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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 DECEMBER 31, 1997
                                       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             0-23059
                                         ...................................

                            HEALTHWORLD CORPORATION
           (EXACT NAME OF THE REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
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                        DELAWARE                                                 13-3922288
              (STATE OR OTHER JURISDICTION                                    (I.R.S. EMPLOYER
           OF INCORPORATION OR ORGANIZATION)                                IDENTIFICATION NO.)
 
               100 AVENUE OF THE AMERICAS
                   NEW YORK, NEW YORK                                              10013
        (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                                 (ZIP CODE)
</TABLE>
 
      REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 966-7640
 
         SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
                                     None
 
         SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                        Common Stock, $0.01 par value
 
     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 at March 9, 1998, approximately 7,415,000 shares of Common Stock of the
Registrant were issued and outstanding and the aggregate market value of voting
common stock held by non-affiliates was approximately $37,834,569.
 
                     DOCUMENTS INCORPORATED BY REFERENCE:
 
     Portions of the Registrant's definitive Proxy Statement for its 1998 annual
meeting of stockholders to be filed pursuant to Regulation 14A are hereby
incorporated by reference into Part III of this Form 10-K.
 
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                           HEALTHWORLD CORPORATION

                INDEX TO ANNUAL REPORT ON FORM 10-K FILED WITH
                    THE SECURITIES AND EXCHANGE COMMISSION
                         YEAR ENDED DECEMBER 31, 1997
                              ITEMS IN FORM 10-K
 
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                                                  PART I
Item 1.     BUSINESS.......................................................................................      1
Item 2.     PROPERTIES.....................................................................................      9
Item 3.     LEGAL PROCEEDINGS..............................................................................     10
Item 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............................................     10
 
                                                  PART II
Item 5.     MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS..........................     11
Item 6.     SELECTED CONSOLIDATED FINANCIAL DATA...........................................................     12
Item 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..........     13
Item 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.....................................     17
Item 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA....................................................     17
Item 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE...........     34
 
                                                 PART III
Item 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.............................................     34
Item 11.    EXECUTIVE COMPENSATION.........................................................................     34
Item 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.................................     34
Item 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................................................     34
 
                                                  PART IV
Item 14.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K................................     34
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<PAGE>
                                     PART I
 
     This 1997 Annual Report on Form 10-K contains statements which constitute
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Those statements include statements regarding the intent, belief or
current expectations of the Registrant and its management team. The Registrant's
stockholders and prospective investors are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, and that actual results may differ materially from
those projected in the forward-looking statements. Such risks and uncertainties
include, among other things, competitive, economic and regulatory factors in the
health care marketing and communications industry and the pharmaceutical and
health care industry, general economic conditions, the ability of the Registrant
to manage its growth and successfully implement its business strategy and other
risks and uncertainties that are discussed herein.
 
ITEM 1. BUSINESS.
 
     On November 12, 1997, Healthworld Corporation acquired (the
'Consolidation'), in exchange for shares of its Common Stock, all of the issued
and outstanding common stock of each of (i) Girgenti, Hughes, Butler & McDowell,
Inc. and its affiliated entities ('GHB&M') and (ii) Milton Marketing Group
Limited and its subsidiaries ('Milton'). Unless otherwise indicated, all
references herein to the 'Company' include GHB&M and Milton and give effect to
the Consolidation and all references herein to 'Healthworld' refer to
Healthworld Corporation prior to the consummation of the Consolidation.
 
  Overview
 
     The Company is an international marketing and communications services
company specializing in health care. The Company provides many of the world's
largest pharmaceutical and other health care companies with a comprehensive
range of integrated strategic marketing services designed to accelerate the
market acceptance of new products and to sustain marketability throughout their
life-cycles. The Company's services include advertising and promotion, contract
sales, consulting, publishing, medical education, public relations, interactive
multimedia, database marketing and marketing research services. The Company
offers its clients global reach and expertise through its operations in the
United States and the United Kingdom, and through Healthworld B.V., a world-wide
network of licensed independent marketing and communications agencies located in
13 other countries, in which the Company is a founding licensee.
 
     Healthworld was incorporated in Delaware on September 12, 1996 and
conducted no operations prior to the consummation of the Consolidation on
November 12, 1997. In connection with the Consolidation, the entities comprising
GHB&M and Milton became wholly-owned subsidiaries of Healthworld on November 12,
1997, and Healthworld conducts all of its operations in the United States
through GHB&M (the 'U.S. Operations') and in the United Kingdom through Milton
(the 'U.K. Operations'). GHB&M and Milton have been operating in the marketing
and communications industry since April 1986 and August 1978, respectively. See
the Company's consolidated financial statements contained elsewhere herein for
additional financial information with respect to the U.S. Operations and the

U.K. Operations.
 
     In November 1997, the Company consummated an initial public offering (the
'IPO'), pursuant to which the Company issued and sold an aggregate of 2,415,000
shares of its common stock, $.01 par value per share (the 'Common Stock').
 
     The Company's principal executive offices are located at 100 Avenue of the
Americas, New York, New York 10013. The Company's telephone number is (212)
966-7640.
 
  Services
 
     The Company provides a variety of marketing and communications services to
its clients ranging from the execution of a discrete marketing project to taking
responsibility for the overall marketing message, which enables the Company to
incorporate a wide variety of its services into one integrated marketing
campaign. The Company seeks to develop brand loyalty and awareness for its
clients at any stage of a product's life-cycle and
 
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approaches each project by carefully evaluating the product, the client's goals
with respect to such product and industry and competitive considerations.
 
     Revenues from the Company's U.S. Operations are derived primarily from
providing advertising and promotion, consulting, publishing and medical
education services to its clients. In addition, the Company also offers other
marketing and communications services in the U.S. to its clients, including
public relations, interactive multimedia, database marketing, marketing research
and contract sales services. Revenues from the Company's U.K. Operations are
derived primarily from providing contract sales, advertising and promotion and
public relations services to its clients.
 
     The services provided by the Company include:
 
     Advertising and Promotion. The Company's traditional advertising and
promotion services include developing creative concepts for advertising
campaigns for pharmaceutical and other health care products and applying such
creative concepts to the development and production of a wide variety of
marketing and promotional materials, including medical journal advertisements,
direct mail materials, sales force brochures, hospital displays, convention
exhibit panels, drug sample packages and reminder promotional items. Such
campaigns are targeted almost exclusively to physicians, nurses and other health
care providers and to wholesale distributors. The Company also analyzes
marketing research data, which is either developed by the Company (through
various methods including focus group studies, telephone interview studies and
mailings) or obtained from its clients and other third-party sources, to
determine the most appropriate audience to target as well as the types of
marketing and promotional materials to employ in a campaign.
 
     In response to the growth of direct-to-consumer marketing ('DTC') campaigns
during the last five years, GHB&M expanded its advertising and promotion
services to include DTC. The Company believes that GHB&M was one of the first
firms to develop a DTC campaign for prescription drugs and has become an

industry leader in developing such DTC campaigns based on the number of DTC
assignments it has performed. Through a dedicated team engaged exclusively in
developing DTC campaigns, the Company believes it offers more specialized and
comprehensive services to its clients than firms which focus primarily on the
promotion of consumer products generally or on non-DTC advertising and the
promotion of pharmaceutical products. In fiscal 1995, 1996 and 1997, the
Company's revenues from DTC represented 21%, 20%, and 16%, respectively, of the
Company's total revenues.
 
     The Company's U.S. Operations generated revenues from advertising and
promotion services of approximately $8.5 million in fiscal 1995, $9.6 million in
fiscal 1996 and $13.0 million in fiscal 1997, constituting 68%, 67% and 71%,
respectively, of its U.S. Operations' consolidated revenues. The Company's U.K.
Operations generated revenues from advertising and promotion services of
approximately $2.9 million in fiscal 1995, $3.1 million in fiscal 1996 and $3.4
in fiscal 1997, constituting 66%, 31% and 20%, respectively, of the U.K.
Operations' consolidated revenues. The Company's total revenues from advertising
and promotion services were approximately $11.4 million in fiscal 1995, $12.7
million in fiscal 1996 and $16.4 million in fiscal 1997, constituting 68%, 52%
and 46%, respectively, of the Company's total revenues.
 
     Contract Sales Services. The Company offers a flexible range of contract
sales services which are delivered through dedicated and syndicated sales teams.
The Company's contract sales teams form a network of trained professionals that
provides clients with substantial flexibility in selecting the extent and costs
of promoting products as well as the clients' level of involvement in managing
the sales effort. Dedicated sales teams are comprised of sales representatives
recruited by the Company in accordance with client specifications to conduct
sales efforts for a particular client. Dedicated sales teams can be managed by
the Company or can report directly to the client, depending on client
preference. Syndicated sales teams can promote a number of products for
different clients or multiple products for a single client. These teams are
generally managed directly by the Company.
 
     The Company believes that speed of recruitment, quality of training and
management of sales representatives, supported by information technology, are
key to providing clients with a sales force tailored to meet their geographic
and scheduling needs. The Company's ability to assemble a sales team quickly is
a product of combining the talents of experienced personnel for screening and
interviewing candidates with the use of information technology to expedite
recruitment. The Company believes that it can recruit client-specific national
 
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sales force in as few as eight to twelve weeks, depending on the assignment.
Sound hiring procedures, supplemented by the Company's internal training and
development programs, help to ensure the quality of recruited personnel.
 
     Currently, the Company provides its contract sales services in the United
Kingdom primarily to consumer products, utility and other non-health care
related companies. The Company hires sales personnel on a project-by-project
basis, with the actual number of representatives retained contingent upon a
particular assignment. As of December 31, 1997, the Company employed, either on
a part-time or full-time basis, approximately 834 contract sales

representatives. The Company began providing contract sales services to
pharmaceutical and other health care product companies in the United Kingdom in
May 1997 and as of December 31, 1997 revenues generated from such clients were
not significant. As of December 31, 1997, the Company employed approximately 65
part-time salaried sales representatives in its United Kingdom health
care-related contract sales operations.
 
     In February 1998, the Company began offering contract sales services in the
United States through Headcount LLC ('Headcount LLC') a recently formed limited
liability company which will be managed by two recently hired senior managers
who both have prior experience in managing a contract sales organization
dedicated to the pharmaceutical industry. The Company owns 85% of the members'
equity in Headcount LLC and such senior managers own the remaining 15% of the
members' equity in Headcount LLC. The Company and such senior managers have
entered into an Operating Agreement with respect to, among other things, the
business and management of Headcount LLC and the transfer or other disposition
of any members' equity in Headcount LLC. The Company anticipates that its
contract sales operations in the United States will focus almost exclusively on
pharmaceutical and other health care products and services.
 
     The Company generated revenues from its contract sales services of
approximately $1.5 million in fiscal 1995, $6.6 million in fiscal 1996 and $13.3
million in fiscal 1997, constituting 34%, 67% and 78%, respectively, of the
consolidated revenues of the Company's U.K. Operations, and 9%, 27% and 38%,
respectively, of the Company's total revenues. The Company's U.S. Operations did
not include any contract sales operations during such periods.
 
     Consulting. The Company's consulting services include strategic planning,
new product development, clinical and regulatory affairs and health economics.
Clients retain the Company to assist them in the development of strategic and
business plans. Typically, the Company investigates and studies the results of
clinical trials and marketing research studies to formulate a strategic
direction for a client's products. The Company may recommend to its clients,
among other things, conducting cost effectiveness clinical studies, extending
patent life protection through line extensions, considering various approaches
to dealing with the FDA, and developing pricing strategies and specific clinical
trials to support certain marketing objectives. The Company currently
subcontracts clinical and regulatory affairs and health economics consulting
services to independent companies specializing in such services. While the
Company is currently considering expanding to provide such regulatory affairs
and health economics consulting services 'in-house,' there can be no assurance
that the Company will, in the future, expand into such services.
 
     The Company generated revenues from its consulting services of
approximately $1.5 million in fiscal 1995, $1.8 million in fiscal 1996 and $2.8
million in fiscal 1997, constituting 13%, 13% and 15%, respectively, of the
consolidated revenues of the Company's U.S. Operations, and 9%, 8% and 8%,
respectively, of the Company's total revenues. The Company's U.K. Operations do
not provide consulting services.
 
     Publishing. Patient management publications are increasingly being employed
as an additional element of an integrated marketing campaign to promote disease
awareness, understanding of and compliance with treatment, and brand awareness
and loyalty. As part of a DTC campaign developed by the Company for Wyeth-Ayerst

Laboratories' drug Premarin, an estrogen replacement for menopausal women, the
Company publishes and manages the circulation for Seasons, a bi-monthly magazine
for women who are on Premarin therapy, which is devoted to women's health care
issues, including issues concerning menopause and osteoporosis as well as the
efficacy and benefits of the drug and the means by which it can help improve
overall quality of life. The Company believes that the magazine's current per
issue circulation of 1.0 million Premarin patients makes it one of the most
popular women's health magazines ever published and that the Company's
integrated marketing
 
                                       3
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campaign has contributed to Premarin becoming one of the world's leading drugs
in terms of prescription sales volume.
 
     The Company is seeking to expand its publishing business by offering
patient management publications to pharmaceutical companies as a marketing tool
with respect to drugs used for long term therapy for chronic conditions or
illnesses such as asthma, arthritis, ulcers, heart disease, diabetes and
obesity. In addition, the Company believes that such patient management
publications can be utilized by insurers and managed care companies as part of a
disease specific patient management program designed to educate a patient as to
his or her disease, including treatment options and lifestyle advice which may
lead to an overall reduction in the cost of treatment and care.
 
     The Company generated revenues from its publishing services of
approximately $1.1 million in fiscal 1995, $1.2 million in fiscal 1996 and $1.0
million in fiscal 1997, constituting 8%, 8% and 5%, respectively, of the
consolidated revenues of the Company's U.S. Operations in each of such periods,
and 6%, 5% and 3%, respectively, of the Company's total revenues. The Company's
U.K. Operations do not provide publishing services.
 
