salary costs for
administrative staff as well as increases in facilities and operating expenses.

                                      -26-
<PAGE>
 
       Interest expense declined 37% in 1995 to $80,000, or 0.2% of revenues,
from $126,000, or 0.6% of revenues, for 1994. This decline was primarily
attributable to the reduction in interest payments to Gemini under the Gemini
Loan, which was repaid following the Company's initial public offering in April
1995. Interest income was $569,000, or 2% of revenues, for 1995, up from
$21,000, or less than 1% of revenues, during 1994. The increase in interest
income resulted from interest earned on the proceeds of the Company's initial
public offering.

       The pro forma provision for income taxes in 1995 was $2.3 million
compared with a pro forma tax provision of $744,000 in 1994. Both figures are
computed as if the Company had been taxable as a C corporation since its
inception and ISS had been taxable as a C corporation prior to its acquisition
by the Company on December 31, 1996. Prior to its Reorganization in April 1995,
the Company was not subject to federal or state income taxes at the Company
level. The 1995 pro forma effective tax rate was 40%. The 1994 pro forma
effective tax rate of 23% was less than the federal statutory tax rate of 34%
due to the carryforward of operating losses from 1993.

       Under the Teaming Agreement as then in effect, during the six month
period commenced on May 1, 1995 and ended October 31, 1995, Gemini was obligated
to provide the Company with bookings (as defined in the Teaming Agreement) of
$8.25 million. The actual bookings for such period totalled approximately $1.9
million. Gemini satisfied the approximately $6.3 million deficiency through a
combination of revenues generated from client work referred to Renaissance by
Gemini, work performed by Renaissance as a subcontractor for Gemini and work
performed by Renaissance directly for Gemini. A portion of the deficiency
satisfied directly by Gemini was payable in installments through September 1,
1996.

Liquidity and Capital Resources

       To date, the Company's financing requirements have been met through a
combination of funds generated by operations, loans from Gemini, bank
borrowings, loans from certain of the Company's stockholders, the sale of Common
Stock in the Company's initial and follow-on public offerings and the sale to
Gemini of warrants to purchase up to 633,600 shares of Common Stock (the "Gemini
Warrants") and the subsequent exercise of the Gemini Warrants. At December 31,
1996, the Company had working capital of $68.4 million, an increase of $49.7
million as compared to working capital of $18.7 million at December 31, 1995.
The increase was primarily attributable to the Company's follow-on offerings in
May and November 1996, which provided net proceeds of approximately $34 million.

       Funds provided (used) by operations amounted to $2,169,000, $(1,964,000)
and $10,120,000 for 1994, 1995, and 1996, respectively. Accounts receivable and
unbilled services decreased significantly in 1996 over 1995 as a result of the
increased focus on collections by the Company in 1996. Accounts receivable and
unbilled services

                                      -27-
<PAGE>
 
decreased 21% to $9.8 million on December 31, 1996 as compared to $12.4 million
on December 31, 1995. During this same period revenues increased 48%, to $52.4
million from $35.5 million in 1995. Accounts receivable and unbilled services
increased 118% to $12.4 million on December 31, 1995 as compared to $5.7 million
on December 31, 1994. Advance payments are recorded when billings exceed
revenues earned or expenses incurred. In 1995, advanced payments decreased to
$424,000 from $983,000 in 1994. Advance payments in 1996 increased to $879,000
from $424,000 in 1995.

       Capital expenditures were $1.1 million $2.3 million and $1.8 million for
1994, 1995 and 1996, respectively.

       On July 21, 1994, the Company entered into a revolving line of credit
agreement with Shawmut Bank (now Fleet Bank, N.A.) providing for borrowings of
up to $1.0 million. The line of credit agreement was subsequently amended to
increase the amount available for borrowings to $3.5 million. This line of
credit expires on June 1, 1997. As of December 31, 1995, $1.5 million was
outstanding under the line. No borrowings were outstanding under the line as of
December 31, 1996. The line of credit includes customary financial and other
covenants relating to the maintenance of certain financial tests, such as
minimum tangible net worth and quarterly profitability, and restricting the
Company's ability to incur additional indebtedness. On August 25, 1995, the
Company entered into a revolving line of credit agreement with Barclays Bank in
London providing for borrowings of up to British Pound Sterling 250,000. The
line of credit was subsequently amended to increase the amount available for
borrowings to British Pound Sterling 425,000. No borrowings were outstanding
under the line as of December 31, 1996. See Note 6 of Notes to Consolidated
Financial Statements.

       The Company made a partnership distribution totaling $2,672,000 in
January 1995, which represented the cumulative net earnings of Renaissance
Strategy Group Limited Partnership, the Company's predecessor (the
"Partnership") from December 1, 1993 through December 31, 1994. The Company made
a final partnership distribution totaling $754,475 in March 1995, which
represented the estimated amount of the Partnership's net earnings during the
period commencing on January 1, 1995 and ending immediately prior to the
Company's reorganization on April 3, 1995 (the "Reorganization"). Both the
January 1995 and the March 1995 partnership distributions were evidenced by
promissory notes from the Company (the

                                      -28-
<PAGE>
 
"Stockholder Notes"), which Stockholder Notes were repaid from a portion of
the net proceeds of the Company's initial public offering. The partnership
distributions represent earnings of the Partnership upon which the recipients of
the Stockholder Notes were required to pay income taxes.

       In the event that the Restated Teaming Agreement is validly terminated by
either party prior to its expiration, Renaissance is required to pay a
termination fee to Gemini in an amount declining from $1.6 million in the event
of a termination prior to November 1, 1996 to $250,000 in the event of a
termination prior to November 1, 1999.


     In connection with the acquisition of COBA-UK, the Company will acquire all
of the deferred convertible non-voting stock of COBA-UK (the "Deferred Stock")
in 1998 and 1999 at a price based on the financial performance of COBA-UK in
1997 and 1998. The maximum possible purchase price for the Deferred Stock is
$12.6 million, part of which may be paid by the issuance of shares of Common
Stock of the Company.

     In connection with the acquisition of COBA-Boston, the Company has agreed
to pay an earn-out to the former stockholders of COBA-Boston in 1998 and 1999
based upon the financial performance of COBA-Boston in 1997 and 1998,
respectively. The maximum possible amount of the payments to be made pursuant to
the earn-out is $9.25 million per year, part of which may be paid by the
issuance of shares of Common Stock of the Company.

       Management believes that funds generated by operations, existing cash
balances (including proceeds from the Company's initial and follow-on public
offerings) and borrowings under the bank lines will be sufficient to meet the
Company's working capital and capital expenditure requirements for at least the
next twelve months. Thereafter, the Company's liquidity will be materially
dependent upon its internally generated funds and its ability to obtain funds
from financings from external sources, in the form of either additional equity
or indebtedness. The Company's ability to borrow will be a function of the level
of its internally generated funds and the assets of its business that are
available to serve as collateral, which will consist primarily of accounts
receivable.


                                      -29-
<PAGE>
 
Certain Factors That May Affect Future Results

        The following important factors, among others, could cause actual
results to differ materially from those indicated by forward-looking statements
made in this Annual Report on Form 10-K and presented elsewhere by management
from time to time.

        Risks Associated with Acquisitions. The Company's strategy includes the
acquisition of businesses, products and technologies that are complementary to
those of the Company. Promising acquisitions are difficult to identify and
complete for a number of reasons, including competition among prospective
buyers. In furtherance of this strategy, in late 1996 and early 1997 the Company
acquired three businesses, ISS, COBA-UK and COBA-Boston. There can be no
assurance that the Company will be able to complete future acquisitions or that
the Company will be able to successfully integrate these and any future acquired
businesses, and the failure of the Company to integrate any acquired businesses
could have a material adverse effect on the Company's business and results of
operations. In order to finance any such future acquisitions, it may be
necessary for the Company to raise additional funds through public or private
financings. Any equity or debt financing, if available at all, may be on terms
which are not favorable to the Company and, in the case of equity financing, may
result in dilution to the Company's stockholders.


        Management of Growth. The Company is currently experiencing a period of
rapid growth which has placed and could continue to place a strain on the
Company's financial, management and other resources. From January 1, 1993
through December 31, 1996, the size of the Company's professional staff
increased from 17 to 208 full-time equivalent employees, and further increases
are anticipated. Since January 1, 1993, the Company has expanded geographically
by adding employees based in Atlanta, Georgia; Boston, Massachusetts; Chicago,
Illinois; San Francisco, California; Stamford, Connecticut; Washington D.C.; and
London, England. The Company intends to open additional domestic and
international offices as needed. The Company's ability to manage its staff and
facilities growth effectively will require it to continue to improve its
operational, financial and other internal systems and to train, motivate and
manage its employees. If the Company's management is unable to manage growth
effectively and new employees are unable to achieve anticipated performance
levels, the Company's business and results of operations could be adversely
affected.

        Dependence on Gemini. Since 1993 the Company has been a party to the
Teaming Agreement with Gemini pursuant to which the Company and Gemini have
agreed to market and perform certain service offerings on a collaborative basis.
Approximately 44%, 34% and 31% of the Company's revenues in 1994, 1995 and 1996,
respectively, resulted from its relationship with Gemini; approximately 36%, 15%
and 21%, respectively, of revenues were from services and other amounts billable
to Gemini and approximately 8%, 19% and 10%, respectively, of revenues were from
services billable directly to third parties. As a result, the Company's success
is currently dependent in part on the success of Gemini's marketing efforts.

        In November 1996, the Company and Gemini entered into the Restated
Teaming Agreement. Gemini has committed to provide the Company with certain
minimum bookings during the term of the Restated Teaming Agreement, subject to
the satisfaction of certain conditions. In the event that during any of the six
month periods during the term of the Restated Teaming Agreement bookings
obtained by Renaissance from Gemini customers or customers of joint service
offerings by Renaissance and Gemini are less than specified minimum commitment
levels, Gemini may retain the services of Renaissance for a fee equal to the
amount of the deficiency. If at the end of twelve months a bookings deficiency
still remains, Gemini is required to make a compensating payment to Renaissance
of 25% of the remaining deficiency in full satisfaction of the bookings
deficiency. Gemini's obligation to provide these bookings to the Company will
terminate in the event that any of Harry M. Lasker, David A. Lubin or David P.
Norton, the founders of the Company, ceases to be employed by the Company on a
full time basis during the term of the Restated Teaming Agreement. In such
event, the parties have agreed to negotiate in good faith to establish new
commitments for the remainder of the term of the Restated Teaming Agreement. In
addition, the amount of Gemini's bookings commitment is subject to adjustment as
a result of, among other things, any failure by Renaissance to make available to
Gemini such quantities of marketing and sales resources and such number of staff
for joint service offerings as may from time to time be mutually agreed upon by
the parties.

        The Company monitors Gemini's progress in meeting its bookings
commitments through regular conference calls and meetings with Gemini
representatives. "Bookings" are generally defined for purposes of the Restated

                                      -30-
<PAGE>
 
Teaming Agreement as gross fees (excluding expense reimbursements) committed to
Renaissance as a result of the relationship with Gemini during the applicable
period, as evidenced by a written agreement between the Company and the customer
for the delivery of goods or services within twelve months, plus any such fees
actually collected by the Company during such period which are not evidenced by
a written agreement. Gemini generally is treated as having satisfied its
bookings commitment regardless of whether revenues are recognized by Renaissance
with respect to a particular engagement. For example, under the Restated Teaming
Agreement, 50% of the fees attributable to a cancelled contract count towards
Gemini's bookings commitment if such cancellation is not primarily attributable
to the actions or omissions of Gemini. In accordance with industry practice,
nearly all of the Company's contracts are terminable by either the customer or
the Company on short or no notice and without penalty. In addition, Gemini does
not guarantee the collectibility of any receivables resulting from customer
engagements under the Restated Teaming Agreement.

        The Restated Teaming Agreement has a term ending on November 1, 1999.
The Restated Teaming Agreement is subject to earlier termination upon the
occurrence of certain events, including a change in control of the Company (as
defined in the Restated Teaming Agreement). In the event that the Restated
Teaming Agreement is validly terminated by either party prior to its expiration,
Renaissance is required to pay a termination fee to Gemini in an amount
declining from a maximum of $1.6 million in the event of a termination prior to
November 1, 1996 to a minimum of $250,000 in the event of a termination prior to
November 1, 1999. In addition, in such event, various payment obligations
contained in the Restated Teaming Agreement will terminate on the termination
date. While the Company is continuing to build its internal marketing force and
seeking additional strategic alliances, the termination of the Restated Teaming
Agreement could have a material adverse effect on the Company's business and
results of operations.

        Under the Restated Teaming Agreement, the Company has agreed to train
Gemini in the use of the Company's Balanced Scorecard, desktop application and
certain other methodologies during the period ending October 31, 1998 and to
perpetually license these methodologies, to the extent developed prior to
November 1, 1998, to Gemini on a non-exclusive basis. As a result, during the
term of the Restated Teaming Agreement Gemini personnel may perform services in
connection with joint service offerings which might otherwise be performed by
Company personnel. In addition, following the termination of the Restated
Teaming Agreement, Gemini will be in a position to compete with the Company
using know-how and methodologies which might otherwise be proprietary to the
Company.

        The Company's ability to obtain the benefit of the bookings commitments
under the Restated Teaming Agreement may be affected by Gemini's
creditworthiness. Under the terms of the Restated Teaming Agreement, Gemini is
not

                                      -31-
<PAGE>
 
required to provide the Company with information regarding Gemini's financial
condition. Based on information made publicly available by an affiliate of
Gemini, the Company believes that Gemini experienced a significant decline in
sales and profits as well as capacity problems in 1995, and that Gemini's
results for the first quarter of 1996 were below its budget for such quarter.

