<PAGE>   1
 
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                   FORM 10-K
(MARK ONE)
 
      [X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
       SECURITIES EXCHANGE ACT OF 1934
 
                   FOR THE FISCAL YEAR ENDED JANUARY 31, 1998
                                       OR
 
      [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
       SECURITIES EXCHANGE ACT OF 1934
                         FOR THE TRANSITION PERIOD FROM
                               --------------- TO
                               --------------- .
 
                         COMMISSION FILE NUMBER 0-21631
                            TICKETMASTER GROUP, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
<TABLE>
<S>                                              <C>
                    ILLINOIS                                        36-3597489
        (STATE OR OTHER JURISDICTION OF                (I.R.S. EMPLOYER IDENTIFICATION NO.)
         INCORPORATION OR ORGANIZATION)
 
             8800 SUNSET BOULEVARD                                    90069
           WEST HOLLYWOOD, CALIFORNIA                               (ZIP CODE)
    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
 
                                 (310) 360-6000
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
                                      NONE
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                      COMMON STOCK, NO PAR VALUE PER SHARE
 
     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 April 20, 1998, there were 26,251,440 shares of the registrant's
common stock outstanding. The aggregate market value of the registrant's voting
stock that was held by non-affiliates on such date was $785,915,611, based on
the closing sale price of the registrant's common stock on such date as reported
on the Nasdaq National Market.
 
     The exhibit index is located on page 31.
 
                      DOCUMENTS INCORPORATED BY REFERENCE:
 
     Portions of the registrant's definitive proxy statement for its annual
meeting of shareholders is tentatively scheduled to be held on June 30, 1998 are
expected to be incorporated by reference into Part III of this Form 10-K, as
indicated, or this Form 10-K will be amended to include Part III.
 
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                                     PART I
 
ITEM 1. BUSINESS
 
     As used in this Annual Report on Form 10-K, references to a "fiscal" year
refer to the 12-month period ending on January 31 of each year (e.g., "fiscal
1998" shall mean the Company's fiscal year ended January 31, 1998). Unless the
context otherwise requires, references to "Ticketmaster" or the "Company"
include Ticketmaster Group, Inc., its predecessors and its subsidiaries.
References to the "Managed Businesses" include the Company's wholly and majority
owned subsidiaries (the "Consolidated Businesses") together with the Company's
interest in unconsolidated businesses (the "Unconsolidated Businesses").
 
GENERAL
 
     Ticketmaster, through the Managed Businesses, is the leading provider of
automated ticketing services in the world with over 3,750 domestic and over 550
foreign clients, including many of the foremost entertainment facilities and
promoters and over 200 professional and semi-professional sports franchises. The
Company has established its market position by providing these clients with
comprehensive ticket inventory control and management, a broad distribution
network and dedicated marketing and support services. Ticket orders are received
and fulfilled through operator-staffed call centers, independent sales outlets
remote to the facility box office and the Company's Web site, Ticketmaster
Online. Revenue is generated principally from convenience charges received by
the Company for tickets sold on its clients' behalf. The Company generally
serves as an exclusive agent for its clients and typically has no financial risk
for unsold tickets. The Company, through its Managed Businesses, sold 70.2
million tickets in fiscal 1998, while generating revenues of $376.5 million.
 
     Based upon recent trends in the entertainment, sporting and leisure
industries, the Company believes that its principal business, live entertainment
ticketing, will experience increased revenues under existing venue contracts.
The Company believes that significant opportunities exist through continued
penetration of this principal market. Additionally, the Company believes that
further ticketing opportunities will arise from the construction of new and
larger facilities, the increase in the number of professional sports teams and
the development of new sports leagues. Furthermore, the Company plans to
continue to broaden its client base to include such venues as museums, amusement
parks, state and county fairs and golf courses.
 
     Although the Company, through its Managed Businesses, has recently expanded
its operations into territories outside of the U.S., it has already experienced
significant growth in these markets as ticket sales have increased from 3.4
million to 14.0 million from fiscal 1996 to fiscal 1998, while revenues from
ticket sales have increased from $15.7 million to $61.6 million for the same
periods, respectively. Accordingly, ticket sales and revenues from international
markets represented 20% and 19% of total ticket sales and revenues in fiscal
1998, up from approximately 6% and 7% in fiscal 1996, respectively.
 
     The Company believes that there are additional significant opportunities
which exist in international markets to attract existing and new venues in a
historically under-penetrated market for automated ticketing services for live
entertainment events. In addition, the continued enthusiasm for soccer and
growing popularity of major American sports such as football, baseball and
basketball should lead to increased utilization of these international venues
and provide additional revenue opportunities. To be in a position to capitalize
on these trends in fiscal 1999, the Company has expanded its existing operations
in the U.K., Australia and Mexico, has entered into new markets in Canada,
Argentina and Ireland, and is exploring further opportunities in Europe, the
Pacific Rim and Central and South America.
 
     The Company, through its Managed Businesses, has also expanded its ticket
distribution capabilities through the development and launch of Ticketmaster
Online (http://www.ticketmaster.com), its site on the World Wide Web designed to
promote ticket sales for live events, disseminate event information and offer
transactional and merchandising services. Since the launch of Ticketmaster
Online in September 1996, the Company has experienced significant growth in
ticket sales through its World Wide Web site and expects this trend to continue
during the next several fiscal years. Monthly ticket sales through the Internet
have steadily increased since the Website became transactional in November 1996,
rising from $100,000 to more than $7.2 million in March 1998. For the quarter
ended January 31, 1998, online ticket sales accounted for
 
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approximately 2.5% of the Company's fourth quarter ticketing business with
ticket sales of approximately 400,000 having a gross dollar value of over $16.1
million. Online ticketing sales for the fiscal year ended January 31, 1998 were
approximately 1.0 million tickets with a gross dollar value of over $39.1
million.
 
     The Company is continuing to leverage its widely recognized brand name and
extensive distribution capabilities by developing new opportunities in related
areas, such as entertainment information and publishing, merchandising,
advertising, promotional services and direct marketing. Specific examples of its
efforts include offering integrated brand management and marketing services to
strategic partners, such as MasterCard International, Intel, Cendant Membership
Services, Inc., Sprint Communications, First USA and United Parcel Service,
through sponsorship and advertising opportunities during live events, during
telephone ticketing services, on its ticket stock and envelopes, on event
promotional material and in additional media outlets which the Company is
developing. In addition, in February 1996, the Company launched Live!, a monthly
entertainment magazine and event guide which the Company believes is a natural
extension of its existing distribution channels. These efforts to create new
promotional, marketing and distribution opportunities by utilizing and
integrating the Company's traditional principal ticketing services and brand
name have formed the basis for new growth opportunities in the future.
 
     The Company also believes that significant opportunities exist through its
current call center capacity to become a provider of outsourced telephone-based
sales, marketing and customer management services. The Company's client base is
currently comprised of large organizations with growing needs for cost-effective
means of contacting and servicing current and prospective customers. The
Company's current client base includes organizations such as the American Red
Cross, Cendant Membership Services, Inc. and TVN Enterprises Corporation.
 
     The Company believes that the Ticketmaster System and its extensive
distribution capabilities provide a competitive advantage that enhances the
Company's ability to attract new clients and maintain its existing client base.
The Ticketmaster System, which includes both hardware and software, is typically
installed in a client's facility box office and provides a single centralized
inventory control management system capable of tracking total ticket inventory
for all events, whether sales are made on a season, subscription, group or
individual ticket basis. The Ticketmaster System is capable of processing over
100,000 tickets per hour in certain regions, and each of its 26 computer systems
can support 32,000 users per system, of which as many as 4,000 can be online at
any one time.
 
     Through its Managed Businesses, Ticketmaster has a comprehensive domestic
distribution system that includes approximately 2,800 remote sales outlets in 44
states covering many of the major metropolitan areas in the U.S. and 15 domestic
call centers with approximately 1,525 operator positions. The foreign
distribution system includes approximately 300 remote sales outlets in 7
countries and 14 call centers with over 600 operator positions. The Company
provides the public with convenient access to tickets and information regarding
live entertainment events. Ticket purchasers are assessed a convenience charge
for each ticket sold offsite by the Company on behalf of its clients. These
charges are negotiated and included in the Company's contracts with its clients.
The versatility of the Ticketmaster System allows it to be customized to satisfy
a full range of client requirements.
 
     From fiscal 1996 through 1998, the number of tickets sold and revenues for
the Managed Businesses have grown from 53.1 million tickets and $241.3 million
of revenues to 70.2 million tickets and $376.5 million of revenues, which
reflects annual compounded growth rates for ticketing and revenues of
approximately 15.0% and 24.9%, respectively.
 
CLIENT RELATIONSHIPS
 
     The Company's clients include many of the most well known arenas, stadiums,
theaters, sports teams and promoters in the U.S. The Company currently provides
service to clients ranging in size from large stadiums with more than 60,000
seats to smaller theaters with seating in the hundreds, and from multi-event
promoters to one-time single event promoters.
 
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     Representative of the Company's clients are the following:
 
                         ARENAS, STADIUMS AND THEATERS
 
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Alamodome, San Antonio, TX                     Madison Square Garden, New York, NY
Arie Crown Theater, Chicago, IL                Miami Arena, Miami, FL
Astrodome, Houston, TX                         Nassau Coliseum, Uniondale, NY
Blossom Amphitheatre, Cleveland, OH            Nederlander New York Broadway Theatres,
Bradley Center, Milwaukee, WI                  New York, NY
Cajundome, Lafayette, LA                       The New World Music Theatre, Tinley Park, IL
Centrum, Worcester, MA                         New Amsterdam Theatre, New York, NY
Charlotte Coliseum, Charlotte, NC              Orlando Arena and Centroplex, Orlando, FL
Chicago Theater, Chicago, IL                   The Palace at Auburn Hills, Auburn Hills, MI
Coral Sky Amphitheatre, West Palm Beach, FL    Pine Knob Music Theatre, Clarkston, MI
Crown Center, Cincinnati, OH                   The Pond, Anaheim, CA
Deer Creek Music Center, Indianapolis, IN      Pontiac Stadium, Detroit, MI
Fargo Dome, Fargo, ND                          Pro Player Stadium, Miami, FL
Fleet Center, Boston, MA                       Pyramid, Memphis, TN
Ford Center for the Performing Arts,           Radio City Music Hall, New York, NY
  New York, NY                                 RCA Dome, Indianapolis, IN
Freedom Hall, Louisville, KY                   Rosemont Horizon, Rosemont, IL
Garden State Arts Center, Holmdel, NJ          Rupp Arena, Lexington, KY
The Georgia Dome, Atlanta, GA                  San Jose Arena, San Jose, CA
The Grand Center, Grand Rapids, MI             Seattle Center, Seattle, WA
Great Western Forum, Inglewood, CA             Sun Dome, Tampa, FL
Greek Theatre, Los Angeles, CA                 Star Lake Amphitheatre, Pittsburgh, PA
Gund Arena, Cleveland, OH                      The Summit, Houston, TX
Ice Palace, Tampa, FL                          Tacoma Dome, Tacoma, WA
Irvine Meadows Amphitheatre, Costa Mesa, CA    Target Center, Minneapolis, MN
Joe Louis Arena, Detroit, MI                   Tennessee Performing Arts Center, Nashville,
John G. Shedd Aquarium and Oceanarium,         TN
  Chicago, IL                                  Turner Field, Atlanta, Georgia
Jones Beach Theatre, Wantagh, NY               The United Center, Chicago, IL
Los Angeles Memorial Coliseum, Los Angeles,    The Wang Center for the Performing Arts,
CA                                             Boston, MA
Louisiana Superdome, New Orleans, LA
 
PROMOTERS                                      GENERAL
Avalon Attractions                             American Music Festival
Belkin Productions                             Beale Street Music Festival
Cellar Door Concerts                           Chicago International Film Festival
Jam Productions                                Del Mar Fair
Livent                                         The 500 Festival Parade
Pace Management                                Houston Exposition and Rodeo
Sunshine Promotions                            New Orleans Jazz and Heritage Festival
Universal Concerts                             U.S. Hotrod Nationals
Electric Factory                               Walt Disney Company
</TABLE>
 
     The Company's clients also include 82 professional sports franchises in the
U.S., including 16 Major League Baseball teams, 20 National Football League
teams, 20 National Basketball Association teams, 13 National Hockey League
teams, 6 Major League Soccer teams and 7 Women's National Basketball Association
teams.
 
     The Company generally enters into written agreements with its clients
pursuant to which it agrees to provide the Ticketmaster System and to serve as
the client's exclusive ticket sales agent for all sales of individual tickets
sold outside of the facility's box office, including any tickets sold at remote
sales outlets, over the phone or through other media, for a specified period,
typically three to five years. Pursuant to an agreement with a facility, the
Company generally is granted the right to sell tickets for all events presented
at that facility, and as part of such arrangement the Company installs the
Ticketmaster System in the facility's box office. An agreement with a promoter
generally grants the Company the right to sell tickets for all events presented
by that promoter at any facility, unless the facility is covered by an exclusive
agreement with Ticketmaster or another automated ticketing service company. The
terms of the agreements with clients are
 
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negotiated on a contract-by-contract basis. In the case of contracts subject to
public bid (e.g., by facilities owned or managed by municipalities or
governmental agencies), the terms are defined, to a material degree, by the
specifications and conditions set forth in the formal requests for bid.
 
     Clients are routinely required by contract to include the Ticketmaster name
in print, radio and television advertisements for entertainment events sponsored
by such clients. The Ticketmaster name and logo are also prominently displayed
on printed tickets and ticket envelopes.
 
     The Company generally does not buy tickets from its clients for resale to
the public and has no financial risk for unsold tickets. In the U.K., the
Company may from time to time buy tickets from its clients for resale to the
public in an amount typically not exceeding (LOGO)600,000 in the aggregate. All
ticket prices are determined by the Company's clients. The Company's clients
also generally determine the scheduling of when tickets go on sale to the public
and what tickets will be available for sale through the Company. Facilities and
promoters, for example, often handle group sales and season tickets in-house.
The Company only sells a portion of its clients' tickets, the amount of which
varies from client to client and varies as to any single client from year to
year.
 
     Among the primary benefits derived by the Company's clients by use of the
Ticketmaster System are (1) centralized control of total ticket inventory as
well as accounting information and market research data, (2) centralized
accountability for ticket proceeds, (3) manageable and predictable transaction
costs, (4) broader and expedited distribution of tickets, (5) wide dissemination
of information about upcoming events through Ticketmaster's call centers, the
Company's Web site and other media platforms, (6) the ability to easily add
additional performances if warranted by demand and (7) marketing and promotional
support.
 
     The Ticketmaster System also provides the Company's clients with
flexibility in processing season, subscription and group ticketing. For example,
a sports team may want to give priority to season tickets, mini-ticket plans and
group sales, permitting those ticket purchasers to have first choice of tickets
before their sale to the general public. In addition, clients have the ability
to structure single or multiple events, including season events, in almost any
number and type of pricing and discount plans.
 
     In general, the Company negotiates a contract with each client. Pursuant to
these contracts, Ticketmaster is granted the right to collect from ticket
purchasers a per ticket convenience charge on all tickets sold at remote sales
outlets, by telephone, through the Company's web site and other media. There is
an additional per order handling charge on all tickets sold by the Company at
other than remote sales outlets to partially offset the cost of fulfillment. The
amount of the convenience charge is determined during the contract negotiation
process, and typically varies based upon numerous factors, including the
services to be rendered to the client, the amount and cost of equipment to be
installed at the client's box office and the amount of advertising and/or
promotional allowances to be provided, as well as the type of event and whether
the ticket is purchased at a remote sales outlet, by telephone, through the
Company's Web site or otherwise. Any deviations from those amounts for any event
are negotiated and agreed upon by the Company and its client prior to the
commencement of ticket sales. During fiscal 1998, the convenience charges
generally ranged from $1.50 to $7.00 per ticket. Convenience charges from ticket
sales at outlets, through call centers and via the internet (inclusive of per
order handling charges added for sales through call centers and via the
internet) when added together averaged $4.49 per ticket in fiscal 1998.
Generally, the agreement between the Company and a client will also establish
the amounts and frequency of any increases in the convenience charge and
handling charges during the term of the agreement.
 
     The agreements with certain of the Company's clients may provide for a
client to participate in the convenience and/or handling charges paid by ticket
purchasers for tickets bought through the Company for that client's events. The
amount of such participation, if any, is determined by negotiation with clients.
Some agreements also may provide for the Company to make participation advances
to the client, generally recoupable by the Company out of the client's future
right to participations. In isolated instances, the Company may make an upfront,
non-recoupable payment to a client for the right to sell tickets for that
client.
 
     If an event is canceled, the Company's current policy is to refund the per
ticket convenience charges (but not the handling charge which is payable with
respect to transactions by telephone and online orders).
 
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Refunds of the ticket price for a canceled event are funded by the client. To
the extent that funds then being held by Ticketmaster on behalf of the client
are insufficient to cover all refunds, the client is obligated to provide
Ticketmaster with additional amounts within a specified period of time
(typically 24 to 72 hours) after a request by Ticketmaster. Clients have
historically fulfilled these obligations.
 
     During fiscal 1998, no single client accounted for more than 4.0% of the
Managed Businesses total revenues and no single facility accounted for more than
1.5% of the Company's total revenues. Historically, approximately 15% to 20% of
the Company's contracts are subject to renewal each fiscal year. The Company has
experienced substantial success in renewing its contracts with clients on an
annual basis.
 
DISTRIBUTION SYSTEM
 
     The Company's distribution system is principally comprised of remote sales
outlets, call centers and the Company's Web site, Ticketmaster Online
(http://www.ticketmaster.com). During fiscal 1998, ticket sales at the remote
sales outlets, at call centers and on the Internet accounted for approximately
50.0%, 48.5% and 1.5%, respectively, of ticket sales for the Company.
 
     Remote Sales Outlets. Through its Managed Businesses, the Company has
approximately 3,100 remote sales outlets worldwide with 2,800 in the U.S. and
approximately 300 in foreign territories, up from approximately 2,500 worldwide
at the end of fiscal 1996. The Company has emphasized the establishment of
retail outlets in high visibility chain stores with existing name recognition,
significant customer traffic and customer profiles consistent with the type of
events sold through the Ticketmaster System. The majority of remote sales
outlets are located in major department, grocery, and music stores. Among the
retailers that serve as remote sales outlets are Carson Prairie Scott,
Dayton/Hudson, Foley's and Robinsons-May department stores, Dominick's, Fiesta
and Kroger food stores, Coconuts and Tower Records music stores. The specific
stores within each chain that will serve as remote sales outlets is negotiated
by the Company with each chain.
 
     The Company is responsible for installation and maintenance of the hardware
and software necessary to operate the Ticketmaster System at the remote sales
outlets. The Company also trains the remote sales outlet's employees in the use
of the Ticketmaster System, provides support and oversight in connection with
the sale of tickets and furnishes the remote sales outlets with promotional
materials relative to the Ticketmaster System and events for which tickets are
available. The remote sales outlets are responsible for the staffing of the
stores and their daily operation. The remote sales outlets generally are paid a
commission of approximately 20% to 25% of the convenience charge, typically
subject to a maximum amount per ticket. A majority of sales at remote sales
outlets are for cash, although some department stores also accept their own
charge cards (in which case the cost of the charge card and payment risk are
borne by the department stores). Ticket purchasers are delivered their tickets
at the point of sale. The remote sales outlets generally deliver sales proceeds
and convenience charges to Ticketmaster on a schedule ranging from daily to
weekly depending on the financial condition of the particular remote sales
outlets and other factors. The Company has not suffered any material loss with
respect to funds collected by its remote sales outlets for remittance to the
Company.
 
     Call Centers. Through its Managed Businesses, the Company currently
operates 29 call centers worldwide, up from 19 at the end of fiscal 1996. Ticket
purchasers seeking a greater degree of convenience than is afforded at facility
box offices or remote sales outlets can purchase tickets by telephone seven days
a week, up to 14 hours per day, using a major credit card. Sales agents for the
Managed Businesses, staffing up to approximately 1,525 telephone positions
domestically and over 600 in foreign markets, take the caller's credit card
order and mail the tickets directly to the ticket purchasers. Tickets that are
purchased by telephone can also be picked up at the appropriate facility's "will
call" ticket window. A per order handling charge typically is assessed in
addition to the per ticket convenience charge. The ticket sales proceeds and
convenience and handling charges from telephone credit card transactions are
generally received by the Company within two business days after submission to
the credit card company. The call centers also respond to large numbers of
informational calls relative to events, including requests for facility
characteristics, directions, telephone numbers, disability access and seating
and local hotels and restaurants. Concurrently with the sale of tickets to
entertainment events, the Company's call centers offer other products for sale
related
 
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to the events for which tickets are being sold. The Company fulfills these sales
by ordering the products from a third party. The Company's domestic call centers
are located in Atlanta, Chicago, Cleveland, Columbus, Dallas, Denver, Detroit,
Houston, Los Angeles, Minneapolis, Orlando, Pittsburgh, San Diego, Seattle and
Virginia Beach. The Company also operates call centers in London, England, in
Calgary, Edmonton, Ottawa, Toronto, Vancouver and Winnipeg, Canada, in Dublin,
Ireland, in Buenos Aires, Argentina, in Santiago, Chile, in Melbourne and
Sydney, Australia, and in Mexico City and Monterey, Mexico.
 
     An important feature of the Company's domestic telephone system is the
ability to channel all or a portion of incoming calls from any city to a
selected call center. Accordingly, the number of telephone positions available
to receive telephone orders in a given region is capable of being increased in
advance of the commencement of sales activity for a major event. Similarly, the
ability to network call centers affords the Company backup capabilities in the
event that a call center experiences operating difficulties.
 
     Online Services. The Company has recently expanded its distribution network
through the addition of online services, which permit consumers to purchase
tickets and access information on their personal computers via the internet.
Currently, retail transactions for the Company and ticketing transactions for
the Company's entire ticketing clientele are capable of being processed through
the Company's Web site, Ticketmaster Online. The Company expects online to
become an important distribution channel as more consumers engage in
transactions over the internet. Additionally, this medium provides the Company
with a cost efficient way to disseminate information and cross-promote, which
may help reduce costs for these services across the Company's other distribution
channels.
 
THE TICKETMASTER SYSTEM
 
     The Company's proprietary operating system and application software, and
its computer and telephone systems, were specifically developed for the live
event ticketing industry. The Ticketmaster System provides clients with the
means to maintain and control their ticket inventory efficiently. Users of the
Ticketmaster System can effect a range of functions from the most basic to the
most complex, including individual advanced ticket sales, season and
subscription ticketing, day of show walk-up ticket sales and group ticket sales.
 
     The Ticketmaster System software is maintained in-house, eliminating any
reliance upon outside software companies. Consequently, the Company is able to
adapt to its clients' needs, changing market conditions and advances in hardware
and other technologies. The Ticketmaster System communicates directly with bank
processing centers for instantaneous online credit card authorization and
electronic deposit of credit card receipts. All of the Ticketmaster System's
online terminals at the call centers and at selected facility box offices have
access to the authorization network.
 