     Medical Education. The Company develops medical educational programs
targeted primarily to health care providers that are tied closely to the
strategy and marketing goals for its clients, including continuing medical
education programs for which physicians obtain credit and are required to
complete to maintain their licenses. In addition to planning, implementing and
managing symposia, workshops and other conferences that commonly utilize a
multi-disciplinary faculty to address the full spectrum of care on featured
topics, the Company creates newsletters, articles, slide lecture kits and
posters. The Company also assists pharmaceutical and other health care companies
in developing, writing and placing journal articles and supplements, and offers
specialized training programs which incorporate new training technologies that
can be applied in selling pharmaceutical products to non-traditional purchasers,
including managed care organizations and public health officials. The Company
offers such services throughout a product's life-cycle, including prior to
regulatory approval, in order to create awareness and generate interest among
the health care community about such product prior to such approval.
 
     The Company generated revenues from its medical education services of
approximately $1.1 million in fiscal 1995, $1.4 million in fiscal 1996 and $1.2
million in fiscal 1997, constituting 9%, 10% and 7%, respectively, of the
consolidated revenues of the Company's U.S. Operations, and 7%, 6% and 4%,
respectively, of the Company's total revenues. The Company's U.K. Operations do

not provide medical education services.
 
     Public Relations. The Company provides a broad range of public relations
services to its clients, including tactical development, media relations, crisis
management, special events, public sponsorship packages, professional and
patient association liaison, grant and fellowship initiatives, editorial
projects, graphic design and video production. The Company typically integrates
its public relations programs into its overall marketing campaign for a client.
The Company believes that its in-depth knowledge of professional trade and
consumer media and its strong media contacts provide it with ongoing
opportunities to place high impact stories publicizing client products and
services.
 
     Interactive Multimedia. The Company develops and incorporates interactive
multimedia and other new technologies into its programs and campaigns. The
Company has utilized virtually all existing digital formats, including laser
disc, kiosks, on-line and CD-ROM and owns an extensive archive of over 4,000
medical illustrations which it incorporates in such multimedia formats. The
Company also provides website design and updating, demographics targeting,
statistical measurement and list analysis. The Company believes that interactive
multimedia are particularly attractive to its clients because specific audiences
can be targeted.
 
     Database Marketing. The Company employs database technology to develop and
implement marketing campaigns that are targeted to specific audience profiles.
The Company utilizes its own or its clients' databases as well as databases it
leases from third parties (including the American Medical Association). Through
its direct marketing division, the Company developed and manages a database of
1.5 million patients generated from current and former patient readers of
Seasons.
 
     Marketing Research. The Company develops and offers its clients specialized
research programs to measure the 'return on investment' ('ROI') of its DTC and
other marketing programs. The ROI model utilized by the Company is a proprietary
model based on a consumer products research methodology that has been
 
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adapted and modified for use with respect to prescription drugs. Through the use
of its ROI model, the Company has established normative data that it will use as
benchmarks for future ROI studies. The Company believes that data from such
programming assists the Company and its clients in determining the most
effective means of marketing a particular product.
 
     Revenues from public relations, interactive multimedia, database marketing
and marketing research services, in the aggregate, did not constitute more than
3% of the Company's total revenues in any fiscal year.
 
  Healthworld B.V.
 
     Healthworld B.V. is a world-wide network of licensed independent marketing
and communications agencies which began operating in August 1993. Healthworld
B.V. was organized as a Dutch corporation by the Company and two other founding
licensees in response to the founders' belief that pharmaceutical and other

health care companies will increasingly seek to retain marketing and
communications companies with international reach and experience. Healthworld
B.V. generally operates as a trade organization through which its licensed
agencies provide business referrals to one another and, where appropriate, work
with other licensed agencies with respect to projects which require expertise in
other geographic markets. As such, Healthworld B.V. does not generate revenues
from operations and is funded solely by membership fees and royalty payments
from its licensees. Healthworld B.V. enables its member agencies to utilize the
creative talents of other member agencies that have expertise and knowledge of
particular countries or geographic regions to develop consistent and integrated
multinational campaigns for the clients of such member agencies.
 
     Healthworld B.V. currently consists of GHB&M in the United States, Milton
in the United Kingdom, and 13 other licensed independent marketing and
communications agencies located in Canada, Denmark, Finland, France, Germany,
Holland, Hungary, Italy, Norway, Russia, South Africa, Spain and Sweden.
Healthworld B.V. also has an informal, non-binding arrangement with agencies in
Australia, Japan and South America for such agencies to provide assistance in
their geographic regions in the development of multinational campaigns. Member
agencies are carefully selected based on, among other things, quality of work,
local reputation, client base and certain other organizational financial
criteria. Each member agency has entered into a license agreement with
Healthworld B.V. which provides, among other things, that such agency will
perform services for the clients of any other member agency upon request by such
other member agency. In addition, each such license agreement provides for the
member agency to pay a royalty fee to Healthworld B.V. and permits such member
agency to use certain of Healthworld's trademarks, including the 'Healthworld'
name, within its geographic market.
 
     The Company owns 61.2% of the capital stock of Healthworld B.V., and the
remainder is owned by eight other member agencies. Each agency that enters into
a license agreement with Healthworld B.V. is given the opportunity to become a
shareholder of Healthworld B.V. Healthworld B.V. is managed by a Board of
Directors consisting of five members, and the Company is entitled to designate
two members.
 
     Although to date, Healthworld B.V. has neither conducted significant
operations nor contributed materially to the Company's operations, the Company
believes that Healthworld B.V. has enabled the Company to attract additional
clients based upon the Company's ability to offer global reach and expertise.
 
  Strategy
 
     The Company's strategy is to capitalize on continued growth in marketing
and communication spending by pharmaceutical and other health care companies by
(i) maintaining and enhancing its creative excellence and technical expertise,
(ii) offering its clients a comprehensive range of integrated services, (iii)
continuing to specialize in health care marketing and communications services,
(iv) increasing its contract sales services, and (v) further expanding globally.
The Company intends to implement its strategy through internal development and
potential acquisitions.
 
     Maintain and Enhance Creative Excellence and Technical Expertise. The
Company seeks to recruit the best available creative talent to maintain its

creative excellence. The Company believes that its creative talent enables it to
develop new ways to effectively promote its clients' products. The Company
believes that it is an industry leader in the development of DTC campaigns for
prescription drugs and in the development of marketing
 
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strategies and campaigns for 'switching' a drug from prescription to
over-the-counter (non-prescription) status based on the number of assignments
the Company has performed in such respective areas. GHB&M, which has
consistently been recognized in the industry as one of the top health care
communications agencies, was named 'Agency of the Year' in 1993 and 1996 by Med
Ad News, a medical advertising and communications trade publication, based on a
number of criteria, including creative marketing ability and account wins and
losses, and was a finalist for such award in 1992 and 1994. GHB&M was also named
'Most Creative Agency' by Med Ad News in 1995, based on a poll of the presidents
of the top 50 communications agencies. The Company maintains a high level of
technological expertise and utilizes new interactive multimedia and other new
technologies in its programs and campaigns.
 
     Offer a Comprehensive Range of Integrated Services. The Company believes
that its clients are continuing to expand their sales and marketing efforts and
require marketing and communications companies that can provide a comprehensive
range of integrated services. The Company's communications services include
advertising and promotion, publishing, medical education, public relations,
consulting, interactive multimedia and database marketing services. The Company
also provides contract sales and marketing research services. Through such
diversification, the Company is able to provide a specific service or cross-sell
multiple services to its clients within a fully integrated campaign. The Company
believes that it will continue to realize significant benefits by capitalizing
on available opportunities which may arise to increase the number of services it
provides.
 
     Continued Specialization in Health Care. The Company will continue to focus
on providing its services primarily to pharmaceutical and other health care
companies. The Company believes that its expertise in and understanding of the
business, consumer, scientific, medical and regulatory issues relating to the
health care industry are critical in developing the most effective marketing
campaigns and strategies with respect to pharmaceutical and other health care
products and services. The Company's staff includes physicians, pharmacists,
biologists and other personnel with extensive experience in providing marketing
and communications services to health care companies. The Company intends to
continue to recruit experienced health care and scientific professionals to
ensure that its knowledge base remains up to date.
 
     Expansion of Contract Sales Services. Pharmaceutical and other health care
companies are increasingly outsourcing certain marketing and sales services to
contract sales organizations. Historically, the Company's contract sales
organization operated only in the United Kingdom and provided its services
primarily to consumer products, utility and other non-health care related
companies. The Company began providing contract sales services to pharmaceutical
and other health care companies in order to take advantage of the increased use
by such companies in the United Kingdom of contract sales forces to market their
products in May 1997 and, as of December 31, 1997, revenues generated for such

clients were not significant. In February 1998, the Company began offering
contract sales services in the United States and the Company anticipates that
such operations will focus almost exclusively on pharmaceutical and other health
care products. The Company believes that contract sales will enable it to
complement its existing communication services with a flexible sales force
designed to augment its clients' sales activities.
 
     The successful expansion of the Company's contract sales operations in the
United Kingdom and in the United States will be dependent on a number of
factors, including (i) its ability to effectively compete against the in-house
sales departments of pharmaceutical companies and contract sales organizations
specializing in pharmaceutical and other health care products, (ii) the hiring
and training of qualified management personnel, and (iii) the ability to
integrate such contract sales operations into the Company's current structure.
An inability to manage future growth, compete effectively, or successfully
integrate such contract sales operations could have a material adverse effect on
the Company's business, financial condition or results of operations.
 
     Extend Global Reach. The Company believes that pharmaceutical and other
health care companies will increasingly seek to retain marketing and
communications companies with international reach and experience. The Company
believes that it is positioned to address such future demand through its
operations in the United States and the United Kingdom, and through Healthworld
B.V., a world-wide network of licensed independent advertising agencies located
in 13 other countries of which the Company is a founding licensee. Healthworld
B.V. generally operates as a trade organization through which its licensed
agencies provide business referrals to one another. In addition, Healthworld
B.V. enables the Company and its other member agencies to utilize the creative
talents of other member agencies that have expertise and knowledge of particular
countries or geographic
 
                                       6
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regions in order to develop consistent and integrated multinational campaigns
for its clients. The Company currently intends to continue to expand the
Healthworld B.V. network and will regularly evaluate opportunities to expand its
business into other international locations.
 
     Growth Through Acquisitions. The Company intends to pursue acquisitions of
marketing and communications companies specializing in health care in its
existing markets and internationally, including possibly acquiring Healthworld
B.V. licensed independent agencies. Although the Company believes that
opportunities for future acquisitions are currently available, due to
considerable acquisitions and consolidations in the marketing and communications
industry in recent years, increased competition for acquisition candidates
exists and may continue in the future. Consequently, there may be fewer
acquisition opportunities available to the Company as well as higher acquisition
prices. There can be no assurance that the Company will be able to identify,
acquire, manage or successfully integrate acquired businesses without
substantial costs, delays or operational or financial problems. While the
Company regularly evaluates and discusses potential acquisitions, the Company
currently has no understandings, commitments or agreements with respect to any
acquisitions. The Company may be required to obtain additional financing to fund
future acquisitions. The Company has no current commitments or arrangements for

such additional financing and there can be no assurance that the Company will be
able to obtain additional financing on acceptable terms or at all.
 
  Clients
 
     The Company's communications clients are primarily pharmaceutical and other
health care companies, including health care service providers and manufacturers
of diagnostic equipment, medical equipment, medical devices and medical
supplies. The Company currently provides its contract sales services in the
United Kingdom primarily to consumer products, utility and other non-health care
related companies. The Company's major clients include many of the world's
largest pharmaceutical companies. The Company has enjoyed long-standing
relationships with many of such clients.
 
     The Company's revenues are highly dependent upon the advertising, sales and
marketing expenditures of pharmaceutical and other health care companies and
other clients. Generally, clients are not bound to an individual marketing and
communications company, and any client of the Company could at any time in the
future and for any reason, including a prolonged economic recession or
regulatory problems with respect to a product, reduce its marketing budget,
transfer its business to another agency or take in-house all or part of the
business performed by the Company.
 
     The Company derives a large portion of its revenues from a small number of
clients. These clients generally do not engage the Company on an exclusive basis
and may engage different companies for different services with respect to their
products or with respect to a particular product. Moreover, the contracts with
the Company's clients generally have a term of up to one year and are generally
renewable. Typically, such contracts may be terminated by the client on short
notice. As a result, the Company's results of operations may be materially
adversely affected by the loss of one or more of its clients, the deterioration
of the Company's relationship with any of its major clients, a decline in the
business of its major clients or a decline in the marketing and communications
spending by its major clients, either generally or with respect to specific
products for which the Company is engaged.
 
     For the 1996 and 1997 fiscal years, the five largest clients of the Company
represented an aggregate of 52% and 46%, respectively, of the Company's total
revenues. For the 1996 and 1997 fiscal years, American Home Products (through
its Wyeth-Ayerst Laboratories and Whitehall Laboratories divisions) accounted
for approximately 27% and 19%, respectively, of the Company's total revenues.
 
     The Company typically enters into contracts with new clients or contracts
for additional projects from existing clients either by being directly retained
by such clients or after being invited to present and successfully winning the
project for such clients.
 
     Client conflicts of interest are inherent in the marketing and
communications industry, particularly with respect to pharmaceutical and other
health care clients for whom the Company performs services, due to the
proprietary nature of such clients' products. The Company's ability to compete
for new clients and assignments is limited by the Company's general practice,
and the practice followed by many of the Company's competitors, of
 

                                       7
<PAGE>
not representing more than one competing product. In addition, the Company is
often contractually precluded from being assigned a competing product. As a
result, the Company may not be retained by existing, new and potential clients
with respect to certain products if the Company provides marketing or
communications services for competing products.
 