        In each of the four six month periods ended October 31, 1996, Gemini's
actual bookings were lower than the minimum bookings provided for under the
Teaming Agreement. During the six month period commenced on May 1, 1995 and
ended October 31, 1995, Gemini's bookings commitment (as defined in the Teaming
Agreement) to the Company was $8.25 million. The actual bookings for such
period, net of bookings applied to the prior period deficiency, totalled
approximately $1.9 million. Gemini satisfied the resulting $6.3 million
deficiency in the subsequent six month period through a combination of revenues
generated from client work referred to Renaissance by Gemini, work performed by
Renaissance as a subcontractor for Gemini, work performed by Renaissance
directly for Gemini and the acquisition by Gemini from the Company of certain
Company program designs and related materials. During the six month period
commenced on November 1, 1995 and ended April 30, 1996, Gemini's bookings
commitment to the Company was $7.0 million. The actual bookings for the period,
net of bookings applied to the prior period deficiency, totalled approximately
$1.2 million. Gemini issued to Renaissance a purchase order for the deficiency
of approximately $5.8 million. This purchase order was satisfied by Gemini in
the subsequent six month period through a combination of revenues generated from
client work referred to Renaissance by Gemini of approximately $4.0 million and
a cash payment by Gemini to Renaissance of $750,000 in the third fiscal quarter
of 1996 in satisfaction of the remaining $1.8 million purchase order obligation.
The Company's net income for the third fiscal quarter of 1996 was favorably
affected by this cash payment which was included in revenues and had no
incremental cost associated with it. During the six month period commenced on
May 1, 1996 and ended on October 31, 1996, Gemini's bookings commitment to the
Company was $8.0 million. Approximately $4.1 million in revenues generated from
the $5.2 million in bookings in this six month period were applied to satisfy
the prior period deficiency. Pursuant to the terms of the Restated Teaming
Agreement, Gemini satisfied the resulting bookings deficiency for the period
ending October 31, 1996 with a one-time payment by Gemini to Renaissance of
approximately $1.5 million.

        Concentration of Revenues. The Company has in the past derived, and may
in the future derive, a significant portion of its revenues from a relatively
limited number of major projects. In 1994, 1995 and 1996, revenues from services
and other amounts billable to Gemini accounted for approximately 36%, 15% and
21%, respectively, of the Company's total revenues. Revenues from services
billable to Gemini in 1994 include revenues from services

                                      -32-
<PAGE>
 
provided to CIGNA Corporation ("CIGNA") by the Company as a subcontractor on
behalf of Gemini pursuant to the Teaming Agreement. These revenues from services
provided to CIGNA accounted for approximately 25% of the Company's total
revenues in 1994. In addition, revenues from services billable to divisions of
AT&T and to Mobil Corporation accounted for approximately 8% and 7%,
respectively, of the Company's total revenues in 1994 and revenues from services
billable to divisions of AT&T and to CIGNA accounted for approximately 23% and
8%, respectively, of the Company's total revenues in 1995. In 1996, revenues
from services billable to operating companies of AT&T accounted for
approximately 26% of the Company's total revenues. The Company anticipates that
revenues from operating companies of AT&T will decrease in the future because
several engagements for this group of clients have been completed. The Company's
revenues and earnings can fluctuate from quarter to quarter based on the number
of customer engagements and the requirements of these engagements. In accordance
with industry practice, nearly all of the Company's contracts are terminable by
either the customer or the Company on short or no notice and without penalty. An
unanticipated termination of a major project could have a material adverse
effect on the Company's business and results of operations.

        Variability of Quarterly Operating Results. Variations in the Company's
revenues and operating results occur from quarter to quarter as a result of a
number of factors. Quarterly revenues and operating results can depend on the
size of customer engagements during a quarter, the number of working days in a
quarter and employee utilization rates. The timing of revenues is difficult to
forecast because the Company's sales cycle is relatively long in the case of new
customers and may depend on factors such as the size and scope of assignments
and general economic conditions. Because a high percentage of the Company's
expenses are relatively fixed, a variation in the level of customer assignments
can cause significant variations in

                                      -33-
<PAGE>
 
operating results from quarter to quarter and could result in losses. The
Company attempts to manage its personnel utilization rates by closely monitoring
project timetables and staffing requirements for new projects. While the number
of professional staff may be adjusted to some degree to reflect active projects,
the Company must maintain a sufficient number of senior professionals to oversee
existing customer projects and participate in securing new customer engagements.
In addition, most of the Company's engagements are terminable without customer
penalty. An unanticipated termination of a major project could result in an
increase in underutilized employees and a decrease in revenues and profits or
the incurrence of losses.

        Need to Develop New Offerings. The Company's future success will depend
in significant part on its ability to successfully develop and introduce new
service offerings and improved versions of existing service offerings. There can
be no assurance that the Company will be successful in developing, introducing
on a timely basis and marketing such service offerings or that any service
offerings will be accepted in the market. Moreover, services offered by others
may render the Company's services non-competitive or obsolete.

        Project Risks. Many of the Company's engagements involve projects which
are critical to the operations of its customers' businesses and which provide
benefits that may be difficult to quantify. The Company's failure or inability
to meet a customer's expectations in the performance of its services could
result in the incurrence by the Company of a financial loss and could damage the
Company's reputation and adversely affect its ability to attract new business.
In addition, an unanticipated difficulty in completing a project could have an
adverse effect on the Company's business and results of operations. Fees for the
Company's engagements typically are based on the project schedule, Renaissance
staffing requirements, the level of customer involvement and the scope of the
project as agreed upon with the customer at the project's inception. The Company
generally seeks to obtain an adjustment in its fees in the event of any
significant change in any of the assumptions upon which the

                                      -34-
<PAGE>
 
original estimate was based. However, there can be no assurance that the Company
will be successful in obtaining any such adjustment in the future.

        Attraction and Retention of Key Personnel; Dependence on Founders.   The
Company's business involves the delivery of professional services and is labor
intensive. The Company's success will depend in large part upon its ability to
attract, retain and motivate highly skilled employees. There is significant
competition for employees with the skills required to perform the services
offered by the Company. Although the Company expects to continue to attract and
retain sufficient numbers of highly skilled employees for the foreseeable
future, there can be no assurance that the Company will be able to do so. The
loss of any of the Company's three founders or other key personnel could have a
material adverse effect on the Company's business and results of operations,
including its ability to attract employees and secure and complete engagements.

        Competition. The management consulting and client/server systems
integration markets are subject to rapid change and are highly competitive. The
Company competes with and faces potential competition for customer assignments
and experienced personnel from a number of companies that have significantly
greater financial, technical and marketing resources, generate greater revenues
and have greater name recognition than does the Company. In addition, the
management consulting and client/server systems integration markets are highly
fragmented and served by numerous firms, many of which serve only their
respective local markets. The Company's customers primarily consist of major
corporations, and there are an increasing number of professional services firms
seeking management consulting and client/server systems integration engagements
from that customer base. The Company believes that the principal competitive
factors in the management consulting and client/server systems integration
industries include the nature of the services offered, quality of service,
responsiveness to customer needs, experience,

                                      -35-
<PAGE>
 
technical expertise and price. There can be no assurance that the Company will
continue to compete successfully with its existing competitors or will be able
to compete successfully with any new competitors.

        International Operations.  Sales outside North America accounted for
approximately 10% of the Company's revenues in 1996.  The Company intends to
expand its presence in European markets and anticipates that international sales
will account for an increasing portion of revenues in the future. International
revenues are subject to a number of risks, including the following: agreements
may be difficult to enforce and receivables difficult to collect through a
foreign country's legal system; foreign customers may have longer payment
cycles; foreign countries could impose additional withholding taxes or otherwise
tax the Company's foreign income, impose tariffs or adopt other restrictions on
foreign trade; fluctuations in exchange rates could affect product demand and
adversely affect the profitability in U.S. dollars of services provided by the
Company in foreign markets where payment for the Company's services is made in
the local currency; U.S. export licenses may be difficult to obtain; and the
protection of intellectual property in foreign countries may be more difficult
to enforce. There can be no assurance that any of these factors will not have a
material adverse effect on the Company's business and results of operations.

        Intellectual Property Rights. The Company's success is dependent in part
upon its management consulting and client/server systems integration
methodologies and other intellectual property, some of which is proprietary to
the Company. A significant portion of the Company's management consulting
services are based on the Balanced Scorecard concept described in three Harvard
Business Review articles and in The Balanced Scorecard, a recently published
book, all of which were co-authored by one of the Company's founders. The
Company believes that the Balanced Scorecard name is in the public domain. As a
result, third parties may provide services using the Balanced Scorecard name
which are competitive with the services offered by the Company.

        The Company relies upon a combination of trade secret, nondisclosure and
other contractual arrangements, and copyright and trademark laws to protect its
proprietary rights. The Company presently holds no patents or registered
copyrights or trademarks. The Company generally enters into confidentiality
agreements with its employees, consultants, customers and potential customers
and limits distribution of its proprietary information. There can be no
assurance that the steps taken by the Company in this regard will be adequate to
deter misappropriation of its proprietary information or that the Company will
be able to detect unauthorized use and take appropriate steps to enforce its
intellectual property rights. Although the Company believes that its services
and products do not infringe on the intellectual property rights of others,
there can be no assurance that such a claim will not be asserted against the
Company in the future.

                                      -36-
<PAGE>
 
Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                        Page
                                                        ----
<S>                                                     <C>
Independent Auditors' Report..........................   38

Consolidated Balance Sheets as of
 December 31, 1995 and 1996...........................   39

Consolidated Statements of Operations
 for the Years Ended December 31, 1994,
 1995 and 1996........................................   40

Consolidated Statements of
 Stockholders' Equity for the Years
 Ended December 31, 1994, 1995 and
 1996.................................................   41

Consolidated Statements of Cash Flows
 for the Years Ended December 31, 1994,
 1995 and 1996........................................   42

Notes to Consolidated Financial
 Statements...........................................   43


</TABLE>

                                     -37-
<PAGE>
 
                          INDEPENDENT AUDITORS' REPORT

Renaissance Solutions, Inc.:

    We have audited the accompanying consolidated balance sheets of Renaissance
Solutions, Inc. and its subsidiaries (the "Company") as of December 31, 1995 and
1996, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our 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, such consolidated financial statements present fairly, in
all material respects, the financial position of Renaissance Solutions, Inc. and
its subsidiaries as of December 31, 1995 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.

    As described in Note 1, the consolidated financial statements of the Company
give retroactive effect to the acquisition of International Systems Services
Corporation by the Company on December 31, 1996 as a pooling-of-interests.


Deloitte & Touche LLP

Boston, Massachusetts
February 28, 1997

                                     -38-
<PAGE>
 
                          RENAISSANCE SOLUTIONS, INC.

                          CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                         December 31,
                                                                -------------------------------
                                                                    1995                1996
                                                                -----------         -----------
                                                           (amounts in thousands, except share data)
<S>                                                             <C>                 <C>
Assets
Current assets:
        Cash and cash equivalents.........................          $ 6,159             $49,415
        Marketable securities.............................            4,890              17,910
        Accounts receivable, net..........................            8,304               7,765
        Unbilled services, net............................            4,049               2,057
        Receivable from officers/shareholders............              278                 ---
        Deferred tax asset................................              ---                 560
        Prepaid expenses and other current assets.........              298                 826
                                                                    -------             -------
                Total current assets......................           23,978              78,533
                                                                    -------             -------
Property and equipment, net...............................            3,085               3,977
Other assets..............................................               72                  72
                                                                    -------             -------
                Total assets..............................          $27,135             $82,582
                                                                    =======             =======
Liabilities and Stockholders' Equity
Current liabilities:
        Short-term borrowings.............................          $ 1,500             $   500
        Current portion of note payable...................              180                 782
        Note payable to officers/shareholders.............              ---                 500
        Accounts payable..................................            1,708               2,642
        Accrued payroll and related costs.................            1,190               1,775
        Advanced payments.................................              424                 879
        Income taxes payable..............................              270                 120
        Accrued acquisition costs.........................              ---               3,131
                                                                    -------             -------
                Total current liabilities.................            5,272              10,329
Long-term portion notes payable...........................              720                 --
Deferred tax liability....................................               --                 431
Other liabilities.........................................               87                 181
                                                                    -------             -------
                Total liabilities.........................            6,079              10,510
                                                                    -------             -------
Commitments and contingencies--Notes 6, 7 and 10
Stockholders' equity:
        Preferred stock, $.01 par value,
         authorized 2,000,000 shares, none issued.........               --                  --
        Common stock, $.0001 par value,
         authorized 20,000,000 shares, issued and
         outstanding 7,279,396 and 9,243,594
         shares in 1995 and 1996, respectively............                1                   1
        Additional paid in capital........................           14,741              64,897
        Warrants to acquire common stock..................            1,600                 ---
        Cumulative translation adjustments................              (48)                264
        Unrealized gain/(loss) on marketable securities...               35                 (18)
        Retained earnings.................................            4,727               6,497
                                                                    -------             -------
                Stockholders' equity......................           21,056              71,641
                                                                    -------             -------
                Total.....................................          $27,135             $82,582
                                                                    =======             =======
</TABLE>
                See notes to consolidated financial statements.

                                     -39-
<PAGE>
 
                          RENAISSANCE SOLUTIONS, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
 
                                                                      Years Ended
                                                                     ------------
                                                                     December 31,
                                                                     ------------
                                                     1994                1995               1996
                                                   --------            --------          ----------
                                                     (amounts in thousands, except per share data)
<S>                                                <C>                 <C>               <C>
Revenues................................           $22,988             $35,536           $52,450
                                                   -------             -------           -------
 
Costs and expenses:
  Professional personnel................            14,056              21,089            31,733
  Professional development and  
  recruiting............................               894               1,895             2,045
  Marketing and sales...................               482                 810             1,624
  General and administrative............             4,274               6,442             9,217
  Acquisition costs.....................               ---                 ---             3,524
                                                   -------             -------           -------
 
            Total costs and expenses...             19,706              30,236            48,143
                                                   -------             -------           -------
 
Income from operations..................             3,282               5,300             4,307
Interest expense........................              (126)                (80)             (139)
Interest income.........................                21                 509             1,693
                                                   -------             -------           -------
 
Income before income taxes..............             3,177               5,729             5,861
Provision for income taxes..............               ---               1,894             4,091
                                                   -------             -------           -------
 
Net income..............................           $ 3,177             $ 3,835           $ 1,770
                                                   =======             =======           =======
Net income per share....................           $   .51             $   .53           $   .20
                                                   =======             =======           =======
 
Pro forma data:
Historical income before pro forma
 adjustments...........................                                                  $ 5,861
 
Pro forma adjustment to officer's
 salary................................                                                    2,100
                                                                                         -------
Historical/pro forma income before income                                                                   
 taxes..................................           $ 3,177             $ 5,729           $ 7,961 
Historical provision for income taxes...               ---               1,894             4,091
Additional pro forma provision (credit)
 for income taxes.......................               744                 403              (266)
                                                   -------             -------           -------  
 
Pro forma income taxes..................               744               2,297             3,825
                                                   -------             -------           -------
 
Pro forma net income....................           $ 2,433             $ 3,432           $ 4,136
                                                   =======             =======           =======
 
Pro forma net income per share..........           $   .39             $   .48           $   .47
                                                   =======             =======           =======
 
Pro forma weighted average number of
 common and common equivalent shares                 
 outstanding............................             6,303               7,223             8,804 
                                                   =======             =======           =======
</TABLE>
                See notes to consolidated financial statements.