     Significant measures are taken to prevent system failure in each computer
center. Each system has a live backup standing ready in the event of a primary
system failure. The rooms housing the computer-related equipment are protected
by computer-safe fire protection systems. Dual custom air conditioning units
provide constant climate control. To guard against power outages, the Company
employs uninterruptable power supplies. High capacity back-up generators
eliminate the dependency on public electric sources. Moreover, all data is
continually recorded on a back-up hard copy and the Company maintains an online
disaster recovery site in one of its principal offices. Historically, the
Ticketmaster System has experienced minimal downtime.
 
     The Company's proprietary software is a product of over 20 years of
continual enhancement by a team of in-house software and system professionals
currently numbering over 80. The Company's research and development staff has
produced significant enhancements to the Ticketmaster System, including
proprietary ticket printers and data telecommunications multiplexors, and
regularly upgrades its software. In January of 1998, the Company acquired the
software capabilities of Distributed System Architects, Inc. ("DSA") which
provides software and service products for automated ticketing systems.
 
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INDUSTRY OVERVIEW
 
     The Company believes that since a small percentage of all tickets for live
entertainment events sold in the U.S. during fiscal 1998 were sold through
retail outlet networks, call centers and online services operated by automated
ticketing service companies, the domestic market represents a growth
opportunity.
 
     The use of automated ticketing is generally in an earlier stage of
development outside of the U.S., although the actual level of use varies greatly
from country to country. While the Company believes that there is substantial
potential for international growth, the timing and rate of penetration within
each international market will vary.
 
     The supply of tickets, both domestically and internationally, has increased
in recent years by virtue of, among other factors, increases in the number of
facilities (e.g., construction of amphitheaters), facility size and seating
capacity, event expansion into new market areas (e.g., the increase in the
number of professional sports teams and the development of new sports leagues)
and increases in the number of performances of an event (e.g., the adoption of
lengthened regular season play and expanded post-season play by sporting leagues
and associations). Ticket supply has also been enhanced by the desire of, and
necessity for, facilities to continually present as many revenue-producing
events as possible in order to meet their financial and other obligations. In
recent years, the public's increased demand for tickets to certain live
entertainment events has been evidenced by its willingness to pay higher ticket
prices to attend these events and the spread of public interest in certain types
of events beyond customary boundaries (e.g., increased worldwide interest in
football, baseball and basketball). In addition to live entertainment events
held at arenas, amphitheaters, stadiums and performing arts venues, automated
ticketing for live events has expanded into servicing ticket issuing facilities
that do not generally have seats (e.g., museums, amusement parks, state and
county fairs and golf courses).
 
     The success of automated ticket service companies depends on their ability
to develop and maintain relationships with facilities, sports teams and
promoters by providing high quality service as well as the availability of, and
public demand for, tickets for all types of events, including sports, family
entertainment, concerts, fine arts and cultural attractions.
 
COMPANY HISTORY
 
     Ticketmaster Corporation, the Company's principal subsidiary, was organized
in 1976 for the primary purpose of developing stand-alone automated ticketing
systems for sale to individual facilities. Ticketmaster Corporation initially
derived its revenues solely from the sale and installation of equipment and
ongoing royalties and service fees, but was not involved in the actual process
of selling tickets to the public. In the fall of 1982, Ticketmaster Corporation
began its transformation from a seller of stand-alone systems to a service
provider. Ticketmaster Corporation's growth and success resulted from combining
an integrated ticket inventory control management system (which permitted
season, subscription, group and individual tickets to be handled on one system)
with extensive distribution capabilities. In addition, by establishing revenue
sharing arrangements similar to those employed by food service and other
concessionaires to the facilities, Ticketmaster Corporation provided the
facilities with a new source of revenue.
 
     Historically, the Company expanded both internally and through joint
ventures and acquisitions. During the 1980s and the early 1990s, the Company
formed four principal domestic joint ventures covering all or parts of Alabama,
Arkansas, Georgia, Indiana, Kentucky, Mississippi, North Carolina, Ohio, Oregon,
South Carolina, Tennessee, Washington and West Virginia to operate ticket
selling services in those states. In addition, the Company selectively licensed
its name and technology to other entities for use in certain regions, including
Northern California, Washington, D.C., Philadelphia and parts of Canada and
Mexico.
 
     During the early 1990s, the Company continued to expand both through
acquisitions and strategic alliances with joint venture partners, including, in
1991, the acquisition of certain assets (principally client contracts) of
Ticketron, which previously had been one of the Company's major competitors; in
1992, the formation of a joint venture with an affiliate of Warner Music Group,
Inc. to pursue automated ticketing opportunities in European markets; and in
1994, the formation of a joint venture with an affiliate of Wembley plc to
provide advance ticketing for movie theaters worldwide and to market general
admission ticket selling
 
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and concession control systems to various clients, including movie theaters,
stadiums, arenas and amusement parks. During the past three years, the Company
has begun to reacquire certain of the rights to use the Company's name and the
Ticketmaster System that had previously been granted to joint ventures and to
licensees.
 
JOINT VENTURES AND LICENSEES
 
     In addition to the ticketing operations performed directly by the Company,
the Ticketmaster System is operated in certain territories through joint
ventures and licensees. Included among the Company's current and proposed joint
ventures and strategic alliances are the following:
 
     Australian Joint Ventures. On December 1, 1995, the Company and the
Victorian Arts Centre Trust formed joint ventures (the "Australian Joint
Ventures") for the purpose of conducting the Company's live entertainment
ticketing business in Australia and, possibly, in New Zealand. The Company has a
50% interest in and serves as the managing partner of the Australian Joint
Ventures. The Australian Joint Ventures' clients include the Victorian Arts
Centre, the Australian Football League, the Melbourne Cricket Grounds and the
Australian Chamber Orchestra.
 
     Ireland Joint Venture. On July 31, 1997, the Company acquired 50% of the
capital stock of the Ticket Shop Limited and, through this company, conducts its
live entertainment ticketing business in Ireland. The Company serves as the
managing partner of the joint venture.
 
     Latin American Development Arrangement. The Company and Corporacion
Interamericana de Entretenimiento, S.A. de C.V. ("CIE") have entered into a
development arrangement (the "Latin American Venture") for the purpose of
marketing and operating the Ticketmaster System throughout Central and South
America. CIE is currently the owner of a 50.01% equity interest in the Company's
Mexico licensee with the Company owning the remaining 49.99% equity interest in
this licensee. The Company will have a 50.01% interest in and serve as the
manager of each operating entity which is organized pursuant to the Latin
American Venture. To date, the Latin American Venture has commenced operations
in Argentina and Chile.
 
     Domestic Licensees. The Company has selectively licensed its name and
technology to third parties for use in Oklahoma, Oregon, parts of Washington and
Maryland and in Washington, D.C. and certain other cities (see Item 3 -- "Legal
Proceedings"). The Company derives revenues from the licensees in the form of
license fees and/or ongoing per ticket royalties. Less than 1% of the Company's
total revenues during fiscal 1998 were derived from these license arrangements.
Some of the Company's license agreements continue indefinitely while others have
scheduled expirations through May 2001. Certain of the license agreements are
renewable at the option of the licensee.
 
COMPETITION
 
     Not all facilities, promoters and other potential clients use the services
of an automated ticketing company, choosing instead to distribute their tickets
through their own internal box offices or other distribution channels.
Accordingly, the Company competes with the facilities, promoters and other
potential clients for the right to distribute their tickets at retail outlets,
by telephone and on the Internet. Among those who perform their own ticketing
are The Shubert Organization (Telecharge), New York Mets, Contemporary
Productions, a wholly owned subsidiary of SFX Entertainment, Inc. and Don Law
Presents (Next Ticketing).
 
     For those facilities and promoters which decide to utilize the services of
an automated ticketing company, the Company competes with many international,
national and regional ticketing systems, such as Telecharge Systems, which is a
division of The Schubert Organization, Inc. and licenses the Ticketron software,
Dillards Ticketing Systems, which is a division of Dillard's Department Stores,
Inc. (which uses its own department stores as ticket outlets), Advantix and ETM.
Several of the Company's competitors have operations in multiple locations
throughout the U.S., while others compete principally in one specific geographic
location. One or more of these regional ticketing systems could expand into
other regions or nationally. Other companies compete with the Company by selling
stand-alone automated ticketing systems to enable the
 
                                        8
<PAGE>   10
 
facilities to do their own ticketing, including companies that sell systems
under the names Prologue, Artsoft and Lasergate in the U.S., Bocs in the U.K.
and Softix in Australia, New Zealand and Pacific Rim countries. The Company has
experienced substantial competition for new accounts, such as 1994 World Cup
soccer (which became a client of the Company) and the National and California
Park Systems and the 1996 Summer Olympics (all of which became clients of one of
the Company's competitors). Accordingly, there can be no assurance that
prospective clients will enter into contracts with the Company rather than the
Company's competitors. The Company believes that it competes on the basis of
service provided, capability of the ticketing system, distribution network,
reliability and price.
 
     As an alternative to purchasing tickets through the Company, ticket
purchasers generally may purchase tickets from the facility's box office at
which an event will be held or by season, subscription or group sales directly
from the venue or promoter of the event. Although processed through the
Ticketmaster System, the Company derives no convenience charge revenue from the
ticket purchasers with respect to those ticket purchases.
 
TRADEMARKS AND PATENTS
 
     The Company owns a number of registered trademarks in various countries
relating to, among other things, the name Ticketmaster and its related logo. The
Company believes that such trademarks are widely recognized throughout North
America and other parts of the world and have considerable value. The Company is
not aware of any actions against its trademarks used in the ticketing business
and has not received any notice or claim of infringement in respect of such
trademarks.
 
     The Company also acquired the rights to the name Ticketron in connection
with the Company's purchase of certain assets of Ticketron.
 
     The Company presently has no patents pertaining to the Ticketmaster System.
Although the Company may in the future file for patent protection on products
developed or to be developed by it, there can be no assurance that any patents
will be issued or, if issued, that such patents will provide the Company with
meaningful protection. Further, the technology used by the Company in many of
its products is likely to be within the state-of-the-art and may not be more
advanced than the technology used by or available to certain of its present or
potential competitors. The Company may be unable to prevent its competitors and
others from incorporating features of the Company's products into their own
products.
 
REGULATION
 
     The Company is regulated by certain state and local regulations, including,
but not limited to, a law in Georgia that establishes maximum convenience
charges on tickets for certain sporting events. Other bills that could affect
the way the Company does business, including bills that would regulate the
amount of convenience charges and handling charges, are introduced from time to
time in federal, state and local legislative bodies. The Company is unable to
predict whether any such bills will be adopted and, if so, the impact thereof on
its business.
 
     In addition, increasing concern over consumer privacy has led to the
introduction from time to time of proposed legislation which could impact the
direct marketing and market research industries. The Company does not know when
or whether any such proposed legislation may pass or whether any such
legislation would relate to the types of services currently provided by the
Company or which the Company intends to develop. Accordingly, the Company cannot
predict the effect, if any, that any such future regulation may have on its
business.
 
     Because the Company's current business consists primarily of responding to
inbound telephone calls, it is not highly regulated. However, in the event that
the Company decides to expand its outbound telemarketing services to improve
off-peak call center utilization, such rules and regulations would apply to a
larger percentage of the Company's business. Accordingly, the Company must
comply with the Federal Communications Commission's rules under the Federal
Telephone Consumer Protection Act of 1991 and the Federal Trade Commission's
regulations under the Federal Telemarketing and Consumer Fraud and Abuse
Prevention Act of 1994, both of which govern telephone solicitation. The Company
believes that it currently is, and will continue to be, in compliance with such
statutes. Furthermore, there may be additional federal or state
 
                                        9
<PAGE>   11
 
legislation, or changes in regulatory implementation, that limit the activities
of the Company or its clients in the future or significantly increase the cost
of compliance.
 
EMPLOYEES
 
     As of January 31, 1998, the Company employed approximately 1,465 domestic
and 550 foreign full-time employees, approximately 285 domestic part-time
administrative employees and approximately 3,660 domestic and 395 foreign
part-time telephone sales agents.
 
     The telephone sales agents in Chicago and Ontario, Canada and the telephone
sales agents employed by the Australian Joint Venture (approximately 15% of the
Company's telephone sales agents) are the only employees of the Company covered
by collective bargaining agreements. The collective bargaining agreements
covering the telephone sales agents in Canada and Chicago are scheduled to
expire on March 31, 2000 and December 31, 2000, respectively. The collective
bargaining agreement covering the telephone sales agents in Australia expired on
December 1, 1997, however, the Company is continuing to operate under the terms
of the preexisting agreement until a new agreement is finalized. The Company
believes that its relations with its employees are good.
 
ITEM 2. PROPERTIES
 
     The Company owns its principal offices in West Hollywood, California, and
an operating office in Vancouver, Canada, while leasing office space in various
cities throughout the U.S., the U.K., Germany, France, Singapore, Canada, Chile
and Argentina. The Company currently has approximately 562,000 square feet of
space under lease, with scheduled expirations ranging from May 1998 to May 2008.
 
     The Company's corporate offices are housed in a 70,000 square foot
building. The building was purchased in October 1996 and also serves as the
principal offices for Live! magazine and Ticketmaster Online. The Company
currently occupies approximately 55,000 square feet of the building, with
tenants occupying a majority of the remaining space.
 
ITEM 3. LEGAL PROCEEDINGS
 
     During 1994, the Company was named as a defendant in 16 federal class
action lawsuits filed in United States District Courts purportedly on behalf of
consumers who were alleged to have purchased tickets to various events through
the Company. These lawsuits alleged that the Company's activities violated
antitrust laws. On December 7, 1994, the Judicial Panel on Multidistrict
Litigation transferred all of the lawsuits to the United States District Court
for the Eastern District of Missouri (the "District Court") for coordinated and
consolidated pretrial proceedings. After an amended and consolidated complaint
was filed by the plaintiffs, the Company filed a motion to dismiss and, on May
31, 1996, the District Court granted that motion ruling that the plaintiffs had
failed to state a claim upon which relief could be granted. On June 12, 1996,
the plaintiffs appealed the District Court's decision to the Court of Appeals
for the Eighth Circuit. Oral argument on the appeal was held on February 14,
1997.
 
     On April 10, 1998, the Court of Appeals issued an opinion affirming the
district court's ruling that the plaintiffs in the consolidated consumer class
action lawsuit lack standing to pursue their claims for damages under the
antitrust laws. However, the Appellate Court held that the plaintiffs' status as
indirect purchasers of Ticketmaster's services did not bar them from seeking
injunctive relief against the Company.
 
     The Company believes that the Court's affirmance of the decision
prohibiting plaintiffs from obtaining monetary damages against Ticketmaster
eliminates the substantial portion of plaintiffs' claims. With respect to
injunctive relief, the Antitrust Division of the United States Department of
Justice had previously investigated Ticketmaster for in excess of 15 months and
closed its investigation with no suggestion of any form of injunctive relief or
modification of the manner in which Ticketmaster does business.
 
     On July 23, 1997, a three-member tribunal of the American Arbitration
Association issued an Award in favor of the claimant MovieFone, Inc., Promofone,
Inc. and the Teleticketing Co. LP (the "MovieFone Entities") and against the
respondent, Pacer Cats Corporation, a wholly owned subsidiary of Wembley plc and
now known as "PCC Management, Inc.". The Award provides, among other things, (i)
that the respondent shall pay to the claimant damages aggregating $22,751,250
and (ii) for injunctive relief relating to certain
 
                                       10
<PAGE>   12
 
conduct of the respondent and its successors and assigns with respect to the
MovieFone Entities' business for a specified period of time. The foregoing only
summarizes certain provisions of the Award, and reference is made to the full
text thereof filed as Exhibit 99.3.
 
     No entity owned by the Company, including, but not limited to,
Pacer/CATS/CCS, was a party to the arbitration proceeding. Nonetheless, counsel
for Wembley plc, WIL, Incorporated, PCC Management, Inc. and Wembley, Inc.
(collectively the "Wembley Entities"), by letter dated August 4, 1997, advised
Pacer/ CATS/CCS, Ticketmaster Corporation, Ticketmaster Cinema Group, Ltd. and
Cinema Acquisition Corporation (collectively, the "Ticketmaster Entities"), that
the Wembley Entities intend to look to the Ticketmaster Entities to be made
whole with respect to the costs of the arbitration, including attorneys' fees
incurred in connection therewith, and all or part of any monetary damages
assessed against the respondent.
 
     The Ticketmaster Entities in turn have advised counsel for the Wembley
Entities that they believe that there is no validity to any claim by the Wembley
Entities against any of the Ticketmaster Entities. In this regard, by agreement
dated July 2, 1996 ("the Agreement"), the Wembley Entities released and
covenanted not to sue the Ticketmaster Entities in connection with any claims
arising out of the arbitration proceeding; however, the Wembley Entities
retained certain limited indemnification rights under the Agreement, solely with
respect to Pacer/CATS/CCS and its operations from and after April 15, 1994. In
the event any of the alleged claims are pursued by the Wembley Entities, the
Ticketmaster Entities intend to vigorously oppose them. No determination,
adverse or otherwise, can presently be made as to the effect, if any, this
matter may have on the Company.
 
     On April 18, 1997, Ticketmaster Group Limited Partnership ("TGLP"), the
Company's licensee in Maryland, Washington, D.C. and parts of Virginia, filed an
amended complaint against Ticketmaster Corporation, a wholly-owned subsidiary of
the Company, in the United States District Court for the Northern District of
Illinois. Plaintiff alleges that Ticketmaster Corporation has undertaken a
course of conduct designed to force plaintiff to sell its operations or
relinquish management control to Ticketmaster Corporation by intentionally
withholding access codes and enhancements to the Ticketmaster System. Plaintiff
alleges that Ticketmaster Corporation, by its conduct, has breached the license
agreement between the parties and has engaged in tortious and unfair business
practices. Ticketmaster Corporation has filed an answer denying the material
allegations contained in the complaint and has asserted a counter claim for the
breach of the license agreement against TGLP on May 5, 1997. Discovery is
currently in process and no determination, adverse or otherwise, can presently
be made as to the effect, if any, this matter may have on the Company.
 
     On April 28, 1997, Ticketmaster Corporation filed a complaint against
Microsoft Corporation ("Microsoft") in the United States District Court for the
Central District of California. Plaintiff alleges that Microsoft wrongfully
appropriated and misused Ticketmaster's worldwide web site by unlawfully linking
its own web site to and associating it with the Ticketmaster web site. Plaintiff
seeks declaratory judgment in its favor, seeks to permanently enjoin Microsoft
from making any commercial use of Ticketmaster's web site and seeks unspecified
damages. On February 12, 1998, Ticketmaster filed a second amended complaint
against Microsoft. In addition to the allegations in its original complaint
which remain substantially intact, copyright infringement allegations were added
in the amended complaint. Microsoft has answered the second amended complaint,
asserted various affirmative defenses and a counter claim for declaratory
relief.
 
     The Company and, as indicated below, certain of its current and former
directors have been named as defendants in the following six purported class
action lawsuits (one of which has since been dismissed):
 
     O Natalee Klein and Martin Lubow v. Ticketmaster Group, Inc., Home Shopping
       Network Inc., Paul G. Allen, Peter Barton, Barry Diller, Jonathan Dolgen,
       James Held, John A. Pritzker, Fredric D. Rosen, and William D. Savoy,
       Circuit Court of Cook County, Illinois, Chancery Division, No. 97 CH
       13392 [DISMISSED]
 
     O Mary E. O'Donnell v. HSN Inc., Barry Diller, Paul G. Allen, Fredric D.
       Rosen, Charles Evans Gerber, David E. Liddle, John A. Pritzker, William
       D. Savoy, Terence M. Strom, and Ticketmaster Group, Inc. Circuit Court of
       Cook County, Illinois, Chancery Division, No. 97 CH 13411
 
     O Ari Parnes v. Ticketmaster Group, Inc., Home Shopping Network Inc., Paul
       G. Allen, Peter Barton, Barry Diller, Jonathan Dolgen, James Held, John
       A. Pritzker, Fredric D. Rosen, and William D. Savoy, Circuit Court of
       Cook County, Illinois, Chancery Division, No. 97 CH 14086
                                       11
<PAGE>   13
 
     O Brickell Partners, a Florida Partnership v. Paul G. Allen, Fredric D.
       Rosen, Jonathan Dolgen, Peter Barton, John A. Pritzker, William D. Savoy,
       and HSN, Inc., Circuit Court of Cook County, Illinois, Chancery Division,
       No. 97 CH 13537
 
     O Tiger Options, LLC v. Ticketmaster Group, Inc., Barry Diller, Paul Allen,
       David E. Liddle, William D. Savoy, Fredric D. Rosen, John A. Pritzker,
       Terence M. Strom, James Held, and Home Shopping Network, Inc., Superior
       Court of the State of California, County of Los Angeles, No. BC 180045
 
     O Curt C. Bender, Trustee, On Behalf of Himself and All Other Similarly
       Situated v. Ticketmaster Group, Inc., Barry Diller, Paul Allen, David E.
       Liddle, William D. Savoy, Fredric Rosen, John A. Pritzker, Terence M.
       Strom, James Held, and Home Shopping Network, Inc. Does 1-25, Superior
       Court of the State of California, County of Los Angeles, No. BC 181006
 
     The complaints, all of which are substantially similar, challenge the offer
by USA Networks, Inc. ("USAi") (formerly Home Shopping Network, Inc.) to acquire
the remaining shares in the Company which it does not already own and allege
that the consideration offered by USAi is inadequate and that the defendants
have breached their fiduciary duties to the plaintiffs and the class of
shareholders of the Company which they claim to represent. The cases seek to
enjoin the proposed transaction and ask for unspecified damages. The three
pending Illinois cases have been consolidated, and the plaintiffs in one of the
California cases have agreed to stay proceedings in that case pending the
outcome of the Illinois cases. The Company believes that all the lawsuits are
without merit and intends to vigorously defend the claims asserted.
 
     From time to time, federal, state and local authorities commence
investigations or inquiries with respect to the Company's compliance with
applicable antitrust, consumer protection, deceptive advertising, unfair
business practice and other laws. The Company has historically cooperated in and
satisfactorily resolved each such investigation or inquiry.
 
     The Company believes that it has conducted its business in substantial
compliance with all applicable laws, including federal and state antitrust laws.
In the opinion of the Company's management, none of the Company's legal
proceedings will have a material adverse effect on the Company's financial
position or results of operation. The Company has incurred significant legal
expenses in connection with these and other investigations and lawsuits and may
incur additional significant legal expenses in the future should investigations
or lawsuits be instituted.
 
     The Company is involved in various other litigation and claims arising out
of or related to the normal conduct of its business, including but not limited
to, claims alleging violations of the antitrust laws. In the opinion of the
Company, none of these proceedings will have a material adverse effect on its
results of operations or financial condition.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
     No matters were submitted to a vote of the Company's shareholders during
the fourth quarter of its fiscal year ended January 31, 1998.
 