  Intellectual Property
 
     In 1997, the Company entered into a 50-year license agreement (the 'License
Agreement') with Healthworld B.V. pursuant to which Healthworld B.V. granted the
Company rights to use the 'Healthworld' and 'Healthworld Communications'
trademarks, the tradename 'Healthworld' and the Healthworld logo, for $1.00 per
year. Under the License Agreement, Healthworld B.V. must obtain the Company's
prior written consent before further licensing such licensed property.
Healthworld B.V. has trademarks registered with the United States Patent and
Trademark Office for the words 'Healthworld' and 'Healthworld Communications'
which expire in March 2004 and for the Healthworld name together with its logo
which expires in May 2005. Healthworld B.V. also has trademarks registered or
applications for such registrations pending for the tradename 'Healthworld' and
the Healthworld logo in the United Kingdom and in each of the other countries in
which licensed Healthworld B.V. agencies are located, as well as several other
countries. The Company considers all United States and United Kingdom trademarks
to be material to its operations.
 
  Competition
 
     The health care marketing and communications industry throughout the United
States and Europe is highly competitive. The Company competes with many other
marketing and communications firms, including international and regional
full-service and specialty marketing and communications firms. Consolidation
within the pharmaceutical and health care industries as well as a trend by
pharmaceutical and health care companies to limit outsourcing of sales,
marketing and communications services to fewer organizations has heightened the
competition among such service providers. In addition, many of the larger
consumer product marketing and communications companies have acquired specialty
health care marketing and communications companies, which themselves have been
increasingly consolidating in recent years. For instance, each of Bozell,
Jacobs, Kenyon & Eckhardt, Grey Advertising, Interpublic Group, Omnicom Group,
Inc., Saatchi & Saatchi Advertising Affiliates Holdings, Inc. and Young &
Rubicam, Inc., has one or more divisions specializing in health care marketing
and communications. Many of these companies have substantially greater financial
resources, personnel and facilities than the Company. If the previously
described consolidation trends continue, the Company may face greater
competition for its clients and for acquisition candidates. Although the Company
believes it is able to compete on the basis of the quality of its creative
product, service, reputation and personal relationships with clients, there can
be no assurance that the Company will be able to maintain its competitive
position in the industry.
 
     With respect to contract sales services provided to consumer products and
utility companies in the United Kingdom, the Company currently competes against
in-house sales departments of such companies and contract sales organizations

operating in the United Kingdom, many of which are larger and have substantially
greater financial resources. With respect to contract sales services targeted to
pharmaceutical and medical devices, the Company currently competes in the United
Kingdom, and, as a result of the recent expansion of such services into the
United States, will compete in the United States, against the in-house sales
departments of pharmaceutical companies and local contract sales organizations
specializing in pharmaceutical and medical device products. The primary
competitive factor affecting contract sales and marketing services is the
ability to quickly assemble, train and manage large qualified sales forces to
handle broad scale sales campaigns. The Company believes that it competes
favorably in these areas in the United Kingdom with respect to its non-health
care related contract sales services. However, with respect to health care
related contract sales services, there can be no assurance that the Company will
compete favorably in these areas in the United Kingdom or in the United States.
 
     While there are relatively low barriers to entry into the marketing and
communications industry as a whole, the Company believes that its specific
expertise with respect to the pharmaceutical and health care industry
distinguish it from prospective competitors attempting to develop health care
communications businesses. Notwithstanding the Company's expertise, it expects
that it will face additional competition from new entrants
 
                                       8
<PAGE>
into the industry in the future. There can be no assurance that existing or
future competitors will not develop or offer marketing communications services
and products that provide significant performance, creative, technical or other
advantages over those offered by the Company.
 
  Government Regulation
 
     While there are no laws that specifically regulate the health care
communications industry, the health care and pharmaceutical industries are
generally subject to a high degree of government regulation, and the trend is
toward regulation of increasing stringency. Federal, state, local and foreign
laws and regulations affect the permissible form, content and timing of
marketing activities involving pharmaceutical and other health care products.
Some of these laws relate to general considerations such as truthfulness,
comparative advertising and the relative responsibilities of clients and
advertising firms. Other laws, such as the Food, Drug and Cosmetics Act and the
anti-fraud and abuse laws and regulations affecting the Medicare, Medicaid and
other governmental health care programs, regulate the form, content and/or
timing of marketing activities involving pharmaceutical and other health care
products, including the permissible activities the Company may undertake to
develop markets for its clients' products. The Company has implemented a
rigorous review process, emphasizing the importance of compliance with
regulatory matters. In addition, the Company's clients generally follow a
rigorous internal review process.
 
     The health care industry is subject to changing political, economic and
regulatory influences that may affect pharmaceutical and other health care
companies, particularly with respect to spending by such companies on marketing
and communications services to promote their products. Numerous governments have
undertaken efforts to control growing health care costs through legislation,

regulation and voluntary agreements with medical care providers and
pharmaceutical and other health care product companies. Implementation of
government health care reform may adversely affect marketing expenditures by
pharmaceutical and other health care companies which could decrease the business
opportunities available to the Company. Management is unable to predict the
likelihood of health care reform legislation being enacted or the effects such
legislation would have on the Company. In addition, the success of the Company's
growth strategy depends on its ability to take advantage of certain industry
trends, including continued increases in overall spending levels by
pharmaceutical and other health care companies for marketing and communications
services. Such growth in spending levels has evolved rapidly in recent years,
the Company is unable to predict whether such growth in spending will continue
at present levels or at all. The Company's results of operations could be
materially adversely affected in the event the Company is unable to respond
effectively to the enactment of health care reform legislation or changing
industry trends which may affect future spending levels by pharmaceutical and
other health care companies for marketing and communications services.
 
  Employees
 
     As of December 31, 1997, the Company had 197 full-time employees and six
part-time employees, 118 of which were employed in the Company's U.S. Operations
and 85 of which were employed in the Company's U.K. Operations, excluding sales
representatives employed in the Company's contract sales organization. In the
U.K., the Company employed, as of December 31, 1997, 834 sales representatives
for its contract sales organization and such sales representatives were employed
both on a full-time and part-time basis. The Company is not a party to any
collective bargaining agreement and the Company's employees are not represented
by any labor union. The Company considers its relationship with its employees to
be good. The Company's success depends in large part, upon its ability to
attract, develop, motivate and retain highly skilled creative and technical
employees, of which there can be no assurance.
 
ITEM 2. PROPERTIES.
 
     The Company maintains corporate headquarters in New York City in a leased
facility which occupies approximately 44,600 square feet of office space. The
lease for such office space is due to expire on December 31, 2009 and has
escalating rent currently at the base rate of $662,000 per annum which will
increase to $750,000 per annum in December 1998 and $970,000 per annum from
December 2003 through the expiration of the lease.
 
                                       9
<PAGE>
     The Company leases approximately 16,870 square feet of office space in
various locations in the United Kingdom. The aggregate annual base rent for all
of the Company's United Kingdom facilities is approximately $382,000.
 
     The Company believes that its existing facilities are adequate to meet its
current operating needs and that suitable additional space should be available
to the Company on reasonable terms should the Company require additional space
to accommodate future operations or expansion.
 
ITEM 3. LEGAL PROCEEDINGS.

 
     The Company is a party in various lawsuits incidental to its business
operations. In the opinion of the Company, none of such litigation in which it
is currently a party, if adversely determined, will have a material adverse
effect on the Company's financial condition or its operations.
 
     The Company, as part of its business, develops marketing and communications
campaigns and materials and provides contract sales services with respect to
pharmaceutical and other health care products, including newly developed drugs
and other health care products. As a result, the Company may, in the future, be
subject to certain types of litigation, including claims arising from false or
misleading statements made with respect to the use or efficacy of such
pharmaceutical and health care products or, in limited circumstances, product
liability claims. Certain of the Company's contracts with its clients provide
for the client to indemnify the Company against such liabilities. In addition,
the Company maintains liability insurance, although there can be no assurance
that the coverage maintained by the Company will be sufficient to cover all
future claims. In certain limited circumstances, however, the Company is
obligated to indemnify its clients with respect to such claims and liabilities.
The Company could be materially and adversely affected if it were required to
pay damages or bear the costs of defending any claim outside the scope of or in
excess of a contractual indemnification provision or beyond the level of
insurance coverage or in the event that an indemnifying party does not fulfill
its indemnification obligations. Even if any such claim was without merit,
defending against such claim could result in adverse publicity and diversion of
management's time and attention and could have a material adverse effect on the
Company.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
     On November 6, 1997, Healthworld's stockholders unanimously consented in
writing to the ratification and approval of the Company's 1997 Stock Option Plan
and the Employment Agreements between the Company and each of Steven Girgenti,
the Chairman of the Board and Chief Executive Officer, and William Leslie
Milton, the Vice Chairman of the Board and President.
 
     On November 10, 1997, Healthworld's stockholders unanimously consented in
writing to the adoption of that certain Guaranty of the obligations of GHB&M
under the Accounts Receivable Purchase Agreement between GHB&M and the CIT
Group/Commercial Services, Inc.
 
                                       10

<PAGE>
                                    PART II
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
 
     On December 4, 1997, the Company completed its IPO, pursuant to which it
issued and sold an aggregate of 2,415,000 shares of Common Stock. The Common
Stock has been listed for quotation on The Nasdaq National Market under the
symbol 'HWLD' since November 21, 1997, the date that the Company's Registration
Statement on Form S-1 relating to the IPO was declared effective by the
Securities and Exchange Commission. As of March 9, 1998, there were
approximately 16 holders of record of the Common Stock. The Company believes
that as of March 9, 1998, there were approximately 695 beneficial owners of the
Common Stock.
 
     The following table sets forth the range of high and low sales prices for
the Common Stock for the period indicated:
 
                                                                 1997
                                                            ---------------
                                                             HIGH      LOW
                                                            ------    -----
Fourth Quarter
  (from November 21, 1997)...............................   $12.75    $9.00
 
  Dividends
 
     Prior to the consummation of the Consolidation on November 12, 1997, the
companies comprising GHB&M (other than Syberactive, Inc. ('Syberactive'), which
is treated as a C Corporation) elected to be treated as S Corporations, pursuant
to which income or loss of each of such companies was allocated to its
stockholders by inclusion in their respective individual income tax returns. As
a result of the consummation of the Consolidation, the status of each of the
companies comprising GHB&M as S Corporations terminated and each of the
companies comprising GHB&M became subject to Federal and state income taxes at
applicable corporate rates.
 
     In connection with the termination of the status of each of the companies
comprising GHB&M as S Corporations, GHB&M entered into an agreement under which,
prior to the consummation of the Consolidation, GHB&M sold approximately $2.6
million of its accounts receivable to an unaffiliated financial institution at a
discount rate equal to 2% of the gross face amount of the accounts receivable
sold (the 'Accounts Receivable Sale'). Immediately prior to the consummation of
the Consolidation, GHB&M made distributions (the 'S Corporation Distributions')
to its stockholders of $3.7 million in the aggregate from existing cash balances
for the payment by such stockholders of taxes due on GHB&M's estimated 1997 S
Corporation earnings through the date of the Consolidation (including taxable
earnings arising from the Accounts Receivable Sale). See 'Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources.'
 
     Healthworld has never declared or paid a dividend on its Common Stock. The
companies comprising GHB&M, as S Corporations (other than Syberactive, which has
always been treated as a C Corporation), made cash distributions to the

stockholders of GHB&M of an aggregate of $209,000 in fiscal 1995, $1.5 million
in fiscal 1996, $498,000 in fiscal 1997 through September 30, 1997, and,
immediately prior to the consummation of the Consolidation on November 12, 1997,
made the S Corporation Distributions of approximately $3.7 million. The
companies comprising Milton paid cash dividends on their common stock to the
stockholders of Milton of an aggregate of $101,000 in fiscal 1995, none in
fiscal 1996 and $160,000 in fiscal 1997 through November 12, 1997, the date of
the consummation of the Consolidation.
 
     The Company intends to retain all earnings, if any, to finance the
expansion of its business and for general corporate purposes, including future
acquisitions, and does not anticipate paying any cash dividends on its Common
Stock for the foreseeable future. Any future determination to pay cash dividends
will be at the discretion of the Board of Directors and will be dependent on the
Company's financial condition, results of operations, financial requirements and
such other factors as the Board of Directors deems relevant.
 
                                       11
<PAGE>
  Use of Proceeds from the IPO
 
     On November 21, 1997, the Company commenced an initial public offering of
2,100,000 shares of its Common Stock, par value $.01 per share. The Company's
registration statement (the 'Registration Statement') on Form S-1 (File No.
333-34751) filed with the Securities and Exchange Commission (the 'Commission')
with respect to the IPO was declared effective by the Commission on November 21,
1997. All of the shares of the Common Stock included in the IPO were sold by the
Company.
 
     The managing underwriter for the IPO was C.E. Unterberg, Towbin and the
co-managing underwriter was Pennsylvania Merchant Group Ltd.
 
     As part of the IPO, the Company granted to the underwriters an
over-allotment option (the 'Underwriters' Option') to purchase up to an
additional 315,000 shares of the Common Stock. The underwriters exercised the
Underwriters' Option and purchased all of such additional shares from the
Company on December 4, 1997. The IPO was completed on December 4, 1997 and the
Common Stock is trading on the Nasdaq National Market under the symbol 'HWLD'.
 
     The aggregate offering price of the 2,100,000 shares of Common Stock sold
in the IPO to the public was $18,900,000 (exclusive of the Underwriters'
Option), with proceeds to the Company (after deduction of the underwriting
discount) of $17,577,000 (before deducting offering expenses payable by the
Company). The aggregate offering price of the 315,000 shares of Common Stock
sold to the public pursuant to the exercise of the Underwriters' Option was
$2,835,000, with proceeds to the Company (after deduction of the underwriting
discount) of $2,636,550 (before deducting offering expenses payable by the
Company). The total initial public offering price, underwriting discount and
proceeds to the Company (before deducting offering expenses payable by the
Company) were $21,735,000, $1,521,450 and $20,213,550, respectively.
 