                                     -40-
<PAGE>
 
                          RENAISSANCE SOLUTIONS, INC.

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                          Warrants                    Unrealized
                                                                             To                          Gain
                                                           Additional      Acquire      Cumulative     (Loss) on     Retained  
                                    Number      Common       Paid in        Common       Translation   Marketable     Earnings  
                                  of Shares     Stock       Capital         Stock       Adjustments   Securities    (Deficit)  
                                  ---------     -----       -------         -----       -----------   ----------    ---------
                                                                      (amounts in thousands)  
<S>                               <C>        <C>            <C>           <C>             <C>         <C>           <C>        
Balance at January 1, 1994, as
 previously reported              4,412,358  $        --    $      --     $        --     $      --   $        --   $  (1,457)      
   Adjustment for pooling-of-
   interests with ISS                                                                                                              
   (Note 2).....................  1,310,000            1          403              __            __            __       1,283       
                                  ---------  -----------    ---------     -----------     ---------   -----------   ---------     
Balance at January 1, 1994......  5,722,358            1          403              --            --            --        (174)      
   Issuance of common stock.....    155,038           --            1              --            --            --          --       
   Net income...................         --           --           --              --            --            --       3,177       
                                  ---------  -----------    ---------     -----------     ---------   -----------   --------- 
Balance at December 31, 1994.     5,877,396            1          404              --            --            --       3,003       
   Issuance of common stock,
     net of related issuance
     costs of $1,291............  1,400,000           --       15,636              --            --            --          --
   Distribution to shareholders.                                                                                       (3,426)      
   Corporate reorganization.....         --           --       (1,315)             --            --            --       1,315       
   Sale of warrants to acquire
     common stock...............         --           --           --           1,600            --            --          --       
   Exercise of stock options....      2,000           --           16              --            --            --          --       
   Translation adjustment.......         --           --           --              --           (48)           --          --
   Unrealized gain on
     marketable securities......         --           --           --              --            --            35          --       
   Net income...................         --           --           --              --            --            --       3,835       
                                  ---------  -----------    ---------     -----------     ---------   -----------   ---------       
Balance at December 31, 1995....  7,279,396  $         1    $  14,741     $     1,600     $    (48)   $        35   $   4,727       
                                  ---------  -----------    ---------     -----------     ---------   -----------   --------- 
   Issuance of common stock,
     net of related issuance
     costs of $578..............  1,117,275           --       34,758              --           --             --          --       
   Exercise of Gemini Warrants..    633,600           --       11,917          (1,600)          --             --          --
   Exercise of stock options....    171,201           --        1,696              --           --             --          --       
   Issuance of stock through
     Employee Stock Purchase
     Plan.......................     42,122           --          607              --           --             --          --       
   Tax benefit from exercise of
     stock options..............         --           --        1,178              --           --             --          --
   Translation adjustment.......         --           --           --              --          312             --          --      
   Unrealized (loss) on
     marketable securities......         --           --           --              --           --            (53)         --       
   Net income...................         --           --           --              --           --             --       1,770       
                                  ---------  -----------    ---------     -----------     ---------   -----------   ---------       
Balance at December 31, 1996....  9,243,594  $         1    $  64,897     $        --     $     264   $       (18)  $   6,497       
                                  =========  ===========    =========     ===========     =========   ===========   =========       

<CAPTION> 

                                          Stockholders'
                                             Equity
                                          (Deficiency)
                                          ------------
                                      (amounts in thousands) 
<S>                                       <C> 
Balance at January 1, 1994, as
 previously reported                      $    (1,457)
   Adjustment for pooling-of-
   interests with ISS                             
   (Note 2).....................                1,687 
                                          -----------  
Balance at January 1, 1994......                  230
   Issuance of common stock.....                    1
   Net income...................                3,177 
                                          -----------                                   
Balance at December 31, 1994.                   3,408
   Issuance of common stock,
     net of related issuance
     costs of $1,291............               15,636
   Distribution to shareholders.               (3,426)
   Corporate reorganization.....                   -- 
   Sale of warrants to acquire
     common stock...............                1,600
   Exercise of stock options....                   16
   Translation adjustment.......                  (48)
   Unrealized gain on
     marketable securities......                   35
   Net income...................                3,835
                                          -----------                                   
Balance at December 31, 1995....          $    21,056
                                          -----------                                       
   Issuance of common stock,
     net of related issuance
     costs of $578..............               34,758
   Exercise of warrants.........               10,317
   Exercise of stock options....                1,696
   Issuance of stock through
     Employee Stock Purchase
     Plan.......................                  607
   Tax benefit from exercise of
     stock options..............                1,178
   Translation adjustment.......                  312
   Unrealized (loss) on
     marketable securities......                  (53)
   Net income...................                1,770
                                          -----------
Balance at December 31, 1996....          $    71,641
                                          ===========
</TABLE> 
                                 

See notes to consolidated financial statements. 

                                     -41-
<PAGE>
 
                          RENAISSANCE SOLUTIONS, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                               Years Ended
                                                                               December 31,
                                                                               ------------
                                                                          1994      1995      1996
                                                                          ----      ----      ----
                                                                         (amounts in thousands)
<S>                                                                    <C>        <C>       <C>
Cash flows from operating activities:
     Net income..................................................       $ 3,177   $ 3,835   $  1,770
     Adjustments to reconcile net income to                             
      net cash provided by (used for) operating activities:             
        Depreciation.............................................           355       495        739
        Deferred income taxes....................................           ---       ---        129
        Change in:                                                      
           Accounts receivable, net..............................        (1,914)   (7,609)       539
           Unbilled services, net................................          (785)      996      1,992
           Receivable from officers/shareholders.................           ---      (278)       278
           Prepaid expenses and other current assets.............          (132)      (43)      (528)
           Payable to officers/shareholders......................           ---       ---        500
           Accounts payable......................................           (66)      865        934
           Accrued payroll and related costs.....................           552       (23)       585
           Income taxes payable..................................           ---       270       (150)
           Advanced payments.....................................           983      (559)       455
           Acquisition costs.....................................           ---       ---      3,131  
           Other liabilities.....................................           ---        87         94
                                                                        -------   -------   --------
        Net cash provided by (used for) operating activities.....         2,169    (1,964)    10,210
Cash flows from investing activities:                                   
     Purchases of marketable securities..........................           ---    (4,855)   (46,267)
     Sales and maturities of marketable securities...............           ---       ---     33,194
     Expenditures for property and equipment.....................        (1,122)   (2,015)    (1,631)
     Increase in other assets....................................           ___       (72)       ---
                                                                        -------   -------   --------
        Net cash used for investing activities...................        (1,122)   (6,942)   (14,704)
Cash flows from financing activities:                                   
     Issuance of common stock, net...............................             1    15,652     47,378
     Tax benefit from exercise of stock options..................           ---       ---      1,178
     Sale of warrants to acquire common stock....................           ---     1,600        ---
     Payment of shareholder distributions........................           ---    (3,426)       ---
     Short-term borrowings.......................................           845     1,800        500
     Repayment of borrowings.....................................          (500)   (2,000)    (1,618)
                                                                        -------   -------   --------
        Net cash provided by financing                                  
          activities.............................................           346    13,626     47,438
Effect of exchange rate changes on cash and cash                        
     equivalents.................................................           ---       (48)       312
                                                                        -------   -------   --------
Increase in cash and cash equivalents............................         1,393     4,672     43,256
Cash and cash equivalents, beginning of year.....................            94     1,487      6,159
                                                                        -------   -------   --------
Cash and cash equivalents, end of year...........................       $ 1,487   $ 6,159   $ 49,415
                                                                        =======   =======   ========
                                                                        
Supplemental disclosure of cash flow information:                       
     Interest paid...............................................       $   100   $    75   $    146
     Income taxes paid...........................................       $     2   $ 1,620   $  2,650
</TABLE>
                See notes to consolidated financial statements.

                                     -42-
<PAGE>
 
                          RENAISSANCE SOLUTIONS, INC.


                   Notes to Consolidated Financial Statements
                   (Amounts in thousands, except share data)



1. Nature of Business and Summary of Significant Accounting Policies


   Nature of Business

     The Company provides management consulting and client/server systems
integration services, primarily for large corporations. The Company's offerings
fall into three categories, Strategic Services, Performance Solutions Services
and Technology Services, all of which can incorporate consulting services and
technology implementation.

   Reorganization

     Renaissance Solutions, Inc. ("Renaissance" or the "Company") was
organized as a Delaware corporation in March 1992. In December 1993, the Company
contributed all of its assets, subject to all of its liabilities, to Renaissance
Strategy Group Limited Partnership, a Delaware limited partnership (the
"Partnership"), in exchange for the sole general partnership interest in the
Partnership. The business of the Company was conducted by the Partnership from
December 1, 1993 to April 3, 1995. Pursuant to a reorganization agreement (the
"Reorganization Agreement") entered into among the Company, the Partnership,
the limited partners of the Partnership, the holders of certain units of
economic interest ("Units") in the Partnership and the holders of certain
options to purchase Units, effective April 3, 1995 (i) the Company issued
4,567,396 shares of its Common Stock in exchange for all of the outstanding
limited partnership interests and Units in the Partnership, and (ii) options to
purchase 1,730,000 Units outstanding as of such date were exchanged for options
to purchase 432,605 shares of Common Stock. Immediately thereafter, the
Partnership was dissolved and all of its assets and liabilities were distributed
to and assumed by the Company. The reorganization of the Company described above
is referred to herein as the "Reorganization." The Reorganization has been
accounted for in a manner similar to a pooling of interests and, except as
otherwise indicated or where the context otherwise requires, the information set
forth in these financial statements has been adjusted to give retroactive effect
to the Reorganization. References herein to the "Company" and "Renaissance"
refer to Renaissance Solutions, Inc. and International Systems Services
Corporation and, with respect to operations between December 1, 1993 and April
3, 1995 (the date of the Reorganization), the Partnership, and its wholly-owned
subsidiaries, Renaissance Solutions Limited and Renaissance Securities Corp.

   Principles of Consolidation and Basis of Presentation

     The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All intercompany accounts and transactions
have been eliminated in consolidation. The consolidated financial statements of
the Company have been restated to give retroactive effect to the acquisition of
International Systems Services Corporation (ISS) on December 31, 1996 (Note 2)
as a pooling-of-interests.

   Fiscal Years    

     The Company's fiscal year ends on December 31.

                                     -43-
<PAGE>
 
                          RENAISSANCE SOLUTIONS, INC.

            Notes to Consolidated Financial Statements--(Continued)
                   (Amounts in thousands, except share data)


 Use of Estimates in the Preparation of Financial Statements

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

 Revenue Recognition

    The Company derives most of its revenues from professional service
activities. Revenues on service contracts are recorded under the percentage of
completion method based upon the number of labor hours incurred compared to the
total estimated hours at estimated realizable rates. Provisions are made for
estimated unbillable and uncollectible amounts. Revenues are reported net of
reimbursable expenses which are billed and collected from clients. Reimbursable
expenses were approximately $1,947, $3,031 and $4,140 for the years ended
December 31, 1994, 1995 and 1996, respectively. When billings exceed revenues
earned and/or expenses incurred, the excess is recorded as advance payments.

    In September and December 1996, Gemini satisfied a bookings deficiency under
the Teaming Agreement (Note 7) by making cash payments of $750 and $1,500,
respectively, which have been included in revenues for the year ended December
31, 1996.

 Property and Equipment

    Property and equipment are stated at cost. Major additions and improvements
are capitalized, while repairs and maintenance are charged to expense.

    Depreciation is computed using straight-line methods over the estimated
useful lives of the assets as follows:

<TABLE>
<CAPTION>
 
                       Description               Estimated Useful Life
          -------------------------------------  ---------------------
          <S>                                    <C>
          Computer hardware and software..              5 Years
          Furniture and fixtures..........              7 Years
          Leasehold improvements..........             10 Years
 
</TABLE>
 Income Taxes

    From its inception in 1992 to immediately prior to April 3, 1995 (the date
of its Reorganization), the Company was either an S corporation or a limited
partnership for federal income tax reporting purposes, and the taxable income of
the Company for that period was reportable by and taxable directly to the
Company's stockholders or partners rather than to the Company. Accordingly, no
federal or state income tax provision was required for the Company for the year
ended December 31, 1994 and through the date of the Reorganization.

                                     -44-
<PAGE>
 
                          RENAISSANCE SOLUTIONS, INC.

            Notes to Consolidated Financial Statements--(Continued)
                   (Amounts in thousands, except share data)



  Effective with the closing of the Company's initial public offering, the
Company has been subject to federal and state income taxes as a C corporation.

  Prior to its acquisition by the Company, ISS was an S corporation for income
tax purposes.  Accordingly, no federal or state income tax provision was
required for ISS for the years ended December 31, 1994 and 1995, and through
December 30, 1996.  The provision for income taxes in 1996 includes a one-time
charge resulting from converting ISS from an S corporation to a C corporation,
primarily resulting from a change from the cash basis to the accrual basis of
accounting.

  Deferred taxes are determined based on the estimated future tax effects of
differences between financial statement and tax bases of assets and liabilities
given the provisions of the enacted tax laws.


 Foreign Currency Translation

  The functional currency for the Company's U.K. subsidiaries, Renaissance
Solutions Limited and International Systems Services (U.K.), is the British
pound. Assets and liabilities are translated at year-end rates of exchange, and
income and expenses are translated at average rates of exchange for the year.
The resulting translation adjustments are excluded from net earnings and
accumulated as a separate component of stockholders' equity. Gains and losses
from foreign currency transactions have not been material and are reflected in
net income.


 Per Share Amounts

  Per share amounts are based on the pro forma weighted average number of common
and dilutive common equivalent shares (common stock options) outstanding. The
pro forma weighted average number of common shares assumes that 10,002 shares of
common stock issued in March 1994 and all stock options granted in January 1995
and March 1995 were outstanding for all periods presented. Common equivalent
shares are not included in the per share calculations where the effect of their
inclusion would be anti-dilutive, except in accordance with Securities and
Exchange Commission Staff Accounting Bulletin No. 83. The Bulletin requires that
all common shares issued and options to purchase shares of common stock granted
by the Company during the twelve-month period prior to filing of a proposed
initial public offering be included in the calculation as if they were
outstanding for all periods. The pro forma weighted average number of common
shares for 1994 and through April 11, 1995 also assumes that approximately
300,000 shares of the 1,400,000 shares issued in the Company's initial public
offering, the proceeds of which were used to repay stockholder notes totaling
approximately $3,426 (see Note 8), were outstanding. Pro forma weighted average
number of common shares also assumes the 1,310,000 shares in connection with the
ISS Acquisition (see Note 2) were outstanding for all periods presented.