                                       12
<PAGE>   14
 
                                    PART II
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
 
     In November 1996, the Company completed the Initial Public Offering at an
initial price to the public of $14.50 per share. The market price of the Common
Stock is likely to be highly volatile and could be subject to wide fluctuations
in response to quarterly variations in operating results, announcements of new
contracts or contract cancellations, announcements of technological innovations
or new products or services by the Company or its competitors, changes in
financial estimates by securities analysts or other events or factors. The
market price of the Common Stock also may be affected by the Company's ability
to meet analysts' expectations, and any failure to meet such expectations, even
if minor, could have a material adverse effect on the market price of the Common
Stock.
 
     The Common Stock is traded on the Nasdaq National Market under the symbol
"TKTM." The following table sets forth the range of the high and low closing
sale prices of the Common Stock, for the fiscal quarter indicated, as reported
on the Nasdaq National Market:
 
<TABLE>
<CAPTION>
                                                              HIGH      LOW
                                                              ----      ---
<S>                                                           <C>       <C>
Fiscal 1997
  Fourth Quarter (from November 18, 1996)...................  $15       $10 1/4
Fiscal 1998
  First Quarter.............................................   14 5/8    11 3/4
  Second Quarter............................................   17 3/4    11 5/8
  Third Quarter.............................................   25        16
  Fourth Quarter............................................   24 1/2    20 7/8
</TABLE>
 
     As of April 20, 1998, there were 26,251,440 shares of Common Stock
outstanding, held by approximately shareholders of record.
 
     Since November 17, 1993, the Company has not declared or paid any dividends
upon its Common Stock. The Company presently intends to retain earnings during
the foreseeable future for general corporate purposes, including business
expansion and capital expenditures. The declaration and payment of future
dividends will be at the sole discretion of the Board of Directors and will
depend on the Company's profitability, financial condition, capital needs,
future prospects and other factors deemed relevant by the Board of Directors.
 
     Furthermore, the Company's Credit Agreement, as amended (the "Credit
Agreement"), imposes restrictions and limitations on the making of dividends and
distributions to the Company's shareholders. Accordingly, the future ability of
the Company to declare and pay dividends on its Common Stock will be limited by
virtue of the restrictions under the Credit Agreement.
 
     In addition, the separate credit agreement pertaining to the Company's
Pacer/CATS/CCS operations restricts the ability of that entity to transfer funds
to the Company in the form of cash dividends, loans or advances.
 
     On March 20, 1998, USAi and Ticketmaster entered into a definitive merger
agreement pursuant to which USAi will acquire each share of Ticketmaster not
owned by USAi at the time of the merger for .563 of a USAi common share (1.126
shares after giving effect to the USAi 2-for-1 stock split paid to USAi
shareholders on March 26, 1998). The transaction is subject to approval by
Ticketmaster shareholders.
 
                                       13
<PAGE>   15
 
ITEM 6. SELECTED FINANCIAL DATA
 
     The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" and the Consolidated Financial Statements and the related notes
appearing elsewhere in this Report.
 
                            SELECTED FINANCIAL DATA
 
                            HISTORICAL AND PRO FORMA
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                                                                    PRO FORMA
                                                                                                                   FISCAL YEAR
                                                                      YEAR ENDED JANUARY 31,                          ENDED
                                                  --------------------------------------------------------------   JANUARY 31,
                                                     1994         1995         1996         1997         1998         1998
                                                  ----------   ----------   ----------   ----------   ----------   -----------
<S>                                               <C>          <C>          <C>          <C>          <C>          <C>
Consolidated Businesses
  Revenue.......................................  $  146,640   $  182,950   $  161,250   $  230,961   $  340,980   $  361,697
  Operating income..............................       7,763        4,045        2,710       13,663       29,525       32,140
  Net income (loss).............................          40       (6,678)      (8,095)       1,792        8,147        9,582
  Basic earnings (loss) per share...............  $      .01   $     (.44)  $     (.53)  $      .10   $      .32   $      .37
  Diluted earnings (loss) per share.............         .01         (.44)        (.53)         .10          .31          .36
Unconsolidated Businesses
  Revenue.......................................  $   41,812   $   69,269   $   80,053   $   67,541   $   35,511   $   20,587
  Operating income..............................       3,845        4,712        8,690        9,398        4,247          929
  Pretax income.................................       3,738        3,632        7,443        8,859        4,648          531
  Ticketmaster's share of net income (loss).....       1,577        1,360        1,458        3,605        1,240         (302)
SUPPLEMENTAL INFORMATION:
Number of tickets sold:
Consolidated Businesses.........................      38,655       42,458       37,619       45,530       61,890       66,397
Unconsolidated Businesses.......................      12,194       13,156       15,497       14,491        8,297        4,396
                                                  ----------   ----------   ----------   ----------   ----------   ----------
Managed Businesses..............................      50,849       55,614       53,116       60,021       70,187       70,793
                                                  ==========   ==========   ==========   ==========   ==========   ==========
Gross dollar value of ticket sales:
Consolidated Businesses.........................  $1,001,098   $1,308,310   $1,116,660   $1,370,709   $2,055,702   $2,196,499
Unconsolidated Businesses.......................     282,274      345,491      414,918      409,646      234,465      122,035
                                                  ----------   ----------   ----------   ----------   ----------   ----------
Managed Businesses..............................  $1,283,372   $1,653,801   $1,531,578   $1,780,355   $2,290,167   $2,318,534
                                                  ==========   ==========   ==========   ==========   ==========   ==========
Total revenues:
Consolidated Businesses.........................  $  146,640   $  182,950   $  161,250   $  230,961   $  340,980   $  361,697
Unconsolidated Businesses.......................      41,812       69,269       80,053       67,541       35,511       20,587
                                                  ----------   ----------   ----------   ----------   ----------   ----------
Managed Businesses..............................  $  188,452   $  252,219   $  241,303   $  298,502   $  376,491   $  382,284
                                                  ==========   ==========   ==========   ==========   ==========   ==========
EBITDA(1)
Consolidated Businesses.........................  $   15,585   $   15,986   $   10,577   $   22,602   $   52,581   $   58,832
Unconsolidated Businesses.......................       8,671        9,774       13,091       13,426        6,910        2,247
                                                  ----------   ----------   ----------   ----------   ----------   ----------
Managed Businesses..............................  $   24,256   $   25,760   $   23,668   $   36,028   $   59,491   $   61,079
                                                  ==========   ==========   ==========   ==========   ==========   ==========
Attributable EBITDA(2)..........................  $   18,235   $   19,503   $   15,222   $   28,299   $   55,310   $   58,329
Net cash provided by (used in) operating
  activities:
Consolidated Businesses.........................  $   14,571   $   12,309   $   (3,068)  $   15,585   $   34,147   $   39,193
Unconsolidated Businesses.......................       6,439       15,761       17,658       11,806       13,158        7,745
                                                  ----------   ----------   ----------   ----------   ----------   ----------
Managed Businesses..............................  $   21,010   $   28,070   $   14,590   $   27,391   $   47,305   $   46,938
                                                  ==========   ==========   ==========   ==========   ==========   ==========
Net cash used in investing activities:
Consolidated Businesses.........................  $   (6,250)  $  (14,553)  $   (9,452)  $  (43,752)  $  (52,627)  $  (51,443)
Unconsolidated Businesses.......................      (4,654)      (1,772)      (6,508)      (4,775)      (9,948)      (3,900)
                                                  ----------   ----------   ----------   ----------   ----------   ----------
Managed Businesses..............................  $  (10,904)  $  (16,325)  $  (15,960)  $  (48,527)  $  (62,575)  $  (55,343)
                                                  ==========   ==========   ==========   ==========   ==========   ==========
Net cash provided by (used in) financing
  activities:
Consolidated Businesses.........................  $   (2,732)  $   15,086   $    7,772   $   55,096   $   35,920   $   36,555
Unconsolidated Businesses.......................      (5,406)      (9,133)      (5,011)      (4,810)      (1,373)      (2,008)
                                                  ----------   ----------   ----------   ----------   ----------   ----------
Managed Businesses..............................  $   (8,138)  $    5,953   $    2,761   $   50,286   $   34,547   $   34,547
                                                  ==========   ==========   ==========   ==========   ==========   ==========
</TABLE>
 
---------------
(1) Defined as revenue less operating costs before interest, taxes, depreciation
    and amortization, ("EBITDA"). Managed Business EBITDA does not represent
    cash flows from operations, as defined by generally accepted accounting
    principles, and should not be considered to be an alternative to net income
    as an indicator of operating performance or to cash flows from operations as
    a measure of liquidity. Management believes that an EBITDA presentation is
    an important factor in evaluating the amount of cash available for repayment
    of debt, future investments and dividends and in determining cash available
    for future distributions.
 
(2) Defined as Ticketmaster's pro rata share in the results of its Consolidated
    Businesses and Unconsolidated Businesses' revenue less operating costs
    before interest, taxes, depreciation and amortization. EBITDA does not
    represent cash flows from operations, as defined by generally accepted
    accounting principles, and should not be considered to be an alternative to
    net income as an indicator of operating performance or to cash flows from
    operations as a measure of liquidity. Management believes that an EBITDA
    presentation is an important factor in evaluating the amount of cash
    available for repayment of debt, future investments and dividends and in
    determining cash available for future distributions.
 
                                       14
<PAGE>   16
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
 
     Management's discussion and analysis of the results of operations and
financial condition of the Company should be read in conjunction with the
Consolidated Financial Statements and related Notes thereto.
 
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
 
     The Company has made forward-looking statements in this document that are
subject to risks and uncertainties. Forward-looking statements include
information concerning possible or assumed future results of operations, and
include statements preceded by, followed by or that otherwise include the words
"believes," "expects," "anticipates," "intends," "estimates" or similar
expressions. For those statements, the Company claims the protection of the safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. The following important factors, in addition to
those discussed elsewhere in this document and in the documents which are
incorporated by reference, and in other public filings, press releases and
discussions with Company management, could affect the future results and could
cause these results to differ materially from those expressed in our
forward-looking statements: material adverse changes in economic conditions
generally or in the markets served by the Company; material changes in
inflation; future regulatory and legislative actions affecting the company's
industry; competition from others; product demand and market acceptance; the
ability to protect proprietary information and technology or to obtain necessary
licenses on commercially reasonable terms; the ability to expand into and
successfully operate in foreign markets; and obtaining and retaining skilled
workers.
 
GENERAL
 
     The Company seeks to optimize the performance of each of the Managed
Businesses regardless of its percentage ownership. The Company provides the same
scope of ticket inventory control and management, distribution and dedicated
marketing and support services to its unconsolidated businesses as it does to
its wholly and majority owned operating subsidiaries. Consequently, certain
aspects of the performance of the Managed Businesses are better understood by
measuring their performance as a whole without regard to the Company's ownership
interest. Where relevant, certain aspects of the performance of the Managed
Businesses are also discussed with regard to the Consolidated Businesses and
Unconsolidated Businesses separately.
 
     The Company believes that a meaningful measure of its operating results, in
addition to those of the Company on a historical consolidated basis, is a period
to period comparison of the results of the Managed Businesses. Furthermore, in
order to obtain a better understanding of the factors affecting the Company's
performance, additional operating data is presented to show the Company's
attributable beneficial interest in (i.e., its pro rata share of the results of)
the Managed Businesses regardless of whether or not fully consolidated.
 
     During fiscal 1998, the Company made several acquisitions of third party
interests in certain of the Company's joint ventures and licensees. Comparisons
of results of operations have been significantly affected by these acquisitions.
 
REVENUES
 
     Historically, ticket operation revenues are primarily comprised of
convenience charges which the Company generates by providing clients with access
to the Company's extensive distribution capabilities including Company-owned
call centers, an independent network of sales outlets remote to the client's box
office and non-traditional distribution channels such as the Internet. Other
components of ticket operations revenue include handling fees attributed to the
sale and distribution of tickets through channels other than remote sales
outlets and licensing fees. Supplemental revenues are generated through the
development of integrated marketing programs designed to provide a strategic
partner with access to the Company's extensive distribution capabilities and
media assets such as Live! magazine and Ticketmaster Online. Additional
sponsorship and promotion opportunities exist through call center music on hold,
ticketbacks, inserts and ticket envelopes. The Company also generates revenues
from the sale of ticketing systems to licensees and
 
                                       15
<PAGE>   17
 
other third party users, which revenues historically have averaged between 1%
and 2% of total revenues on an annual basis.
 
     The Company generally contracts with each client to be its exclusive agent
for ticket distribution for a specified period, typically three to five years,
and has experienced a high contract renewal rate. In contracts with clients, the
Company is granted the right to collect from ticket purchasers a per ticket
convenience charge on all tickets sold by the Company and an additional per
order handling charge on those tickets sold by the Company at other than remote
sales outlets.
 
     Fluctuations in ticket operation revenues occur largely as a result of
changes in the number of tickets sold and changes in the Company's average
revenue per ticket. The number of tickets sold by the Company can vary as a
result of (i) additions or deletions to the list of client facilities serviced
by the Company; (ii) fluctuations in the scheduling of events, particularly for
popular performers; (iii) overall consumer demand for live entertainment events;
and (iv) the percentage of tickets for events which are sold directly by the
Company's clients and not through the Company's distribution system.
 
     The average revenue per ticket will vary as a result of the amount of
convenience charges earned on each ticket. The amount of the convenience charge
typically varies based upon numerous factors, including the type of event and
whether the ticket is purchased at a retail sales outlet, through call centers,
or via the Internet, as well as the services to be rendered to the client, the
amount and cost of equipment to be installed at the client's facility and the
amount of advertising and/or promotional allowances to be provided by the
Company. Generally, contracts with clients provide for scheduled increases in
convenience charges during the term of the contract.
 
     The sale of tickets for an event often commences several months prior to
the date of the event. The Company recognizes ticket operation revenue when the
ticket is sold. If an event is likely to be canceled, an allowance is
established in the financial statements for potential convenience charge
refunds. Except for major league sports' work stoppages, the losses attributable
to cancellations have been very limited because most events are postponed and
rescheduled rather than canceled.
 
     Additional revenue is generated through the sale of automated concession
inventory control systems which are manufactured by Pacer/CATS/CCS and marketed
to movie theatres, stadiums, arenas and general admission facilities. Revenue is
principally recognized from the sale of software and hardware.
 
     The Company has generated revenue through the sale of subscriptions to the
Ticketmaster Entertainment Guides, which were produced and distributed by the
Company to provide the ticket buying public with regional information regarding
future live entertainment events. Significant growth in the number of
subscribers to the Entertainment Guide led, in part, to the creation of Live!
magazine, a monthly entertainment publication whose first edition was published
in February 1996. Each edition of Live! contains a supplemental regional
Entertainment Guide inserted for the reader's benefit.
 
     The Company also operates Entertainment To Go ("ETG"), a merchandising
business designed to leverage the Company's inbound call center traffic, its
database of consumers and its relationships with the music and entertainment
industries to sell generally at retail prices music, tour and entertainment
related merchandise products to consumers.
 
OPERATING COSTS
 
     The Company records ticket operations costs specifically associated with
the distribution of tickets sold through its system. The largest components of
these operating costs are payroll, telecommunication charges, data communication
costs and commissions paid on tickets distributed through outlets away from the
box office, along with the clients' share of convenience and handling charges,
and other expenses with lesser components including ticket stock and postage.
These costs are primarily variable in nature. Direct payroll costs relate to the
Company's call centers, which are located throughout the U.S., and in the U.K.,
Canada, Australia, Mexico, Argentina, Chile and Ireland. Outlet commissions are
paid to grocery store/supermarkets, department stores, music chains and other
independent retail locations in exchange for their providing space
 
                                       16
<PAGE>   18
 
and personnel to service ticket purchases. The participation, if any, by clients
in the Company's revenues from convenience and handling charges and other
revenues is set forth in the Company's contracts with its clients.
 
     Costs incurred from the manufacturing and distribution of automated
concession inventory control systems include research and development, inventory
procurement, payroll and distribution expenses. These costs are primarily
variable in nature and fluctuate based upon the number of systems installed on
an annual basis.
 
     Costs associated with the production and fulfillment of Live! magazine
include production (paper and printing), editorial and distribution costs. These
costs are primarily variable in nature and fluctuate based upon the number of
copies produced and the number of pages in each edition.
 
     The costs recorded by the Company for its merchandising operations are
directly related to the procurement of products which are ultimately sold and
distributed to consumers. The Company acquires its products through licensees of
major touring acts and other copyright owners and does not generally invest in
or hold inventory prior to sale; consequently, operations are designed to
quickly access product inventory to fulfill orders.
 
     Because many operating expenses such as those attributable to technology
support, sales and marketing, human resources management and other
administrative functions are not allocable to specific businesses, they are
recorded as corporate general and administrative expenses. These cost
characteristics of maintaining the Company's Consolidated Businesses differ from
the cost characteristics of the Unconsolidated Businesses; consequently,
Consolidated Businesses have higher costs of services as a percentage of revenue
than Unconsolidated Businesses.
 
OTHER
 
     Although the Company collects ticket receipts, representing the full ticket
sale price, on behalf of its clients, it only records as revenue the convenience
charges and handling fees included in the ticket sales price. The remainder of
the ticket sales price constitutes funds being held on behalf of clients, which
the Company is obligated to remit to its clients at times specified by contracts
with each client. As a result, a significant portion of the Company's cash,
accounts receivable and accounts payable relates to funds received and held on
behalf of clients. Accounts payable clients primarily represent the ticket
proceeds payable to its clients, which are paid according to the terms specified
in each contract, typically weekly. Accounts receivable ticket proceeds
primarily represent the portion of ticket proceeds, including the convenience
charges, due the Company from its independent outlets and from credit card
companies. The Company's contracts with outlets set forth payment terms,
generally ranging from daily to weekly, which together with other collection
procedures virtually eliminate losses from these receivables.
 
PRO FORMA FINANCIAL INFORMATION
 
     As described in Note 4 of the Consolidated Financial Statements, the
Company acquired ownership interests in Ticketmaster operating entities from
certain joint venture partners, minority shareholders and licensees during
fiscal 1998. Accordingly, the following pro forma financial information has been
prepared to illustrate the effects of these acquisitions. The pro forma
financial information does not purport to represent what the Company's results
of operations actually would have been assuming the acquisitions had been made
as of February 1, 1997. The pro forma adjustments are based on currently
available information and upon certain assumptions that management believes are
reasonable under certain circumstances. The pro forma financial information and
accompanying notes should be read in conjunction with the Consolidated Financial
Statements and related Notes thereto.
 
                                       17
<PAGE>   19
 
                            TICKETMASTER GROUP, INC.
 
                   PRO FORMA COMBINED STATEMENT OF OPERATIONS
                       FISCAL YEAR ENDED JANUARY 31, 1998
              (IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                TICKETMASTER    ACQUIRED
                                                CONSOLIDATED   TICKETING     PRO FORMA      COMBINED
                                                 BUSINESSES    BUSINESSES   ADJUSTMENTS     PRO FORMA
                                                ------------   ----------   -----------    -----------
<S>                                             <C>            <C>          <C>            <C>
Revenues:
  Ticketing operations........................  $   295,419     $20,796       $   (79)(1)  $   316,136
  Concession control systems..................       30,036                                     30,036
  Publications................................       13,067                                     13,067
  Merchandising...............................        2,458                                      2,458
                                                -----------     -------       -------      -----------
                                                    340,980      20,796           (79)         361,697
Operating costs, expenses and other items:
  Ticketing operations........................      169,007      10,839           (79)(1)      179,767
  Ticketing selling, general and                     49,957       3,706                         53,663
     administrative...........................
  Concession control systems operations.......       16,900                                     16,900
  Concession control systems selling, general        10,911                                     10,911
     and administrative.......................
Publications..................................       17,753                                     17,753
Merchandising.................................        2,375                                      2,375
Corporate general and administrative..........       21,496                                     21,496
Depreciation..................................       10,561         505                         11,066
Amortization of goodwill......................        4,692          14           496(2)         5,202
Amortization of other.........................        9,220         465           428(2)        10,113
Equity in net (income) loss of unconsolidated        (1,417)      1,728                            311
  affiliates..................................
                                                -----------     -------       -------      -----------
  Operating income............................       29,525       3,539          (924)          32,140
Other expenses:
  Interest expense, net.......................        9,560         (45)          690(3)        10,205
  Minority interests..........................          (65)       (240)                          (305)
                                                -----------     -------       -------      -----------
     Income before income taxes...............       20,030       3,824        (1,614)          22,240
  Income tax provision........................       11,883         484           291(4)        12,658
                                                -----------     -------       -------      -----------
     Net income...............................  $     8,147     $ 3,340       $(1,905)     $     9,582
                                                ===========     =======       =======      ===========
  Basic earnings per share....................         0.32                                $      0.37
                                                ===========                                ===========
     Diluted earnings per share...............  $      0.31                                $      0.36
                                                ===========                                ===========
Basic weighted average number of common shares   25,846,344                                 25,939,305
  outstanding (5).............................
                                                ===========                                ===========
Diluted Weighted average number of common        26,284,555                                 26,377,516
  shares outstanding (5)......................
                                                ===========                                ===========
Supplemental Financial Information:
  EBITDA(6)............................................................................    $    58,832
  Attributable EBITDA(7)...............................................................         58,329
  Net cash provided by operating activities............................................         39,193
  Net cash used in investing activities................................................        (51,443)
  Net cash provided by financing activities............................................         36,555
</TABLE>
 
                                       18
<PAGE>   20
 
                            TICKETMASTER GROUP, INC.
 
           NOTES TO JANUARY 31, 1998 PRO FORMA FINANCIAL INFORMATION
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
 
---------------
(1) Represents the elimination of license fees paid by Canada to Ticketmaster
    during the year.
 
(2) Represents amortization arising from the purchased user agreements and
    excess purchase price paid for the net assets of a joint venture partner's
    50% equity interest in Ticketmaster-Northwest and Synchro Systems, joint
    venture partners' 67% equity interest in Ticketmaster-Southeast and a
    licensee's 100% equity interest in the Canadian licensee. The purchased user
    agreements are being amortized using a discounted cash flow method through
    the expiration date of the underlying contracts, generally ranging from 3 to
    10 years. The cost in excess of net assets acquired is being amortized over
    a 30-year period.
 
(3) Represents the interest expense resulting from additional borrowings under
    the Company's Credit Agreement incurred by the Company as if the
    acquisitions had taken place on February 1, 1997, at rates of interest
    incurred by the Company during the year, approximately 7.0%.
 
(4) Represents the related income tax effect of the pro forma adjustments
    utilizing a statutory Federal rate of 34% and a statutory rate for state and
    foreign taxes based on the rate in the applicable jurisdiction.
 
(5) Includes the pro forma effect of 1,115,531 common stock equivalents issued
    in connection with the acquisition of the Canadian licensee for one
    additional month.
 