     Through December 31, 1997, the end of the reporting period, the aggregate
amount of the expenses incurred by the Company in connection with the issuance
and distribution of the shares of Common Stock offered and sold in the IPO

(including the shares sold pursuant to the exercise of the Underwriters' Option)
was $5,290,000 which includes underwriting discounts and commissions
($1,521,450), underwriters' non-accountable expense allowance ($217,350) and
expenses paid for accounting, legal, printing and other expenses ($3,551,200).
None of such payments were direct or indirect payments to directors, officers,
general partners of the Company or their associates, to persons owning 10% or
more of any class of equity securities of the issuer or to any affiliate of the
issuer, other than a portion of such payments which were made for legal fees and
expenses to Todtman, Nachamie, Hendler & Spizz, P.C., of which Alex Spizz, a
director of the Company, is a partner.
 
     The aggregate net proceeds received by the Company from the Offering and as
a result of the exercise of the Underwriters' Option, after deducting
underwriting discounts and commissions and expenses, were approximately
$16,445,000.
 
     From the effective date of the Registration Statement until December 31,
1997, the end of the reporting period, the Company used $1,000,000 of the net
proceeds of the IPO, solely for working capital uses, including funding working
capital needs which resulted from the Accounts Receivable Sale which was
undertaken in connection with the S Corporation Distributions.
 
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.
 
     The following selected consolidated financial data as of and for the years
ended December 31, 1996 and 1997, and for the year ended December 31, 1995 have
been derived from the Company's audited Consolidated Financial Statements which
are included elsewhere herein and should be read in conjunction with those
Consolidated Financial Statements and notes thereto and Management's Discussion
and Analysis of Financial Condition and Results of Operations. The following
selected consolidated financial data as of and for the year ended December 31,
1994 and as of December 31, 1995 have been derived from the Company's audited
Consolidated Financial Statements not included herein. The following selected
consolidated financial data as of
 
                                       12

<PAGE>
and for the year ended December 31, 1993 have been derived from the Company's
unaudited Consolidated Financial Statements not included herein.
<TABLE>
<CAPTION>
                                                                            YEAR ENDED DECEMBER 31,
                                                              ---------------------------------------------------
                                                               1993       1994       1995       1996       1997
                                                              -------    -------    -------    -------    -------
<S>                                                           <C>        <C>        <C>        <C>        <C>
STATEMENT OF INCOME DATA:
Revenues...................................................   $11,206    $13,081    $16,767    $24,209    $35,292
Operating expenses
  Salaries and related costs...............................     7,554      7,890      9,857     15,733     24,186
  Other operating expenses.................................     3,321      3,713      4,425      5,208      6,276
                                                              -------    -------    -------    -------    -------
                                                               10,875     11,603     14,282     20,941     30,462
                                                              -------    -------    -------    -------    -------
Income from operations.....................................       331      1,478      2,485      3,268      4,830
Interest expense (income), net.............................         8         14          2         69        (86)
                                                              -------    -------    -------    -------    -------
Income before provision for income taxes and minority
  interests................................................       323      1,464      2,483      3,199      4,916
Provision for income taxes.................................       106        136        283        524        719
Minority interests in net earnings of subsidiary...........        10         39         68        124        192
                                                              -------    -------    -------    -------    -------
Net income.................................................   $   207    $ 1,289    $ 2,132    $ 2,551    $ 4,005
                                                              -------    -------    -------    -------    -------
                                                              -------    -------    -------    -------    -------
Pro forma information:
  Income before provisions for income taxes and minority interests....................................    $ 4,916
  Pro forma provision for income taxes................................................................      2,023
  Minority interests in net earnings of subsidiaries..................................................        192
                                                                                                          -------
  Pro forma net income................................................................................    $ 2,701
                                                                                                          -------
                                                                                                          -------
 
<CAPTION>
 
                                                                                 DECEMBER 31,
                                                              ---------------------------------------------------
                                                               1993       1994       1995       1996       1997
                                                              -------    -------    -------    -------    -------
<S>                                                           <C>        <C>        <C>        <C>        <C>
BALANCE SHEET DATA:
Working capital............................................   $ 1,834    $ 2,391    $ 3,904    $ 4,132    $18,953
Total assets...............................................    13,792     13,913     16,688     20,536     41,809
Long-term debt, including current portion..................       907        733      1,223      1,419      1,156
Stockholders' equity.......................................     2,914      3,880      5,235      6,372     24,766
</TABLE>
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

 
     The following discussion should be read in conjunction with the Company's
audited Consolidated Financial Statements and notes thereto appearing elsewhere
herein.
 
  Introduction
 
     Healthworld was incorporated in Delaware on September 12, 1996 and
conducted no operations prior to the consummation of the Consolidation on
November 12, 1997. Healthworld is a holding company whose principal assets are
the common stock of GHB&M and Milton. Healthworld entered into separate
Agreements and Plans of Organization (the 'Consolidation Agreements') in October
1997 with the stockholders of GHB&M and Milton and, pursuant thereto, acquired
GHB&M and Milton on November 12, 1997. As a result of the Consolidation, all of
the shares of GHB&M and Milton (including the minority interests in the
subsidiaries of Milton) were acquired by Healthworld, and GHB&M and Milton
became wholly-owned subsidiaries of Healthworld.
 
     The Consolidation has been accounted for as a pooling of interests, which
method of accounting assumes that GHB&M and Milton have been combined from
inception and restates the historical financial statements for the periods prior
to the consummation of the Consolidation as though GHB&M and Milton had been
combined from inception. The acquisition by Healthworld of the minority
interests in certain of the subsidiaries comprising Milton occurred
simultaneously with the acquisition by Healthworld of GHB&M and Milton Marketing
Group Limited ('MMGL'), and has been accounted for under the purchase method of
accounting.
 
                                       13

<PAGE>
  General
 
     The Company offers to its pharmaceutical and other health care clients a
comprehensive range of integrated services throughout a product's life-cycle,
from the development stage (pre-regulatory approval) to product launch and
continuing through the post-launch stage and, if applicable, such product's
switch from prescription to over-the-counter status. The Company derives its
revenues from fees generated from providing marketing and communications
services to its clients.
 
     The Company has provided contract sales services since January 1994.
Historically, the Company's contract sales organization operated only in the
United Kingdom and provided its services primarily to consumer products, utility
and other non-health care related companies. The Company began providing
contract sales services to pharmaceutical and other health care companies in
order to take advantage of the increased use by such companies in the United
Kingdom of contract sales forces to market their products in May 1997 and, as of
December 31, 1997, revenues generated from such clients were not significant. In
February 1998, the Company began offering contract sales services in the United
States and anticipates that such operations will focus almost exclusively on
pharmaceutical and other health care products.
 
     Historically, the Company's results of operations have been subject to
quarterly fluctuations. Generally, the Company's revenues and profits have been
lowest in the first quarter and highest in the fourth quarter. The Company's
quarterly revenue trends result from a number of factors including, among other
things, the timing of commencement, completion or cancellation of major projects
and industry billing practices which are tied to clients' annual marketing
budgets, while the Company's communications services expenses generally remain
constant. The Company's quarterly results may fluctuate as a result of such
factors and a number of additional factors, including delays or costs associated
with acquisitions, government regulatory initiatives and general conditions in
the health care industry. The Company believes that because of such
fluctuations, quarterly comparisons of its financial results cannot be relied
upon as an indication of future performance.
 
     Milton operates only in the United Kingdom and, as a result, the Company is
susceptible to foreign exchange rate fluctuations between the British Pound
Sterling and the U.S. Dollar. The Company's financial statements are denominated
in U.S. Dollars, and accordingly, changes in the exchange rate between the
British Pound Sterling and the U.S. Dollar will affect the translation of
Milton's financial results into U.S. Dollars for purposes of reporting the
Company's consolidated financial results.
 
RESULTS OF OPERATIONS
 
     The following table sets forth certain total income statement data of the
Company expressed as a percentage of revenues for the periods indicated.
 
<TABLE>
<CAPTION>
                                                                                         YEAR ENDED DECEMBER 31,
                                                                                        -------------------------

                                                                                        1995      1996      1997
                                                                                        -----     -----     -----
<S>                                                                                     <C>       <C>       <C>
Statement of Income Data:
  Revenues..........................................................................    100.0%    100.0%    100.0%
  Operating expenses
     Salaries and related costs.....................................................     58.8      65.0      68.5
     Other operating expenses.......................................................     26.4      21.5      17.8
                                                                                        -----     -----     -----
                                                                                         85.2      86.5      86.3
                                                                                        -----     -----     -----
  Income from operations............................................................     14.8      13.5      13.7
                                                                                        -----     -----     -----
  Interest expense (income), net....................................................      0.0       0.3     (0.2)
                                                                                        -----     -----     -----
  Income before provision for income taxes and minority interests...................     14.8      13.2      13.9
  Provision for income taxes........................................................      1.7       2.2       2.0
  Minority interests in net earnings of subsidiary..................................      0.4       0.5       0.6
                                                                                        -----     -----     -----
  Net income........................................................................     12.7%     10.5%     11.3%
                                                                                        -----     -----     -----
                                                                                        -----     -----     -----
Pro forma information:
  Income before provisions for income taxes and minority interests..................                         13.9%
  Pro forma provision for income taxes..............................................                          5.6
  Minority interests in net earnings of subsidiaries................................                          0.6
                                                                                                            -----
                                                                                                            -----
  Pro forma net income..............................................................                          7.7%
                                                                                                            -----
                                                                                                            -----
</TABLE>
 
                                       14

<PAGE>
FISCAL 1997 COMPARED TO FISCAL 1996
 
     Revenues for 1997 were $35.3 million, an increase of $11.1 million, or
45.8% from $24.2 million for 1996. Of such increase, (i) $6.7 million was
attributable to the growth of the Company's contract sales operations, of which
$3.3 million was attributable to business from new clients and $3.4 million was
attributable to net new projects from existing clients, and (ii) $3.3 million
and $984,000 was attributable to revenues from advertising and promotion and
consulting, respectively, of which approximately $1.0 million was attributable
to business from new clients, and the remaining amount resulted primarily from
new projects from existing clients.
 
     Salaries and related costs for 1997 were $24.2 million, an increase of $8.5
million or 53.7% from $15.7 million for 1996. Such increase was primarily
attributable to (i) $4.9 million of labor and other direct costs related to the
Company's contract sales operation, and $700,000 relating to additional
management staff for increased contract sales operations, (ii) $1.3 million
relating to additional staff hired to support the increased level of business
activity in the United States and (iii) $800,000 relating to staffing costs in
the United Kingdom incurred in anticipation of increased business activity in
advertising and promotion and public relations which did not occur in the
period. Salaries and related costs represented 68.5% of revenues in 1997
compared to 65.0% in 1996. Such increase, as a percentage of revenues, was
primarily attributable to the growth of the Company's contract sales operations
and the corresponding increase in labor costs of such operations, and increases
in salaries and other costs. Generally, labor costs associated with contract
sales operations are greater as a percentage of corresponding revenues than
those for the Company's other services.
 
     Other operating expenses for 1997 were $6.3 million, an increase of $1.1
million or 20.5% from $5.2 million for 1996. Such increase was primarily
attributable to (i) additional rent and occupancy costs of $600,000 primarily
related to expanded office space in the United Kingdom and (ii) increased costs
of $300,000 primarily related to increased business development costs, and the
growth of the Company's contract sales operations. Other operating expenses
represented 17.8% of revenues in 1997, compared to 21.5% in 1996. The decrease
in other operating expenses, as a percentage of revenues, was primarily
attributable to such expenses generally being fixed relative to increases in the
Company's revenues.
 
     Income from operations for 1997 was $4.8 million, an increase of $1.6
million, or 47.8% from $3.3 million for 1996. Income from operations represented
13.7% of revenues in 1997, compared to 13.5% in 1996.
 
     The provision for income taxes fluctuated in 1995, 1996 and 1997 primarily
as a result of the dollar amount of income before provision for income taxes. It
should be noted that the low effective income tax rate in each year is primarily
the result of the Company's U.S. subsidiaries being treated as S Corporations
rather than C Corporations for the entire three year period up until November
12, 1997.
 
FISCAL 1996 COMPARED TO FISCAL 1995
 

     Revenues for 1996 were $24.2 million, an increase of $7.4 million, or
44.4%, from $16.8 million for 1995. Of such increase, (i) $5.1 million was
attributable to the growth of the Company's contract sales operations, of which
$2.5 million was attributable to the operations of Milton Headcount Limited
('Headcount') (acquired in November 1995) and the remainder was primarily
attributable to additional business from new clients, and (ii) $1.3 million,
$300,000, $300,000 and $200,000 was attributable to additional revenues from
advertising and promotion, medical education, consulting and public relations
services, respectively, which all resulted primarily from new projects from
existing clients.
 
     Salaries and related costs for 1996 were $15.7 million, an increase of $5.9
million, or 59.6%, from $9.9 million for 1995. Such increase was primarily
attributable to (i) $3.4 million of labor and other direct costs related to the
Company's contract sales operations, (ii) $1.5 million for additional staff
hired to support the higher level of business activity, (iii) $500,000 for
annual salary increases, and (iv) $400,000 related to the retention of the staff
of Headcount as a result of its acquisition by Milton. Salaries and related
costs represented 65.0% of revenues in 1996, compared to 58.8% in 1995. Such
increase, as a percentage of revenues, was primarily attributable to the growth
of the Company's contract sales operations and the corresponding increase in
labor costs of such operations, and increases in salaries and other costs.
 
     Other operating expenses for 1996 were $5.2 million, an increase of
$783,000, or 17.7%, from $4.4 million for 1995. Such increase was primarily
attributable to additional rent and occupancy costs of $500,000 primarily
 
                                       15
<PAGE>
related to expanded office space, and increased business development costs of
$300,000 in the United States and the United Kingdom. Other operating expenses
represented 21.5% of revenues in 1996, compared to 26.4% in 1995. The decrease
in other operating expenses, as a percentage of revenues, was primarily
attributable to such expenses generally being fixed relative to increases in the
Company's revenues.
 