 Pro Forma Data

  The pro forma data is presented to show the effects on 1996 of the contractual
reduction of ISS's officer's compensation following the acquisition of ISS and
the income taxes that would have been provided for in 1994, 1995 and 1996 on pro
forma income before taxes if ISS and the Company had been C corporations for all
periods presented.  The pro forma data is presented for informational purposes
only and is not necessarily indicative of future net income or net income per
share.

                                     -45-
<PAGE>
 
                          RENAISSANCE SOLUTIONS, INC.

            Notes to Consolidated Financial Statements--(Continued)
                   (Amounts in thousands, except share data)


 Cash Flow Information

  The Company considers all bank deposits and short-term investments having
original maturities of ninety days or less to be cash and cash equivalents.

 Impairment of Long-Lived Assets

  The Company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" ("SFAS 121") in 1996. SFAS 121 establishes accounting standards
for the impairment of long-lived assets, certain identifiable intangibles, and
goodwill related to those assets. There was no effect of adopting of SFAS 121 on
the consolidated financial statements.

 Stock-Based Compensation

  The Company accounts for stock-based awards to employees using the intrinsic
value method in accordance with APB No. 25, Accounting for Stock Issued to
Employees.  Accordingly, no compensation expense has been recognized in the
consolidated financial statements for employee stock arrangements.

 Fair Value of Financial Instruments

  Financial instruments held or used by the Company consist of cash, marketable
securities, accounts receivable and accounts payable. Marketable securities are
carried at fair value at each balance sheet date. Management believes that
carrying value approximates fair value for all other financial instruments.

2. International Systems Services Corporation (ISS) Acquisition

  On December 31, 1996, the Company acquired all of the outstanding capital
stock of ISS in exchange for 1,310,000 shares of the Company's common stock. The
acquisition has been accounted for as a pooling-of-interests and, as described
in Note 1, the Company's consolidated financial statements have been restated to
include the accounts of ISS for all periods presented.

     Revenues, income before taxes, and net income of the separate companies are
     as follows:

<TABLE>
<CAPTION>
 
                               Years Ended December 31
                               1994      1995      1996
                           ----------  --------  --------
           <S>               <C>       <C>       <C>
           Revenues                              
              Renaissance     $12,881   $22,601   $34,784
              ISS              10,107    12,935    17,666
                           ----------  --------  --------
                              $22,988   $35,536   $52,450
                           ==========  ========  ========
           Income
            before taxes
              Renaissance     $ 2,800   $ 5,567   $ 5,716
              ISS                 377       162       145
                           ----------  --------  --------
                              $ 3,177   $ 5,729   $ 5,861
                           ==========  ========  ========
           Net income                            
              Renaissance     $ 2,800   $ 3,676   $ 2,474
              ISS                 377       159      (704)
                           ----------  --------  --------
                              $ 3,177   $ 3,835   $ 1,770
                           ==========  ========  ========
 
</TABLE>

                                     -46-
<PAGE>
 
                          RENAISSANCE SOLUTIONS, INC.

            Notes to Consolidated Financial Statements--(Continued)
                   (Amounts in thousands, except share data)


  In connection with the acquisition, Renaissance recorded one-time charges for
the acquisition of $3,524.  This charge includes investment banking, legal and
accounting fees, consolidation of duplicate facilities, elimination of certain
redundant assets, and costs associated with consolidating such operations,
including severance and other related items.

3. Accounts Receivable and Unbilled Services

     Accounts receivable and unbilled services consisted of the following:
<TABLE>
<CAPTION>
                         
                                                          December 31,
                                                     -------------------
                                                        1995      1996
                                                      -------    ------
           <S>                                       <C>        <C>
           Billed..................................   $ 8,640    $8,225
           Unbilled services.......................     4,149     2,404
           Allowance for uncollectible accounts....      (436)     (807)
                                                      -------    ------
           Accounts receivable and unbilled           
            services, net..........................   $12,353    $9,822
                                                      =======    ====== 
</TABLE>

  Provisions for uncollectible accounts charged to expense were $256, $242 and
$795 in 1994, 1995 and 1996, respectively. Write-offs of uncollectible accounts
amounted to $99, $79, and $424 for the years ended December 31, 1994, 1995 and
1996, respectively.

4. Marketable Securities

  Marketable securities are classified as available for sale and consist of U.S.
Treasury Notes, Federal Agency Bonds and Corporate Bonds having maturity dates
of more than three months and are stated at fair value. Aggregate net unrealized
holding gains/(losses) of $35 and $(18) at December 31, 1995 and 1996,
respectively, have been included as a separate component of stockholders' equity
in the accompanying consolidated balance sheets. Certain information with
respect to the Company's marketable securities as of December 31, 1995 and 1996
is presented below.

<TABLE>
<CAPTION>
 
                                             December 31, 1995
                                  ---------------------------------------
                                            Gross          Gross
                                            -----          -----              
                             Amortized   Unrealized      Unrealized      Fair  
                             ---------   ----------      ----------      ---- 
     Security Type             Cost     Holding Gains  Holding Losses   Value 
     -------------             ----     -------------  --------------   ----- 
     <S>                     <C>        <C>            <C>             <C>
     U.S. Treasury Notes...    $ 3,604         $   31          $   --   $ 3,635
     Federal Agency Bonds..      1,251              5               1     1,255
                               -------         ------          ------   -------
                               $ 4,855         $   36          $    1   $ 4,890
                               =======         ======          ======   =======

<CAPTION> 
                                             December 31, 1996
                                  ---------------------------------------
                                            Gross          Gross
                                            -----          -----              
                             Amortized   Unrealized      Unrealized      Fair  
                             ---------   ----------      ----------      ---- 
     Security Type             Cost     Holding Gains  Holding Losses   Value 
     -------------             ----     -------------  --------------   ----- 
     <S>                     <C>        <C>            <C>             <C> 
     U.S. Treasury Notes...    $ 9,978             13             ---   $ 9,986
     Federal Agency Bonds..      6,308            ---              32     6,276
     Corporate Bonds.......      1,647              1             ---     1,648
                               -------         ------          ------   -------
                               $17,928         $   14          $   32   $17,910
                               =======         ======          ======   =======
</TABLE>

                                     -47-
<PAGE>
 
                          RENAISSANCE SOLUTIONS, INC.

            Notes to Consolidated Financial Statements--(Continued)
                   (Amounts in thousands, except share data)


    The fair value of marketable securities, by contractual maturity, are shown
below. Actual maturities may differ from contractual maturities because
borrowers may have the right to call or prepay obligations without call or
prepayment penalties.

<TABLE>
<CAPTION>
 
                                                          December 31,  
                                                       1995          1996
                                                       ----          ----    
           <S>                                  <C>           <C>
           Due in one year or less............        $1,105       $ 7,131
           Due after one through three years..         3,785        10,779
                                                      ------       -------
             Total............................        $4,890       $17,910
                                                      ======       =======
 
</TABLE>

    There were no sales or maturities of securities during the year ended
December 31, 1995. Sales or maturities of marketable securities totalled $33,194
during the year ended December 31, 1996.



5. Property and Equipment

    Property and equipment consisted of the following:

<TABLE>
<CAPTION>
 
                                                        December 31,
                                                     1995           1996  
                                                   --------        -------
            <S>                               <C>             <C>
            Computer hardware and software..       $  2,306        $ 3,093
            Furniture and fixtures..........          1,253          1,658
            Equipment.......................            661            836
            Leasehold improvements..........            261            525
                                                   --------        -------
                                                      4,481          6,122
            Less accumulated depreciation...         (1,396)        (2,135)
                                                   --------        -------
            Property and equipment, net.....       $  3,085        $ 3,977
                                                   ========        =======
 
</TABLE>

6. Financing Arrangements 

    Line-of-Credit

    At December 31, 1996, the Company had a $3,500 unsecured revolving line of
credit agreement with a bank, expiring on June 1, 1997. Interest is payable at
the bank's corporate rate (8.50% at December 31, 1996). The loan agreement
includes various customary financial and other covenants including maintenance
of minimum levels of tangible net worth and quarterly profitability. Borrowings
outstanding under the line were $1,500 at December 31, 1995.  No borrowings were
outstanding as of December 31, 1996.

    The Company had a British Pound Sterling 425 ($655) revolving line of credit
with a U.K. bank at December 31, 1996. There were no borrowings outstanding
under this line at December 31, 1995 or 1996.

                                     -48-


<PAGE>
 
                          RENAISSANCE SOLUTIONS, INC.

            Notes to Consolidated Financial Statements--(Continued)
                   (Amounts in thousands, except share data)



    At December 31, 1996, ISS had a $500 working capital line of credit,
collateralized by ISS accounts receivables, expiring on April 27, 1997. Interest
is payable at prime (8.25% at December 31, 1996). The line of credit agreement
includes customary financial and other covenants including the maintenance of
minimum tangible net worth and quarterly profitability. Borrowings outstanding
under the line of $500 as of December 31, 1996 have subsequently been repaid.


Note Payable

    At December 31, 1996, ISS had a note payable to a bank. The note bears
interest at prime (8.25% at December 31, 1996) and is due in equal installments
through December 28, 2000. The note payable, which was paid in full subsequent
to the balance sheet date, was classified as current as of December 31, 1996.

Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                    December 31,
                                                    -----------
                                                    1995   1996
                                                    ----   ----
         <S>                                       <C>    <C>
         Note payable                              $ 900  $ 782
         Less current portion                       (180)  (782)
                                                   -----  -----
         Long-term debt                            $ 720  $ --
                                                   =====  =====
</TABLE>

Note Payable to Officers/Shareholders

    ISS had a $500 promissory note, payable on demand to its President. The
outstanding balance at December 31, 1996 was $500, with interest at 5.8%. This
loan was repaid in full in January 1997.


7. Gemini Relationship

    On October 17, 1994, the Company entered into a Teaming Agreement (the
"Teaming Agreement") with Gemini Consulting, Inc. ("Gemini") pursuant to which
the Company and Gemini agreed to market and perform certain service offerings on
a collaborative basis. Approximately 44%, 34% and 31% of the Company's revenues
in 1994, 1995 and 1996 resulted from its relationship with Gemini; approximately
36%, 15% and 21% of revenues were from services and other amounts billable to
Gemini and approximately 8%, 19% and 10% of revenues were from services billable
directly to third parties. Gemini had committed to provide the Company with
certain minimum bookings during the term of the Teaming Agreement, commencing
November 1, 1994, subject to the satisfaction of certain conditions.

                                     -49-
<PAGE>
 
                          RENAISSANCE SOLUTIONS, INC.

            Notes to Consolidated Financial Statements--(Continued)
                   (Amounts in thousands, except share data)


      Since the inception of the Teaming Agreement, Gemini has not met certain
of the minimum bookings commitments. In accordance with the Teaming Agreement,
Gemini has satisfied these bookings deficiencies through a combination of
revenues generated from client work referred to the Company, work performed by
the Company as a subcontractor for Gemini, work performed by the Company
directly for Gemini, the acquisition by Gemini from the Company for $2,200 of
certain Company program designs and related materials and cash payments of
$2,250. The $2,200 and $2,250 are included in revenues for the year ended
December 31, 1996.

      On November 18, 1996, the Company and Gemini entered into a Restated
Teaming Agreement (the "Restated Teaming Agreement"). As part of the Restated
Teaming Agreement, Gemini has committed to provide the Company with certain
reduced levels of bookings during the 12 month periods ending October 31, 1997,
1998 and 1999. In the event that during any of the six month periods during the
term of the Restated Teaming Agreement bookings obtained by the Company from
Gemini customers or customers of joint service offerings by the Company and
Gemini are less than the specified minimum bookings, Gemini may retain the
services of the Company for a fee equal to the amount of the deficiency. If at
the end of twelve months a bookings deficiency still remains, Gemini is required
to make a compensating payment to the Company of 25% of the remaining deficiency
in full satisfaction of the bookings deficiency. In no event will Gemini be
obligated to make a payment with respect to any bookings deficiency in an amount
in excess of 25% of such deficiency.
      
      In the event that the Restated Teaming Agreement is validly terminated by
either party prior to its expiration, Renaissance is required to pay a
termination fee to Gemini in an amount declining from a maximum of $1.6 million
in the event of a termination prior to November 1, 1996 to a minimum of $250,000
in the event of a termination prior to November 1, 1999.

      Under the Teaming Agreement, as amended by the Restated Teaming
Agreement, the Company has agreed to train Gemini in use of the Company's
Balanced Scorecard, desktop application and certain other methodologies prior to
November 1, 1998, to perpetually license these methodologies, to the extent
developed prior to November 1, 1998, to Gemini on a non-exclusive basis and
agreed to perform certain services for Gemini in 1996. In exchange, Gemini has
agreed to pay the Company an annual fee of $2.0 million in each of the years
during the three year period ending October 31, 1997. Revenue for these services
will be recognized by the Company as the services are performed pursuant to the
terms of the Restated Teaming Agreement. The license of methodologies by
Renaissance to Gemini expressly excludes any software created by Renaissance.
The Company is obligated to pay Gemini an annual fee of $400,000 in each of the
years during the three year period ending October 31, 1997 for certain training
services provided by Gemini to Renaissance personnel. The Restated Teaming
Agreement also provides for the payment of certain license fees by Gemini to
Renaissance in five equal installments of $1.0 million during the period
commencing on November 18, 1996 and ending on November 1, 1998.

      Simultaneously with the closing of the Company's initial public offering
on April 11, 1995, Messrs. Harry Lasker and David Lubin and Ms. Melissa Norton,
the wife of David Norton (the "Principal Stockholders"), sold to Gemini options
for the purchase of 150,000 shares of Common Stock (the "Gemini Options") for an
aggregate purchase price of $675. Each Principal Stockholder sold to Gemini an
option for up to 50,000 shares of Common Stock at an exercise price equal to
$13.00 per share. In November 1996, the Company registered the shares underlying
the Gemini Options and the options were exercised.


                                     -50-




<PAGE>
 
                          RENAISSANCE SOLUTIONS, INC.