(6) Defined as revenue less operating costs before interest, taxes, depreciation
    and amortization. EBITDA does not represent cash flows from operations, as
    defined by generally accepted accounting principles, and should not be
    considered to be an alternative to net income as an indicator of operating
    performance or to cash flows from operations as a measure of liquidity.
    Management believes that an EBITDA presentation is an important factor in
    evaluating the amount of cash available for repayment of debt, future
    investments and dividends and in determining cash available for future
    distributions.
 
(7) Defined as Ticketmaster's pro rata share of its Consolidated Businesses and
    Unconsolidated Businesses' revenue less operating costs before interest,
    taxes, depreciation and amortization. EBITDA does not represent cash flows
    from operations, as defined by generally accepted accounting principles, and
    should not be considered to be an alternative to net income as an indicator
    of operating performance or to cash flows from operations as a measure of
    liquidity. Management believes that an EBITDA presentation is an important
    factor in evaluating the amount of cash available for repayment of debt,
    future investments and dividends and in determining cash available for
    future distributions.
 
                                       19
<PAGE>   21
 
RESULTS OF OPERATIONS
 
     The following tables set forth operating results for the Managed Businesses
showing the results of the Consolidated Businesses and the Unconsolidated
Businesses as a percentage of total revenues. The percentages shown for the
Unconsolidated Businesses represent the full balance for each line item and are
not reduced by the joint venture ownership interests held by entities other than
the Company.
 
<TABLE>
<CAPTION>
                                                              YEAR ENDED JANUARY 31,
                                                              -----------------------
                                                              1996     1997     1998
                                                              -----    -----    -----
<S>                                                           <C>      <C>      <C>
I. CONSOLIDATED BUSINESSES
  Revenue:
     Ticketing operations...................................   96.1%    88.9%    86.7%
     Concession control systems.............................    0.0      5.4      8.8
     Publications...........................................    2.6      4.7      3.8
     Merchandising..........................................    1.3      1.0      0.7
                                                              -----    -----    -----
                                                              100.0    100.0    100.0
                                                              -----    -----    -----
  Operating Costs:
     Ticketing operations...................................   60.2     52.9     49.5
     Ticketing selling, general and administrative..........   17.2     15.5     14.6
     Concession control systems operations..................    0.0      3.2      5.0
     Concession control systems selling, general and
      administrative........................................    0.0      2.6      3.2
     Publications...........................................    5.7      7.8      5.2
     Merchandising..........................................    1.2      0.9      0.7
     Corporate general and administrative...................    9.2      7.3      6.3
     Depreciation...........................................    3.0      2.9      3.1
     Amortization of goodwill...............................    1.2      1.0      1.4
     Amortization of other..................................    1.6      1.7      2.7
     Equity in net income of unconsolidated affiliates......   (0.9)    (1.8)    (0.4)
                                                              -----    -----    -----
          Operating income..................................    1.6      6.0      8.7
  Other (income) expenses:
     Interest expense, net..................................    7.9      5.0      2.8
     Minority interests.....................................    0.2      0.1      0.0
     Gain on sale of unconsolidated affiliate...............    0.0     (1.4)     0.0
                                                              -----    -----    -----
          Income (loss) before income taxes.................   (6.5)     2.3      5.9
  Income tax provision (benefit)............................   (1.4)     1.4      3.5
                                                              -----    -----    -----
          Net income (loss).................................   (5.1)%    0.9%     2.4%
                                                              =====    =====    =====
II. UNCONSOLIDATED BUSINESSES:
  Revenue:
     Ticketing operations...................................   68.9%    80.5%    99.9%
     Concession control systems.............................   28.7     19.2      0.0
     Publications...........................................    2.4      0.3      0.1
                                                              -----    -----    -----
                                                              100.0    100.0    100.0
                                                              -----    -----    -----
  Operating costs:
     Ticketing operations...................................   38.5     45.1     56.2
     Ticketing selling, general and administrative..........   11.5     15.4     24.3
     Concession control systems operations..................   19.9     12.5      0.0
     Concession control systems selling, general and
      administrative........................................   12.3      6.9      0.0
     Publications...........................................    1.4      0.2      0.0
     Depreciation...........................................    3.2      3.0      4.6
     Amortization of goodwill...............................    0.5      0.2      0.0
     Amortization of other..................................    1.8      2.8      2.9
                                                              -----    -----    -----
          Operating income..................................   10.9     13.9     12.0
  Other (income) expenses:
     Interest expense and other.............................    1.2      1.4     (0.2)
                                                              -----    -----    -----
          Income before income taxes........................    9.7%    12.5%    12.2%
                                                              =====    =====    =====
</TABLE>
 
                                       20
<PAGE>   22
 
FISCAL YEAR 1998 COMPARED WITH FISCAL YEAR 1997
 
     The following tables set forth operating results for the Consolidated
Businesses and the Unconsolidated Businesses, collectively, the Managed
Businesses. The amounts shown for the Unconsolidated Businesses represent the
full balance for each line item and do not give effect to the joint venture
ownership interests held by entities other than the Company.
 
<TABLE>
<CAPTION>
                                       YEAR ENDED JANUARY 31, 1997                  YEAR ENDED JANUARY 31, 1998
                                ------------------------------------------   ------------------------------------------
                                CONSOLIDATED   UNCONSOLIDATED    MANAGED     CONSOLIDATED   UNCONSOLIDATED    MANAGED
                                 BUSINESSES      BUSINESSES     BUSINESSES    BUSINESSES      BUSINESSES     BUSINESSES
                                ------------   --------------   ----------   ------------   --------------   ----------
                                                                     (IN THOUSANDS)
<S>                             <C>            <C>              <C>          <C>            <C>              <C>
Revenues:
  Ticketing operations........    $205,491        $54,401        $259,892      $295,419        $35,476        $330,895
  Concession Control
    Systems...................      12,401         12,964          25,365        30,036             --          30,036
  Publications................      10,769            176          10,945        13,067             35          13,102
  Merchandising...............       2,300             --           2,300         2,458             --           2,458
                                  --------        -------        --------      --------        -------        --------
         Total Revenues.......     230,961         67,541         298,502       340,980         35,511         376,491
                                  --------        -------        --------      --------        -------        --------
Operating costs:
  Ticketing operations........     122,243         30,472         152,715       169,007         19,974         188,981
  Ticketing selling, general
    and administrative........      35,789         10,366          46,155        49,957          8,627          58,584
  Concession control systems
    operations................       7,377          8,462          15,839        16,900             --          16,900
  Concession control systems
    selling, general and
    administrative............       5,995          4,687          10,682        10,911             --          10,911
  Publications................      17,965            128          18,093        17,753             --          17,753
  Merchandising...............       2,141             --           2,141         2,375             --           2,375
  Corporate general and
    administrative............      16,849             --          16,849        21,496             --          21,496
  Depreciation................       6,714          2,012           8,726        10,561          1,647          12,208
  Amortization of goodwill....       2,356            142           2,498         4,692             --           4,692
  Amortization of other.......       3,923          1,874           5,797         9,220          1,016          10,236
                                  --------        -------        --------      --------        -------        --------
         Total operating
           costs..............     221,352         58,143         279,495       312,872         31,264         344,136
                                  --------        -------        --------      --------        -------        --------
                                     9,609        $ 9,398        $ 19,007        28,108        $ 4,247        $ 32,355
                                                  =======        ========                      =======        ========
  Equity in net income of
    unconsolidated
    affiliates................      (4,054)                                      (1,417)
                                  --------                                     --------
  Operating income............      13,663                                       29,525
  Interest expense and
    other.....................      11,808                                        9,495
  Gain on sale of
    unconsolidated
    affiliate.................      (3,195)                                          --
  Income tax provision........       3,258                                       11,883
                                  --------                                     --------
         Net income...........    $  1,792                                     $  8,147
                                  ========                                     ========
Supplemental information:
  EBITDA......................    $ 22,602        $13,426        $ 36,028      $ 52,581        $ 6,910        $ 59,491
                                  ========        =======        ========      ========        =======        ========
  Attributable EBITDA.........                                   $ 28,299                                     $ 55,310
                                                                 ========                                     ========
  Net cash provided by
    operating activities......    $ 15,585        $11,806        $ 27,391      $ 34,147        $13,158        $ 47,305
  Net cash used in investing
    activities................     (43,752)        (4,775)        (48,527)      (52,627)        (9,948)        (62,575)
  Net cash provided by (used
    in) financing
    activities................      55,096         (4,810)         50,286        35,920         (1,373)         34,547
</TABLE>
 
                                       21
<PAGE>   23
 
CONSOLIDATED BUSINESSES
 
     Revenues from ticketing operations increased by $89.9 million, or 44%, to
$295.4 million for fiscal 1998 from $205.5 million for fiscal 1997. The increase
is primarily attributed to an increase of 36% in the number of tickets sold
(from 45.5 million to 61.9 million tickets), and a 6% increase in average per
ticket operations revenue (from $4.23 to $4.49). The increase in the number of
tickets sold is largely attributed to the acquisition of the Company's Canadian
licensee effective March 1997 and acquisitions of joint venture partners'
interests in (and subsequent consolidation of) Ticketmaster-Northwest in June
1997 and Ticketmaster-Southeast in August 1997. In addition, the effect of
consolidating a full year of operations rather than partial years for each of
the fiscal 1997 acquisitions (Delaware Valley, Europe and Indiana) has
contributed to the increase in tickets sold.
 
     Revenues generated from the sales of concession and control systems for the
year ended January 31, 1998 and the six months ended January 31, 1997 are
included in the results from Consolidated Businesses, while revenues generated
for the six months ended July 31, 1996 are included in the Unconsolidated
Businesses due to the acquisition of the joint venture partners' interest on
July 29, 1996. Accordingly, the discussion and analysis included herein is based
upon the increase in combined revenues of the Consolidated Businesses and the
Unconsolidated Businesses of $4.7 million, or 18%, to $30.0 million from $25.4
million for the prior year. The increase in revenue is primarily attributed to
increased sales from the release of new products to major theatre chains in the
United States, Europe and South America.
 
     Publications revenues increased by $2.3 million, or 21%, to $13.1 million
for fiscal 1998 from $10.8 million for fiscal 1997. The increase is primarily
attributed to increased subscription revenues resulting from increases in annual
subscription rates. In addition, advertising revenue increased resulting from an
increase in the aggregate number of advertising pages in the issues of Live!
Magazine published during 1998 which were 373 from 351 in 1997 combined with a
modest increase in the revenue earned for each advertising page.
 
     Ticketing operations costs increased by $46.8 million, or 38%, to $169.0
million in fiscal 1998 from $122.2 million in fiscal 1997. This increase is
attributed to the increase in ticketing operations revenues as these costs are
primarily variable in nature. Ticketing operations costs decreased as a
percentage of ticketing operations revenues to 57% in fiscal 1998 from 59% in
fiscal 1997. Much of this decrease is attributed to increased revenue per
ticket, which is primarily related to increased sponsorship and promotion
activities that yields higher margins, combined with an increase in the number
of tickets sold along with operating efficiencies resulting from investments in
technological developments inclusive of new digital phone switches and upgrades
of computer hardware and software in the call centers.
 
     Ticketing selling, general and administrative costs increased by $14.2
million, or 40%, to $50.0 million in fiscal 1998 from $35.8 million in fiscal
1997. This increase is primarily attributed to the increase in territories
serviced by Consolidated Businesses resulting from the acquisitions of its joint
venture partners' interest in (and subsequent consolidation of) the
Ticketmaster-Europe operations in June 1996, Ticketmaster-Indiana operations in
November 1996, Ticketmaster-Northwest operations in June 1997 and
Ticketmaster-Southeast operations in August and December of 1997 and the
acquisitions of the Company's Delaware Valley (Philadelphia) licensee in October
1996 and the Canadian licensee effective March 1997. Lastly, the increase is
partly attributed to cost incurred for start up operations in South American
territories. Ticketing selling, general and administrative costs remained
consistent at 17% as a percentage of ticketing operations revenue from year to
year.
 
     The operating costs of concession and control systems increased by $1.1
million, or 7%, to $16.9 million for fiscal 1998 from $15.8 million for fiscal
1997. As a percentage of revenue, these expenses decreased from 62% to 56%,
which is attributed to a combination of product mix and improvements in the
quotation, assembly and delivery process and a reduction in research and
development costs. The selling, general and administrative costs of concession
and control systems remained relatively constant from fiscal 1997 to fiscal
1998.
 
     Corporate general and administrative costs increased by $4.7 million, or
28%, to $21.5 million in fiscal 1998 from $16.8 million in fiscal 1997. Much of
the increase resulted from increased expenses associated with
 
                                       22
<PAGE>   24
 
growth in administrative functions necessary to support the development of the
Company's principal businesses, inclusive of recent acquisitions, formation of
new joint ventures, additional costs associated with being a publicly traded
company and increased activity designed to create integrated marketing
opportunities with strategic partners.
 
     Depreciation increased by $3.9 million, or 58%, to $10.6 million in fiscal
1998 from $6.7 million in fiscal 1997. The increase is attributed to
acquisitions (and subsequent consolidation) of interests previously owned by
third parties in Ticketmaster's operations in Canada, Ticketmaster-Northwest and
Ticketmaster-Southeast. Additionally, the effect of including a full year of
depreciation rather than partial years for each of the fiscal 1997 acquisitions
(Pacer/CATS/CCS, Delaware Valley, Europe and Indiana) has contributed to the
increase.
 
     Amortization of goodwill increased by $2.3 million, or 96%, to $4.7 million
in fiscal 1998 from $2.4 million in fiscal 1997. The increase is attributed to
acquisitions (and subsequent consolidation) of interests previously owned by
third parties in Ticketmaster's operations in Canada, Ticketmaster-Northwest and
Ticketmaster-Southeast. Additionally, the effect of including a full year of
amortization rather than partial years for each of the fiscal 1997 acquisitions
(Pacer/CATS/CCS, Delaware Valley, Europe and Indiana) has contributed to the
increase.
 
     Other amortization increased by $5.3 million, or 135%, to $9.2 million in
fiscal 1998 from $3.9 million in fiscal 1997. The increase is attributed to the
acquisitions (and subsequent consolidation) of interests previously owned by
third parties in Ticketmaster's operations in Canada, Ticketmaster-Northwest and
Ticketmaster-Southeast. Additionally, the effect of including a full year of
amortiziation rather than partial years for each of the fiscal 1997 acquisitions
(Delaware Valley, Europe and Indiana) has contributed to the increase.
 
     Consolidated interest expense net of interest income and other expense
decreased by $2.3 million, or 20%, to $9.5 million in fiscal 1998 versus $11.8
million in fiscal 1997. The decrease is primarily attributed to lower borrowing
levels and further offset by an increase in interest income resulting from
higher cash balances invested during the 1998 fiscal year.
 
     In the prior year, the Company recognized a gain from the sale of its
interest in an unconsolidated affiliate of $3.2 million.
 
     Income tax expense, measured as a percentage of pre-tax income, decreased
from 65% in fiscal 1997 to 59% in fiscal 1998. The high effective tax rate is
primarily attributed to non-deductible amortization resulting from acquisitions
and effective international tax rates, which are higher than those in the U.S.
 
     As a result of the foregoing, the Company's net income increased by $6.4
million, or 355%, to $8.1 million in fiscal 1998 from $1.8 million in fiscal
1997.
 
  UNCONSOLIDATED BUSINESSES
 
     Revenues from ticket operations decreased by $18.9 million, or 35%, to
$35.5 million in fiscal 1998 from $54.4 million in fiscal 1997. This decrease is
primarily attributed to a decrease of 43% in the number of tickets sold (from
14.5 million to 8.3 million tickets) offset by an increase in average per ticket
operation revenue of 14% (from $3.75 to $4.28). The decrease in the number of
tickets sold by Unconsolidated Businesses is attributed to the acquisition by
the Company of its partners' joint venture interests (and thus inclusion of
operating results in Consolidated Businesses rather than Unconsolidated
Businesses) in the Ticketmaster-Northwest and Ticketmaster-Southeast operations
during fiscal 1998. In addition, during fiscal 1997, the Company acquired its
interests in the Ticketmaster Europe and Indiana operations; thus there were
partial years of operations included in the fiscal 1997 results; whereas, the
operating results of those two business are included in Consolidated Businesses
for the full year of fiscal 1998.
 
     The discussion and analysis with respect to results of operations from
concession control systems is included in Consolidated Businesses.
 
                                       23
<PAGE>   25
 
     Ticketing operations costs decreased by $10.5 million, or 34%, to $20.0
million in fiscal 1998 from $30.5 million in fiscal 1997. This decrease is
attributed to the decrease in ticketing operations revenues of 35%, as these
costs are primarily variable in nature.
 
     Ticketing selling, general and administrative costs decreased by $1.7
million, or 17%, to $8.6 million in fiscal 1998 from $10.4 million in fiscal
1997. This decrease is primarily attributed to the acquisition by the Company of
its partners' joint venture interest (and this inclusion of operating results in
Consolidated Businesses rather than Unconsolidated Businesses) in the
Ticketmaster-Europe and Indiana operations in June and November 1996,
respectively, and in the Ticketmaster-Northwest and Southeast operations in June
and August 1997, respectively.
 
     Depreciation decreased by $0.4 million, or 18%, to $1.6 million in fiscal
1998 from $2.0 million in fiscal 1997. The decrease is attributed to the
acquisition by the Company of its partners' Joint Venture interests (and thus
inclusion of operating results in Consolidated Businesses rather than
Unconsolidated Businesses) in the Ticketmaster-Northwest and Southeast
operations during fiscal 1998. In addition, during fiscal 1997, the Company
acquired its interests in the Pacer/CATS/CCS and in Ticketmaster Europe and
Indiana operations; thus, there were partial years of operations included in the
fiscal 1997 results; whereas, the operating results of those three businesses
are included in Consolidated Businesses for the full year of fiscal 1998.
 
     Other amortization decreased by $0.9 million, or 46%, to $1.0 million in
fiscal 1998 from $1.9 million in fiscal 1997. The decrease is attributed to the
acquisition by the Company of its partners' joint venture interests (and thus
inclusion of operating results in Consolidated Businesses rather than
Unconsolidated Businesses) in the Ticketmaster-Northwest and
Ticketmaster-Southeast operations during fiscal 1998. In addition, during fiscal
1997, the Company acquired its interests in the Ticketmaster Europe and Indiana
operations; thus there were partial years of operations included in the fiscal
1997 results; whereas, the operating results of those two businesses are
included in Consolidated Businesses for the full year of fiscal 1998.
 
  MANAGED BUSINESSES
 
     Aggregate revenues for the Managed Businesses increased by $78.0 million,
or 26%, to $376.5 in fiscal 1998 from $298.5 million in fiscal 1997, principally
as a result of an increase of $71.0 million, or 27%, to $330.9 million in ticket
operations revenue.
 
     EBITDA for the Managed Businesses increased by $23.5 million, or 65%, to
$59.5 million in fiscal 1998 from $36.0 million in fiscal 1997, principally as a
result of an increase of $22.3 million in ticketing operations income net of
ticketing operations and selling, general and administrative costs.
 
                                       24
<PAGE>   26
 
FISCAL YEAR 1997 COMPARED WITH FISCAL YEAR 1996
 
     The following tables set forth operating results for the Consolidated
Businesses and the Unconsolidated Businesses, collectively, the Managed
Businesses. The amounts shown for the Unconsolidated Businesses represent the
full balance for each line item and do not give effect to the joint venture
ownership interests held by entities other than the Company.
 
<TABLE>
<CAPTION>
                                      YEAR ENDED JANUARY 31, 1996                  YEAR ENDED JANUARY 31, 1997
                               ------------------------------------------   ------------------------------------------
                               CONSOLIDATED   UNCONSOLIDATED    MANAGED     CONSOLIDATED   UNCONSOLIDATED    MANAGED
                                BUSINESSES      BUSINESSES     BUSINESSES    BUSINESSES      BUSINESSES     BUSINESSES
                               ------------   --------------   ----------   ------------   --------------   ----------
                                                                   (IN THOUSANDS)
<S>                            <C>            <C>              <C>          <C>            <C>              <C>
Revenues:
  Ticketing operations.......    $154,851        $55,129        $209,980      $205,491        $54,401        $259,892
  Concession Control
     Systems.................          --         22,985          22,985        12,401         12,964          25,365
  Publications...............       4,198          1,939           6,137        10,769            176          10,945
  Merchandising..............       2,201             --           2,201         2,300             --           2,300
                                 --------        -------        --------      --------        -------        --------
          Total Revenues.....     161,250         80,053         241,303       230,961         67,541         298,502
                                 --------        -------        --------      --------        -------        --------
Operating costs, expenses and
  other items:
  Ticketing operations.......      97,147         30,836         127,983       122,243         30,472         152,715
  Ticketing selling, general
     and administrative......      27,748          9,232          36,980        35,789         10,366          46,155
  Concession control
     systems operations......          --         15,912          15,912         7,377          8,462          15,839
  Concession control
     systems selling, general
     and administrative......          --          9,834           9,834         5,995          4,687          10,682
  Publications...............       9,129          1,148          10,277        17,965            128          18,093
  Merchandising..............       1,891             --           1,891         2,141             --           2,141
  Corporate general and
     administrative..........      14,758             --          14,758        16,849             --          16,849
  Depreciation...............       4,868          2,599           7,467         6,714          2,012           8,726
  Amortization of goodwill...       1,925            380           2,305         2,356            142           2,498
  Amortization of other......       2,595          1,422           4,017         3,923          1,874           5,797
                                 --------        -------        --------      --------        -------        --------
          Total operating
            costs............     160,061         71,363         231,424       221,352         58,143         279,495
                                 --------        -------        --------      --------        -------        --------
                                    1,189        $ 8,690        $  9,879         9,609        $ 9,398        $ 19,007
                                                 =======        ========                      =======        ========
  Equity in net income of
     unconsolidated
     affiliates..............      (1,521)                                      (4,054)
                                 --------                                     --------
  Operating income...........       2,710                                       13,663
  Interest expense and
     Other...................      13,055                                       11,808
  Gain on sale of
     unconsolidated
     affiliate...............          --                                       (3,195)
  Income tax provision
     (benefit)...............      (2,250)                                       3,258
                                 --------                                     --------
  Net (loss) income..........    $ (8,095)                                    $  1,792
                                 ========                                     ========
  Supplemental Information:
     EBITDA..................    $ 10,577        $13,091        $ 23,668      $ 22,602        $13,426        $ 36,028
                                 ========        =======        ========      ========        =======        ========
     Attributable EBITDA.....                                   $ 15,222                                     $ 28,299
                                                                ========                                     ========
     Net cash provided by
       (used in) operating
       activities............    $ (3,068)       $17,658        $ 14,590      $ 15,585        $11,806        $ 27,391
     Net cash used in
       investing
       activities............      (9,452)        (6,508)        (15,960)      (43,752)        (4,775)        (48,527)
     Net cash provided by
       (used in) financing
       activities............       7,772         (5,011)          2,761        55,096         (4,810)         50,286
</TABLE>
 
                                       25
<PAGE>   27
 
CONSOLIDATED BUSINESSES
 
     Revenues from ticketing operations increased by $50.6 million, or 33%, to
$205.5 million for fiscal 1997 from $154.9 million for fiscal 1996. The increase
is attributed to an increase of 21% in the number of tickets sold (from 37.6
million to 45.5 million tickets), a 5% increase in average per ticket revenue
(from $4.01 to $4.23) and an increase in sponsorship and promotions revenue. The
increase in the number of tickets sold is largely attributed to the acquisition
of the Company's Nashville and Delaware Valley (Philadelphia) licensees in
February 1996 and October 1996, respectively, acquisitions of Joint Venture
partners' interests in (and subsequent consolidation of) the Ticketmaster Europe
operations in June 1996 and Ticketmaster Indiana operations in November 1996,
and an overall increase in the number of events made available for sale to the
consumer and subsequent demand for live entertainment events. Increased
sponsorship and promotions revenue is primarily attributed to an increase in
activity with strategic marketing partners resulting from the Company's efforts
to create integrated marketing opportunities around live events, its call
centers, ticket stock and envelopes and event promotional material and in
additional media outlets such as Ticketmaster Online and Ticketmaster Travel.
 