     Income from operations for 1996 was $3.3 million, an increase of $783,000,
or 31.5%, from $2.5 million for 1995. Income from operations represented 13.5%
of revenues in 1996, compared to 14.8% in 1995.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     In November 1997, the Company consummated its IPO, pursuant to which the
Company issued and sold an aggregate of 2,415,000 shares of Common Stock
(including 315,000 shares issued and sold in December 1997 pursuant to the
exercise by the underwriters of an over-allotment option) at a per share price
of $9.00. The net proceeds received by the Company in the IPO were $16.4
million, after deducting underwriting discounts and commissions, an underwriters
non-accountable expense allowance and other expenses payable by the Company in
connection with the IPO.
 
     During fiscal 1997, cash provided by operations was $5.3 million, and
primarily consisted of net income for the period of $4.0 million, non-cash
charges of $449,000, an increase of accrued expenses of $4.1 million, and a

decrease in advance billings of $200,000. This was partially offset by (i) an
increase of accounts receivable of $2.5 million and (ii) a decrease in accounts
payable of $610,000 and (iii) an increase in other current assets of $379,000.
Cash used in investing activities was $971,000 and was primarily attributable to
capital expenditures. Cash provided by financing activities was $11.5 million
and consisted of net proceeds from the initial public offering of $16.4 million
and proceeds from bank loans of $255,000 which were partially offset by
distributions to stockholders of $4.2 million, repayments of bank loans and a
line of credit of $662,000, and capital lease repayments of $151,000.
 
     The Company's working capital was $19.0 million at December 31, 1997,
compared to $4.1 million at December 31, 1996. The increase in working capital
at December 31, 1997, as compared to December 31, 1996, was primarily
attributable to the net proceeds received from the IPO.
 
     Bank borrowings for the Company's U.S. Operations from Chase Manhattan
Bank, N.A. (the 'GHB&M Credit Facility') consist of (i) an uncommitted line of
credit (the 'GHB&M Line of Credit') which expires on June 30, 1998 and bears
interest at the bank's prime rate (8.5% as of December 31, 1997) plus 1.0% per
annum, pursuant to which GHB&M may request borrowings of, but the bank is not
obligated to lend, up to $3.5 million, (ii) a term note in the principal amount
of $300,000 (the 'GHB&M Term Note'), and (iii) a letter of credit in the amount
of $300,000 (the 'GHB&M Letter of Credit'). The GHB&M Credit Facility is secured
by a first security interest in GHB&M's personal property and is personally
guaranteed by certain of GHB&M's stockholders. The GHB&M Term Note, which was
provided to GHB&M to finance the construction of additional office space, had
$125,000 outstanding as of December 31, 1997 and bears interest at 7.75% per
annum and is payable in 36 equal monthly installments with the last installment
due February 1999. No amounts were outstanding under the GHB&M Line of Credit as
of December 31, 1997.
 
     Borrowings for the Company's U.K. Operations consist of an overdraft
facility (the 'Milton Overdraft Facility') with Bank of Scotland ('Bank of
Scotland') for an aggregate amount of up to $820,000. Amounts drawn under the
Milton Overdraft Facility bear interest payable at the United Kingdom base rate
(7.25% as of December 31, 1997) plus 2.0% per annum (the 'Prevailing Rate'). As
of December 31, 1997, Milton had an outstanding balance of approximately
$634,000 under the facility. Although the Milton Overdraft Facility expired on
November 30, 1997, pursuant to an informal arrangement between Milton and Bank
of Scotland, the Company is continuing to operate under the Milton Overdraft
Facility pending finalization and execution of a new overdraft facility which is
currently being negotiated. In addition, as of December 31, 1997, the Company
had the following outstanding indebtedness with respect to its U.K. Operations:
(i) a term loan from Bank of Scotland (the 'Milton Term Loan') in the principal
amount of $588,000 (of which $345,000 was outstanding on December 31, 1997),
which bears interest payable at the Prevailing Rate with principal payable in
installments of $58,000 each May and November through November 2000; (ii) a term
loan in the principal amount of $452,000 (all of which was outstanding), which
bears interest at the rate of 4% per annum, originally issued in connection with
Milton's acquisition of Headcount, under which principal is due and payable in
July 1998; and (iii) a term
 
                                       16
<PAGE>

loan from National Westminster Bank plc in the principal amount of $75,000
($10,000 of which was outstanding as of December 31, 1997), which bears interest
at 10.5% per annum payable in monthly installments, with the final payment due
in April 1998.
 
     As a result of the consummation of the Consolidation, the status of the
companies comprising GHB&M (other than Syberactive) as S Corporations terminated
and each of the companies comprising GHB&M is subject to Federal and state
income taxes at applicable corporate rates. In connection with the termination
of the S Corporation status of such companies, GHB&M entered into an agreement
with respect to the Accounts Receivable Sale pursuant to which, prior to the
consummation of the Consolidation, GHB&M sold approximately $2.6 million of its
accounts receivable to an unaffiliated financial institution at a discount rate
equal to 2% of the gross face amount of the accounts receivable sold.
Immediately prior to the consummation of the Consolidation, GHB&M made the S
Corporation Distributions to its stockholders of $3.7 million in the aggregate
from existing cash balances for payment by such stockholders of income taxes due
on S Corporation earnings.
 
     In fiscal 1997, the Company spent $1.1 million for capital expenditures,
primarily for expansion of the Company's New York offices. The Company
anticipates that capital expenditures for the 1998 fiscal year will total
approximately $500,000. Such expenditures will primarily include spending
associated with the expansion of the Company's New York offices and the
acquisition of additional office furniture and computer equipment for the
Company's U.S. and U.K. offices.
 
     Pursuant to the Consolidation Agreements, the Company will pay to one of
Milton's minority stockholders no later than July 31, 1999 an amount in cash up
to approximately $320,000 based on the profits earned by PDM Communications
Limited.
 
     The Company believes that cash generated from the Company's operations, the
net proceeds received by the Company from the IPO and borrowings under the GHB&M
Credit Facility and the Milton Overdraft Facility will be sufficient to fund the
Company's capital requirements (including working capital and capital
expenditure requirements) for at least the next 12 months.
 
     The Company believes that future costs to be incurred in connection with
the modification of its software and systems to make them Year 2000 compliant
will not have a material adverse effect on the Company's results of operations
or financial position.
 
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
 
     Not applicable.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
 
     The following financial information is included on the pages indicated:
 
<TABLE>
<CAPTION>
<S>                                                                                                    <C>

  Report of Independent Public Accountants.....................................................         18
  Consolidated Balance Sheets..................................................................         19
  Consolidated Statements of Income............................................................         20
  Consolidated Statements of Stockholders' Equity..............................................         21
  Consolidated Statements of Cash Flows........................................................         22
  Notes to Consolidated Financial Statements...................................................         23
</TABLE>
 
                                       17

<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To Healthworld Corporation and Subsidiaries:
 
We have audited the accompanying consolidated balance sheets of Healthworld
Corporation (a Delaware Corporation) and Subsidiaries as of December 31, 1996
and 1997 (Note 3), and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
 
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Healthworld Corporation and
Subsidiaries as of December 31, 1996 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
 
                                          ARTHUR ANDERSEN LLP
 
Melville, New York
February 11, 1998
 
                                       18

<PAGE>
                    HEALTHWORLD CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                                                 DECEMBER 31,
                                                                                              -------------------
                                                                                               1996        1997
                                                                                              -------     -------
<S>                                                                                           <C>         <C>
                                          ASSETS
Current Assets:
  Cash and cash equivalents................................................................   $ 2,214     $18,092
  Accounts receivable......................................................................    11,805      14,269
  Unbilled production charges..............................................................     1,564       1,501
  Other current assets.....................................................................       537       1,004
                                                                                              -------     -------
Total current assets.......................................................................    16,120      34,866
Property and equipment, net................................................................     2,112       2,434
Goodwill, net..............................................................................     1,800       3,670
Other assets...............................................................................       504         839
                                                                                              -------     -------
                                                                                              $20,536     $41,809
                                                                                              -------     -------
                                                                                              -------     -------
 
                           LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Line of credit...........................................................................   $   400     $    --
  Bank loans and overdrafts................................................................       406         634
  Current portion of long-term debt........................................................       216         702
  Current portion of capitalized lease obligations.........................................       125         125
  Accounts payable.........................................................................     2,471       1,836
  Accrued expenses.........................................................................     2,097       6,148
  Advance billings.........................................................................     6,273       6,468
                                                                                              -------     -------
Total current liabilities..................................................................    11,988      15,913
Long-term debt.............................................................................       950         230
Capitalized lease obligations..............................................................       128          99
Minority interests.........................................................................       143          --
Deferred rent..............................................................................       665         768
Deferred income taxes......................................................................       207          --
Other liabilities..........................................................................        83          33
                                                                                              -------     -------
Total liabilities..........................................................................    14,164      17,043
                                                                                              -------     -------
                                                                                              -------     -------
Commitments and contingencies (Note 15)
Stockholders' Equity:
  Preferred stock, $.01 par value; 1,000,000 shares authorized; no shares outstanding......
  Common stock, $.01 par value; 20,000,000 shares authorized; 4,740,983 and 7,415,000
     shares issued and outstanding in 1996 and 1997, respectively..........................        47          74

  Additional paid-in capital...............................................................       256      22,746
  Retained earnings........................................................................     6,003       1,931
  Cumulative translation adjustments.......................................................        66          15
                                                                                              -------     -------
Total stockholders' equity.................................................................     6,372      24,766
                                                                                              -------     -------
                                                                                              $20,536     $41,809
                                                                                              -------     -------
                                                                                              -------     -------
</TABLE>
 
The accompanying notes to consolidated financial statements are an integral part
                              of these statements.
                                       19

<PAGE>
                    HEALTHWORLD CORPORATION AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF INCOME
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                                       YEAR ENDED DECEMBER 31,
                                                                                    -----------------------------
                                                                                     1995       1996       1997
                                                                                    -------    -------    -------
<S>                                                                                 <C>        <C>        <C>
Revenues.........................................................................   $16,767    $24,209    $35,292
                                                                                    -------    -------    -------
Operating expenses:
  Salaries and related costs.....................................................     9,857     15,733     24,186
  Other operating expenses.......................................................     4,425      5,208      6,276
                                                                                    -------    -------    -------
                                                                                     14,282     20,941     30,462
Income from operations...........................................................     2,485      3,268      4,830
Interest expense (income), net...................................................         2         69        (86)
                                                                                    -------    -------    -------
Income before provision for income taxes and minority interests..................     2,483      3,199      4,916
Provision for income taxes.......................................................       283        524        719
Minority interests in net earnings of subsidiaries...............................        68        124        192
                                                                                    -------    -------    -------
Net income.......................................................................   $ 2,132    $ 2,551    $ 4,005
                                                                                    -------    -------    -------
                                                                                    -------    -------    -------
 
Pro forma information (Notes 4 and 5):
  Income before provisions for income taxes and minority interests...............                         $ 4,916
  Pro forma provisions for income taxes..........................................                           2,023
  Minority interests in net earnings of subsidiaries.............................                             192
                                                                                                          -------
  Pro forma net income...........................................................                         $ 2,701
                                                                                                          -------
                                                                                                          -------
Per share information (Note 5):
  Pro forma net income per common share:
     Basic.......................................................................                         $  0.54
                                                                                                          -------
                                                                                                          -------
     Diluted.....................................................................                         $  0.54
                                                                                                          -------
                                                                                                          -------
Common shares used in computing per share amounts:
     Basic.......................................................................                           5,037
                                                                                                          -------
                                                                                                          -------
     Diluted.....................................................................                           5,047
                                                                                                          -------
                                                                                                          -------
</TABLE>

 
The accompanying notes to consolidated financial statements are an integral part
                              of these statements.
                                       20

<PAGE>
                    HEALTHWORLD CORPORATION AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                    ADDITIONAL                 CUMULATIVE
                                                          COMMON     PAID-IN      RETAINED     TRANSLATION
                                                          STOCK      CAPITAL      EARNINGS     ADJUSTMENTS     TOTAL
                                                          ------    ----------    ---------    -----------    -------
<S>                                                       <C>       <C>           <C>          <C>            <C>
Balance, December 31, 1994.............................    $ 47      $    256      $ 3,102        $   7       $ 3,412
  Net income...........................................                              2,132                      2,132
  Distributions to stockholders........................                               (209)                      (209)
  Dividends............................................                                (86)                       (86)
  Cumulative translation adjustments...................                                             (13)          (13)
                                                          ------    ----------    ---------       -----       -------
Balance, December 31, 1995.............................      47           256        4,939           (6)        5,236
  Net income...........................................                              2,551                      2,551
  Distributions to stockholders........................                             (1,487)                    (1,487)
  Cumulative translation adjustments...................                                              72            72
                                                          ------    ----------    ---------       -----       -------
Balance, December 31, 1996.............................      47           256        6,003           66         6,372
  Initial public offering of common stock,
     net of cost of offering...........................      24        16,421                                  16,445
  Issuance of common stock for acquisition
     of minority interests.............................       3         2,329                                   2,332
  Net income...........................................                              4,005                      4,005
  Distributions to stockholders........................                             (4,197)                    (4,197)
  Dividends............................................                               (105)                      (105)
  Transition loss in foreign subsidiaries..............                                (35)                       (35)
  Undistributed earnings in 'S' corporation............                 3,740       (3,740)                        --
  Cumulative translation adjustments...................                                             (51)         ( 51)
                                                          ------    ----------    ---------       -----       -------
Balance, December 31, 1997.............................    $ 74      $ 22,746      $ 1,931        $  15       $24,766
                                                          ------    ----------    ---------       -----       -------
                                                          ------    ----------    ---------       -----       -------
</TABLE>
 
The accompanying notes to consolidated financial statements are an integral part
                              of these statements.
                                       21