            Notes to Consolidated Financial Statements--(Continued)
                   (Amounts in thousands, except share data)


8. Stockholders' Equity

   Initial Public Offering

     On April 11, 1995, the Company completed its initial public offering of
Common Stock, whereby the Company issued 1,400,000 shares of Common Stock and an
additional 885,000 shares were sold by existing stockholders of the Company. The
net proceeds from the sale of the shares by the Company were approximately
$15,636 after deducting offering expenses of $1,291. Approximately $1,872 of the
net proceeds of the offering were used to repay a note due to Gemini and $3,426
of the net proceeds were used to repay notes payable to the Company's
stockholders incurred by the Company in connection with the payment of
partnership distributions in January and March 1995. Simultaneously with the
closing of the offering the Company also sold warrants to Gemini to acquire
633,600 shares of the Company's Common Stock for cash of $1,600.

   Follow-on Offering

     On May 17, 1996, the Company completed a follow-on public offering, whereby
the Company issued 902,125 shares of Common Stock and existing shareholders sold
647,500 shares of Common Stock. The net proceeds from the sale of shares by the
Company were approximately $28,263, after deducting offering expenses of $225.

   November 1996 Offering

     On November 18, 1996, the Company completed an additional offering.  The
transaction included 215,150 shares sold by the Company and 1,049,850 shares
sold by existing shareholders, including shares acquired by Gemini upon
exercise of the Gemini Options (Note 7) and the Gemini Warrants (below).  The
net proceeds of the offering were $6,495, after deducting offering expenses of
$353.

   Gemini Warrants

     The Company sold two warrants (together, the ''Gemini Warrants'') to Gemini
upon the closing of the Company's initial public offering for an aggregate
purchase price of $1,600. One warrant was exercisable through April 11, 1998 for
up to 313,600 shares of Common Stock at an exercise price equal to $13.00 per
share. The second warrant was exercisable through November 1, 1999 for up to
320,000 shares of Common Stock at an exercise price equal to $19.50 per share.
In November 1996, Gemini exercised the warrants and the Company received
proceeds from the exercise of $10,317.

                                     -51-
<PAGE>
 
                          RENAISSANCE SOLUTIONS, INC.

            Notes to Consolidated Financial Statements--(Continued)
                   (Amounts in thousands, except share data)



 Partnership Distributions

  In January and March 1995, the Partnership declared and made partnership
distributions totalling $3,426 evidenced by delivery of the Company's promissory
notes which were paid with proceeds from the Company's initial public offering.
Distributions in excess of earnings were reclassified to paid in capital
pursuant to Securities and Exchange Commission Staff Accounting Bulletin Topic
4:B.


 Preferred Stock

  Authorized preferred stock consists of 2,000,000 shares, $.01 par value per
share. The Board of Directors is authorized, without shareholder approval, to
issue such shares of preferred stock in one or more series, with such rights,
preferences, privileges and restrictions, including voting rights, dividend
rights, conversion rights, redemption privileges and liquidation preferences, as
the Board of Directors may determine.


 1995 Equity Incentive Plan

  In January 1995, the Board of Directors adopted and the stockholders approved
the 1995 Equity Incentive Plan (the ''Equity Plan''). Under the terms of the
Equity Plan, the Company is authorized to make awards of restricted stock and to
grant incentive and non-statutory options to employees of, and consultants and
advisors to, the Company to purchase shares of the Common Stock of the Company.
A total of 1,100,000 shares of Common Stock may be issued upon exercise of
options granted or awards made under the Equity Plan. Options granted through
December 31, 1996 generally vest in either four or five equal annual
installments commencing on the first anniversary of the optionee's date of hire.

  On September 18, 1996, the Board of Directors adopted, and on November 15,
1996, the stockholders of the Company approved, an amendment to the Company's
1995 Equity Incentive Plan increasing the number of shares of Common Stock
available for issuance under the Plan from 1,100,000 to 2,100,000.


 1995 Director Stock Option Plan

  In January 1995, the Board of Directors adopted and the stockholders approved
the 1995 Director Stock Option Plan (the ''Director Plan''), which became
effective on the closing of the Company's initial public offering. Under the
terms of the Director Plan, directors of the Company who are not employees of
the Company or any subsidiary of the Company are eligible to receive non-
statutory options to purchase shares of Common Stock. A total of 50,000 shares
of Common Stock may be issued upon exercise of options granted under the
Director Plan. Options to purchase 25,000 shares of Common Stock have been
granted to the two eligible directors. The exercise price of options granted
under the Director Plan was equal to the closing price of the Common Stock on
the date of grant.

                                     -52-
<PAGE>
 
                           RENAISSANCE SOLUTIONS, INC.

            Notes to Consolidated Financial Statements--(Continued)
                   (Amounts in thousands, except share data)


A summary of activity under the Equity Plan and the Director Plan is as follows:

<TABLE>
<CAPTION>
                                                                                     Weighted Average
                                                                Shares                Exercise Price
                                                                ------               ---------------- 
<S>                                                            <C>                 <C>
Outstanding as of January 1, 1995                                  --                          --
   Options Granted (weighted average fair value $12.46)        744,218                      $11.17
                                                                                 
   Exercised                                                    (2,000)                       8.00     
   Cancelled/expired                                            (2,900)                      13.00    
                                                             ---------                       -----
Outstanding as of December 31, 1995                            739,318                       11.40    

   Granted (weighted average fair value $16.06)                719,000                       29.34   

   Exercised                                                  (171,213)                      10.57
   Cancelled/expired                                          (126,510)                      10.57
                                                             ---------                       -----
Outstanding as of December 31, 1996                          1,160,595                      $22.31
                                                             =========                       =====
Exercisable as of December 31, 1995                             74,611                      $ 8.74
                                                             =========                       ===== 
Exercisable as of December 31, 1996                            102,274                      $12.30
                                                             =========                       =====
</TABLE>

  Additional information regarding options outstanding as of December 31, 1996
is as follows:

<TABLE>
<CAPTION>
 
                                      OPTIONS OUTSTANDING                                           OPTIONS EXERCISABLE
---------------------------------------------------------------------------------------       --------------------------------
                                                Weighted Average                                
   Range of                                        Remaining          Weighted Avgerage                      Weighted Avgerage 
Exercise Prices                 Outstanding      Contractual Life      Exercise Price          Exercisable    Exercise  Price  
<S>                           <C>                <C>               <C>                  <C>               <C> 
$ 8.00 - $ 9.00                    290,136               10.9               $ 8.00                 40,921          $ 8.00      
  9.00 -  13.00                     97,860                9.6                12.54                 22,530           11.00   
 13.01 -  15.00                    233,762               10.8                14.25                 21,624           14.26   
 16.01 -  18.00                     15,500               10.8                16.89                    233           16.75   
 18.01 -  23.00                     87,287                9.5                19.22                 11,966           18.96   
 23.01 -  44.75                    436,050                9.8                39.17                  5,000           28.75   
 ==============                ===========       ============          ===========           ============     ===========   
$ 8.00 - $28.75                  1,160,595               10.2               $22.31                102,274          $12.30   
</TABLE>         

  At December 31, 1996, 964,405 and 25,000 shares were available for future
grants under the Equity Plan and Directors' Plan, respectively.


1995 Employee Stock Purchase Plan

  In January 1995, the Board of Directors adopted and the shareholders approved
the 1995 Employee Stock Purchase Plan (the "Purchase Plan"), which became
effective on the closing of the Company's initial public offering. The Purchase
Plan authorizes the issuance of up to a total of 450,000 shares of Common Stock
to participating employees. Under the terms of the Purchase Plan, the purchase
price is an amount equal to 85% of the fair market value per share of the Common
Stock on either the first day or the last day of the offering period, whichever
is lower. There were no shares acquired under the Purchase Plan during the year
ended December 31, 1995. 42,145 shares were issued under the Purchase Plan in
1996 at a weighted average price of $14.66. The weighted average fair value of
the 1995 and 1996 awards under the Purchase Plan were $1.72 and $2.57,
respectively. At December 31, 1996, 407,855 shares were reserved for future
issuances under the Purchase Plan.
<PAGE>
 
                          RENAISSANCE SOLUTIONS, INC.

            Notes to Consolidated Financial Statements--(Continued)
                   (Amounts in thousands, except share data)

Additional Information

   As discussed in Note 1, the Company continues to account for its stock-based
compensation plans in accordance with APB Opinion 25 and related
Interpretations. SFAS No. 123, "Accounting for Stock Based Compensation"
requires the disclosure of pro forma income and earnings per share had the
Company adopted the Fair Value method as of the beginning of fiscal 1995. If the
computed fair values of the 1995 and 1996 awards had been amortized to expense
over the vesting period of the awards, pro forma net income would have been
$3,164 ($.44 per share) in 1995 and $289 ($.03 per share) in 1996. The
Company's calculations for the stock option plans were made using the Black-
Scholes option pricing model with the following assumptions: expected life, 6
months following vesting; stock volatility, 66% in 1995 and 62% in 1996; risk
free interest rates, 6.28% in 1995 and 6.36% in 1996; and no dividends during
the expected term. The Company's calculations are based on a multiple option
valuation approach and forfeitures are recognized as they occur. Compensation
cost for the Purchase Plan was estimated using the Black-Scholes model with the
following assumptions: an expected life of 6 months; expected volatility of 66%
in 1995 and 62% in 1996; and risk-free interest rates of 5.27% and 5.63%.

9. Income Taxes

   The provision for income taxes on a pro forma basis is as follows:

<TABLE>
<CAPTION>
 
                                          Years Ended
                                          -----------
                                          December 31,
                                          ------------
                                    1994     1995      1996
                                   ------   ------    ------ 
<S>                                <C>      <C>      <C>
Current taxes:
  Federal........................  $  978    $1,763   $3,703
  State..........................     301       534    1,020
                                   ------    ------   ------
     Total current...............   1,279     2,297    4,723
                                   ------    ------   ------
Deferred taxes:
  Federal........................      30       ---     (762)
  State..........................       5       ---     (136)
  Change in valuation allowance..    (570)      ---      ---
                                   ------    ------   ------
     Total deferred..............    (535)      ---     (898)
                                   ------    ------   ------
     Total provision.............  $  744    $2,297   $3,825
                                   ======    ======   ======
</TABLE>

  Effective with the closing of the Company's initial public offering, the
Company's S corporation election was automatically terminated. The cumulative
effect of temporary differences between financial accounting and income tax
reporting was not material.

  Prior to its acquisition by the Company, ISS was an S corporation for income
tax purposes.  Accordingly, no federal or state income tax provision was
required for ISS for the years ended December 31, 1994 and 1995, and through
December 30, 1996. The historical provision for income taxes in 1996 includes a
one-time charge of $1,002 resulting from converting ISS from an S corporation to
a C corporation, primarily resulting from a change from the cash basis to the
accrual basis of accounting.

                                     -54-
<PAGE>
 
                          RENAISSANCE SOLUTIONS, INC.
                          ----------------------------

            Notes to Consolidated Financial Statements--(Continued)
                   (Amounts in thousands, except share data)



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

<TABLE>
<CAPTION>
                                                            Years Ended
                                                            -----------
                                                            December 31,
                                                            ------------
                                                         1994   1995   1996
                                                         -----  -----  -----
<S>                                                      <C>    <C>    <C>
Statutory tax rate................................       34.0%  34.0%  34.0%
State income taxes--net of federal benefit........        6.0    6.0    6.3
Non-deductible acquisition costs..................        ---    ---    8.3
Change in valuation allowance.....................      (18.0)   ---    ---
Other.............................................        1.4    ---   (0.6)
                                                         ----   ----   ----
Effective income tax rate.........................       23.4%  40.0%  48.0%
                                                         ====   ====   ====
</TABLE>
    The tax effect of significant items comprising the Company's net deferred
  tax asset as of December 31, 1995 and 1996 are as follows:

<TABLE>
<CAPTION>
 
                                                          December 31,
                                                          -----------
                                                        1995       1996
                                                        ----       ----
<S>                                                      <C>     <C>
Short Term Deferred Tax Assets (Liabilities):
  Deferred revenue.................................      ---      $  260
  Accrued acquisition costs........................      ---         557
  Allowance for doubtful accounts..................    $  33         (28)
  Other, principally accrued vacation..............       38          77
  Cash-to-accrual basis conversion.................      ---      $ (192)
  Depreciation.....................................      (71)       (114)
                                                       -----      ------
  Total............................................    $ ---      $  560
                                                       -----      ------

Long Term Deferred Tax Assets (Liabilities):
  Cash-to-accrual basis conversion.................      ---      $ (576)
  Accrued acquisition costs........................      ---         145
                                                       -----      ------
                                                       $ ---      $ (431)
                                                       =====      ======
</TABLE>

10. Commitments and Contingencies

   Operating Leases

    The Company is obligated under various leases for office space and several
equipment and service leases through 2004. Total rent expense under all
operating leases for the years ended December 31, 1994, 1995 and 1996 was $812,
$1,259 and $1,529, respectively.

                                     -55-
<PAGE>
 
                          RENAISSANCE SOLUTIONS, INC.

            Notes to Consolidated Financial Statements--(Continued)
                   (Amounts in thousands, except share data)


  Future minimum payments under non-cancellable operating leases at December 31,
1996 are as follows:

<TABLE>
<CAPTION>
 
                                                Office    Equipment    Total 
                                               ---------  ---------  ---------
         <S>                                  <C>           <C>      <C>     
         1997...........................          1,593         55      1,648
         1998...........................          1,249         49      1,298
         1999...........................          1,068          2      1,070
         2000...........................            795        ---        795
         2001...........................            315        ---        315
         Thereafter.....................            946        ---        946
                                              ---------     ------   ---------
         Total                                    5,966        106      6,072

</TABLE>                                                    

11. Segment Information

    The Company operates in one business segment.

 Geographic Information

    Revenues of the Company's U.K. subsidiaries totaled approximately $5,463, or
10% of consolidated 1996 revenues.  Income from operations for the Company's
U.K. subsidiaries for the year ended December 31, 1996 was $524, and
identifiable assets at December 31, 1996 were $3,812. The Company's U.K.
subsidiaries had no material operations in 1994. Revenues from customers outside
of North America, primarily in the United Kingdom, accounted for approximately
7%, 10% and 10% of total revenues for the year ended December 31, 1994, 1995 and
1996, respectively.

 Major Customer and Credit Concentration Information

    Revenues from certain of the Company's largest customers individually
exceeded 10% of revenues as follows:

<TABLE>
<CAPTION>
 
                                      Year ended December 31,
                                  --------------------------------
              Customer             1994        1995          1996
              --------          ----------  ----------    -----------
                 <S>                <C>         <C>           <C>
                 A (see note 7)      36%         15%           21%
                 B                   --          23%           26%

</TABLE>

  The Company's customers are principally large corporations from whom the
Company does not require collateral. The Company maintains reserves for
potential credit losses.