     Publications revenues increased by $6.6 million, or 157%, to $10.8 million
for fiscal 1997 from $4.2 million for fiscal 1996. The increase is attributed to
Ticketmaster Publications' launch of Live! magazine, a monthly consumer oriented
entertainment magazine, which distributed its first issue in February of 1996.
Live! was created as an extension of the Entertainment Guide which was published
and distributed without significant advertising revenue as a stand-alone
publication by the Company through fiscal 1996. With the February 1996 launch of
Live! magazine, the subscription base has remained relatively constant with the
increase in revenues resulting from increases in annual subscription rates and
advertising revenues.
 
     Revenues generated by concession and control systems for the six months
ended January 31, 1997 are included in Consolidated Businesses while the
revenues generated for the first six months ended July 31, 1996 are included in
Unconsolidated Businesses due to the acquisition of the joint venture partner's
interest on July 29, 1996. Accordingly, the discussion and analysis included
herein is based upon the increase in combined revenues of the Consolidated
Businesses and the Unconsolidated Businesses of $2.4 million, or 10%, to $25.4
million from $23.0 million for the prior year. The increase is primarily
attributed to increased sales from the release of new products. The combined
operating costs of concession and control systems remained consistent at $15.9
million in both years. As a percentage of revenue, these expenses decreased from
69% to 62%, which decrease is attributed to a combination of product mix and
improvements in the quotation, assembly and delivery processes. The combined
selling, general and administrative costs of concession and control systems
increased by $0.8 million, or 9%, to $10.7 million in fiscal 1997 from $9.8
million in fiscal 1996. The increase is attributed to legal costs associated
with the MovieFone complaint. See Item 3 -- "Legal Proceedings."
 
     Ticketing operations costs increased by $25.1 million, or 26%, to $122.2
million in fiscal 1997 from $97.1 million in fiscal 1996. This increase is
attributed to the increase in ticketing operations revenues as these costs are
primarily variable in nature. Ticketing operations costs decreased as a
percentage of ticketing operations revenues to 59% in fiscal 1997 from 63% in
fiscal 1996. Much of this decrease is attributed to operating efficiencies and
increased revenues generated from sponsorship and promotions activities in
fiscal 1997.
 
     Publications costs increased by $8.8 million, or 97%, to $18.0 million in
fiscal 1997 from $9.1 million in fiscal 1996. This increase is attributed to the
increased production costs resulting from the launch of Live! magazine.
 
     Corporate general and administrative costs increased by $2.1 million, or
14%, to $16.8 million in fiscal 1997 from $14.8 million in fiscal 1996. Much of
the increase resulted from increased compensation expense associated with growth
in administrative functions necessary to support the development of the
Company's principal business, and more recent development efforts in
Ticketmaster Publications, Ticketmaster Online and Ticketmaster Travel. The
increase in compensation expense was partially offset by decreases in legal
fees.
 
                                       26
<PAGE>   28
 
     Depreciation increased by $1.8 million, or 38%, to $6.7 million in fiscal
1997 from $4.9 million in fiscal 1996. The increase is attributed to
acquisitions (and subsequent consolidation) of interests previously owned by
third parties in Ticketmaster's operations in Europe, Delaware Valley and
Indiana.
 
     Amortization of goodwill increased by $0.4 million, or 22%, to $2.4 million
in fiscal 1997 from $1.9 million in fiscal 1996. The increase is attributed to
acquisitions (and subsequent consolidation) of interests previously owned by
third parties in Ticketmaster's operations in Europe, Delaware Valley, Indiana,
Florida and Texas. Amortization of goodwill is expected to increase in
subsequent years over 1997 because 1997 amortization is computed from the dates
of acquisition which occurred in mid to late 1997.
 
     Other amortization increased by $1.3 million, or 51%, to $3.9 million in
fiscal 1997 from $2.6 million in fiscal 1996. The increase is attributed to the
acquisitions (and subsequent consolidation) of interests previously owned by
third parties in Ticketmaster's operations in Europe, Delaware Valley, Indiana,
Florida and Texas.
 
     The income tax provision of $3.3 million in fiscal 1997, compared to an
income tax benefit of $2.2 million for the prior year, is primarily attributed
to taxes on the gain of the sale of an unconsolidated affiliate and state income
taxes.
 
     As a result of the foregoing, the Company had net income of $1.8 million in
the current year compared to net losses of $8.1 million in the prior year.
 
  UNCONSOLIDATED BUSINESSES
 
     Revenues from ticket operations decreased by $0.7 million, or 1%, to $54.4
million in fiscal 1997 from $55.1 million in fiscal 1996. This decrease is
primarily attributed to a decrease of 6% in the number of tickets sold (from
15.5 million to 14.5 million tickets) offset by an increase in average per
ticket operation revenue of 6% (from $3.56 to $3.75). The decrease in the number
of tickets sold by Unconsolidated Businesses is largely attributed to the
reacquisition by the Company of its partners' joint venture interests (and thus
inclusion of operating results in Consolidated Businesses rather than
Unconsolidated Businesses) in the Ticketmaster Europe and Indiana operations in
June and November 1996, respectively, offset by the acquisition of 50% of the
business of the Company's Australian licensee in December 1995. The 6% increase
in average revenue per ticket is comparable to the 6% increase in average gross
price per ticket of tickets sold (from $26.77 to $28.27), which is the result of
both inflation and varying ticket prices between markets.
 
     The discussion and analysis with respect to results of operations from
concession control systems is included in Consolidated Businesses.
 
     Ticketing operations costs decreased by $0.4 million, or 1%, to $30.5
million in fiscal 1997 from $30.8 million in fiscal 1996. This decrease is
attributed to the decrease in ticketing operations revenues as these costs are
primarily variable in nature. As a percentage of ticket operations revenues
these expenses totaled 56% in both periods.
 
     Depreciation decreased by $0.6 million, or 23%, to $2.0 million in fiscal
1997 from $2.6 million in fiscal 1996. The decrease is attributed to the
reacquisition by the Company of its partners' joint venture interests (and thus
inclusion of operating results in Consolidated Businesses rather than
Unconsolidated Businesses) in the Ticketmaster Europe and Indiana operations in
June and November 1996, respectively, which was partially offset by the
acquisition of 50% of the business of the Company's Australian licensee,
achieved through the formation of Joint Ventures in December 1995.
 
     Amortization of goodwill decreased by $0.2 million, or 63%, to $0.1 million
in fiscal 1997 from $0.4 million in fiscal 1996. The decrease is attributed to
the reacquisition by the Company of its partners' Joint Venture interests (and
thus inclusion of operating results in Consolidated Businesses rather than
Unconsolidated Businesses) in the Ticketmaster Europe and Indiana operations in
June and November 1996, respectively, which was partially offset by the
acquisition of 50% of the business of the Company's Australian licensee,
achieved through the formation of Joint Ventures in December 1995.
 
                                       27
<PAGE>   29
 
     Other amortization increased by $0.5 million, or 32%, to $1.9 million in
fiscal 1997 from $1.4 million in fiscal 1996. The increase is attributed to the
acquisition of 50% of the business of the Company's Australian licensee,
achieved through the formation of Joint Ventures in December 1995 (2 months of
operations in fiscal 1996 versus 12 months of operations in fiscal 1997).
 
  MANAGED BUSINESSES
 
     Aggregate revenues for the Managed Businesses increased by $57.2 million,
or 24%, to $298.5 in fiscal 1997 from $241.3 million in fiscal 1996, principally
as a result of an increase of $49.9 million, or 24%, to $259.9 million in ticket
operations revenue.
 
     EBITDA for the Managed Businesses increased by $12.4 million, or 52%, to
$36.0 million in fiscal 1997 from $23.7 million in fiscal 1996, principally as a
result of an increase of $16.0 million in ticketing operations income net of
ticketing operations and selling, general and administrative costs, offset by a
decrease of $3.0 million in Publications income net of Publications costs.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     The Company's primary sources of liquidity are cash flows from operations
and available credit under its revolving bank credit facilities. Management
believes that these sources adequately provide for its working capital, capital
expenditures and debt service needs.
 
     Net cash provided by operating activities was $34.1 million in fiscal 1998
compared with $15.6 million in fiscal 1997. This change primarily reflects an
increase in operating income.
 
     As of January 31, 1998, the Company had cash and cash equivalents of $26.1
million for its own account, separate from funds held in accounts on behalf of
venues and promoters and working capital of $9.4 million.
 
     Net cash used in investing activities was $52.6 million in fiscal 1998
compared with $43.8 million in fiscal 1997. This change primarily reflects cash
used to fund the acquisition and formation of new ventures net of cash acquired
of $35.7 million (as described in Notes 3 and 4 to the Consolidated Financial
Statements) and investments in equipment and improvements of $16.7 million.
 
     Excluding the acquisitions and formations of new venture investment
activity, the Company expects its capital expenditures to approximate $20.0
million in fiscal 1999. These expenditures are designed to take advantage of
technological developments which enhance productivity and contain costs,
expansion of existing capacity and additional growth opportunities which
management determines as necessary in order to maintain the Company's
competitive position or otherwise achieve its business strategies. The Company
plans on investing some of these funds to develop new markets in the U.S.,
Australia and South America, and in developing new business opportunities,
specifically in becoming a provider of outsourced telephone-based call center
services.
 
     Net cash provided by financing activities was $35.9 million in fiscal 1998
compared to $55.1 million in fiscal 1997. This change primarily reflects
proceeds received in fiscal 1997 from the Company's Initial Public Offering net
of amounts used to reduce a portion of the outstanding indebtedness under the
Company's bank lending facilities and other long term debt versus net borrowings
from the Company's bank lending facilities in fiscal 1998 to partially fund
acquisitions. The change also reflects proceeds of $5.2 million from the
exercise of stock options.
 
     Amounts available under the Credit Agreement are limited to the lower of
the commitment amount or a borrowing base calculated as a multiple of cash flows
as defined in the Credit Agreement. As of January 31, 1998, the Company had $142
million in outstanding bank borrowings under its $165 million revolving bank
credit line. Amounts available under the credit line decrease to $150 million as
of December 31, 1998. As of January 31, 1998, the borrowing base calculation did
not restrict the Company's availability under the Credit Agreement. The
Company's Credit Agreement contains other covenants and restrictions as to which
the Company was in compliance or obtained necessary waivers at January 31, 1998.
 
                                       28
<PAGE>   30
 
     Also as of January 31, 1998, Pacer/CATS/CCS had indebtedness of $7.5
million outstanding under a bank term loan. The loan agreement is secured by all
of Pacer/CATS/CCS's assets and contains certain restrictions and covenants with
which Pacer/CATS/CCS is in full compliance.
 
     The Company anticipates that funds from operations and from its bank
lending facilities will be sufficient to meet its working capital, capital
expenditure and debt service requirements through the expiration of the Credit
Agreement (December 31, 1999) and the Pacer/CATS/CCS Credit Agreement (June 30,
1999). However, to the extent that such funds are insufficient, the Company may
need to incur additional indebtedness and/or refinance existing indebtedness.
The Company's ability to do so may be restricted by borrowing base calculations
and other financial covenants described in the Credit Agreement.
 
SEASONALITY
 
     The Company's ticketing operations results for its Managed Businesses are
occasionally impacted by fluctuations in the availability of events for sale to
the public, which varied depending upon scheduling by clients. This, together
with the general practice of scheduling the commencement of ticket sales several
months prior to event dates, historically tends to benefit the Company's first
two fiscal quarters; however, this was not the case in fiscal 1998, due to an
increase in live events scheduled for the last two quarters of the fiscal year.
Set forth below are quarterly ticket quantities and gross sales for the Managed
Businesses for the past three fiscal years:
 
                             NUMBER OF TICKETS SOLD
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                         FIRST      SECOND     THIRD      FOURTH
                     FISCAL YEAR                        QUARTER    QUARTER    QUARTER    QUARTER    TOTAL
                     -----------                        --------   --------   --------   --------   ------
<S>                                                     <C>        <C>        <C>        <C>        <C>
1996..................................................   13,509     13,667     12,759     13,181    53,116
1997..................................................   15,268     15,135     14,936     14,682    60,021
1998..................................................   17,564     16,759     18,147     17,717    70,187
</TABLE>
 
                       GROSS DOLLAR VALUE OF TICKET SALES
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                              FIRST      SECOND     THIRD      FOURTH
                FISCAL YEAR                  QUARTER    QUARTER    QUARTER    QUARTER      TOTAL
                -----------                  --------   --------   --------   --------   ----------
<S>                                          <C>        <C>        <C>        <C>        <C>
1996.......................................  $383,564   $389,791   $379,741   $378,482   $1,531,578
1997.......................................   425,382    444,612    453,232    457,129    1,780,355
1998.......................................   538,985    527,575    622,880    600,727    2,290,167
</TABLE>
 
INFLATION RISK
 
     General economic inflation has not had a significant impact on the
Company's operations during the periods covered by the accompanying Consolidated
Financial Statements.
 
FOREIGN CURRENCY RISK
 
     As the Company increases its operations in international markets it becomes
increasingly exposed to volatile movements in currency exchange rates. The
economic impact of currency exchange rate movements on the Company could become
complex because such changes are often linked to variability in real growth,
inflation, interest rates, governmental actions and other factors. These
changes, if material, could cause the Company to adjust its financing and
operating strategies.
 
     As currency exchange rates change, translation of the income statements of
our international businesses into U.S. dollars affects year-over-year
comparability of operating results. The Company does not hedge translation risks
because cash flows from international operations are generally reinvested
locally. Further, the
 
                                       29
<PAGE>   31
 
Company does not enter into hedges to minimize volatility of reported earnings
because the Company does not believe it is justified by the attendant cost.
 
     Foreign exchange gains and losses were not material to the Company's
earnings for the last three years.
 
EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS
 
     In June 1997, the FASB issued SFAS 130, "Reporting Comprehensive Income"
("SFAS 130") effective for fiscal years beginning after December 15, 1997. The
new rules establish standards for the reporting of comprehensive income and its
components in financial statements. Comprehensive income consists of net income
and other gains and losses affecting shareholders' equity that, under generally
accepted accounting principles, are excluded from net income, such as unrealized
gains and losses on investments available for sale, foreign currency translation
gains and losses and minimum pension liability. The Company will adopt SFAS 130
in fiscal 1999 and does not expect that the adoption will have a material effect
on its financial statements.
 
     In June 1997, the FASB issued SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131") effective for fiscal years
beginning after December 15, 1997. The new rules establish revised standards for
public companies relating to the reporting of financial and descriptive
information about their operating segments in financial statements. The Company
continues to assess the impact these revised standards will have on existing
segment disclosures; however, it does not expect that the adoption in fiscal
1999 will have a material effect on its financial statements.
 
YEAR 2000
 
     The widespread use of computer programs that rely on two-digit dates to
perform computations and decision-making functions may cause computer systems to
malfunction prior to or in the year 2000 and lead to significant business delays
and disruptions in the U.S. and internationally. Each of the Company's business
units has developed a plan to minimize the impact of this "year 2000 problem"
and periodically reports on the status of its efforts to the Company's corporate
officers and ultimately the Board of Directors. Pursuant to such plans, each
business unit is engaged in the process of identifying programs used by its
computer systems that may require modification as a result of the use of such
two-digit dates, and has initiated programs to rectify any problems, including
upgrading existing software packages, implementing new year 2000 compliant
systems or repairing existing software. Each business unit has also begun
communications with its significant suppliers to determine the extent to which
the Company's operations are vulnerable to those third parties' failure to solve
their own year 2000 issues and in this regard, the plan includes vendor
compliance certification and selection of secondary sources of supply.
Management believes that the costs of resolving potential year 2000 issues will
not be material and that the necessary revisions or replacements of material
computer systems will be accomplished in a timely manner.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
     The index to Consolidated Financial Statements and supplementary data
required by this item are located on page F-1 of this report.
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
 
     On August 5, 1997, the Company engaged Ernst & Young LLP as its independent
accountant to audit the financial statements of the Company and its subsidiaries
for the fiscal year ending January 31, 1998.
 
     Disagreements with accountants on accounting and financial disclosure:
None.
 
                                       30
<PAGE>   32
 
                                    PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
     There is hereby incorporated by reference the information to appear in
Ticketmaster's definitive proxy statement for its 1998 Annual Meeting of
Shareholders (the "1998 Proxy Statement") under the captions "Information
Concerning Nominees for Election as Directors," "Section 16(a) Beneficial
Ownership Reporting Compliance" and "Executive Officers."
 
ITEM 11. EXECUTIVE COMPENSATION
 
     There is hereby incorporated by reference the information to appear under
the caption "Compensation of Executive Officers" in the 1998 Proxy Statement
provided, however, that neither the Report of the Compensation Committee on
Executive Compensation nor the Performance Graph set forth therein shall be
incorporated by reference herein or in any of Ticketmaster's previous or future
filings under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
     There is hereby incorporated by reference the information to appear under
the caption "Security Ownership of Certain Beneficial Owners and Management" in
the 1998 Proxy Statement.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
 
     There is hereby incorporated by reference the information to appear under
the caption "Related Party Transactions" in the 1998 Proxy Statement.
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
 
(a) The following documents are filed as part of this report:
 
     (1) CONSOLIDATED FINANCIAL STATEMENTS:
 
         The Index to Consolidated Financial Statements and Supplementary Data
         is set forth on page F-1 of this report.
 
     (2) FINANCIAL STATEMENT SCHEDULES:
 
        Valuation and Qualifying Accounts
 
     (3) EXHIBITS:
 
<TABLE>
<CAPTION>
NUMBER
EXHIBIT                           DESCRIPTION
-------                           -----------
<S>       <C>
 2.1      Agreement of Purchase and Sale of Stock, dated May 13, 1997,
          among the Company and Ticketmaster Canada Holdings Ltd. and
          certain parties (5)
 3.1      Amended and Restated Articles of Incorporation of the
          Company (1)
 3.2      Amended and Restated Bylaws of the Company (1)
 4.1      Specimen of Stock Certificate for Common Stock (1)
10.1      Credit Agreement dated as of November 18, 1994 among the
          Company, its lenders and Wells Fargo Bank, National
          Association, as agent (the "Credit Agreement") (1)
10.2      First Amendment to Credit Agreement dated as of January 6,
          1995 (1)
10.3      Second Amendment to Credit Agreement dated as of January 30,
          1995 (1)
10.4      Third Amendment and Limited Waiver to Credit Agreement dated
          as of April 7, 1995 (1)
</TABLE>
 
                                       31
<PAGE>   33
 
<TABLE>
<CAPTION>
NUMBER
EXHIBIT                           DESCRIPTION
-------                           -----------
<S>       <C>
10.5      Fourth Amendment and Limited Waiver to Credit Agreement
          dated as of August 28, 1995 (1)
10.6      Waiver to Credit Agreement dated as of April 30, 1996 (1)
10.7      Fifth Amendment to Credit Agreement dated as of June 6, 1996
          (1)
10.9      First Amended and Restated Credit Agreement dated as of July
          31, 1996 between Pacer/CATS/ CCS and U.S. Bank of
          Washington, National Association (1)
10.10     Employment Agreement dated as of December 15, 1993 between
          the Company and Fredric D. Rosen (1, 7)
10.11     Employment Agreement dated as of February 1, 1994 between
          the Company and Marc Bension (1, 7)
10.12     Amendment to Employment Agreement dated as of January 31,
          1996 between the Company and Marc Bension (1, 7)
10.13     Employment Agreement dated as of February 1, 1994 between
          the Company and Ned S. Goldstein (1, 7)
10.14     Employment Agreement dated as of February 1, 1994 between
          the Company and Peter B. Knepper (1, 7)
10.15     Employment Agreement dated as of February 1, 1994 between
          the Company and Ann Mooney (1, 7)
10.16     Employment Agreement dated as of November 1, 1995 between
          the Company and Stuart W. DePina (1, 7)
10.17     Employment Agreement dated as of March 1, 1995 between the
          Company and Judy A. Black (1, 7)
10.18     Employment Agreement dated as of December 1994 between the
          Company and Alan Citron (1, 7)
10.19     Employment Agreement dated as of May 31, 1995 between the
          Company and Claire Rothman (1, 7)
10.20     Employment Agreement dated as of February 1995 between the
          Company and Carole Ference (1, 7)
10.21     Employment Agreement dated as of January 3, 1995 between the
          Company and Annie Gilbar (1, 7)
10.22     Stock Option Agreement, dated December 15, 1993 between the
          Company and Fredric D. Rosen (1, 7)
10.23     Ticketmaster 401 (k) Savings Plan and Trust Agreement, as
          Amended and Restated Effective October 1, 1994 (1, 7)
10.24     Ticketmaster Stock Plan (as amended and restated) (1, 7)
10.25     Covenant Not to Compete, dated November 19, 1993 between the
          Company and Fredric D. Rosen (1)
10.26     Covenant Not to Compete, dated November 19, 1993 between the
          Company and Robert A. Leonard (1)
10.27     Registration Rights Agreement dated as of December 15, 1993
          between the Company and Paul Allen (1)
10.28     Registration and Exchange Rights Agreement dated as of
          December 15, 1993 among the Company, HG, Inc., Wells Fargo &
          Company, Rockwood & Co., Richard L. Schulze, Harold S.
          Handelsman and Fredric D. Rosen (1)
10.29     Covenant Not to Compete dated December 15, 1993 among HG
          Inc., the Company and Paul Allen (1)
10.30     Covenant Not to Compete dated December 15, 1993 among
          Fredric D. Rosen, the Company and Paul Allen (1)
</TABLE>
 