<PAGE>
                    HEALTHWORLD CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                         YEAR ENDED DECEMBER 31,
                                                                                       ---------------------------
                                                                                        1995      1996      1997
                                                                                       ------    ------    -------
<S>                                                                                    <C>       <C>       <C>
Cash flows from operating activities:
  Net income........................................................................   $2,132    $2,551    $ 4,005
  Adjustments to reconcile net income to net cash
     provided by operating activities:
     Depreciation and amortization..................................................      410       627        849
     Deferred rent..................................................................      200        23        103
     Deferred income taxes..........................................................       83        89       (643)
     Transition loss................................................................       --        --        (35)
     Minority interest in net earnings..............................................       68       124        192
     Loss (gain) on sale of fixed assets............................................        1        18        (17)
  Changes in operating assets and liabilities:
     Accounts receivable............................................................      198    (2,141)    (2,519)
     Unbilled production charges....................................................     (691)    1,562         61
     Other current assets...........................................................     (110)      (46)      (379)
     Other assets...................................................................       30       (88)        69
     Accounts payable...............................................................     (361)     (507)      (610)
     Advance billings...............................................................   (1,579)      221        200
     Accrued expenses...............................................................      861       998      4,082
     Other liabilities..............................................................       --        18        (48)
                                                                                       ------    ------    -------
Net cash provided by operating activities...........................................    1,242     3,449      5,310
                                                                                       ------    ------    -------
Cash flows from investing activities:
Net purchase price of acquisitions..................................................     (639)     (242)        --
Capital expenditures, net...........................................................     (766)     (720)    (1,071)
Proceeds from the sale of fixed assets..............................................       63        50        100
                                                                                       ------    ------    -------
Net cash (used in) investing activities.............................................   (1,342)     (912)      (971)
                                                                                       ------    ------    -------
Cash flows from financing activities:
  Net proceeds from initial public offering.........................................       --        --     16,445
  Distributions to stockholders.....................................................     (209)   (1,487)    (4,197)
  Payment of majority stockholder dividends.........................................      (86)       --       (105)
  Payment of minority interest shareholders dividends...............................      (15)       --        (55)
  Repayment of bank loans...........................................................       --      (131)      (262)
  Proceeds from bank loans..........................................................      613        --        255
  Net proceeds (repayment of) from line of credit...................................      200       109       (400)
  Issuance of long-term debt........................................................       --       300         --
  Repayment of long-term debt.......................................................     (105)     (158)        --
  Capital lease repayments..........................................................     (152)      (77)      (151)
                                                                                       ------    ------    -------
Net cash (used in) provided by financing activities.................................      246    (1,444)    11,530

                                                                                       ------    ------    -------
Effect of exchange rates on cash....................................................      (14)      (17)         9
Net increase in cash and cash equivalents...........................................      132     1,076     15,878
Cash and cash equivalents at beginning of year......................................    1,006     1,138      2,214
                                                                                       ------    ------    -------
Cash and cash equivalents at end of year............................................   $1,138    $2,214    $18,092
                                                                                       ------    ------    -------
                                                                                       ------    ------    -------
Supplemental disclosure of cash flow information:
  Cash paid for:
  Taxes.............................................................................   $  196    $  131    $   851
                                                                                       ------    ------    -------
                                                                                       ------    ------    -------
  Interest..........................................................................   $   53    $  129    $   139
                                                                                       ------    ------    -------
                                                                                       ------    ------    -------
Supplemental schedule of noncash investing activities:
  Issuance of stock for acquisition of minority interests (Note 6)..................   $   --    $   --    $ 2,332
                                                                                       ------    ------    -------
                                                                                       ------    ------    -------
</TABLE>
 
The accompanying notes to consolidated financial statements are an integral part
                              of these statements.
                                       22

<PAGE>
                    HEALTHWORLD CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
NOTE 1. ORGANIZATION
 
     Healthworld Corporation (the 'Company') was incorporated in Delaware on
September 12, 1996. The Company conducted no operations prior to November 12,
1997, at which time it acquired all of the outstanding common stock of Girgenti,
Hughes, Butler & McDowell, Inc. and its affiliated entities ('GHB&M') and Milton
Marketing Group Limited and its subsidiaries ('Milton') in exchange for an
aggregate of 4,741 shares of common stock of the Company (the 'Consolidation').
The Consolidation has been accounted for using the pooling of interests method
of accounting. As a result of the Consolidation, the entities comprising GHB&M
(other than Syberactive, which was already treated as a subchapter 'C'
corporation) no longer qualified as subchapter 'S' corporations, and became
subject to C corporation taxation. Simultaneously, with the Consolidation, the
entities comprising GHB&M declared and paid an S corporation distribution to the
then existing stockholders of GHB&M in the aggregate amount of $3,700 for
payment by such stockholders of taxes due on GHB&M's 1997 S corporation
earnings. GHB&M's undistributed S corporation earnings of $3,740 have been
transferred to additional paid-in capital in the accompanying consolidated
statements of stockholders' equity. The provision for income taxes for the year
ended December 31,1997 reflects S corporation taxation for GHB&M through the
date of the Consolidation, and C corporation taxation thereafter (Note 12).
Concurrent with the Consolidation, the stockholders holding the minority
interests in Milton's subsidiaries contributed their interests in such
respective companies in exchange for an aggregate of 259 shares of the Company's
common stock. These acquisitions were accounted for using the purchase method of
accounting. The excess purchase price over the underlying equity of the minority
interests was recorded as goodwill (Note 6).
 
     On November 21,1997, the Company consummated its initial public offering
('the IPO') relating to the offer and sale of 2,415 shares of Common Stock at
$9.00 per share. Net proceeds received by the Company from the IPO were $16,445.
 
NOTE 2. BUSINESS
 
     The Company is an international marketing and communications services
company specializing in health care. The Company provides many of the world's
largest pharmaceutical and other health care companies with a comprehensive
range of integrated strategic marketing services designed to accelerate the
market's acceptance of new products and to sustain marketability throughout
their life-cycles.
 
NOTE 3. SIGNIFICANT ACCOUNTING POLICIES
 
  Principles of Consolidation
 
     The accompanying consolidated financial statements include the accounts of
the Company and its majority and wholly owned subsidiaries. All intercompany
accounts and transactions have been eliminated.
 

  Restatement
 
     As discussed in Note 1, the Company completed the Consolidation on November
12, 1997, which was accounted for under the pooling of interests method of
accounting. Accordingly, the Company's consolidated financial statements and
notes thereto have been restated to include the results of GHB&M and Milton for
all periods presented.
 
  Fiscal-Year Change
 
     In December 1997, the Company changed the fiscal year end of Milton from
November 30 to December 31 to eliminate the one month lag in reporting. The one
month lag was eliminated during the fourth quarter as an adjustment to retained
earnings of $(35).
 
                                       23
<PAGE>
                    HEALTHWORLD CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
NOTE 3. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
  Foreign Currency Translation
 
     All assets and liabilities of the Company's Milton subsidiaries are
translated into United States Dollars from United Kingdom Pound Sterling at
year-end exchange rates. Income and expense items are translated at average
exchange rates prevailing during each fiscal year. The resulting translation
adjustments are recorded as a separate component of stockholders' equity.
 
  Revenue Recognition
 
     Revenues and fees are derived from clients for creative concept
development, production of advertising and promotional materials, the supply of
long and short-term personnel for client marketing purposes and the provision of
public relations services to public health service institutions. For services
such as the production of advertising and promotion materials, fees are
recognized when the production materials are completed. With respect to services
such as consulting, publishing and public relations, the Company is either paid
a monthly retainer or bills on an actual time incurred basis, which, in each
case, the Company recognizes as income each month to match its monthly payroll
and operating costs. Additionally, revenues associated with contract sales
services are recognized as such services are provided and payroll expenses are
incurred.
 
     Accounts receivable include fees recognized, project costs, and media and
production costs incurred on behalf of clients, which are paid for by the
Company and billed to clients. The Company records gross contract revenues for
contract sales services and the related direct costs are included in salaries
and related costs on the accompanying consolidated statements of income.
 
  Concentration of Credit Risk
 
     The Company provides services to a range of clients operating mostly in the

healthcare, communication and utility industries. For the year ended December
31, 1997, the Company had three clients which constituted approximately 18.8%,
8.6% and 7.9% of total revenues, respectively. In addition, the Company's five
largest clients represented 45.9% of total revenues for the year ended December
31,1997. The Company had three clients which constituted approximately 26.9%,
9.3% and 5.4% and 28.5%, 13.0% and 9.7% of total 1996 and 1995 revenues,
respectively. The Company extends credit to all qualified clients, but does not
believe that it is exposed to any undue concentration of credit risk to any
significant degree. The Company maintains reserves for potential credit losses,
but has not experienced any material losses from individual clients or groups of
clients.
 
  Cash and Cash Equivalents
 
     For purposes of the consolidated balance sheets and consolidated statements
of cash flows, the Company considers all highly liquid debt instruments
purchased with original maturities of three months or less to be cash
equivalents, including commercial paper and money market mutual funds.
 
  Unbilled Production Charges
 
     Unbilled production charges consists principally of costs incurred in
producing marketing communications for clients and field marketing personnel to
be billed. Such amounts will be billed to clients at either a defined stage of
the project or when production is complete.
 
                                       24
<PAGE>
                    HEALTHWORLD CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
NOTE 3. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
  Property and Equipment
 
     Property and equipment is stated at cost, net of accumulated depreciation
and amortization. Depreciation and amortization are computed using both
accelerated and straight-line methods over the following periods:
 

Motor vehicles......................  4-8 years
Furniture and equipment.............  4-14 years
Leasehold improvements..............  Lesser of lease term or useful life
 
  Equipment Held Under Capital Leases
 
     Equipment held under capital leases is accounted for in accordance with
Statement of Financial Accounting Standards No. 13 'Accounting for Leases', and
is recorded in property and equipment. The present value of the related
liability is included in capitalized lease obligations.
 
  Goodwill
 
     Goodwill represents the Company's excess purchase price over the fair value

of net assets acquired and is being amortized on a straight-line basis over the
estimated useful life. Amounts recognized to date have been amortized over 30
years from the original date of acquisition. Amortization expense of goodwill
for the years ended December 31, 1995, 1996 and 1997 amounted to $2, $42 and $78
respectively.
 
  Accounting for Long-Lived Assets
 
     During 1996, the Company adopted Statement of Financial Accounting
Standards ('SFAS') No. 121, 'Accounting for the Impairment of Long-Lived Assets
to be Disposed of.' This statement requires the Company to review long-lived
assets, including certain intangibles and goodwill, for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. The effect of adoption was immaterial.
 
  Advance Billings
 
     Advance billings consists of progress billings for production jobs that are
not completed, as well as accrued media placements that have been billed to
clients.
 
  Income Taxes
 
     The Company accounts for income taxes in accordance with SFAS No. 109
'Accounting for Income Taxes'. This statement requires an asset and liability
approach for measuring deferred taxes based on temporary differences between the
financial statement and income tax bases of assets and liabilities existing at
each balance sheet date using enacted rates for the years in which the taxes are
expected to be paid or recovered. The Company has not recorded any deferred tax
assets or liabilities as any differences between book and income tax recognition
are immaterial.
 
     As a result of the Consolidation, the entities comprising GHB&M (other than
Syberactive, which was already treated as a C corporation) are no longer treated
as S corporations. Deferred tax assets and liabilities were established in the
fourth quarter of fiscal 1997 due to the termination of GHB&M's S corporation
status on November 12, 1997. This resulted in a credit to the provision for
income taxes of $404 for the year ended December 31, 1997 (Note 12).
 
                                       25

<PAGE>
                    HEALTHWORLD CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
NOTE 3. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
  Stock-Based Compensation
 
     In 1997, the Company adopted the provisions of SFAS No. 123, 'Accounting
for Stock-Based Compensation', by continuing to apply the provisions of
Accounting Principles Board ('APB') Opinion No. 25, 'Accounting for Stock Issued
to Employees,' while providing the required pro forma disclosures as if the fair
value method had been applied (Note 13).
 
  Use of Estimates
 
     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
 
NOTE 4. PRO FORMA NET INCOME
 
     Pro forma net income for the year ended December 31, 1997 includes the pro
forma effect of a C corporation income tax provision as if each of the companies
comprising GHB&M (other than Syberactive, which was already treated as a C
corporation) were treated as C corporations for the entire fiscal year.
 
NOTE 5. NET INCOME PER COMMON SHARE
 
     Effective December 15, 1997, the Company adopted SFAS No. 128, 'Earnings
Per Share' ('EPS'). This statement establishes standards for computing and
presenting EPS, replacing the presentation of primary EPS with a presentation of
basic EPS. For companies with complex capital structures, the statement requires
dual presentation of both basic EPS and diluted EPS on the face of the statement
of income. In accordance with SFAS No. 128, basic earnings per common share
amounts were computed by dividing net earnings by the weighted average number of
common shares outstanding, excluding any potential dilution. Diluted earnings
per common share amounts were computed by reflecting potential dilution from the
exercise of stock options.
 
     The following chart provides a reconciliation of information used in
calculating the per share amounts, for the year ended December 31, 1997:
 
<TABLE>
<CAPTION>
                                                            PRO FORMA       WEIGHTED
                                                           NET INCOME        SHARES
         (IN THOUSANDS, EXCEPT PER SHARE DATA)             (NUMERATOR)    (DENOMINATOR)    PER SHARE AMOUNT
        ----------------------------------------           -----------    -------------    ----------------
<S>                                                        <C>            <C>              <C>
Pro forma net income....................................     $ 2,701
Basic EPS pro forma net income available to common
  stockholders..........................................     $ 2,701           5,037            $ 0.54

Effect of dilutive securities stock options.............          --              10                --
Diluted EPS Pro forma net income available to common
  stock and assumed option exercises....................     $ 2,701           5,047            $ 0.54
</TABLE>
 
NOTE 6. ACQUISITIONS OF BUSINESSES
 
  Minority Interests
 
     On November 12, 1997, the Company acquired the remaining minority interests
in all Milton subsidiaries. In accordance with the terms of the acquisitions,
the Company issued 259 shares of common stock in exchange for all minority
shareholders' interest in their respective companies. These acquisitions were
accounted for using the purchase method of accounting. The excess purchase price
over the fair value of the minority interest share of the net assets acquired
was $2,046 and has been recorded as goodwill.
 