                                     -56-
<PAGE>
 
                          RENAISSANCE SOLUTIONS, INC.

            Notes to Consolidated Financial Statements--(Continued)
                   (Amounts in thousands, except share data)


12. Employee Benefit Plan

     The Company has a 401(k) profit-sharing plan (the ''Plan'') established in
1994 and covering substantially all domestic employees. The Plan allows each
participant to defer up to 20% of annual earnings up to an amount not to exceed
an annual statutory maximum. Subject to the approval of the Board of Directors
on an annual basis, the Company may make profit-sharing contributions and/or
match employee deferrals. For the years ended December 31, 1995 and 1996, the
Company's contributions totalled $269 and $446, respectively.


13.  Subsequent Acquisitions

     On February 3, 1997, the Company acquired all of the outstanding common
stock of COBA Consulting Limited ("COBA-UK") for $11,900 in cash, plus 163,160
shares of common stock of the Company. The Company will also acquire certain
non-voting, convertible shares of COBA-UK in 1998 and 1999 for a purchase price,
as defined by the Stock Purchase Agreement dated January 27, 1997, based on 
COBA-UK's actual financial performance for the years ending December 31, 1997
and 1998. The maximum additional purchase price, which may include shares of
common stock of the Company, is $12,600. This acquisition will be accounted for
as a purchase.

     On February 13, 1997, the Company acquired all of the outstanding capital
stock of C.M. Management Systems Ltd., Inc. ("COBA-Boston") for $9,250 in cash.
The Company may be required to pay an additional amount of up to a maximum of
$18,500 in cash and/or shares of Common Stock at the Company's option,
determined based on COBA-Boston's actual financial performance for the years
ending December 31, 1997 and 1998.  This acquisition will be accounted for as a
purchase.

     Prior to their acquisition by Renaissance, both COBA-UK and COBA-Boston 
were parties to a joint marketing arrangement with a network of consulting firms
in Europe and Asia (the "COBA Network"). No stockholder, director or officer of 
COBA-UK was also a stockholder, director or officer of COBA-Boston. 
Renaissance anticipates that both COBA-UK and COBA-Boston will continue to 
participate in the COBA Network as subsidiaries of the Company.

                                     -57-
<PAGE>
 
 
                          Renaissance Solutions, Inc.

                      SELECTED QUARTERLY FINANCIAL RESULTS
                                  (Unaudited)
<TABLE>
<CAPTION>
 
                                     March 31   June 30  September 29  December 31  March 29    June 28   September 27  December 31
                                     ---------  -------  ------------  -----------  --------    -------   ------------  -----------
                                       1995      1995        1995         1995        1996       1996         1996         1996
                                       ----      ----        ----         ----        ----       ----         ----         ----    
<S>                                  <C>        <C>      <C>           <C>          <C>        <C>        <C>           <C>

Statement of Operations Data:
Revenues...........................    $8,258    $8,395        $8,952      $9,931    $11,468    $12,767       $14,000      $14,215
Costs and expenses:................
   Professional personnel..........     5,281     5,181         5,357       5,270      7,071      8,227         8,853        7,582
   Professional development                                                                                                        
   and recruiting..................       425       348           562         560        570        317           766          392 
   Marketing and sales.............       163       152           188         307        324        460           410          430
   General and administrative......     1,432     1,483         1,565       1,962      2,298      2,020         2,242        2,657
   Acquisition costs...............         0         0             0           0          0          0             0        3,524
----------------------------------------------------------------------------------------------------------------------------------
     Total cost and expenses.......     7,301     7,164         7,672       8,099     10,263     11,024        12,271       14,585
----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations             957     1,231         1,280       1,832      1,205      1,743         1,729         (370)
Interest expense                          (80)        0             0           0        (47)       (35)          (29)         (28)
Interest income                            42       164           185         118        142        292           481          778
----------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes         919     1,395         1,465       1,950      1,300      2,000         2,181          380
----------------------------------------------------------------------------------------------------------------------------------
Provision for income taxes                  2       524           564         804        579        797           926        1,789
Net income (loss) (1)                  $  917    $  871        $  901     $ 1,146     $  721    $ 1,203       $ 1,255      $(1,409)
==================================================================================================================================
Pro Forma Data:
Historical income before pro forma
adjustments                                                                           $1,300    $ 2,000       $ 2,181      $   380
Pro forma adjustment to officer's
salary                                                                                    68        599         1,042          391
----------------------------------------------------------------------------------------------------------------------------------
Historical/pro forma income before
income taxes                           $  919    $1,395        $1,465     $ 1,950     $1,368    $ 2,599       $ 3,223      $   771
----------------------------------------------------------------------------------------------------------------------------------
Historical income taxes                     2       524           564         804        579        797           926        1,789
Additional provision (credit) for
income taxes (3)                          367        37            25         (26)         0          0             1         (267)
----------------------------------------------------------------------------------------------------------------------------------
Pro forma income taxes                    369       561           589         778        579        797           927        1,522
----------------------------------------------------------------------------------------------------------------------------------
Pro forma net income (loss)            $  488    $  871        $  901     $ 1,172     $  789    $ 1,802       $ 2,296      $  (751)
==================================================================================================================================
</TABLE>
(1) From its inception in 1992 through its Reorganization in April 1995, the
    Company was either an S corporation or a limited partnership and prior to
    December 31, 1996, International Systems Services Corporation (ISS) was an S
    corporation.  Accordingly, the Company and ISS were not subject to federal
    and state income taxes.
(2) The pro forma adjustment to officer's salary have been computed based on
    the contractual reduction of ISS's officer compensation following the
    Company's acquisition of ISS.
(3) Income taxes represent the income taxes that would have been provided as if
    the Company and ISS were subject to federal and all applicable state
    corporate income taxes from inception, based on the statutory tax rates and
    the tax laws then in effect.  See "Management's Discussion and Analysis of
    Financial Condition and Results of Operations" and Notes 1 and 9 of Notes to
    Consolidated Financial Statements.

                                     -58-
<PAGE>
 
 
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         Not applicable.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

  The directors and executive officers of the Company and their ages as of
February 15, 1997 are as follows:
<TABLE>
<CAPTION>
 
Name                       Age              Position
----                       ---              -------- 
<S>                       <C>  <C>
Harry M. Lasker........    53  Co-Chairman, Secretary and Director
David A. Lubin.........    46  Co-Chairman, Treasurer and Director
David P. Norton........    55  President, Chief Executive Officer and Director
O. Bruce Gupton........    43  Executive Vice President and Director
Ronald K. Bohlin.......    45  Senior Vice President-Practice Development
George A. McMillan.....    42  Vice President, Chief Financial Officer and Chief
                               Operating Officer
Robert S. Kaplan(1)....    56  Director
John F. Rockart (1)....    65  Director

---------------------
</TABLE>
(1)  Member of the Compensation Committee and Audit Committee.

  Mr. Lasker is a founder of the Company and has served as a director since the
Company's inception in March 1992 and as Co-Chairman and Secretary since
December 1993. From December 1981 to December 1991 Mr. Lasker served as Vice
President and Co-Chairman of Spectrum Interactive, Inc. (''Spectrum''), a
multimedia technology development company which he co-founded with Mr. Lubin.

  Mr. Lubin is a founder of the Company and has served as Treasurer and a
director since the Company's inception in March 1992 and as Co-Chairman since

                                     -59-
<PAGE>
 
 
December 1993. From December 1981 to December 1991 Mr. Lubin served as Vice
President and Co-Chairman of Spectrum, which he co-founded with Mr. Lasker.

  Mr. Norton is a founder of the Company and has served as President and a
director since the Company's inception in March 1992 and as Chief Executive
Officer since December 1993. From 1975 to February 1992 Mr. Norton served as
President of Nolan, Norton & Co., an information technology consulting firm.
Nolan, Norton & Co. was acquired by the accounting firm of KPMG Peat Marwick in
March 1987. As a result, Mr. Norton also served as a Partner of KPMG Peat
Marwick from March 1987 to February 1992.

  Mr. Gupton joined the Company as Executive Vice President and became a
director of the Company in January 1997.  From 1981 to December 1996, Mr. Gupton
served as President and Chief Executive Officer of ISS, a management consulting
firm which was acquired by the Company in December 1996.  Prior to joining ISS,
Mr. Gupton was employed by Price Waterhouse LLP where he provided management
advisory services, primarily in the field of information technology.
  
  Mr. Bohlin joined the Company as Senior Vice President-Practice Development in
December 1994. From September 1993 to November 1994 Mr. Bohlin served as Vice
President-Strategic Services at Digital Equipment Corporation. From February
1992 to September 1993 Mr. Bohlin served as Vice President-Corporate Marketing
and Business Development at Analog Devices, Inc., a semiconductor company. From
January 1981 to February 1992 Mr. Bohlin was a consultant, partner and computer
industry practice leader at McKinsey & Company.

  Mr. McMillan joined the Company as Chief Operating Officer in July 1993 and
has served as Vice President, Chief Financial Officer and Chief Operating
Officer since January 1995. From March 1992 to June 1993 Mr. McMillan operated
his own strategy consulting firm, focusing on strategy development for
underperforming corporations. From April 1989 to March 1992 Mr. McMillan served
as President and Chief Operating Officer of the Michigan Bulb Company, a direct
mailer of horticultural catalogs.

  Dr. Kaplan has served as a director of the Company since April 1995. Dr.
Kaplan is the Marvin Bower Professor of Leadership Development at Harvard
Business School, where he has been a member of the faculty since September 1983.

  Dr. Rockart has served as a director of the Company since April 1995. Dr.
Rockart has been a Senior Lecturer at the Center for Information Systems
Research of the Alfred P. Sloan School of Management of the Massachusetts
Institute of Technology since 1974 and has been the Director of the Center for
Information Systems Research since 1976. Dr. Rockart is a director of ComShare,
Inc. and Keane, Inc.

                                     -60-
<PAGE>
 
  Officers are elected on an annual basis and serve at the discretion of the
Board of Directors.

Section 16(a) Beneficial Ownership Reporting Compliance

  Based solely on its review of copies of reports filed by persons required to
file such reports ("Reporting Persons") pursuant to Section 16(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or written
representations from certain Reporting Persons that no Form 5 filing was
required for such persons, the Company believes that during 1996 all filings
required to be made by its Reporting Persons were timely made in accordance with
the requirements of the Exchange Act, except as follows.  On February 29, 1996,
Gresham T. Brebach, Jr., the Company's then Executive Vice President - Client
Services, sold shares of Common Stock, and a Form 4 reporting such transaction
was filed on April 10, 1996.

ITEM  11.  EXECUTIVE COMPENSATION

  Director Compensation
 
  Each director who is not an employee of the Company receives reimbursements
for expenses incurred in service of the Company as a director, receives a
quarterly retainer of $2,500 and participates in the Company's 1995 Director
Stock Option Plan.
  

 1995 Director Stock Option Plan

  The 1995 Director Stock Option Plan (the "Director Plan") was adopted by the
Board of Directors and approved by the stockholders of the Company in January
1995.  Under the terms of the Director Plan, directors of the Company who are
not employees of the Company or any subsidiary of the Company are eligible to
receive non-statutory options to purchase shares of Common Stock.  A total of
50,000 shares of Common Stock may be issued upon exercise of options granted
under the Director Plan.  As of February 15, 1997, Mr. Kaplan and Dr. Rockart
had each been granted options to purchase 10,000 shares at an exercise price of
$12.25 per share, and options to purchase 2,500 shares at an exercise price of
$28.75 per share, and 25,000 shares remained eligible for future option grants
under the Director Plan.

  Each eligible director is granted an option to purchase 10,000 shares of
Common Stock on the date of his or her initial election to the Board of
Directors.  Annual options to purchase 2,500 shares of Common Stock are granted
to each eligible director on April 15 of each subsequent fiscal year.  The
exercise price of options granted under the Director Plan is equal to the
closing price of the Common Stock on the Nasdaq National Market on the date of
grant.

                                     -61-
<PAGE>
 
  Options granted under the Director Plan are not transferrable by the optionee
except by will or by the laws of descent and distribution.  No option is
exercisable after the expiration of five years from the date of grant.

Compensation of Executive Officers

   Employment Agreements

  The Company is a party to employment agreements (the "Principals' Employment
Agreements") with each of Messrs. Lasker, Lubin and Norton (the "Principals")
for the period commencing January 31, 1995 and ending January 31, 1997. Pursuant
to the Principals' Employment Agreements, each of Mr. Lasker and Mr. Lubin is
employed as a Co-Chairman of the Company and Mr. Norton is employed as President
and Chief Executive Officer of the Company. The Principals' Employment
Agreements originally provided for an annual salary of $500,000. Effective July
1, 1996, the Principals' Employment Agreements were amended to provide for an
annual base salary of $375,000. Each Principal also is eligible for bonuses at
the discretion of the Board of Directors if the Principal satisfies targeted
performance objectives. Each Employment Agreement provides that the Principal's
employment may be terminated by the Company for "cause" (as defined in the
Principals' Employment Agreement) or upon the death or disability of the
Principal. Each Principals' Employment Agreement also contains covenants by the
Principal not to solicit any of the Company's employees or customers or disclose
or use any of the Company's proprietary information for a period of two years
following the termination of the Principal's employment and, in the event that
the Principal is terminated for cause, not to compete with the Company during
such two year period. Each Principal has agreed to assign his right, title and
interest to any inventions, software and other works created by him or at his
direction to the Company.
 
  The Company is also a party to an employment agreement with Mr. Gupton (the
"Employment Agreement").  The Employment Agreement provides for a four year term
commencing on December 31, 1996 (the "Term") and an annual salary of $375,000
for the first year of the Term.  The annual salary is subject to adjustment
thereafter, but may not be decreased without Mr. Gupton's consent.  Mr. Gupton
is also eligible to receive an annual bonus based upon performance criteria
determined by the Company's Board of Directors.  The maximum bonus for the first
year of the term is $125,000, which amount may be increased in subsequent years.
The Employment Agreement may be terminated by either party upon 30 days' notice,
or by the Company immediately if for "cause" (as defined in the Employment
Agreement).  Pursuant to the Employment Agreement, Mr. Gupton has agreed not to
compete with the Company until (i) one year after the termination
or cessation of his employment, if such termination or cessation is (A) due to
the expiration of the Term, (B) due to Mr. Gupton suffering from a "disability"
(as defined in the Employment Agreement) or (C) at the election of the Company,
not for "cause," or (ii) the later of the expiration of the remainder of the 
Term and one year after the termination or cessation of his employment, if such
termination or cessation is (A) at the election of Mr. Gupton or (B) at the
election of the Company for "cause."  Mr. Gupton has also agreed not to disclose
or use any of the Company's proprietary information and to assign his right,
title and interest to any inventions, software and other works created by him or
at his direction to the Company.