                                       32
<PAGE>   34
 
<TABLE>
<CAPTION>
NUMBER
EXHIBIT                           DESCRIPTION
-------                           -----------
<S>       <C>
10.31     Covenant Not to Compete dated December 15, 1993 among Robert
          A. Leonard, the Company and Paul Allen (1)
10.32     Covenant Not to Compete dated December 15, 1993 among
          Fredric D. Rosen and TM Movie Tix, Inc. (1)
10.33     Shareholders' Agreement dated as of December 15, 1993 among
          the shareholders of the Company (1)
10.34     Form of Indemnity Agreement between the Company and each of
          its officers and directors (1)
10.35     Development and Services Agreement dated June 29, 1996 by
          and between Ticketmaster Multimedia Holdings, Inc. and
          Starwave Corporation (1)
10.36     Sixth Amendment to Credit Agreement dated as of September
          27, 1996 (1)
10.37     Seventh Amendment and Limited Waiver to Credit Agreement and
          Release of Third Party Pledge Agreement dated as of October
          24, 1996 (1)
10.38     First Amendment to First Amended and Restated Credit
          Agreement dated as of November 14, 1996(2)
10.39     Employment Agreement dated as of October 18, 1996 between
          the Company and Layne Britton (3, 7)
10.40     Employment Agreement dated as of January 1, 1997 between the
          Company and Michael Mischler (3, 7)
10.41     Employment Agreement dated as of February 1, 1997 between
          the Company and Eugene L. Cobuzzi (3, 7)
10.42     Employment Agreement dated as of March 21, 1997 between the
          Company and John Ruscin (3, 7)
10.43     Waiver and Amendment to Credit Agreement dated as of April
          4, 1997 (3)
10.44     Promissory Note Secured by Deed of Trust between TMC Realty
          Holdings Co. and Wells Fargo, National Association (3)
10.45     Employment Agreement dated as of May 2, 1997 between the
          Company and Terry Barnes (4, 7)
10.46     Amendment No. 1 to Employment Agreement dated as of May 15,
          1997 between the Company and Alan Citron (4, 7)
10.47*    Employment Agreement dated February 1, 1997 between the
          Company and Robert Perkins (7)
10.48*    Employment Agreement dated July 1, 1997 between the Company
          and Tony Tolbert (7)
10.49*    Amendment No. 1 dated September 1997 to Employment Agreement
          dated March 1, 1997 between the Company and Judy Black (7)
10.50*    Amendment No. 1 dated December 1997 to Employment Agreement
          dated January 3, 1995 between the Company and Annie Gilbar
          (7)
10.51*    Amendment No. 2 dated February 1, 1998 to Employment
          Agreement dated February 1, 1994 between the Company and
          Marc Bension (7)
10.52*    Amendment No. 1 dated February 1, 1998 to Employment
          Agreement dated February 1, 1994 between the Company and Ann
          Mooney (7)
10.53*    Amendment No. 1 dated February 28, 1998 to Employment
          Agreement dated February 1995 between the Company and Carole
          Ference (7)
10.54*    Employment Agreement dated January 13, 1997 between the
          Company and Daniel R. Goodman (7)
10.55*    Termination Agreement dated October 29, 1997 between the
          Company and Layne Britton (7)
10.56*    Ninth Amendment to Credit Agreement dated as of March 6,
          1998
10.57*    Cooperation, Non-Competition and Confidentiality Agreement
          between the Company and Fredic D. Rosen dated March 9, 1998
          (7)
</TABLE>
 
                                       33
<PAGE>   35
 
<TABLE>
<CAPTION>
NUMBER
EXHIBIT                           DESCRIPTION
-------                           -----------
<S>       <C>
10.58*    Agreement and Plan of Merger By and Among USA Networks,
          Inc., Brick Acquisition Corp. and the Company dated as of
          March 20, 1998
11.1*     Computation of earnings per share
21.1*     Subsidiaries of the Registrant
23.1*     Consent of KPMG Peat Marwick LLP
23.2*     Consent of Ernst &Young LLP
27.1*     Financial Data Schedule
99.1      Release, dated July 5, 1995, of the Antitrust Division of
          the United States Department of Justice (1)
99.2      Press release dated May 15, 1997 (5)
99.3      Award with respect to the MovieFone arbitration (6)
99.4*     Appeals from the United States District Court with respect
          to alleged antitrust violations dated April 10, 1998
</TABLE>
 
---------------
 * Filed herewith.
 
(1) Incorporated by reference to the correspondingly numbered exhibit to the
    Registration Statement (File No. 333-12413) on Form S-1, as amended, filed
    by Ticketmaster Group, Inc. under the Securities Act of 1933, as amended.
 
(2) Incorporated by reference to the correspondingly numbered exhibit to the
    Company's Quarterly Report on Form 10-Q for the quarterly period ended
    October 31, 1996 (File No. 0-21631).
 
(3) Incorporated by reference to the correspondingly numbered exhibit to the
    Company's Form 10-K for the fiscal year ended January 31, 1997 (File No.
    0-21631).
 
(4) Incorporated by reference to the correspondingly numbered exhibit to the
    Company's Quarterly Report on Form 10-Q for the quarterly period ended April
    30, 1997 (File No. 0-21631).
 
(5) Incorporated by reference to the correspondingly numbered exhibit to the
    Company's Form 8-K on May 28, 1997 (File No. 0-21631).
 
(6) Incorporated by reference to the correspondingly numbered exhibit to the
    Company's Quarterly Report on Form 10-Q for the quarterly period ended July
    31, 1997 (File No. 0-21631).
 
(7) Management contract or compensatory plan or arrangement.
 
(b) Reports on Form 8-K
 
     None.
 
                                       34
<PAGE>   36
 
                                   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, in the City of West
Hollywood, State of California, on April 24, 1998.
 
                                          TICKETMASTER GROUP, INC.,
                                          an Illinois corporation
 
                                                 /s/ FREDRIC D. ROSEN
 
                                          --------------------------------------
                                          By: Fredric D. Rosen
                                          President and Chief Executive Officer
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed on April 24, 1998 by the following persons on behalf of
the registrant and in the capacities indicated:
 
<TABLE>
<CAPTION>
                      SIGNATURE                                            TITLE
                      ---------                                            -----
<C>                                                    <S>
 
                  /s/ PAUL G. ALLEN                    Chairman of the Board
-----------------------------------------------------
                    Paul G. Allen
 
                /s/ FREDRIC D. ROSEN                   President, Chief Executive Officer and
-----------------------------------------------------  Director (Principal Executive Officer)
                  Fredric D. Rosen
 
                /s/ PETER B. KNEPPER                   Senior Vice President and Chief Financial
-----------------------------------------------------  Officer
                  Peter B. Knepper                     (Principal Financial and Accounting Officer)
 
                  /s/ BARRY DILLER                     Director
-----------------------------------------------------
                    Barry Diller
 
                  /s/ PETER BARTON                     Director
-----------------------------------------------------
                    Peter Barton
 
                 /s/ JONATHAN DOLGEN                   Director
-----------------------------------------------------
                   Jonathan Dolgen
 
                   /s/ JAMES HELD                      Director
-----------------------------------------------------
                     James Held
 
                /s/ JOHN A. PRITZKER                   Director
-----------------------------------------------------
                  John A. Pritzker
 
                /s/ WILLIAM D. SAVOY                   Director
-----------------------------------------------------
                  William D. Savoy
 
                /s/ TERENCE M. STROM                   Director
-----------------------------------------------------
                  Terence M. Strom
</TABLE>
 
                                       35
<PAGE>   37
 
                            TICKETMASTER GROUP, INC.
                                AND SUBSIDIARIES
 
       INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Independent Auditors' Reports...............................  F-2
Consolidated Balance Sheets -- January 31, 1997 and 1998....  F-4
Consolidated Statements of Operations -- Years ended January
  31, 1996, 1997 and 1998...................................  F-5
Consolidated Statements of Shareholders' Equity -- Years
  ended January 31, 1996, 1997 and 1998.....................  F-6
Consolidated Statements of Cash Flows -- Years ended January
  31, 1996, 1997 and 1998...................................  F-7
Notes to Consolidated Financial Statements..................  F-8
</TABLE>
 
                                       F-1
<PAGE>   38
 
                          INDEPENDENT AUDITORS' REPORT
 
The Board of Directors
Ticketmaster Group, Inc.:
 
We have audited the accompanying consolidated balance sheet of Ticketmaster
Group, Inc. and subsidiaries at January 31, 1998 and the related consolidated
statements of operations, shareholders' equity, and cash flows for the year then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
 
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
 
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Ticketmaster Group,
Inc. and subsidiaries at January 31, 1998, and the results of their operations
and their cash flows for the year then ended in conformity with generally
accepted accounting principles.
 
                                          Ernst & Young LLP
 
Los Angeles, California
February 24, 1998, except for Note 13
  as to which the date is April 10, 1998
 
                                       F-2
<PAGE>   39
 
                          INDEPENDENT AUDITORS' REPORT
 
The Board of Directors
Ticketmaster Group, Inc.:
 
We have audited the accompanying consolidated balance sheet of Ticketmaster
Group, Inc. and subsidiaries as of January 31, 1997 and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
years in the two year period ended January 31, 1997. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
 
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
 
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Ticketmaster Group,
Inc. and subsidiaries as of January 31, 1997, and the results of their
operations and their cash flows for each of the years in the two year period
ended January 31, 1997 in conformity with generally accepted accounting
principles.
 
                                          KPMG Peat Marwick LLP
 
Los Angeles, California
March 12, 1997
 
                                       F-3
<PAGE>   40
 
                            TICKETMASTER GROUP, INC.
                                AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
                    (IN THOUSANDS, EXCEPT SHARE INFORMATION)
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                                  JANUARY 31,
                                                              --------------------
                                                                1997        1998
                                                              --------    --------
<S>                                                           <C>         <C>
Current assets:
  Cash and cash equivalents.................................  $ 60,880    $ 76,323
  Accounts receivable, ticket sales.........................    12,014      23,374
  Accounts receivable, other................................     8,884      14,448
  Inventory.................................................     4,093       4,813
  Prepaid expenses..........................................     8,079      11,471
                                                              --------    --------
          Total current assets..............................    93,950     130,429
Property, equipment and leasehold improvements, net.........    32,923      45,419
Investments in and advances to affiliates...................     5,305       3,434
Cost in excess of net assets acquired, net..................    65,074     113,166
Purchased user agreements, net..............................    22,323      29,850
Other assets................................................     5,711       5,152
Deferred income taxes, net..................................     3,948       3,428
                                                              --------    --------
                                                              $229,234    $330,878
                                                              ========    ========
 
                       LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Current portion of long-term debt.........................  $    190    $    335
  Accounts payable, trade...................................    10,767      11,148
  Accounts payable, clients.................................    35,842      73,549
  Accrued expenses..........................................    18,721      23,325
  Deferred revenue and other................................    12,439      12,640
                                                              --------    --------
          Total current liabilities.........................    77,959     120,997
Long-term debt, net of current portion......................   127,514     158,561
Deferred rent and other.....................................     2,336       1,919
Minority interests..........................................        80         493
Shareholders' equity:
     Preferred stock, no par value, authorized and unissued
      20,000,000 shares.....................................        --          --
     Common stock, no par value, authorized 80,000,000
      shares, issued and outstanding 24,739,715 and
      26,057,215 shares at January 31, 1997 and 1998,
      respectively..........................................        --          --
     Exchangeable, Class B common stock of a subsidiary,
      non-voting,
       non-participating, no par value, authorized, issued
      and outstanding 99,935 shares at January 31, 1998.....        --       1,449
     Additional paid-in capital.............................   127,466     147,430
     Cumulative currency translation adjustment.............       (53)     (2,050)
     Accumulated deficit....................................  (106,068)    (97,921)
                                                              --------    --------
          Total shareholders' equity........................    21,345      48,908
                                                              --------    --------
                                                              $229,234    $330,878
                                                              ========    ========
</TABLE>
 
                See notes to consolidated financial statements.
 
                                       F-4
<PAGE>   41
 
                            TICKETMASTER GROUP, INC.
                                AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                               YEAR ENDED JANUARY 31,
                                                      -----------------------------------------
                                                         1996           1997           1998
                                                      -----------    -----------    -----------
<S>                                                   <C>            <C>            <C>
Revenue:
  Ticketing operations..............................  $   154,851    $   205,491    $   295,419
  Concession control systems........................           --         12,401         30,036
  Publications......................................        4,198         10,769         13,067
  Merchandising.....................................        2,201          2,300          2,458
                                                      -----------    -----------    -----------
                                                          161,250        230,961        340,980
                                                      -----------    -----------    -----------
Operating costs, expenses and other items:
  Ticketing operations..............................       97,147        122,243        169,007
  Ticketing selling, general and administrative.....       27,748         35,789         49,957
  Concession control systems operations.............           --          7,377         16,900
  Concession control systems selling, general and
     administrative.................................           --          5,995         10,911
  Publications......................................        9,129         17,965         17,753
  Merchandising.....................................        1,891          2,141          2,375
  Corporate general and administrative..............       14,758         16,849         21,496
  Depreciation......................................        4,868          6,714         10,561
  Amortization of goodwill..........................        1,925          2,356          4,692
  Amortization of other.............................        2,595          3,923          9,220
  Equity in net income of unconsolidated
     affiliates.....................................       (1,521)        (4,054)        (1,417)
                                                      -----------    -----------    -----------
  Operating income..................................        2,710         13,663         29,525
Other (income) expenses:
  Interest expense, net.............................       12,782         11,508          9,560
  Minority interests................................          273            300            (65)
  Gain on sale of unconsolidated affiliate..........           --         (3,195)            --
                                                      -----------    -----------    -----------
  Income (loss) before income taxes.................      (10,345)         5,050         20,030
Income tax provision (benefit)......................       (2,250)         3,258         11,883
                                                      -----------    -----------    -----------
  Net income (loss).................................  $    (8,095)   $     1,792    $     8,147
                                                      ===========    ===========    ===========
Basic earnings (loss) per share.....................  $      (.53)   $       .10    $       .32
                                                      ===========    ===========    ===========
Diluted earnings (loss) per share...................  $      (.53)   $       .10    $       .31
                                                      ===========    ===========    ===========
Basic weighted average number of common shares
  outstanding.......................................   15,310,405     17,222,459     25,846,344
                                                      ===========    ===========    ===========
Diluted weighted average number of common shares
  outstanding.......................................   15,310,405     17,222,459     26,284,555
                                                      ===========    ===========    ===========
</TABLE>
 
                See notes to consolidated financial statements.
 
                                       F-5
<PAGE>   42
 
                            TICKETMASTER GROUP, INC.
                                AND SUBSIDIARIES
 
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                    (IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
                                          PREFERRED
                                            STOCK
                                           NO PAR
                                           (NUMBER            (NUMBER OF SHARES)                                      CUMULATIVE
                                         OF SHARES)    --------------------------------                  ADDITIONAL    CURRENCY
                                         REDEEMABLE/       COMMON        EXCHANGEABLE     EXCHANGEABLE    PAID-IN     TRANSLATION
                                         CONVERTIBLE   STOCK, NO PAR    CLASS B, NO PAR     CLASS B       CAPITAL     ADJUSTMENT
                                         -----------   --------------   ---------------   ------------   ----------   -----------
<S>                                      <C>           <C>              <C>               <C>            <C>          <C>
BALANCE AT JANUARY 31, 1995............      --          15,310,405               --        $     --      $     --      $    --
Net loss...............................      --                  --               --              --            --           --
                                         ----------      ----------       ----------        --------      --------      -------
BALANCE AT JANUARY 31, 1996............      --          15,310,405               --              --            --           --
Foreign currency translation
  adjustment...........................      --                  --               --              --            --          (53)
Preferred Stock issued.................      1                   --               --              --        27,000           --
Preferred Stock converted..............     (1)           1,862,069               --              --            --           --
Dividends on Preferred Stock...........      --                  --               --              --            --           --
Public sale of Common Stock at $14.50
  per share (IPO Price), net of
  expenses.............................      --           7,250,000               --              --        95,866           --
Issuance of Common Stock for a Minority
  Interest.............................      --             317,241               --              --         4,600           --
Net income.............................      --                  --               --              --            --           --
                                         ----------      ----------       ----------        --------      --------      -------
BALANCE AT JANUARY 31, 1997............      --          24,739,715               --              --       127,466          (53)
Issuance of Exchangeable Class B common
  stock issued for Canadian
  acquisition..........................      --                  --        1,115,531          16,175            --           --
Class B Conversion.....................      --           1,015,596       (1,015,596)        (14,726)       14,726           --
Exercise of Options....................      --             301,904               --              --         4,378           --
Tax Benefit on Stock Option Gain.......      --                  --               --              --           860           --
Foreign currency translation
  adjustment...........................      --                  --               --              --            --       (1,997)
Net income.............................      --                  --               --              --            --           --
                                         ----------      ----------       ----------        --------      --------      -------
BALANCE AT JANUARY 31, 1998............      --          26,057,215           99,935        $  1,449      $147,430      $(2,050)
                                         ==========      ==========       ==========        ========      ========      =======
 
<CAPTION>
 
                                                           TOTAL
                                                       SHAREHOLDERS'
                                         ACCUMULATED      EQUITY
                                           DEFICIT     (DEFICIENCY)
                                         -----------   -------------
<S>                                      <C>           <C>
BALANCE AT JANUARY 31, 1995............   $(99,698)      $ (99,698)
Net loss...............................     (8,095)         (8,095)
                                          --------       ---------
BALANCE AT JANUARY 31, 1996............   (107,793)       (107,793)
Foreign currency translation
  adjustment...........................         --             (53)
Preferred Stock issued.................         --          27,000
Preferred Stock converted..............         --              --
Dividends on Preferred Stock...........        (67)            (67)
Public sale of Common Stock at $14.50
  per share (IPO Price), net of
  expenses.............................         --          95,866
Issuance of Common Stock for a Minority
  Interest.............................         --           4,600
Net income.............................      1,792           1,792
                                          --------       ---------
BALANCE AT JANUARY 31, 1997............   (106,068)         21,345
Issuance of Exchangeable Class B common
  stock issued for Canadian
  acquisition..........................         --          16,175
Class B Conversion.....................         --              --
Exercise of Options....................         --           4,378
Tax Benefit on Stock Option Gain.......         --             860
Foreign currency translation
  adjustment...........................         --          (1,997)
Net income.............................      8,147           8,147
                                          --------       ---------
BALANCE AT JANUARY 31, 1998............   $(97,921)      $  48,908
                                          ========       =========
</TABLE>
 
                See notes to consolidated financial statements.
 
                                       F-6
<PAGE>   43
 
                            TICKETMASTER GROUP, INC.
                                AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                   YEAR ENDED JANUARY 31,
                                                              --------------------------------
                                                                1996        1997        1998
                                                              ---------   ---------   --------
<S>                                                           <C>         <C>         <C>
Cash flows from operating activities:
  Net income (loss).........................................  $  (8,095)  $   1,792   $  8,147
  Adjustments to reconcile net income (loss) to net cash
    provided by (used in) operating activities:
      Depreciation and amortization.........................      9,388      12,993     24,473
      Income (loss) attributable to minority interests......        273         300        (65)
      Equity in net income of unconsolidated affiliates.....     (1,521)     (4,054)    (1,417)
      Gain on sale of unconsolidated affiliate..............         --      (3,195)        --
      Deferred income taxes.................................     (1,830)      1,252        520
  Changes in operating assets and liabilities net of effects
    from purchase of Joint Venturers' and licensees
    interests:
      Accounts receivable, ticket sales.....................      3,385        (299)    (7,863)
      Accounts receivable, other............................     (1,693)       (216)      (361)
      Inventory.............................................       (223)        424         71
      Prepaid expenses......................................        393      (1,196)    (2,113)
      Accounts payable, trade...............................      1,783         457     (1,715)
      Accounts payable, clients.............................     (5,876)     (2,981)    14,242
      Accrued expenses......................................     (3,432)      5,511      1,068
      Deferred revenue and other............................      3,090       5,355       (218)
      Deferred rent and other...............................      1,290        (558)      (622)
                                                              ---------   ---------   --------
        Net cash provided by (used in) operating
        activities..........................................     (3,068)     15,585     34,147
                                                              ---------   ---------   --------
Cash flows from investing activities:
  Proceeds from sale of unconsolidated affiliate............         --       6,600         --
  Purchase of property, equipment and leasehold
    improvements............................................     (3,644)    (21,796)   (16,727)
  Payments for investments in affiliates....................     (7,736)     (6,312)    (2,156)
  Cash distributions received from affiliates...............      5,760       3,240      1,947
  Cost in excess of net assets acquired.....................     (2,225)         --         --
  Purchased user agreements and other assets................     (1,607)      1,698         51
  Purchase of minority interest for cash....................         --      (6,000)    (1,134)
  Payment for acquisitions of venturers' and licensees
    interests, net of cash acquired.........................         --     (21,182)   (34,608)
                                                              ---------   ---------   --------
        Net cash used in investing activities...............     (9,452)    (43,752)   (52,627)
                                                              ---------   ---------   --------
Cash flows from financing activities:
  Net proceeds from IPO.....................................         --      95,866         --
  Proceeds from long-term debt..............................    136,339      70,999     55,102
  Reduction of long-term debt...............................   (128,029)   (111,401)   (24,628)
  Exercise of stock options including tax benefits..........         --          --      5,238
  Distributions (to) from minority shareholders.............       (538)       (368)       208
                                                              ---------   ---------   --------
        Net cash provided by financing activities...........      7,772      55,096     35,920
                                                              ---------   ---------   --------
Effect of exchange rate on cash and cash-equivalents........         --         (53)    (1,997)
                                                              ---------   ---------   --------
        Net increase (decrease) in cash and
        cash-equivalents....................................     (4,748)     26,876     15,443
Cash and cash equivalents, beginning of year................     38,752      34,004     60,880
                                                              ---------   ---------   --------
Cash and cash equivalents, end of year......................  $  34,004   $  60,880   $ 76,323
                                                              =========   =========   ========
Supplemental disclosures of cash flow information:
  Cash paid during the period for:
    Interest................................................  $  12,913   $  12,623   $ 10,487
                                                              =========   =========   ========
    Income taxes............................................  $     997   $   2,738   $ 10,592
                                                              =========   =========   ========
</TABLE>
 
Supplemental schedule of noncash investing and financing activities:
 
     During the fiscal year ended January 31, 1998, the Company acquired its
licensees' equity interest in the Canadian operation, the 50% interest of its
partners in Ticketmaster-Northwest, the 67% interest of its partners in
Ticketmaster-Southeast, 50% interest in Synchro Systems and 100% interest in
Distributed System Architects. In conjunction with the acquisitions, liabilities
were assumed as follows:
 
<TABLE>
<S>                                                         <C>
Fair value of assets acquired.............................  $111,146
Cash paid for venturers' and licensee's interests.........    59,370
Stock issued for venturer's interest......................    16,175
                                                            --------
Liabilities assumed.......................................  $ 35,601
                                                            ========
</TABLE>
 
                See notes to consolidated financial statements.
 