                                       26

<PAGE>
                    HEALTHWORLD CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
NOTE 6. ACQUISITIONS OF BUSINESSES--(CONTINUED)
  Milton Headcount Limited ('MHL')(formerly Effective Sales Personnel Limited)
 
     In November 1995, the Company acquired all of the outstanding stock of MHL
for a purchase price of $1,130. The purchase price was funded by cash and a $462
note due July 1998. This acquisition was accounted for using the purchase method
of accounting and the purchase price was allocated to the assets purchased and
the liabilities assumed based on their fair values at the date of acquisition.
The excess purchase price over the fair values of the net assets acquired was
$1,027 and has been recorded as goodwill.
 
  Milton Cater Limited ('MCL')
 
     MCL was formed in April 1996, and the Company acquired 51% of its equity in
May 1996. The remaining 49% of MCL's equity was owned by a key employee and was
purchased by the Company on November 12, 1997 for no consideration pursuant to a
prior agreement between Milton and the minority stockholder.
 
  Milton Marketing Limited ('MML')
 
     In April 1996, the Company acquired an additional 7.5% interest in MML for
$234, which increased the Company's interest in MML to 92.5%. The acquisition of
the 7.5% interest was accounted for using the purchase method of accounting. The
excess purchase price over the fair value of the minority share of net assets
was $188 and has been recorded as goodwill. As described above the remaining
7.5% interest was acquired on November 12, 1997.
 
  PDM Communications Limited ('PDM')
 
     In November 1996, the Company acquired a 75% interest in PDM for a cash
purchase price of $32. The minority stockholder had a put option and the Company
had a call option with respect to the remaining 25% of the shares not owned by
the Company. This acquisition was accounted for using the purchase method of
accounting and the purchase price was allocated to the assets purchased and the
liabilities assumed based on their fair values at the date of acquisition. The
excess purchase price over the fair values of the net assets acquired was $523
and has been recorded as goodwill. On November 12, 1997 the Company exercised
its call option as fully described above. The Company may be required under
certain circumstances to remit to a prior PDM stockholder up to approximately
$320 no later than July 31, 1999.
 
  Pro Forma Results of Operations
 
     Summarized below are the unaudited pro forma results of operations of the
Company as though the MHL, MML and PDM acquisitions had occurred at the
beginning of 1995 and the acquisition of the remaining minority interest in
certain of the Milton subsidiaries had occurred at the beginning of 1996.
Adjustments have been made for income taxes, amortization of goodwill and
minority interests in net earnings of subsidiaries related to these

transactions.
 
<TABLE>
<CAPTION>
                                                                           1995       1996       1997
                                                                          -------    -------    -------
<S>                                                                       <C>        <C>        <C>
Pro Forma:
Revenues...............................................................   $19,002    $24,596    $35,292
Net income.............................................................     1,453      1,459      2,834
</TABLE>
 
     These pro forma results of operations are not necessarily indicative of the
actual results of operations that would have occurred had the acquisitions been
made at the beginning of 1995 or 1996 or of results which may occur in the
future.
 
                                       27

<PAGE>
                    HEALTHWORLD CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
NOTE 7. PROPERTY AND EQUIPMENT
 
     Property and equipment consists of the following at December 31:
 
<TABLE>
<CAPTION>
                                                                                         1996      1997
                                                                                        ------    ------
<S>                                                                                     <C>       <C>
Motor vehicles.......................................................................   $  265    $  438
Furniture and equipment..............................................................    3,113     3,822
Leasehold improvements...............................................................      628       942
Equipment held under capital leases..................................................      395        --
                                                                                        ------    ------
                                                                                         4,401     5,202
Less: Accumulated depreciation and amortization......................................   (2,289)   (2,768)
                                                                                        ------    ------
                                                                                        $2,112    $2,434
                                                                                        ------    ------
                                                                                        ------    ------
</TABLE>
 
     Depreciation and amortization expense for the years ended December 31,
1995, 1996 and 1997 amounted to approximately $408, $585 and $771, respectively.
 
NOTE 8. RESTRICTED CASH
 
     In connection with the lease for office space, the Company was required to
establish an Irrevocable Standby Letter of Credit with a face amount of $300.
The Company has set aside a Certificate of Deposit in the amount of $300 as
collateral for the Letter of Credit. The Certificate of Deposit has been
included within other assets due to the term of the underlying lease commitment.
 
NOTE 9. ACCRUED EXPENSES
 
     Major components of accrued expenses at December 31:
 
<TABLE>
<CAPTION>
                                                                               1996      1997
                                                                              ------    ------
<S>                                                                           <C>       <C>
Salary and related cost....................................................   $  701    $2,887
Value added tax............................................................      340     1,393
Income taxes...............................................................      575       902
Other......................................................................      481       680
Offering costs.............................................................       --       286
                                                                              ------    ------
                                                                              $2,097    $6,148

                                                                              ------    ------
                                                                              ------    ------
</TABLE>
 
NOTE 10. BANK LOANS AND OVERDRAFTS
 
     The Company has the following loans outstanding at December 31:
 
<TABLE>
<CAPTION>
                                                                               1996      1997
                                                                              ------    ------
<S>                                                                           <C>       <C>
Line of credit (a).........................................................   $  400    $   --
Term loan (b)..............................................................      470       345
Term note/loan (c).........................................................      223       125
Business development loan (d)..............................................       38        10
Overdraft facility (e).....................................................      379       634
4% loan notes (f)..........................................................      462       452
                                                                              ------    ------
                                                                               1,972     1,566
Less: Current portion......................................................    1,022     1,336
                                                                              ------    ------
                                                                              $  950    $  230
                                                                              ------    ------
                                                                              ------    ------
</TABLE>
 
                                       28


<PAGE>
                    HEALTHWORLD CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
NOTE 10. BANK LOANS AND OVERDRAFTS--(CONTINUED)
------------------
a) On January 22, 1996, Chase Manhattan Bank, N.A. approved a $3,500 Line of
   Credit. As of December 31, 1996 and 1997, $400 and $0 were outstanding,
   respectively. Borrowings under the Line of Credit are limited to 80% of
   eligible trade receivables, as defined in the agreement. The Line of Credit
   which matured on July 31, 1997, was renewed in October 1997, bears interest
   at prime (8.5% as of December 31, 1997) plus 1% per annum and matures on June
   30, 1998. All loans under the Line of Credit are (i) secured by a first
   priority security interest in GHB&M's personal property, and (ii) guaranteed
   by certain officers of the Company. The Line of Credit requires the Company
   to maintain certain financial ratios. As of December 31, 1997, the Company
   was in compliance with all of the provisions of the Line of Credit.
 
b) During November 1995, a bank provided a Term Loan of $588 to the Company
   which bears interest at the United Kingdom ('UK') base rate (7.25% as of
   December 31, 1997) plus 2% per annum and is payable in installments of $58
   every May and November with the final installment due in November 2000. The
   Term Loan requires the Company to maintain certain financial covenants. As of
   December 31, 1997, the Company was in compliance with all of the provisions
   of the Term Loan.
 
c) During February 1996 a bank provided a Term Loan of $300 to finance the
   construction of additional office space. This Term Loan bears interest at
   7.75% per annum and is payable in 36 monthly installments commencing March
   1996.
 
d) This loan bears interest at 10.5% per annum and matures in April 1998.
 
e) The Company has in place an overdraft facility with a bank, which bears
   interest at the UK base rate plus 2% per annum. As of December 31, 1996 and
   1997 the outstanding balance was approximately $379 and $634 respectively,
   while the overdraft facility limits were approximately $672 and $820,
   respectively.
 
f) In connection with the MHL acquisition, the Company has issued a $462, 4%
   unsecured note, which is payable in July 1998.
 
     At December 31, 1997, maturities of debt are as follows:
 
<TABLE>
<S>                                                                 <C>
1998.............................................................   $1,336
1999.............................................................      115
2000.............................................................      115
</TABLE>
 
NOTE 11. CAPITALIZED LEASE OBLIGATIONS

 
     The Company has entered into capital leases for computer equipment and
motor vehicles. The lease payments are payable monthly on a straight-line basis.
The assets relating to the leases are capitalized and amortized over a period
approximating the lease period.
 
     Minimum future lease payments under capital leases as of December 31 are as
follows:
 
<TABLE>
<S>                                                                 <C>
1998.............................................................   $  140
1999.............................................................       72
2000.............................................................       30
2001.............................................................        9
                                                                    ------
Total minimum lease payments.....................................      251
Less: amounts representing interest..............................       27
                                                                    ------
Present value of minimum lease payments..........................   $  224
                                                                    ------
                                                                    ------
</TABLE>
 
     Interest rates on capitalized leases vary from 11% to 15% and are imputed
based on the lessor's implicit rate of return.
 
                                       29

<PAGE>
                    HEALTHWORLD CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
NOTE 12. INCOME TAXES
 
     The provision for income taxes is comprised of the following at December
31:
 
<TABLE>
<CAPTION>
                                                                                   1995    1996    1997
                                                                                   ----    ----    -----
<S>                                                                                <C>     <C>     <C>
Current:
  Federal.......................................................................   $ --    $ --    $ 301
  State and local...............................................................     41      69      681
  Foreign.......................................................................    159     366      380
                                                                                   ----    ----    -----
                                                                                    200     435    1,362
                                                                                   ----    ----    -----
                                                                                   ----    ----    -----
Deferred:
  Federal.......................................................................     --      --      (16)
  State and local...............................................................     83      89     (223)
  Foreign.......................................................................     --      --       --
                                                                                   ----    ----    -----
                                                                                     83      89     (239)
Deferred taxes resulting from subchapter 'S' corporation termination............     --      --     (404)
                                                                                   ----    ----    -----
Total...........................................................................   $283    $524    $ 719
                                                                                   ----    ----    -----
                                                                                   ----    ----    -----
</TABLE>
 
     Reconciliation of the statutory Federal income tax rate to the Company's
effective tax rate is as follows:
 
<TABLE>
<CAPTION>
                                                                                             DECEMBER 31,
                                                                                                 1997
                                                                                             ------------
<S>                                                                                          <C>
U.S. Federal statutory rate...............................................................        34.0%
State and local taxes, net of Federal benefit.............................................         6.1
Tax effect resulting from foreign operations..............................................         0.6
Income from 'S' corporation period taxable to shareholders................................       (21.3)
Deferred taxes resulting from subchapter 'S' corporation termination......................        (8.2)
Non-deductible foreign tax losses.........................................................         1.8
Non-deductible goodwill amortization and other............................................         1.6
                                                                                                ------
Effective income tax rate.................................................................        14.6%

                                                                                                ------
                                                                                                ------
</TABLE>
 
     Significant components of deferred tax assets are as follows:
 
<TABLE>
<CAPTION>
                                                                                             DECEMBER 31,
                                                                                                 1997
                                                                                             ------------
<S>                                                                                          <C>
Current deferred tax assets:
  Accounts receivable.....................................................................      $   55
  Various accruals........................................................................          36
                                                                                                ------
                                                                                                    91
Non-current deferred tax assets:
  Deferred rent...........................................................................         328
                                                                                                ------
Total deferred tax asset..................................................................      $  419
                                                                                                ------
                                                                                                ------
</TABLE>
 
NOTE 13. STOCK-BASED COMPENSATION PLANS
 
     On October 13, 1997, the Board of Directors adopted the 1997 Stock Option
Plan (the '1997 Plan'). The 1997 Plan authorizes the granting of awards, the
exercise of which would allow up to an aggregate of 710 shares of the Company's
common stock to be acquired by the holders of said awards. The awards can take
the form of Incentive Stock Options ('ISOs') or Non-qualified Stock Options
('NQSOs'). Awards may be granted to key employees, directors and consultants.
ISOs and NQSOs are granted in terms not to exceed ten years and become
 
                                       30

<PAGE>
                    HEALTHWORLD CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
NOTE 13. STOCK-BASED COMPENSATION PLANS--(CONTINUED)
exercisable as set forth when the award is granted. Options may be exercised in
whole or part. The exercise price per share of ISOs and NQSOs is the market
price of the Company's common stock on the date of grant. Any 1997 Plan
participant who is granted ISOs and possesses more than 10% of the voting rights
of the Company's outstanding common stock must be granted an option having an
exercise price per share with at least 110% of fair market value per share of
common stock on the date of the grant and the option must be exercised within
five years from the date of grant. Under the 1997 Plan, ISOs and NQSOs have been
granted to key employees and directors for terms of up to ten years, at exercise
prices ranging from $9.00 to $11.00 and vest in whole or part at the stated
times from one year up to three years from the date of grant. At December 31,
1997, there were no options exercisable under the Company's 1997 Plan.
 
     A summary of stock option activity granted within the 1997 Plan and related
information for the years ended December 31, 1997 is presented in the table
below:
 
<TABLE>
<CAPTION>
                                                                                         WEIGHTED AVERAGE
                                                  QUALIFIED    NON-QUALIFIED    TOTAL     EXERCISE PRICE
                                                  ---------    -------------    -----    ----------------
<S>                                               <C>          <C>              <C>      <C>
Balance at December 31, 1996...................       --             --           --              --
Granted........................................      361            180          541          $ 9.09
Exercised......................................       --             --           --              --
Forfeited......................................        1             --            1            9.00
                                                     ---            ---         -----         ------
Balance at December 31, 1997...................      360            180          540          $ 9.07
</TABLE>
 
     The Company accounts for awards granted to employees and directors under
APB No. 25, under which no compensation cost has been recognized for stock
options granted. Had compensation cost for these stock options been determined
consistent with SFAS No. 123, the Company's net income and earnings per share
would have been reduced to the following pro forma amounts.
 