  The Company is also a party to employment agreements with each of Messrs.
Bohlin and McMillan (the "Executive Agreements").  The Executive Agreements
provide for annual salaries of $300,000 and $250,000 for Messrs. Bohlin and
McMillan, respectively.  Under the Executive Agreement, each officer agrees not
to disclose any confidential information of the Company.  Pursuant to the
Executive Agreement, all inventions and intellectual property rights therein,
developed, acquired or conceived by the officer during the term of his
employment become the exclusive property of Renaissance.  Each Executive
Agreement provides that for a period of two years after the date of termination
of employment, the officer shall not solicit any of the Company's employees or
customers.  Each Executive Agreement may be terminated upon 30 days' written
notice by the Company or the officer for any reason or immediately by the
Company in the event that it believes that the officer has acted in a manner
detrimental to the Company's best interests.  In addition, under each Executive
Agreement, in the event of certain changes in control of the Company (as
defined), all unvested stock options then held by such officer shall immediately
become exercisable as of the date of such termination.

                                     -62-
<PAGE>
 
     Effective on February 7, 1997, Gresham T. Brebach, Jr., the Company's
Executive Vice President--Client Services, resigned his position with the
Company. Prior to his resignation, Mr. Brebach and the Company were parties to
an employment agreement containing substantially the same terms as the Executive
Agreements described above. In connection with his resignation and in
consideration of his assistance in orchestrating the acquisition of ISS, the
Company awarded Mr. Brebach a bonus of $187,500.

  Summary Compensation

     The following table sets forth certain information with respect to  the
annual and long-term compensation of the Chief Executive Officer of the Company
and each of the four other most highly compensated executive officers of the
Company (the "Named Executive Officers") for the three years ended December 31,
1996.

                                     -63-
<PAGE>
 
                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                                                        Long-Term 
                                                                      Compensation
                                       Annual Compensation               Awards   
                                       -------------------            -------------
                                                                       Restricted        All Other
         Name and                           Salary        Bonus           Stock         Compensation
    Principal Position               Year    ($)          ($)(1)        Awards($)          ($)(2)
    ------------------               ----   ------        ------       ----------         --------
<S>                                 <C>    <C>          <C>            <C>              <C> 
David P. Norton...............       1996  $387,500     $      ---          ---              $500(3)
   President and Chief               1995   500,000(1)         ---          ---               500(3)
   Executive Officer                 1994   250,000      473,643(2)         ---               500(3)
                                                                            
Harry M. Lasker...............       1996   387,500            ---                            500(3)
   Co-Chairman and                   1995   500,000(1)         ---          ---               500(3)
   Secretary                         1994   250,000      322,601(2)         ---               500(3)

David A. Lubin................       1996   387,500            ---                            500(3)
   Co-Chairman and                   1995   500,000(1)         ---          ---               500(3)
   Treasurer                         1994   250,000      374,858(2)         ---               500(3)
                                                                            
Gresham T. Brebach, Jr.(4)....       1996   375,500         46,154          ---              ---
   Executive Vice President          1995   373,558        119,712          ---              ---
    -- Client Services                                                      
                                                                            
Ronald K. Bohlin..............       1996   300,000         50,000          ---              ---
   Senior Vice President --          1995   300,000            ---          ---              ---    
    Practice Development
 
 
-----------------------------
</TABLE>
(1)  Includes $50,000 paid to the Named Executive Officer as salary in 1995
     which he has repaid to the Company in 1996 in connection with the election
     by the Company's Co-Chairmen and Chief Executive Officer to permanently
     forego a total of $150,000 in compensation to which they were otherwise
     entitled in 1995.

(2)  Includes amounts payable in 1995 for services rendered by the Named
     Executive Officer in 1994.

(3)  Represents the Company's 401(k) profit-sharing plan matching contributions.

(4)  Mr. Brebach resigned his positions with the Company effective February 7,
     1997.

                                     -64-
<PAGE>

  Option Grants

     The following table sets forth certain information concerning grants of
stock option made during fiscal 1996 to each of the Named Executive Officers.

                       OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
                                                                                               Potential Realizable
                                                              Individual Grants                 Value at Assumed
                                                   ---------------------------------------     Annual Rates of Stock
                                  Number of        Percent of Total   Exercise                Price Appreciation for
                                 Securities        Options Granted     Price                      Option Term(2)
                                 Underlying        to Employees In      Per     Expiration   --------------------------
            Name              Options Granted        Fiscal Year       Share      Date(1)           5%             10%
            ----              ---------------        ----------        -----      -------           --            ---
<S>                           <C>                  <C>                 <C>        <C>         <C>             <C>
David P. Norton.............            ___                ___          ___          ___             ___          ___
Harry M. Lasker.............            ___                ___          ___          ___             ___          ___
David A. Lubin..............            ___                ___          ___          ___             ___          ___
Gresham T. Brebach, Jr.(4)..         50,000 (3)            7.0%      $14.25        1/2/06       $448,087   $1,135,542
Ronald K. Bohlin............         25,000 (3)            3.5        14.25        1/2/06        224,044      567,771
_________________
</TABLE>
(1)  The expiration date of an option is the tenth anniversary of the date on
     which the option was originally granted.  The exercisability of these
     options is accelerated upon the occurrence of a change in control.
(2)  The amounts shown on this table represent hypothetical gains that could be
     achieved for the respective options if exercised at the end of the option
     term.  These gains are based on assumed rates of stock appreciation of 5%
     and 10%, compounded annually from the date the respective options were
     granted to their expiration date.  The gains shown are net of the option
     exercise price, but do not include deductions for taxes or other expenses
     associated with the exercise.  Actual gains, if any, on stock option
     exercises will depend on the future performance of the Common Stock, the
     optionholders' continued employment through the option period, and the date
     on which the options are exercised.
(3)  Options vest in four equal installments on each of the date of grant and 
     the first, second and third anniversary of the date of grant.
(4)  Mr. Brebach resigned his positions with the Company effective February 7,
     1997.

  Year-End Option Table

     The following table summarizes certain information regarding stock options
held as of December 31, 1996 by each of the Named Executive Officers.

                                     -65-
<PAGE>
 
                AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                       AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
                                Number of                             Number of Shares                 Value of Unexercised
                                 Shares                            Underlying Unexercised             In-the-Money Options at       
                               Acquired on       Value            Options at Fiscal Year-End              Fiscal Year-End
                                Exercise        Realized         (Exercisable/Unexercisable)        (Exercisable/Unexercisable)
           Name                   (#)            ($)(1)                       (#)                             ($)(2)
           ----                ----------       --------         ---------------------------         --------------------------
                             
<S>                            <C>              <C>               <C>                                <C>
David P. Norton.............        ___               ___                      ___/___                            ___/___
Harry M. Lasker.............        ___               ___                      ___/___                            ___/___
David A. Lubin..............        ___               ___                      ___/___                            ___/___
Gresham T. Brebach, Jr.(3)..     59,500         $1,445,925               3,012/187,536                    $91,866/$6,657,573
Ronald K. Bohlin............     31,250            812,813               25,012/68,762                     919,191/2,409,816
___________
</TABLE> 
(1)     Represents the difference between the exercise price and the fair market
        value of the Common Stock on the date of exercise.
(2)     Based on the fair market value of the Common Stock as of December 31,
        1996 ($44.75 per share) less the option exercise price, multiplied by
        the number of shares underlying the options.
(3)     Mr. Brebach resigned his positions with the Company effective February
        7, 1997.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     The current members of the Company's Compensation Committee are Mr. Kaplan
and Dr. Rockart.  No executive officer of the Company has served as a director
or member of the compensation committee (or other committee serving an
equivalent function) of any other entity, whose executive officers served as a
director of or member of the Compensation Committee of the Company.


ITEM  12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
          OWNERS AND MANAGEMENT

  The following table sets forth certain information as of February 15, 1997
with respect to the beneficial ownership of shares of Common Stock by (i) each
person known to the Company to own beneficially more than 5% of the outstanding
shares of Common Stock, (ii) the Directors of the Company, (iii) the Named
Executive Officers, and (iv) the Directors and executive officers of the Company
as a group.

                                     -66-
<PAGE>
 
<TABLE>
<CAPTION>
                                                  Amount and Nature
                                          of Beneficial Ownership(1)
                                          --------------------------
      Name and Address                                      Percent of
     of Beneficial Owner               Number of Shares        Class
     -------------------               ----------------     -----------
<S>                                    <C>                  <C>
O. Bruce Gupton...................        1,310,000            13.9%
  c/o Renaissance Solutions, Inc.
  100 First Stamford Place
  Stamford, CT 06903-7698
Harry M. Lasker (2)...............          850,785             9.0
  c/o Renaissance Solutions, Inc.
  Lincoln North
  55 Old Bedford Road
  Lincoln, MA  01773
David A. Lubin (3)................          848,286             9.0
  c/o Renaissance Solutions, Inc.
  Lincoln North
  55 Old Bedford Road
  Lincoln, MA  01773
Melissa E. Norton (4).............          850,786             9.0
  c/o Renaissance Solutions, Inc.
  Lincoln North
  55 Old Bedford Road
  Lincoln, MA  01773
Putnam Investments, Inc. (5)......          808,095             8.6
  One Post Office Square
  Boston, MA 02109
RCM Capital Management,...........          605,000             6.4
  L.L.C.(6)
  Four Embarcadero Center
  San Francisco, CA 94111-4189
David P. Norton (7)...............          850,786             9.0
Robert S. Kaplan (8)..............           27,303               *
John F. Rockart (9)...............           12,500               *

</TABLE> 

                                     -67-
<PAGE>
 
<TABLE> 
<S>                                       <C>                    <C>  
Ronald K. Bohlin (10)............            31,262                    *
Gresham T. Brebach, Jr. (11).....            65,524                    *
All directors and executive
  officers as a group
  (8 persons) (12)...............         3,976,810                 41.8%
</TABLE>                                                        
__________
*Less than 1%


(1)  The number of shares beneficially owned by each director and executive
     officer is determined under rules promulgated by the Securities and
     Exchange Commission, and the information is not necessarily indicative of
     beneficial ownership for any other purpose.  Under such rules, beneficial
     ownership includes any shares as to which the individual has sole or shared
     voting power or investment power and also any shares which the individual
     has the right to acquire within 60 days after February 15, 1997 through the
     exercise of any stock option or other right.  The inclusion herein of such
     shares, however, does not constitute an admission that the named
     stockholder is a direct or indirect beneficial owner of such shares.
     Unless otherwise indicated, each person or entity named in the table has
     sole voting power and investment power (or shares such power with his or
     her spouse) with respect to all shares of capital stock listed as owned by
     such person or entity.

(2)  Includes 108,028 shares held by The Harry M. Lasker Children's Trust, the
     beneficiaries of which are Mr. Lasker's children and a trustee of which is
     Mr. Lasker's spouse, as to which shares Mr. Lasker disclaims beneficial
     ownership.  Also includes 42,000 shares held by The Red Farm Charitable
     Trust, the trustees of which are Mr. Lasker and his spouse, as to which
     shares Mr. Lasker disclaims beneficial ownership.

(3)  Includes 72,856 shares held by The David A. Lubin Children's Trust, the
     beneficiaries of which are Mr. Lubin's children, as to which shares Mr.
     Lubin disclaims beneficial ownership.  Also includes 39,500 shares held by
     The Pine Point Foundation, a trust, the trustees of which are Mr. Lubin and
     his spouse, as to which shares Mr. Lubin disclaims beneficial ownership.

(4)  Ms. Norton is the spouse of David P. Norton, the President, Chief Executive
     Officer and a Director of the Company.

(5)  The information reported is based on a Schedule 13G, dated December 31,
     1996, filed with the Securities and Exchange Commission by Putnam
     Investments, Inc. ("PI"), Marsh & McLennan Companies, Inc. ("MMC"), Putnam
     Investment 

                                     -68-
<PAGE>
 
     Management, Inc. ("PIM") and The Putnam Advisory Company, Inc. ("PAC"). PI
     is a registered investment advisor, in which capacity it advises PIM and
     PAC and has shared voting power with respect to 125,489 shares and shared
     dispositive power with respect to 808,095 shares. PIM has shared
     dispositive power with respect to 668,706 shares. PAC has shared voting
     power with respect to 125,489 shares and shared dispositive power with
     respect to 139,389 shares. MMC is the parent holding company of PI. PI and
     MMC disclaim beneficial ownership of such shares.

(6)  The information is based on a Schedule 13G, dated December 31, 1996, filed
     with the Securities and Exchange Commission by RCM Capital Management,
     L.L.C. ("RCM Capital"), RCM Limited L.P. ("RCM Limited"), and RCM General
     Corporation ("RCM General").  RCM Capital is an investment advisor, in
     which capacity it has sole voting power with respect to 529,000 shares,
     sole dispositive power with respect to 574,000 shares and shared
     dispositive power with respect to 31,000 shares.  RCM General is the
     general partner of RCM Limited, the Managing Agent of RCM Capital.  Each of
     RCM General and RCM Limited disclaim beneficial ownership of such shares
     except to the extent each may be deemed to have beneficial ownership of
     securities beneficially owned by RCM Capital.

(7)  Includes 850,786 shares held by Melissa E. Norton, the spouse of Mr.
     Norton, as to which shares Mr. Norton disclaims beneficial ownership.

(8)  Includes 17,301 shares of Common Stock subject to outstanding stock options
     which are exercisable within the 60 day period following February 15, 1997.

(9)  Consists of 12,500 shares of Common Stock subject to outstanding stock
     options which are exercisable within the 60 day period following February
     15, 1997.

(10) Consists of 31,262 shares of Common Stock subject to outstanding stock
     options which are exercisable within the 60 day period following February
     15, 1997.

(11) Consists of 65,524 shares of Common Stock subject to outstanding stock
     options which are exercisable within the 60 day period following February
     15, 1997. Mr. Brebach resigned his position with the Company effective
     February 7, 1997.

(12) Includes 88,196 shares of Common Stock subject to outstanding stock options
     which are exercisable within the 60 day period following February 15, 1997.
     