                                       F-7
<PAGE>   44
 
                            TICKETMASTER GROUP, INC.
                                AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
GENERAL
 
     Ticketmaster Group, Inc. and subsidiaries (the Company) is the leading
provider of automated ticketing services in the United States with clients
including the country's foremost entertainment facilities, promoters and
professional sports franchises. The Company provides automated ticketing
services to organizations that sponsor events which enable patrons alternatives
to purchasing tickets through operator-staffed call centers, the Internet and
independent sales outlets remote to the facility box office.
 
PRINCIPLES OF CONSOLIDATION
 
     The consolidated financial statements include the accounts of Ticketmaster
Group, Inc., its wholly owned subsidiaries and majority owned companies and
joint ventures. Investments in companies and joint ventures, which ownership
interests range from 20-50% and in which the Company exercises significant
influence over operating and financial policies, are accounted for using the
equity method at cost plus advances, increased or decreased by the Company's
share of earnings or losses, less dividends received. All significant
intercompany balances and transactions have been eliminated.
 
REVENUE RECOGNITION
 
     Revenue from ticket operations is recognized as tickets are sold. The
Company also licenses software under noncancellable license agreements and
provides services including maintenance, training, installation, consulting and
support services. License fee revenues are generally recognized when a
noncancellable license agreement has been signed, the product has been shipped,
there are no uncertainties surrounding product acceptance, the fees are fixed
and determinable and collection is considered probable. Revenues from
maintenance agreements for maintaining, supporting and providing periodic
upgrades are recognized ratably over the maintenance period, which in most
instances is one year. Revenues for training and consulting services are
recognized as services are performed. Revenue and profits under contracts
requiring significant customization are recognized using the
percentage-of-completion method of contract accounting based on the ratio of
incurred costs to total estimated costs. Revenue from all other sources are
recognized either upon delivery or when the service is provided.
 
CASH AND CASH EQUIVALENTS
 
     The Company classifies all highly liquid debt instruments purchased with an
original maturity of three months or less as cash equivalents.
 
ACCOUNTS RECEIVABLE, TICKET SALES
 
     Accounts receivable, ticket sales are principally from ticketing outlets
and credit card processors and represent the face value of the tickets sold plus
convenience charges, generally net of outlet commissions. The Company performs
credit evaluations of new ticket outlets, which are reviewed and updated
periodically, requiring collateral as circumstances warrant.
 
ACCOUNTS RECEIVABLE, OTHER
 
     Accounts receivable, other, consists primarily of amounts due from
licensees in connection with software sales and other services including
maintenance and installation.
 
                                       F-8
<PAGE>   45
                            TICKETMASTER GROUP, INC.
                                AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
INVENTORY
 
     Inventory, consisting primarily of systems hardware, maintenance parts and
supplies, is stated at the lower of cost (first-in, first out) or market.
 
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
 
     Property, equipment and leasehold improvements are stated at cost.
Depreciation and amortization are computed using the straight-line method over
the estimated useful lives of the related assets of three to forty years or, for
leasehold improvements, the term of the lease, if shorter. When assets are
retired or otherwise disposed of, the cost is removed from the asset account and
the corresponding accumulated depreciation is removed from the related allowance
account and any gain or loss is reflected in results of operations.
 
COST IN EXCESS OF NET ASSETS ACQUIRED
 
     The cost in excess of net assets acquired represents amounts allocated to
goodwill through the purchase of other businesses, ticketing operations and
minority interests and is being amortized by the straight-line method
principally over terms ranging from five to thirty years. Accumulative
amortization was $11.1 million and $6.4 million at January 31, 1998 and 1997,
respectively.
 
ACCOUNTS PAYABLE, CLIENTS
 
     Accounts payable, clients represents contractual amounts due to clients for
tickets sold by the Company on behalf of the organizations that sponsor events.
 
DEFERRED REVENUE AND OTHER
 
     Deferred revenue primarily consists of subscription revenue related to
publications, maintenance revenue related to Concession Control Systems and
sponsorship revenue related to ticketing operations. Deferred publications
revenue is recognized pro rata on a monthly basis, over the life of the
subscriptions. Costs in connection with the procurement of the subscriptions are
charged to expense pro rata on a monthly basis, over the life of the
subscriptions. Deferred maintenance revenue is recognized over the term
(generally one year) of the agreements on a straight-line basis. Deferred
sponsorship revenue and the related costs are recognized over the term of the
agreements on a straight-line basis or as earned ratable based upon delivery.
 
INCOME TAXES
 
     Deferred tax assets and liabilities are recognized with respect to the tax
consequences attributable to the differences between the financial statement
carrying values and tax bases of assets and liabilities. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which these temporary differences are expected to be
recovered or settled. Further, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes the
enactment date.
 
FOREIGN CURRENCY TRANSLATION
 
     The Company has determined that the functional currency of each foreign
operation is the local currency. The effects of translation rate changes related
to assets and liabilities located outside the United States are included as a
component of shareholders' equity. Foreign currency transaction gains and losses
are included in Interest Expense, net on the Consolidated Statements of
Operations through 1998; such gains and losses have not been significant.
 
                                       F-9
<PAGE>   46
                            TICKETMASTER GROUP, INC.
                                AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
CONCENTRATION OF CREDIT RISK
 
     The Company places its temporary cash investments principally in commercial
paper with large domestic and international companies and limits the amount of
credit exposure in any one company.
 
EARNINGS PER SHARE
 
     Effective in fiscal year 1998, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("SFAS No. 128") and related
interpretations. SFAS No. 128 requires dual presentation of Basic Earnings per
Share ("Basic EPS") and Diluted Earnings per Share ("Diluted EPS"). Basic EPS
excludes dilution and is computed by dividing net income by the weighted average
number of common shares outstanding during the reported period. Diluted EPS
reflects the potential dilution that could occur if stock options and other
commitments to issue common stock were exercised using the treasury stock
method. Earnings per share for all prior periods have been restated to reflect
the adoption of SFAS No. 128.
 
     The composition of Basic EPS and Diluted EPS is as follows:
 
<TABLE>
<CAPTION>
                                                       YEAR ENDED JANUARY 31,
                                              -----------------------------------------
                                                 1996           1997           1998
                                              -----------    -----------    -----------
                                                     (IN THOUSANDS, EXCEPT SHARE
                                                     AND PER SHARE INFORMATION)
<S>                                           <C>            <C>            <C>
Net income (loss)...........................  $    (8,095)   $     1,792    $     8,147
Weighted average shares.....................   15,310,405     17,222,459     25,846,344
Basic earnings (loss) per share.............  $      (.53)   $       .10    $       .32
                                              ===========    ===========    ===========
Weighted average shares including the
  dilutive effect of stock options..........   15,310,405     17,222,459     26,284,555
Diluted earnings (loss) per share...........  $      (.53)   $       .10    $       .31
                                              ===========    ===========    ===========
</TABLE>
 
FINANCIAL INSTRUMENTS
 
     The estimated fair values of cash, accounts receivable, notes receivable,
accounts payable, accrued expenses, and income taxes payable approximate their
carrying value because of the short term maturity of these instruments or the
stated interest rates are indicative of market interest rates.
 
USE OF ESTIMATES
 
     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
 
ACCOUNTING FOR STOCK-BASED COMPENSATION
 
     The Company adopted the disclosure requirements of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock Based Compensation" ("SFAS
No. 123") in fiscal 1996. As permitted by SFAS No. 123, the Company continues to
measure compensation cost in accordance with Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" ("APB 25") but provides pro
forma disclosures of net income and earnings per share as if the fair value
method (as defined in SFAS No. 123) had been applied beginning in 1996.
 
                                      F-10
<PAGE>   47
                            TICKETMASTER GROUP, INC.
                                AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
 
     The Company adopted the disclosure requirements of SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" in fiscal 1996. This Statement requires that long-lived assets
and certain identifiable intangibles be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used is measured by
a comparison of the carrying amount of an asset to future net cash flows (on an
undiscounted basis) expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the fair value of the
assets.
 
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
 
     In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" ("SFAS No. 130") effective for fiscal years beginning after December 15,
1997. The Company will adopt SFAS No. 130 in fiscal 1999 and does not expect
that the adoption will have a material effect on its financial statements.
 
     In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information", ("SFAS No. 131") effective for fiscal
years beginning after December 15, 1997. The new rules establish revised
standards for public companies relating to the reporting of financial and
descriptive information about their operating segments in financial statements.
The Company continues to assess the impact these revised standards will have on
existing segment disclosures; however, it does not expect that the adoption in
fiscal 1999 will have a material effect on its financial statements.
 
RECLASSIFICATIONS
 
     Certain reclassifications have been made to prior years financial
information to conform with the current year presentation.
 
 2. PROPERTY, EQUIPMENT & LEASEHOLD IMPROVEMENTS
 
     Property, equipment and leasehold improvements consisted of the following
(in thousands):
 
<TABLE>
<CAPTION>
                                                     JANUARY 31,
                                                 --------------------
                                                   1997        1998
                                                 --------    --------
<S>                                              <C>         <C>
Land...........................................  $  1,980    $  2,409
Building.......................................    10,804      13,923
Computer equipment.............................    28,287      29,925
Telephone equipment and furnishings............    11,611      16,582
Transportation equipment.......................     1,124       1,704
Leasehold improvements, net....................     2,937       5,193
                                                 --------    --------
                                                   56,743      69,736
Less accumulated depreciation..................   (23,820)    (24,317)
                                                 --------    --------
                                                 $ 32,923    $ 45,419
                                                 ========    ========
</TABLE>
 
                                      F-11
<PAGE>   48
                            TICKETMASTER GROUP, INC.
                                AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
 3. INVESTMENTS IN AND ADVANCES TO AFFILIATES
 
     Investments in Joint Ventures, which the Company refers to also as
affiliates or "affiliated companies", consisted of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                       JANUARY 31,
                                                     ----------------
                                                      1997      1998
                                                     ------    ------
<S>                                                  <C>       <C>
Investments in Ticketing Joint Ventures............  $4,652    $2,400
Other investments..................................     653     1,034
                                                     ------    ------
                                                     $5,305    $3,434
                                                     ======    ======
</TABLE>
 
     All of the above investments are accounted for under the equity method.
 
  Ticketing Joint Ventures
 
     At January 31, 1998, the Company's investments in Ticketing Joint Ventures
consist of a 50% interest in Ticketmaster-Australia, Ticketmaster Ireland and
Ticketmaster Golf and a 27% interest in Ticketmaster-Mexico. During fiscal 1998,
the Company acquired controlling interests in Ticketmaster-Northwest and
Southeast and Synchro Systems (see Note 4). Prior to the fiscal 1998 acquisition
dates, the Company had a 50%, 33% and 50% interest in these Joint Ventures
respectively and, accordingly, classified these investments as affiliates and
accounted for them using the equity method of accounting. In fiscal 1997, the
Company acquired controlling interests in Ticketmaster-Indiana, Ticketmaster-UK
Limited and TM-Europe Group.
 
     On July 31, 1997 the Company acquired 50% of the capital stock of The
Ticket Shop Limited for a purchase price of approximately Irish punts L1,517,000
(approximately US $2,200,000). This acquisition (Ireland acquisition) has been
recorded as a purchase transaction; accordingly, the purchase price was
allocated to the net assets acquired based on their estimated fair market
values. Approximately $0.8 million was allocated to purchased user agreements;
the excess of the estimated fair value of net assets acquired amounted to
approximately $1.4 million, which has been accounted for as goodwill and is
being amortized over 30 years using the straight line method.
 
     On October 10, 1996, the Company acquired a 27% equity interest in the
Company's Mexican licensee from a third party for $1.8 million in cash and 5% of
net distributions (as defined) received with respect to such 27% equity interest
from the Mexican operation.
 
     Summarized financial information of the unconsolidated Ticketing Joint
Ventures is presented below (in thousands):
 
<TABLE>
<CAPTION>
                                                 YEAR ENDED JANUARY 31,
                                                 ----------------------
                                                   1997          1998
                                                 --------      --------
<S>                                              <C>           <C>
COMBINED RESULTS OF OPERATIONS:
Revenues.......................................  $54,577       $38,905
Operating income...............................   10,087         5,567
Pre-tax income.................................   10,032         5,293
</TABLE>
 
                                      F-12
<PAGE>   49
                            TICKETMASTER GROUP, INC.
                                AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
<TABLE>
<CAPTION>
                                                     JANUARY 31,
                                                 --------------------
                                                  1997         1998
                                                 -------      -------
<S>                                              <C>          <C>
COMBINED FINANCIAL POSITION:
Total assets...................................  $24,739      $30,021
Total liabilities..............................   12,551       18,941
Venturers' capital.............................   12,188       11,080
</TABLE>
 
 4. ACQUISITIONS
 
     All acquisitions have been accounted for under the purchase method. The
results of operations of the acquired businesses are included in the
consolidated financial statements from the dates of acquisition.
 
     On February 12, 1996 the Company completed the acquisition of certain
assets of Tennessee Performing Arts Center Management Corporation, which managed
a ticket selling business within the State of Tennessee, for a purchase price of
$1.6 million.
 
     On June 7, 1996, the Company acquired the minority interests held by its
joint venture partner in Ticketmaster UK Limited and Ticketmaster Europe Group.
The purchase consideration was $6 million in cash and an Exchangeable Promissory
Note (the Note) in the principal amount of $5 million, bearing interest at the
prime rate. The Note plus interest was paid in full in November 1996.
 
     On August 31, 1996, the Company purchased certain assets of its
Albuquerque, New Mexico licensee, which managed a ticket distribution business
in Albuquerque, New Mexico, for a purchase price of $150,000.
 
     On October 3, 1996, the Company acquired the license rights and related
assets of its Delaware Valley (Philadelphia) licensee, which manages a ticket
distribution business primarily in Philadelphia, Pennsylvania for $19 million in
cash.
 
     On November 22, 1996, the Company completed the acquisition of the 50%
equity interest of its partner in Ticketmaster-Indiana. In connection with this
transaction, the Company issued 1,862,069 shares of Common Stock having an
aggregate value of $27 million based on the Initial Public Offering ("IPO")
price per share.
 
     On November 25, 1996, the Company acquired the 20% equity interest of the
minority shareholder in Southwest Ticketing, Inc., the Company's consolidated
operating subsidiary in Texas, for $6 million in cash. With the acquisition, the
Company increased its ownership interest to 100%.
 
     Also, on November 25, 1996, the Company acquired the 20% equity interest of
the minority shareholder in Ticketmaster-Florida, Inc., the Company's
consolidated operating subsidiary in Florida. In connection with the
acquisition, the Company issued 317,241 shares of Common Stock (having a value
of $4.6 million based upon the IPO price per share). With the acquisition, the
Company increased its ownership interest to 100%.
 
     On July 29, 1996, the Company acquired the 50% interest held by its joint
venture partner in Pacer/ CATS/CCS -- a Wembley/Ticketmaster Joint Venture (the
Pacer Joint Venture) which business is to develop, design and service
stand-alone computer tickets systems, as well as other management information
systems to be used in various venues, including motion picture theaters,
stadiums, arenas and amusement parks. With the acquisition, the Company
increased its ownership interest to 100%.
 
     Consideration paid by the Company in connection with its initial 50%
interest in the Pacer Joint Venture and the subsequent 50% interest purchased
from WIL, Incorporated ("WIL") aggregated approximately $16 million in cash and
the assumption of $7.5 million of debt. WIL's contribution to the Pacer Joint
Venture included certain ticketing technology in development and employment
contracts with covenants-not-to-
 
                                      F-13
<PAGE>   50
                            TICKETMASTER GROUP, INC.
                                AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
compete, for which the Company paid $7.5 million and $3.75 million,
respectively. The technology in development was expensed as research and
development cost by the Company. During the year ended January 31, 1995, the
covenants-not-to-compete were charged to expense, as it was determined that this
intangible had no future value to the Company. The remaining $3.25 million of
the Company's excess investment over the underlying equity in the Pacer Joint
Venture has been recorded as cost in excess of net assets acquired and is being
amortized using the straight line method over a period of seven and a half
years.
 
     Pursuant to an Agreement of Purchase and Sale of Stock, dated as of May 13,
1997 (with effect from March 1, 1997), the Company acquired all of the issued
and outstanding shares of capital stock of its Canadian licensees for a purchase
price of Canadian $44,650,000 (approximately US $32,350,000), consisting of
approximately Canadian $22,325,000 in cash and 1,115,531 non-voting,
non-participating Class B Shares of the Company's new Canadian subsidiary
(Exchangeable Common Stock). The Class B Shares have certain protective rights
but have no rights with respect to profits on losses of the Canadian subsidiary.
Further, these shares have no redemption features other than for Ticketmaster
Group, Inc. common stock. Holders of the Class B Shares have the right, at any
time, to exchange such Class B Shares for shares of the Company's Common Stock
on a one-for-one basis, subject to adjustment. In addition, the Company has the
right to require such exchange to occur at any time on or after January 1, 2001,
or earlier if certain specified events occur. This acquisition has been recorded
as a purchase transaction; accordingly, the purchase price was allocated to the
net assets acquired based on their estimated fair market values. Approximately
$6.4 million was allocated to purchased user agreements; the excess of the
estimated fair value of net assets acquired amounted to approximately $19.7
million, which has been accounted for as goodwill and is being amortized over 30
years using the straight line method. The accompanying condensed consolidated
statements of operations include the results of operations since the effective
date of the acquisition. Upon the occurrence or satisfaction, as applicable, of
certain specified events and conditions relating to operations in Canada, the
purchase price will be increased by approximately 12.3%, payable on May 1, 1998,
50% in cash and 50% in additional Class B Shares of the Canadian subsidiary. If
increased, the purchase price will be allocated between purchased user
agreements and goodwill.
 
     On June 30, 1997, the Company acquired the 50% interest held by its joint
venture partner in Ticketmaster-Northwest for $12.8 million in cash, including
expenses. This acquisition has been recorded as a purchase transaction;
accordingly, the purchase price was allocated to the net assets acquired based
on their estimated fair market values. Approximately $1.5 million was allocated
to purchased user agreements; the excess of the estimated fair value of net
assets acquired amounted to approximately $10.6 million, which has been
accounted for as goodwill and is being amortized over 30 years using the
straight line method. The accompanying condensed consolidated statements of
operations include the results of operations since the effective date of the
acquisition.
 
     On July 31, 1997, the Company acquired the 20% minority interest held by
its joint venture partner in Ticketmaster-Tennessee for $1.1 million in cash.
This acquisition has been recorded as a purchase transaction; accordingly, the
purchase price was allocated to the net assets acquired based on their estimated
fair market values. Approximately $0.3 million was allocated to purchased user
agreements; the excess of the estimated fair value of net assets acquired
amounted to approximately $0.8 million, which has been accounted for as goodwill
and is being amortized over 30 years using the straight line method.
 
     On August 31 and December 17, 1997, the Company acquired the 33% interest
held by each of its two joint venture partners in Ticketmaster-Southeast for
$19.0 million in cash, resulting in a 100% ownership interest in this Joint
Venture. This acquisition has been recorded as a purchase transaction;
accordingly, the purchase price was allocated to the net assets acquired based
on their estimated fair market values. Approximately $4.5 million was allocated
to purchased user agreements; the excess of the estimated fair value of net
assets acquired amounted to approximately $12.3 million, which has been
accounted for as goodwill and
 
                                      F-14
<PAGE>   51
                            TICKETMASTER GROUP, INC.
                                AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
is being amortized over 30 years using the straight line method. The
accompanying condensed consolidated statements of operations include the results
of operations since the effective date of the acquisition.
 
     On September 30, 1997 the Company acquired all of the equity interests of
the minority shareholders in Synchro Systems Limited for a purchase price of
approximately UK L2,000,000 (approximately US $3,300,000). This acquisition has
been recorded as a purchase transaction; accordingly, the purchase price was
allocated to the net assets acquired based on their estimated fair market
values. The excess of the estimated fair value of net assets acquired amounted
to approximately $0.9 million, which has been accounted for as goodwill and is
being amortized over 30 years using the straight line method.
 
     On January 2, 1998, the Company acquired 100% of the capital stock of
Distributed System Architects Inc., ("DSA") which provides software and service
products for automated ticketing systems, for a purchase price of $8 million.
This acquisition has been recorded as a purchase transaction; accordingly, the
purchase price was allocated to the net assets acquired based on their estimated
fair market values. The excess of the estimated fair value of net assets
acquired amounted to approximately $7.9 million, which has been accounted for as
goodwill and is being amortized over 15 years using the straight-line method.
 
  Proforma Financial Results
 
     The following pro forma information presents a summary of consolidated
results of the Company, the Ticketmaster-Europe, Indiana, Northwest, Southeast
and Pacer/CATS/CCS Joint Ventures, the Delaware Valley (Philadelphia), Canadian
and Mexico licensees, the Texas and Florida operating subsidiaries and Synchro
Systems for the years ended January 31, 1997 and 1998 assuming the acquisitions
had been made as of February 1, 1996, with pro forma adjustments to give affect
to amortization of goodwill and purchased user agreements, interest on the debt
incurred on these acquisitions and the related income tax effect utilizing a
statutory rate for Federal taxes equal to 34%, for state and foreign taxes equal
to the rate applicable in each jurisdiction. Also, the following pro forma
information has been prepared to illustrate the effects of the application of
the proceeds of an Initial Public Offering completed on November 22, 1996. The
pro forma financial information is not necessarily indicative of the results of
operations as they would have been had the transactions been effective on
February 1, 1996. The Pro Forma Financial Information and accompanying notes
should be read in conjunction with the Consolidated Financial Statements and
related Notes thereto.
 
<TABLE>
<CAPTION>
                                               FISCAL YEAR ENDED JANUARY 31
                                               ----------------------------
                                                  1997             1998
                                               -----------      -----------
                                                  (IN THOUSANDS, EXCEPT
                                                    PER SHARE AMOUNTS)
<S>                                            <C>              <C>
Total revenue................................   $324,709         $361,697
Net income...................................      2,738            9,582
Diluted earnings per share...................        .11              .36
</TABLE>
 
     Pro forma results of operations have not been presented for the
Ticketmaster-Ireland, Ticketmaster-Tennessee and DSA acquisitions because the
pro forma effects of these acquisitions are not significant.
 
 5. PURCHASED USER AGREEMENTS, NET
 
     Net purchased user agreements consisted of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                    JANUARY 31,
                                               ----------------------
                                                 1997          1998
                                               --------      --------
<S>                                            <C>           <C>
Purchased user agreements....................  $ 42,643      $ 57,441
Accumulated amortization.....................   (20,320)      (27,591)
                                               --------      --------
                                               $ 22,323      $ 29,850
                                               ========      ========
</TABLE>
 
                                      F-15
<PAGE>   52
                            TICKETMASTER GROUP, INC.
                                AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
     The purchased user agreements are being amortized generally in accordance
with the contract terms, primarily on a straight-line basis, including any
annual minimum guarantees specified by the contract. The lives of the contracts
generally range from 2 to 10 years.
 