<TABLE>
<CAPTION>
                                                  1997
                                                 ------
<S>                              <C>             <C>
Net income:..................    As reported     $2,701
                                 Pro forma        2,582
Basic EPS:...................    As reported       0.54
                                 Pro forma         0.51
Diluted EPS:.................    As reported       0.54
                                 Pro forma         0.51

</TABLE>
 
     The fair value of each option is estimated on the date of the grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions:
 
<TABLE>
<CAPTION>
                                                                                1997
                                                                                ----
<S>                                                                             <C>
Expected life (years)........................................................    4.4
Risk free interest rate......................................................   5.79%
Volatility...................................................................     43%
Dividend yield...............................................................      0%
Remaining contractual life (years)...........................................   8.78
</TABLE>
 
     The weighted average fair value of options granted at fair value and at an
exercise price above the fair market price was $3.88 and $3.77, respectively.
The weighted average exercise price of options granted at fair value and those
granted at an exercise price above fair market price was $9.01 and $9.90,
respectively.
 
     The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future amounts as additional awards in future years are
anticipated.
 
                                       31

<PAGE>
                    HEALTHWORLD CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
NOTE 14. GEOGRAPHIC INFORMATION
 
     Geographic information is as follows:
 
<TABLE>
<CAPTION>
                                                                        YEAR ENDED DECEMBER 31,
                                                                     -----------------------------
                                                                      1995       1996       1997
                                                                     -------    -------    -------
<S>                                                                  <C>        <C>        <C>
Revenues:
  Domestic........................................................   $12,368    $14,314    $18,172
  Foreign.........................................................     4,399      9,895     17,120
                                                                     -------    -------    -------
                                                                     $16,767    $24,209    $35,292
Income from operations:
  Domestic........................................................   $ 1,927    $ 2,183    $ 3,710
  Foreign.........................................................       558      1,085      1,120
                                                                     -------    -------    -------
                                                                     $ 2,485    $ 3,268    $ 4,830
Identifiable assets:
  Domestic........................................................   $13,287    $14,049    $31,365
  Foreign.........................................................     3,401      6,487     10,444
                                                                     -------    -------    -------
                                                                     $16,688    $20,536    $41,809
</TABLE>
 
NOTE 15. COMMITMENTS AND CONTINGENCIES
 
  Leases
 
     The Company has entered into various leases for property. All leases are
accounted for on a straight-line basis over the term of the lease.
 
     The following is a schedule of the minimum annual lease payments due:
 
<TABLE>
<S>                                                                                     <C>
1998.................................................................................   $1,072
1999.................................................................................    1,132
2000.................................................................................    1,132
2001.................................................................................    1,132
2002.................................................................................    1,132
Thereafter...........................................................................    7,687
</TABLE>
 
     Total rent expense incurred for the years ended December 1995, 1996 and
1997 was approximately $868, $1,043 and $1,196 respectively.

 
  Employment Agreements
 
     The Company has entered into employment agreements (the 'Agreements') with
certain key employees. The Agreements contain provisions for base salary and
incentives based upon certain performance measures, and are subject to
termination by either party. The aggregate annual minimum base compensation
required by the Agreements is approximately $2,598.
 
  Defined Contribution Plans
 
     The Company has a defined contribution plan (the 'Contribution Plan') that
is intended to qualify under Section 401(k) of the Internal Revenue Code. All
domestic employees, except those who have not attained the age of 21, are
eligible to participate in the Contribution Plan. Participants may contribute,
through payroll deductions, up to 15% of their base compensation, not to exceed
Internal Revenue Code limitations. The
 
                                       32

<PAGE>
                    HEALTHWORLD CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
NOTE 15. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
Company matches up to 4% of salary for participating employees. For the years
ended December 31, 1995, 1996 and 1997 the Company has contributed $105, $124
and $172, respectively.
 
     The Company makes non-contractual payments into the personal pension plans
of various directors and senior management. For the years ended December 31,
1995, 1996 and 1997, the Company has contributed $74, $41 and $56, respectively.
 
  Litigation
 
     In the normal course of business, the Company is a party to various claims
and/or litigation. Management and the Company's legal counsel believe that the
settlement of all such claims and/or litigation, considered in the aggregate,
will not have a material adverse effect on the Company's financial position and
results of operations.
 
                                       33
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.
 
     None.
 
                                    PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
 
     The information required by this item is incorporated herein by reference
from the portion of the Company's definitive Proxy Statement for its 1998 annual
meeting of stockholders to be filed with the Securities and Exchange Commission
on or prior to 120 days following the end of the Company's fiscal year under the
headings 'Proposal 1-Election of Directors,' 'Executive Officers' and 'Security
Ownership.'
 
ITEM 11. EXECUTIVE COMPENSATION.
 
     The information required by this item is incorporated herein by reference
from the portion of the Company's definitive Proxy Statement for its 1998 annual
meeting of stockholders to be filed with the Securities and Exchange Commission
on or prior to 120 days following the end of the Company's fiscal year under the
heading 'Executive Compensation.'
 
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
 
     The information required by this item is incorporated herein by reference
from the portion of the Company's definitive Proxy Statement for its 1998 annual
meeting of stockholders to be filed with the Securities and Exchange Commission
on or prior to 120 days following the end of the Company's fiscal year under the

heading 'Security Ownership.'
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
 
     The information required by this item is incorporated herein by reference
from the portion of the Company's definitive Proxy Statement for its 1998 annual
meeting of stockholders to be filed with the Securities and Exchange Commission
on or prior to 120 days following the end of the Company's fiscal year under the
heading 'Related Transactions.'
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
 
<TABLE>
<S>  <C>   <C>
(a)  1.    Financial Statements

     The following financial statements of the Company are included under Item 8, of this report:
           Report of Independent Public Accountants.
           Consolidated Balance Sheets as of December 31, 1996 and December 31, 1997.
           Consolidated Statements of Income for the fiscal years ended December 31, 1995, December 31, 1996 and
           December 31, 1997.
           Consolidated Statements of Cash Flows for the fiscal years ended December 31, 1995, December 31, 1996 and
           December 31, 1997.
           Consolidated Statements of Stockholders' Equity for the fiscal years ended December 31, 1995, December 31,
           1996 and December 31, 1997.
           Notes to Consolidated Financial Statements.
 
     2.    Financial Statement Schedules
     The following schedules are filed as a part of this Item 14:
     None.
     All other schedules have been omitted because they are not applicable or are not required or because the required
     information is included in the consolidated financial statements or notes thereto.

     3.    Exhibits
     The exhibits listed in the accompanying Exhibit Index are filed as a part of this Report.
(b)  1.    Reports on Form 8-K filed During the Last Quarter.
     None.
</TABLE>
 
                                       34

<PAGE>
                               INDEX TO EXHIBITS
 
<TABLE>
<CAPTION>
 EXHIBIT
  NUMBER     DESCRIPTION
----------   --------------------------------------------------------------------------------------------------------
<S>          <C>
   *2.01      --   Letter of Intent between Girgenti, Hughes, Butler & McDowell, Inc. ('GH') and its affiliated
                   entities and Milton Marketing Group Limited and its subsidiaries, dated November 14, 1996, as
                   amended July 24, 1997.

   *2.02      --   Agreement and Plan of Organization by and among the Registrant, Steven Girgenti, Francis Hughes,
                   William Butler and Herbert Ehrenthal, dated as of October 23, 1997.

   *2.03      --   Agreement and Plan of Organization between the Registrant and William Leslie Milton, dated as of
                   October 23, 1997.

   *2.04      --   Agreement and Plan of Organization by and between the Registrant and Michael Garnham, dated as of
                   October 23, 1997.

   *2.05      --   Agreement and Plan of Organization between the Registrant and Leonard Moreton, dated as of October
                   23,1997.

   *2.06      --   Agreement and Plan of Organization between the Registrant and Michael Bourne, dated as of October
                   23, 1997.

   *3.01      --   Restated Certificate of Incorporation of the Registrant.

   *3.02      --   Amended and Restated Bylaws of the Registrant.

   *4.01      --   Specimen Common Stock Certificate.

  *10.01      --   Term Loan Facility, dated November 6, 1995, by and between Siteinput Limited (n/k/an/ Milton
                   Marketing Group Limited) and Bank of Scotland, as amended by letter dated July 23, 1997.

  *10.02      --   Line of Credit between The Chase Manhattan Bank, N.A. ('Chase') and GH and each of its affiliated
                   entities, dated January 22, 1996.

  *10.03      --   Line of Credit between Chase and GH and each of its affiliated entities, dated January 17, 1997.

  *10.04      --   Promissory Note made by GH and its affiliated entities for the benefit of Chase, dated January 31,
                   1996.

 +*10.05      --   Registrant's 1997 Incentive Stock Option Plan.

 +*10.06      --   Form of Employment Agreement by and between the Registrant and Steven Girgenti.

 +*10.07      --   Form of Employment Agreement by and between the Registrant and William Leslie Milton.

 +*10.08      --   Form of Employment Agreement by and between GH and William Butler.

 +*10.09      --   Form of Employment Agreement by and between GH and Herbert Ehrenthal.


 +*10.10      --   Employment Agreement by and between GH and Francis Hughes, dated as of September 8, 1995.

 +*10.11      --   Employment Agreement by and between the Registrant and Stuart Diamond.

  *10.12      --   License Agreement between the Registrant and Healthworld, B.V.

  *10.13      --   Lease for office space located at 100 Avenue of the Americas, New York, NY, between The Rector,
                   Church-Wardens and Vestrymen of Trinity Church in the City of New York and GH, dated July 15,
                   1994.

  *10.14      --   Agreement for the sale and purchase of share capital of Effective Sales Personnel Limited between
                   Gloria Olive Sargent and Siteinput Limited, dated November 8, 1995.

  *10.15      --   Supplemental Agreement relating to the sale and purchase of share capital of Effective Sales
                   Personnel Limited between Gloria Olive Sargent and Siteinput Limited, dated November 29, 1996.
</TABLE>
 
                                       35

<PAGE>
<TABLE>
<CAPTION>
 EXHIBIT
  NUMBER     DESCRIPTION
----------   --------------------------------------------------------------------------------------------------------
<S>          <C>
  *10.16      --   Agreement for the sale and purchase of shares in PDM Communications Limited among Leonard Moreton,
                   Lizabeth Jenny Moreton, Leonard Moreton & Co. and Siteinput Limited, dated November 26, 1996.

  *10.17      --   Agreement for the sale and purchase of shares in PDM Communications Limited between William
                   Annandale and Siteinput Limited, dated November 21, 1996.

  *10.18      --   Joint Venture Agreement between Siteinput Limited and Claire Denise Cater, dated May 23, 1996.

  *10.19      --   Share Sale Agreement between Wendy Carter and Siteinput Limited dated April 4, 1996.

  *10.20      --   Overdraft Facility, dated November 6, 1995, between Siteinput Limited and The Bank of Scotland.

  *10.21      --   Multi Option Facility by and between Bank of Scotland and Milton Marketing Group Limited, Milton
                   Marketing Limited, Milton Cater Limited, Milton Headcount Limited, Effective Sales Personnel
                   Limited and PDM Communications Ltd.

  *10.22      --   Form of Employment Agreement by and between Milton Headcount Limited and Michael Garnham.

  *10.23      --   Line of Credit between Chase and GH and each of its affiliated entities, dated October 23, 1997.

  *10.24      --   Accounts Receivable Purchase Agreement, dated November 11, 1997, by and between GH and The CIT
                   Group/Commercial Services, Inc.

  *10.25      --   Guaranty, dated November 11, 1997, by and between the Registrant and GH and each of its affiliated
                   entities in favor of the CIT Group/Commercial Services, Inc.

  *21.01      --   Subsidiaries of the Registrant.

   27.01      --   Financial Data Schedule.

</TABLE>
 
------------------
 
* Filed as an Exhibit to the Company's Registration Statement on Form S-1
  (Registration Statement No. 333-34751), which was declared effective by the
  Securities and Exchange Commission on November 21, 1997, and incorporated
  herein by reference.
 
+ Management contract or compensatory plan or arrangement identified pursuant to
Item 14(a)(3) of this report.
 
                                       36

<PAGE>
                                   SIGNATURES
 
     PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
                                          HEALTHWORLD CORPORATION
 
March 25, 1998                                     By: /s/ STEVEN GIRGENTI
      Date                                            ------------------------
                                                           Steven Girgenti
                                                      Chairman of the Board and
                                                       Chief Executive Officer
 
     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED.
 
<TABLE>
<CAPTION>
                SIGNATURE                                      TITLE                             DATE
------------------------------------------  -------------------------------------------   -------------------
<S>                                         <C>                                           <C>
           /s/ STEVEN GIRGENTI              Chairman of the Board and Chief Executive          March 25, 1998
------------------------------------------  Officer
             Steven Girgenti
 
            /s/ STUART DIAMOND              Executive Vice President, Chief Financial          March 25, 1998
------------------------------------------  Officer (Principal Financial and Accounting
              Stuart Diamond                Officer), Treasurer and Secretary
 
        /s/ WILLIAM LESLIE MILTON           Vice Chairman of the Board and President           March 25, 1998
------------------------------------------
          William Leslie Milton
 
            /s/ FRANCIS HUGHES              Director                                           March 25, 1998
------------------------------------------
              Francis Hughes
 
             /s/ PETER KNIGHT               Director                                           March 25, 1998
------------------------------------------
               Peter Knight
 
             /s/ COLIN LLOYD                Director                                           March 25, 1998
------------------------------------------
               Colin Lloyd
 
            /s/ JONAH SHACKNAI              Director                                           March 25, 1998
------------------------------------------
              Jonah Shacknai
 
              /s/ ALEX SPIZZ                Director                                           March 25, 1998
------------------------------------------
                Alex Spizz

</TABLE>
 
                                       37