                                      -69-
<PAGE>

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

   In January 1995, the Company made a partnership distribution of $2,672,000,
of which approximately $772,000 was distributed to each of Messrs. Lasker, Lubin
and Norton or their affiliates (the "Founders").  This distribution represented
cumulative net earnings of the Partnership from December 1, 1993 through
December 31, 1994.

   In March 1995, the Company made a partnership distribution of $754,475, of
which approximately $218,000 was distributed to each of the Founders.  This
distribution represented the estimated amount of the Partnership's net earnings
for the period commencing on January 1, 1995 and ending immediately prior to the
Reorganization.  Both the January 1995 and the March 1995 distributions were
evidenced by the Stockholder Notes.  The principal amount of the Stockholder
Notes was repaid in April 1995 with a portion of the net proceeds from the
Company's initial public offering.

   The Founders each pledged one-third of their shares of Common Stock as
security for a $2,000,000 loan to the Company from Gemini.  A portion of the net
proceeds from the Company's initial public offering was used to repay all of the
amounts secured by this pledge which was released on April 11, 1995.

   In January 1995, Messrs. Lasker and Lubin, Melissa E.  Norton (the wife of
David P.  Norton), the Harry M.  Lasker Children's Trust (the "Lasker Trust")
and the David A.  Lubin Children's Trust (the "Lubin Trust" and with the Lasker
Trust, the "Trusts") entered into a Stockholders' Voting Agreement (the "Voting
Agreement") pursuant to which, from and after the Reorganization and until
October 31, 1998, each of Messrs. Lasker and Lubin and Ms. Norton are entitled
to designate one representative for nomination to the Board of Directors of the
Company (initially Messrs. Lasker, Lubin and Norton), provided that, in each
case, Mr. Lasker and the Lasker Trust, Mr. Lubin and the Lubin Trust and Ms.
Norton retain at least 50% of their or her respective holdings of Common Stock
as existing immediately following the closing of the Company's initial public
offering.  Under the Voting Agreement, each of Messrs. Lasker and Lubin, Ms.
Norton, the Lasker Trust and the Lubin Trust agrees to vote all of his, her or
its shares of Common Stock for the election of such nominees.

                                     -70-
<PAGE>
 
   In March 1994 the Company entered into a consulting agreement with Robert S.
Kaplan (the "Kaplan Consulting Agreement") pursuant to which Mr. Kaplan agreed
to provide certain consulting services to the Company. Mr. Kaplan is a director
of the Company. The Kaplan Consulting Agreement provides that the Company will
be the sole consulting firm with which Mr. Kaplan will perform Balanced
Scorecard-related services. Pursuant to the Kaplan Consulting Agreement, Mr.
Kaplan has agreed to refer all opportunities to perform potential Balanced
Scorecard projects to the Company, and the Company has agreed to pay Mr. Kaplan
at his per diem rate (currently $6,000) as well as a referral fee on all client
billable work obtained by the Company primarily as a result of Mr. Kaplan's
referrals. The referral fee is payable with respect to Company engagements
during the two years following the referral and equals 10% of the first
$1,000,000 in professional fees collected from a referred client and 2% of
professional fees collected from the client in excess of $1,000,000. Under the
Kaplan Consulting Agreement, during the term of the Kaplan Consulting Agreement,
the Company also has agreed to pay Mr. Kaplan $2,500 for each Balanced Scorecard
engagement completed by the Company under its Teaming Agreement with Gemini. The
Company made payments totaling $38,175, $16,285 and $10,000 to Mr. Kaplan under
the Kaplan Consulting Agreement in 1994, 1995 and 1996, respectively. The Kaplan
Consulting Agreement may be terminated by either party on 90 days' written
notice.

   Pursuant to the Kaplan Consulting Agreement, in March 1994 the Company issued
Mr. Kaplan 10,002 shares of Common Stock and in January 1995 the Company granted
Mr. Kaplan options to purchase an additional 12,004 shares of Common Stock.

   In July 1996 the Company entered into a consulting agreement with John F.
Rockart (the "Rockart Consulting Agreement") pursuant to which Dr. Rockart
agreed to provide certain consulting services to the Company. Dr. Rockart is a
director of the Company. The Rockart Consulting Agreement provides that the
Company will be the sole consulting firm with which Dr. Rockart will jointly
work to develop consulting methodologies or products. Pursuant to the Rockart
Consulting Agreement, the Company

                                     -71-
<PAGE>
 
has agreed to pay Dr. Rockart at his per diem rate (currently $7,500 as well as
a referral fee on all client billable work obtained by the Company primarily as
a result of Dr. Rockart's referrals. The referral fee is payable with respect to
Company engagements during the two years following the referral and equals 5% of
the first $1,000,000 in professional fees collected from a referred client, 3.5%
of the second $1,000,000 in professional fees collected from the client and 2%
of the professional fees collected from a referred client in excess of
$2,000,000. The referral fee only applies to engagements greater than $100,000.
The Rockart Consulting Agreement also provides that in the event Dr. Rockart
and the Company jointly develop methodologies which are embedded in, but
exclusive of, other Renaissance methodologies, the Company will award Dr.
Rockart (i) options to purchase 5,000 shares of Common Stock when annual
revenues attributable to the methodology reach $2,000,000 per year, (ii) options
to purchase an additional 10,000 shares of Common Stock when annual revenues
attributable to the methodology reach $5,000,000, and (iii) options to purchase
an additional 10,000 shares of Common Stock for each additional $5,000,000 in
annual revenues attributable to the methodology. Title to the jointly developed
methodology will reside in the Company. No payments have been made to date under
the Rockart Consulting Agreement.

   In November 1996, Gemini exercised three separate options to purchase 50,000
shares of Common Stock (each, an "Option") which had been sold to Gemini by each
of Messrs. Lubin and Lasker and Ms. Melissa E. Norton in connection with the
Company's initial public offering in April 1995.  In connection with the
exercise of the Options, Gemini paid to each of Messrs. Lubin and Lasker and Ms.
Norton (i) $650,000, representing the exercise price of each Option, and (ii)
$255,454, in repayment, with interest, of a promissory note issued by Gemini to
each of Messrs. Lubin and Lasker and Ms. Norton as the purchase price of the
Option.
 

                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
          AND REPORTS ON FORM 8-K

   (a)    Documents filed as a part of this Form 10-K:
          ------------------------------------------- 

          1.  Financial Statements.  The following documents are set forth in
              --------------------                                           
Item 8 hereto:

       Independent Auditors' Report
       Consolidated Balance Sheets as of December 31, 1995 and 1996
       Consolidated Statements of Operations for the Years Ended
        December 31, 1994, 1995 and 1996
       Consolidated Statements of Stockholders' Equity

                                     -72-

<PAGE>
 
         for the Years Ended December 31, 1994, 1995 and 1996 
       Consolidated Statements of Cash Flows for the Years Ended
         December 31, 1994, 1995 and 1996
       Notes to Consolidated Financial Statements
       Selected Quarterly Financial Results

          2.     Financial Statement Schedules.  The Company is not filing any
                 -----------------------------                                
financial statement schedules as part of this Annual Report on Form 10-K because
they are not applicable or the required information is included in the financial
statements or notes thereto.

   3.     Exhibits.  The Exhibits listed in the Exhibit Index immediately
          --------                                                       
preceding such Exhibits are filed as part of this Annual Report on Form 10-K.

   (b)    Reports on Form 8-K:
          ------------------- 

          None.

                                     -73-
<PAGE>
 
 
                                   SIGNATURES

   Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

 
                                   RENAISSANCE SOLUTIONS, INC.


                                   By: /s/ David P. Norton
                                      --------------------
                                      David P. Norton
                                      President and Chief Executive Officer

Date:  February 28, 1997


  Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
 
Signature                 Title                              Date
---------                 -----                              ----
<S>                       <C>                                <C>

/s/ David P. Norton       President, Chief Executive         February 28, 1997
-------------------       Officer and Director (Principal
David P. Norton           Executive Officer)
 
/s/ George A. McMillan    Vice President, Chief Financial    February 28, 1997
----------------------    Officer, and Chief Operating
George A. McMillan        Officer (Principal Financial and
                          Accounting Officer)
 
/s/ O. Bruce Gupton       Director                           February 28, 1997
-------------------     
O. Bruce Gupton
 
/s/ Harry M. Lasker       Director                           February 28, 1997
-------------------      
Harry M. Lasker
</TABLE> 

                                     -74-
<PAGE>
 
<TABLE>
<CAPTION>
 
Signature                 Title                              Date
---------                 -----                              ----
<S>                       <C>                                <C>

/s/ David A. Lubin        Director                           February 28, 1997
------------------      
David A. Lubin
 
/s/ Robert S. Kaplan      Director                           February 28, 1997
--------------------    
Robert S. Kaplan
 
/s/ John F. Rockart       Director                           February 28, 1997
-------------------     
John F. Rockart

</TABLE>

                                     -75-
<PAGE>
 
                                 EXHIBIT INDEX



  Exhibit
  No.                          Description
  ---                          -----------

  a3.1      Amended and Restated Certificate of Incorporation of the Registrant,
            as amended.

  a3.2      By-Laws of the Registrant.

  a4.1      Specimen Certificate for Shares of Common Stock, $.0001 par value,
            of the Registrant.

  +a10.1    1995 Employee Stock Purchase Plan.

  +a10.2    1995 Equity Incentive Plan.

  +a10.3    1995 Director Stock Option Plan.

  +a10.4    Employment Agreement between the Registrant and Harry M. Lasker, 
            dated as of January 31, 1995.
 
  +b10.5    Amendment No. 1 to Employment Agreement between the Registrant and
            Harry M. Lasker, dated as of July 1, 1996.
 
  +a10.6    Employment Agreement between the Registrant and David A. Lubin,
            dated as of January 31, 1995.

  +b10.7    Amendment No. 1 to Employment Agreement between the Registrant and
            David A. Lubin, dated as of July 1, 1996.
 
  +a10.8    Employment Agreement between the Registrant and David P. Norton,
            dated as of January 31, 1995.
 
  +b10.9    Amendment No. 1 to Employment Agreement between the Registrant and
            David P. Norton, dated as of July 1, 1996.

                                      -1-
<PAGE>
 
  a10.10    Stockholders' Voting Agreement among Harry M. Lasker, David A.
            Lubin, Melissa E. Norton, the Harry M. Lasker Children's Trust and
            the David A. Lubin Children's Trust dated as of January 31, 1995.

  +c10.11   Employment Agreement between the Registrant and Gresham Brebach,
            dated March 27, 1995, as amended.

  +c10.12   Employment Agreement between the Registrant and Ronald K. Bohlin,
            dated March 27, 1995, as amended.

  +c10.13   Employment Agreement between the Registrant and George A. McMillan,
            dated March 27, 1995, as amended.

  +10.14    Employment Agreement between the Registrant and O. Bruce
            Gupton, dated as of December 31, 1996.

  b10.15    Third Amended and Restated Teaming Agreement between the Registrant
            and Gemini Consulting, Inc., dated as of October 23, 1996.
 
  a10.16    Reorganization Agreement among the Registrant, the Partnership and
            the holders of certain equity interests in the Partnership, dated as
            of January 31, 1995.

  a10.17    Registration Rights Agreement among the Registrant, Harry M. Lasker,
            David A. Lubin, Melissa E. Norton, the Harry M. Lasker Children's
            Trust and the David A. Lubin Children's Trust, dated as of January
            31, 1995.

                                      -2-
<PAGE>
 
  +a10.18   Consulting Agreement dated March 14, 1994 between the Partnership
            and Robert Kaplan.

  +10.19    Consulting Agreement dated July 22, 1996 between the Company and
            John F. Rockart

  a10.20    Lease Agreement by and between LadyLin Properties Limited
            Partnership (successor in interest to Old Bedford Road Realty Trust)
            and the Registrant, dated as of November 1, 1993, as amended to
            date.

  a10.21    Sublease Agreement by and between Sun Microsystems, Inc. and the
            Registrant, dated as of May 27, 1993.

  d10.22    Commercial Revolving Line of Credit Agreement between the Registrant
            and Shawmut Bank, N.A., dated as of June 30, 1995.

  d10.23    Commercial Revolving Line of Credit Promissory Note delivered by the
            Registrant to Shawmut Bank, N.A., dated as of June 30, 1995.
 
  e10.24    Amendment to Line of Credit Agreement, dated as of May 7, 1996, by
            and between the Company and Fleet National Bank.        
 
  e10.25    Barclays Bank PLC Facility, dated as of April 26, 1996, by and 
            between Renaissance Solutions Limited and Barclays Bank PLC.
                                    
  f10.26    Agreement and Plan of Merger, dated as of December 31, 1996, among 
            the Registrant, ISS, Artist Acquisition Corp. and O. Bruce Gupton
            (acquisition of ISS).
 
  10.27     Registration Rights Agreement, dated as of December 31, 1996, among
            the Registrant and O. Bruce Gupton.           
                                                                 
  g10.28    Stock Purchase Agreement, dated as of, January 27, 1997, among the
            Registrant, and the other parties named therein (acquisition of
            COBA-UK).
 
  h10.29    Stock Purchase Agreement, dated as of February 13, 1997, among the
            Registrant, C.M. Management Systems Ltd. Inc. and Mark R. Bruneau,
            Andrew R. Belt and Frederique Bouty (acquisition of COBA-Boston).

                                      -3-
<PAGE>
 
  10.30     Registration Rights Agreement, dated as of February 13, 1997, among
            the Registrant and Mark R. Bruneau, Andrew R. Belt and Frederique
            Bouty.

  21        Subsidiaries of the Registrant.


  23        Consent of Deloitte & Touche LLP.

  27        Financial Data Schedule.

__________

  a       Incorporated by reference to the Registrant's Registration Statement
          on Form S-1, File No. 33-89524.

  b       Incorporated by reference to the Registrant's Quarterly Report on Form
          10-Q for the period ended September 27, 1996.
 
  c       Incorporated by reference to the Registrant's Annual Report on Form
          10-K for the period ended December 31, 1995.
 
  d       Incorporated by reference to the Registrant's Quarterly Report on Form
          10-Q for the period ended June 30, 1995.

  e       Incorporated by reference to the Registrant's Quarterly Report on Form
          10-Q for the period ended June 28, 1996.

  f       Incorporated by reference to the Registrant's Current Report on Form
          8-K dated December 31, 1996.

  g       Incorporated by reference to the Registrant's Current Report on Form
          8-K dated February 3, 1997.

  h       Incorporated by reference to the Registrant's Current Report on Form
          8-K dated February 13, 1997.
 
  +       Management contract or compensatory plan or arrangement required to be
          filed as an exhibit to this Annual Report of Form 10-K.

                                      -4-