 6. LONG-TERM DEBT
 
     Long-term debt consisted of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                                  JANUARY 31,
                                                              --------------------
                                                                1997        1998
                                                              --------    --------
<S>                                                           <C>         <C>
Notes payable to bank on revolving loan ($175 million at
  January 31, 1997, $165 million at January 31, 1998,
  respectively), collateralized by substantially all of the
  Company's assets, payable on December 31, 1999; bearing
  interest at the London Inter-Bank Offering Rate (5.4% and
  5.6% at January 31, 1997 and 1998, respectively) plus the
  applicable margin, as defined (1.625% and 1.000% at
  January 31, 1997 and 1998, respectively)..................  $120,000    $142,000
Promissory note secured by a Deed of Trust on the Company's
  Headquarters' building; bearing interest at a rate of
  9.2%; principal and interest payable monthly, based on a
  twenty-five year term, with the balance due on April 25,
  2007. On the maturity date, all unpaid principal and
  accrued but unpaid interest will be due...................        --       8,928
Notes payable to bank on term loan collateralized by
  substantially all of Pacer/ CATS/CCS's assets, interest at
  prime (8.25% and 8.5% at January 31, 1997 and 1998,
  respectively) plus 0.25% or at the Inter-Bank Offering
  Rate plus 225 basis points; interest payable monthly;
  principal payable monthly beginning July 31, 1997 (to the
  extent Pacer/CATS cash flows exceed certain amounts) with
  the balance due on June 30, 1999..........................     7,500       7,500
Other.......................................................       204         468
                                                              --------    --------
                                                               127,704     158,896
Less current portion........................................       190         335
                                                              --------    --------
                                                              $127,514    $158,561
                                                              ========    ========
</TABLE>
 
     Annual principal payments due subsequent to January 31, 1998 are as follows
(in thousands):
 
<TABLE>
<S>                                                 <C>
Year ending January 31:
1999..............................................  $    335
2000..............................................   149,851
2001..............................................       125
2002..............................................       137
2003..............................................       150
Thereafter........................................     8,298
                                                    --------
                                                    $158,896
                                                    ========
</TABLE>
 
     Interest expense incurred was approximately $13.6 million, $13.0 million
and $11.4 million for the years ended January 31, 1996, 1997 and 1998,
respectively.
 
     The aggregate bank group commitment under the terms of the Company's
revolving loan agreement currently equals $165 million reducing to $150 million
at December 31, 1998.
 
                                      F-16
<PAGE>   53
                            TICKETMASTER GROUP, INC.
                                AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
     The Company's revolving credit and term loans borrowing agreements with its
lenders are subject to certain restrictive covenants relating to, among other
things, net worth, cash flows and capital expenditures. The Company was in
compliance with its restrictive covenants or has obtained the necessary waivers
from its bank for the fiscal years ended January 31, 1996, 1997 and 1998. In
addition, the Company's credit agreements impose certain restrictions on the
payment of dividends to the Company's shareholders.
 
     The Company has issued standby letters of credit totaling $0.1 million on
January 31, 1998.
 
 7. INCOME TAXES
 
     Deferred income taxes result from temporary differences in the tax and
financial reporting bases of certain assets and liabilities. The sources of
these differences and the tax effect of each were as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                               JANUARY 31,
                                                             ----------------
                                                              1997      1998
                                                             ------    ------
<S>                                                          <C>       <C>
Deferred tax assets:
Investments in affiliates due to equity in net loss and
  amortization period differences..........................  $3,305    $3,020
Deferred revenue...........................................   1,545     1,110
Contributions..............................................     630        --
State and local taxes......................................      45        --
                                                             ------    ------
          Total deferred tax assets........................   5,525     4,130
Deferred tax liabilities:
Other intangible assets, principally due to amortization...     600       400
Equipment and leasehold improvements, principally due to
  depreciation.............................................     265       240
Cost in excess of net assets acquired, principally due to
  amortization.............................................     415        35
Other......................................................     297        27
                                                             ------    ------
          Total deferred tax liabilities...................   1,577       702
                                                             ------    ------
Net deferred tax assets....................................  $3,948    $3,428
                                                             ======    ======
</TABLE>
 
     In assessing the realizability of the net deferred tax assets, management
considers whether it is more likely than not that some or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax assets
depends upon the generation of future taxable income during the periods in which
those temporary differences become deductible. As of January 31, 1998, the
Company had not provided a valuation allowance to reduce the net deferred tax
assets due to the Company's expectation of future taxable income against which
the deferred tax asset will be realized.
 
                                      F-17
<PAGE>   54
                            TICKETMASTER GROUP, INC.
                                AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
     The provision/(benefit) for income taxes consisted of the following (in
thousands):
 
<TABLE>
<CAPTION>
                                                   YEARS ENDED JANUARY 31,
                                                 ----------------------------
                                                  1996       1997      1998
                                                 -------    ------    -------
<S>                                              <C>        <C>       <C>
Current:
  Federal......................................  $(1,500)   $  545    $ 7,475
  State........................................    1,080     1,330      1,925
  Foreign......................................       --       130      1,855
                                                 -------    ------    -------
                                                    (420)    2,005     11,255
                                                 -------    ------    -------
Deferred:
  Federal......................................   (1,595)    1,092        550
  State........................................     (235)      161         78
                                                 -------    ------    -------
                                                  (1,830)    1,253        628
                                                 -------    ------    -------
Total income tax provision (benefit)...........  $(2,250)   $3,258    $11,883
                                                 =======    ======    =======
</TABLE>
 
     The following is a reconciliation of the statutory Federal income tax rate
to the Company's effective income tax rate:
 
<TABLE>
<CAPTION>
                                                          YEARS ENDED JANUARY 31,
                                                          -----------------------
                                                          1996     1997     1998
                                                          -----    -----    -----
<S>                                                       <C>      <C>      <C>
Statutory Federal income tax expense....................   (34)%    34%      35%
State income taxes, net of Federal benefit..............     5      20        8
Effect of foreign operations............................    (3)     (7)       4
Non-deductible amortization of excess cost over fair
  market value of net assets acquired...................     5      10       11
Meals and entertainment limitation......................     2       5        1
Other...................................................     3       3        0
                                                           ---      --       --
                                                           (22)%    65%      59%
                                                           ===      ==       ==
</TABLE>
 
     Federal income tax returns of the Company for all fiscal years through 1989
and 1992 and 1993 fiscal years have been closed and all matters have been
resolved. The Federal income tax returns for the 1990 and 1991 fiscal years have
been audited by the Internal Revenue Service and the Company received a Notice
of Proposed Adjustment. A response to the proposed adjustments has been filed.
Management believes that the resolution of the proposed adjustments will not
have a material adverse effect on the Company's financial position or results of
operations.
 
 8. STOCK OPTIONS
 
     The Company adopted the Ticketmaster Stock Plan (the Plan), under which
3,750,000 shares of common stock have been reserved for issuance upon exercise
of incentive stock options, nonqualified stock options, restricted stock, stock
appreciation rights or phantom stock awards.
 
                                      F-18
<PAGE>   55
                            TICKETMASTER GROUP, INC.
                                AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
     The table below summarizes stock option activity under the Plan over the
past three years consisting solely of the non-qualified stock options:
 
<TABLE>
<CAPTION>
                                              WEIGHTED                     WEIGHTED
                                              AVERAGE      NUMBER OF       AVERAGE
                                  NUMBER      EXERCISE      SHARES        REMAINING
                                 OF SHARES     PRICE      EXERCISABLE    LIFE (YEARS)
                                 ---------    --------    -----------    ------------
<S>                              <C>          <C>         <C>            <C>
Options outstanding at
  January 31, 1995...........      265,111     $14.14         82,511          9.0
  Granted....................           --
  Exercised..................           --
  Canceled...................           --
                                 ---------     ------      ---------         ----
Options outstanding at
  January 31, 1996...........      265,111     $14.14        165,022          8.0
  Granted....................    2,801,700     $14.50
  Exercised..................           --
  Canceled...................       (9,900)    $14.50
                                 ---------     ------      ---------         ----
Options outstanding at
  January 31, 1997...........    3,056,911     $14.47        247,437         9.48
  Granted....................      145,000     $15.66
  Exercised..................     (301,904)    $14.50
  Canceled...................     (107,471)    $14.50
                                 ---------     ------      ---------         ----
Options outstanding at
  January 31, 1998...........    2,792,536     $14.53      2,772,536         8.50
                                 =========     ======      =========         ====
</TABLE>
 
     Options are granted at prices not less than the market value of the common
stock at grant date and become exercisable over a period of 48 months. Options
expire not later than 10 years after the date of grant, or earlier, in certain
cases, if the individual is no longer employed by the Company. The range of
exercise price for options outstanding at January 31, 1998 range from $13.88 to
$20.00. On January 31, 1998, the Company's underlying stock closed on the NASDAQ
National Market at a price of $24.31 per share.
 
     On December 15, 1993, the Company granted, in addition to the Plan, options
to acquire 1,331,340 shares of common stock at an exercise price of $14.14 per
share. At January 31, 1998, 1,331,340 options were exercisable. The options
expire on December 15, 2003. No options were exercised as of January 31, 1998.
 
     The stock options outstanding on July 17, 1997 became fully vested as a
result of the change in the controlling ownership of the Company.
 
                                      F-19
<PAGE>   56
                            TICKETMASTER GROUP, INC.
                                AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
     The Company applies APB Opinion No. 25 in accounting for its Plan and,
accordingly, no compensation cost has been recognized for its stock options in
the consolidated financial statements. Had the Company determined compensation
cost based on the fair value at the grant date for its stock options under SFAS
No. 123, the Company's net income would have been reduced to the pro forma
amounts indicated below:
 
<TABLE>
<CAPTION>
                                                                YEAR ENDED
                                                               JANUARY 31,
                                                             ----------------
                                                              1997      1998
                                                             ------    ------
<S>                                                          <C>       <C>
Net income as reported.....................................  $1,792    $8,147
  Pro forma................................................     902       560
Diluted earnings per share as reported.....................     .10       .31
  Pro forma................................................     .05       .02
</TABLE>
 
     Pro forma net income reflects only options granted in fiscal 1998 and
fiscal 1997 that became vested in fiscal 1998. Therefore, the full impact of
calculating compensation cost for stock options under SFAS No. 123 is not
reflected in the pro forma net income amounts presented above because
compensation cost is reflected over the options' vesting period of 4 years and
compensation cost for options granted prior to January 31, 1996 is not
considered.
 
     The weighted average fair value of options granted during the year was
$15.10 in 1998. The fair value of each option grant was estimated on the date of
grant using the Black-Scholes option pricing model with the following
weighted-average assumptions:
 
<TABLE>
<CAPTION>
                                                               YEAR ENDED
                                                              JANUARY 31,
                                                              ------------
                                                              1997    1998
                                                              ----    ----
<S>                                                           <C>     <C>
Dividend yield..............................................    0%       0%
Annualized volatility.......................................   27%      43%
Risk free interest..........................................  7.2%    5.69%
Expected terms (years)......................................    4        4
</TABLE>
 
     The impact of outstanding unvested stock options granted prior to 1997 has
been excluded from the pro forma calculations. Accordingly, the 1996 and 1995
pro forma adjustments are not indicative of future period pro forma adjustments,
when the calculation will apply to all applicable stock options.
 
 9. 401(K) PLAN
 
     The Company has a 401(k) plan covering all eligible employees, which
contains an employer matching feature of 25% up to a maximum of 6% of the
employee's compensation. The Company's contribution for the plan years ended
December 31, 1995, 1996 and 1997 was approximately $310,000, $410,000 and
$455,000, respectively.
 
                                      F-20
<PAGE>   57
                            TICKETMASTER GROUP, INC.
                                AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
10. COMMITMENTS AND CONTINGENCIES
 
     The Company leases office space and equipment under various operating
leases that expire at various dates through 2008. Renewal options exist for a
substantial portion of the leases. Additional rental payments may be required
for the Company's pro rata share of certain operating expenses associated with
office space leases. Future minimum lease payments are as follows as of January
31, 1998 (in thousands):
 
<TABLE>
<CAPTION>
              YEAR ENDING JANUARY 31,                AMOUNT
              -----------------------                -------
<S>                                                  <C>
     1999..........................................  $ 7,885
     2000..........................................    5,879
     2001..........................................    4,054
     2002..........................................    3,160
     2003..........................................    1,790
  Thereafter.......................................    1,020
                                                     -------
                                                     $23,788
                                                     =======
</TABLE>
 
     Rental expense charged to operations for operating leases was approximately
$4.9 million, $5.9 million and $6.9 million for the years ended January 31,
1996, 1997 and 1998, respectively.
 
11. RELATED PARTY TRANSACTIONS
 
     At January 31, 1997 and 1998, an affiliate of a primary lender to the
Company held 196,370 shares of Common Stock, which represents less than 1% of
the shares outstanding.
 
     On June 28, 1996, the Company entered into an agreement expiring on
December 31, 2003, with an affiliate of its then majority shareholder, whereby
in exchange for services rendered in connection with the development of the
Company's web site, the Company will pay royalties ranging from 5 - 10% of
ticket convenience charges and merchandise sold through its web site (net of
defined deductions). The agreement calls for an annual minimum royalty payment
of $100,000 per year (pro-rated for calendar 1996). Royalty payments incurred
for the years ended January 31, 1997 and 1998 amounted to $50,000 and $100,000,
respectively.
 
     During fiscal years 1997 and 1998 the Company earned revenues of
approximately $9.2 million and $13.8 million, respectively, from contracts with
certain venues which are managed by an entity controlled through trusts for the
benefit of members of the Pritzker family, one of whom is on the Company's Board
of Directors.
 
12. LITIGATION AND GOVERNMENT INVESTIGATION
 
     The Company and several of its subsidiaries were named as defendants in
several federal and state antitrust consumer class action lawsuits. The federal
cases, consolidated by the Judicial Panel on Multi-District Litigation, asserted
among other things violations of Sections 1 and 2 of the Sherman Act. On May 31,
1996, these cases were dismissed for failure to state a claim. On June 12, 1996,
plaintiffs appealed the court's decision. Oral argument was held on February 14,
1997. The Court of Appeals rendered its opinion on April 10, 1998 (see
Subsequent Events Footnote, No. 13).
 
     On July 23, 1997, an Award was issued in favor of MovieFone, Inc.,
Promofone, Inc. and Teleticketing Co. LP (the "MovieFone Entities") as a result
of arbitration proceeding against the Pacer Cats Corporation, a wholly owned
subsidiary of Wembley plc and now known as "PCC Management, Inc.". The Award
provides, among other things, (i) that Pacer Cats Corporation shall pay to the
MovieFone Entities damages aggregating $22,751,250 and (ii) for injunctive
relief relating to certain conduct of Pacer Cats
 
                                      F-21
<PAGE>   58
                            TICKETMASTER GROUP, INC.
                                AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
Corporation and its successors and assigns with respect to the MovieFone
Entities' business for a specified period of time.
 
     No entity owned by the Company, including, but not limited to,
Pacer/CATS/CCS, was a party to the arbitration proceeding. Nonetheless, counsel
for Wembley plc, WIL, Incorporated, PCC Management, Inc. and Wembley, Inc.
(collectively the "Wembley Entities"), by letter dated August 4, 1997, advised
Pacer/ CATS/CCS, Ticketmaster Corporation, Ticketmaster Cinema Group, Ltd. and
Cinema Acquisition Corporation (collectively, the "Ticketmaster Entities"), that
the Wembley Entities intend to look to the Ticketmaster Entities to be made
whole with respect to the costs of the arbitration, including attorneys' fees
incurred in connection therewith, and all or part of any monetary damages
assessed against Pacer Cats Corporation.
 
     The Ticketmaster Entities in turn have advised counsel for the Wembley
Entities that they believe that there is no validity to any claim by the Wembley
Entities against any of the Ticketmaster Entities. In this regard, by agreement
dated July 2, 1996 ("the Agreement"), the Wembley Entities released and
covenanted not to sue the Ticketmaster Entities in connection with any claims
arising out of the arbitration proceeding; however, the Wembley Entities
retained certain limited indemnification rights under the Agreement, solely with
respect to Pacer/CATS/CCS and its operations from and after April 15, 1994. In
the event any of the alleged claims are pursued by the Wembley Entities, the
Ticketmaster Entities intend to vigorously oppose them.
 
     The Company and certain of its current and former directors have been named
as defendants in several purported class action lawsuits: The complaints, all of
which are substantially similar, challenge the offer by USAi (formerly HSN,
Inc.) to acquire the remaining shares in the Company which it does not already
own and allege that the consideration offered by USAi is inadequate and that the
defendants have breached their fiduciary duties to the plaintiffs and the class
of shareholders of the Company which they claim to represent. The cases seek to
enjoin the proposed transaction and ask for unspecified damages. The three
pending Illinois cases have been consolidated, and the plaintiffs in one of the
California cases have agreed to stay proceedings in that case pending the
outcome of the Illinois cases. The Company believes that all the lawsuits are
without merit and intends to vigorously defend the claims asserted.
 
     The Company also is involved in various other investigations, lawsuits and
claims arising in the normal conduct of its business, including but not limited
to, allegations of antitrust violations. The Company has also at times responded
to inquiries from various government and state authorities. In the opinion of
the Company's management, based on current information and on advice from legal
counsel, none of the Company's legal proceedings will have a material adverse
effect on the Company's financial position, results of operation or cash flows.
 
13. SUBSEQUENT EVENTS
 
     On March 13, 1998, the Company and the majority owner of its Mexican
licensee, Corporacion Interamericana de Entretenimiento, S.A. de C.V. ("CIE")
entered into a series of agreements designed to jointly market and operate the
Company's trademark and technology in Mexico and Central and South America.
Pursuant to the terms of these agreements, the Company received an additional
equity interest in its Mexican licensee of 22.99% (for an aggregate ownership
interest of 49.99%) and agreed that the Company will have a 50.01% interest in
and serve as the manager of each operating entity organized in Central and South
America.
 
     On March 20, 1998, the Company and USA Networks, Inc. (USAi) entered into a
merger agreement subject to Company shareholder approval, wherein USAi will
acquire in a tax free exchange the remaining Company common stock not owned by
USAi for .563 of a share of USAi common stock (1.126 shares after giving effect
to a two-for-one stock split paid to USAi shareholders on March 26, 1998).
 
                                      F-22
<PAGE>   59
                            TICKETMASTER GROUP, INC.
                                AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
     On April 10, 1998, the Court of Appeals issued an opinion affirming the
district court's ruling that the plaintiffs in the consolidated consumer class
action lawsuit lack standing to pursue their claims for damages under the
antitrust laws. However, the Appellate Court held that the plaintiffs' status as
indirect purchasers of Ticketmaster's services did not bar them from seeking
injunctive relief against the Company. The Company believes that the Court's
affirmance of the decision prohibiting plaintiffs from obtaining damages against
Ticketmaster eliminates the substantial portion of plaintiffs' claims.
 
14. QUARTERLY FINANCIAL SUMMARY (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                    APRIL 30    JULY 31    OCTOBER 31    JANUARY 31
                                                    --------    -------    ----------    ----------
<S>                                                 <C>         <C>        <C>           <C>
FISCAL YEAR ENDED JANUARY 31, 1998
  Revenue.........................................  $77,003     $81,695     $89,047       $93,235
  Operating income................................    6,844       6,922       9,145         6,614
  Net income......................................    1,881       1,979       2,972         1,315
  Basic earnings per share........................  $   .07     $   .08     $   .11       $   .05
  Diluted earnings per share......................  $   .07     $   .08     $   .11       $   .05
FISCAL YEAR ENDED JANUARY 31, 1997
  Revenue.........................................  $46,741     $53,218     $62,578       $68,424
  Operating income................................      427       3,069       4,745         5,422
  Net income (loss)...............................   (1,979)       (439)      2,849         1,361
  Basic earnings (loss) per share.................  $  (.13)    $  (.03)    $   .19       $   .06
  Diluted earnings (loss) per share...............  $  (.13)    $  (.03)    $   .19       $   .06
</TABLE>
 
                                      F-23
<PAGE>   60
 
                                                                     SCHEDULE II
 
                            TICKETMASTER GROUP, INC.
 
                       VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
             COLUMN A                COLUMN B              COLUMN C                COLUMN D        COLUMN E
             --------                --------              --------                --------        --------
                                                           ADDITIONS
                                    BALANCE AT   -----------------------------
                                    BEGINNING                   CHARGED TO        DEDUCTIONS      BALANCE AT
           DESCRIPTION               OF YEAR     OTHER(A)   COSTS AND EXPENSES   FROM RESERVES    END OF YEAR
           -----------              ----------   --------   ------------------   -------------   -------------
<S>                                 <C>          <C>        <C>                  <C>             <C>
Allowance for doubtful accounts:
  Year ended January 31,1998......     $989       $  301           $240              $707            $823
Allowance for doubtful accounts:
  Year ended January 31,1997......        0        1,215              0               226             989
</TABLE>
 
---------------
Note A -- Represents amounts related to the Pacer and Synchro Joint Ventures on
          the date of acquisition (consolidation).
<PAGE>   61
 
                                      EXHIBIT INDEX
 
<TABLE>
<CAPTION>
  NUMBER
  EXHIBIT                           DESCRIPTION
  -------                           -----------
  <S>       <C>
  10.47     Employment Agreement dated February 1, 1997 between the
            Company and Robert Perkins
  10.48     Employment Agreement dated July 1, 1997 between the Company
            and Tony Tolbert
  10.49     Amendment No. 1 dated September 1997 to Employment Agreement
            dated March 1, 1997 between the Company and Judy Black
  10.50     Amendment No. 1 dated December 1997 to Employment Agreement
            dated January 3, 1995 between the Company and Annie Gilbar
  10.51     Amendment No. 2 dated February 1, 1998 to Employment
            Agreement dated February 1, 1994 between the Company and
            Marc Bension
  10.52     Amendment No. 1 dated February 1, 1998 to Employment
            Agreement dated February 1, 1994 between the Company and Ann
            Mooney
  10.53     Amendment No. 1 dated February 28, 1998 to Employment
            Agreement dated February 1995 between the Company and Carole
            Ference
  10.54     Employment Agreement dated January 13, 1997 between the
            Company and Daniel R. Goodman
  10.55     Termination Agreement dated October 29, 1997 between the
            Company and Layne Britton
  10.56     Ninth Amendment to Credit Agreement dated as of March 6,
            1998
  10.57     Cooperation, Non-Competition and Confidentiality Agreement
            between the Company and Fredic D. Rosen dated March 9, 1998
  10.58     Agreement and Plan of Merger By and Among USA Networks,
            Inc., Brick Acquisition Corp. and the Company dated as of
            March 20, 1998
  11.1      Computation of earnings per share
  21.1      Subsidiaries of the Registrant
  23.1      Consent of KPMG Peat Marwick LLP
  23.2      Consent of Ernst &Young LLP
  27.1      Financial Data Schedule
  99.4      Appeals from the United States District Court with respect
            to alleged antitrust violations dated April 10, 1998
</TABLE>