<PAGE>

<TABLE>
<CAPTION>

                              FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA

                                                     IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA
                                                                  YEAR ENDED DECEMBER 31,
                                                 1997        1996        1995        1994        1993
                                                 --------------------------------------------------------
<S>                                              <C>         <C>         <C>         <C>         <C>
Revenue                                          $262,970    $196,728    $154,173    $ 94,478    $ 53,061
Cost of services                                  172,248     124,268      97,401      58,062      32,047
---------------------------------------------------------------------------------------------------------
Gross profit                                       90,722      72,460      56,772      36,416      21,014
Selling, general and administrative expenses       68,122      51,538      39,847      26,335      15,471
---------------------------------------------------------------------------------------------------------
Income from operations                             22,600      20,922      16,925      10,081       5,543
Other income (expense), net                           232       1,107         713         303         (80)
---------------------------------------------------------------------------------------------------------
Income from income taxes                           22,832      22,029      17,638      10,384       5,463
Income taxes                                        8,743       8,811       7,280       4,194       2,237
---------------------------------------------------------------------------------------------------------
Net income                                       $ 14,089    $ 13,218    $ 10,358    $  6,190    $  3,226
---------------------------------------------------------------------------------------------------------
Diluted earnings per share                       $   0.88    $   0.82    $   0.65    $   0.41    $   0.24
---------------------------------------------------------------------------------------------------------
Weighted average common
  and common equivalent shares outstanding         16,052      16,077      15,861      14,958      13,620
---------------------------------------------------------------------------------------------------------
SELECTED OPERATING DATA:
Number of branches open at period end                  58          51          42          34          25
BALANCE SHEET DATA:
Working capital                                  $ 65,795    $ 51,812    $ 33,994    $ 19,207    $  3,215
Total assets                                      174,450      64,403      47,811      26,581       9,011
Stockholders' equity                               70,645      55,667      38,461      19,972       3,601
---------------------------------------------------------------------------------------------------------
</TABLE>

4

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

OVERVIEW

Alternative Resources Corporation-Registered Trademark- (ARC) has experienced
substantial growth in revenue and earnings driven by industry trends toward
outsourcing of information technology (IT) operations, increased penetration
of existing clients and expansion into new markets, increased productivity of
existing branch offices, the opening of new branch offices and the
introduction of new services.

On November 7, 1997, ARC acquired CGI Systems, Inc. (CGI). CGI provides ARC
with a range of information technology services including applications
support; network solutions, including network implementation and Lotus Notes
practices; applications development practices; and applications consulting
practices for SAP, data warehousing and other applications. The acquisition
is a strategic expansion of ARC's service offerings in the IT staffing and
managed services area, which will allow for a broader base of solutions to an
increasingly sophisticated information technology marketplace.

The acquisition was accounted for as a purchase. Accordingly, only the
results of the acquired operations since the acquisition date are included in
the 1997 statement of operations. The transaction and its related financing
are described in further detail in the company's 8-K and 8-K/A filings with
the Securities and Exchange Commission.

RESULTS OF OPERATIONS

The following table sets forth the percentage of revenue represented by
certain line items of ARC's consolidated statements of operations for the
periods indicated:

<TABLE>
<CAPTION>

YEAR ENDED DECEMBER 31,          1997           1996           1995
----------------------------------------------------------------------
<S>                             <C>            <C>            <C>

REVENUE                         100.0%         100.0%         100.0%

COST OF SERVICES                 65.5           63.2           63.2
----------------------------------------------------------------------
GROSS PROFIT                     34.5           36.8           36.8

SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES          25.9           26.2           25.8
----------------------------------------------------------------------
INCOME FROM OPERATIONS            8.6           10.6           11.0

OTHER INCOME, NET                 0.1            0.6            0.4
----------------------------------------------------------------------
INCOME BEFORE TAXES               8.7           11.2           11.4

INCOME TAXES                      3.3            4.5            4.7
----------------------------------------------------------------------
NET INCOME                        5.4%           6.7%           6.7%
----------------------------------------------------------------------
----------------------------------------------------------------------

</TABLE>

FISCAL 1997 COMPARED TO FISCAL 1996

REVENUE. Revenue increased by 33.7% from $196.7 million in 1996 to $263.0
million in 1997, primarily as a result of an increase in the hours of service
provided to clients from 5.7 million in 1996 to 7.2 million in 1997, and, to
a lesser extent, an increase in the average revenue per project hour. The
increase in hours of service was primarily from increased productivity of
existing branch offices. Branch offices opened prior to the beginning of 1996
contributed 78.3% of ARC's revenue growth from 1996 to 1997. The increase in
average revenue per project hour reflects demand for technical employees with
higher skills and an increase in prices. The acquisition of CGI contributed
$5.9 million, or 3.0% of the revenue increase.

Beginning in 1996, the Company undertook two significant initiatives. The
first was the addition of a value-added service line called
Smartsourcing-Registered Trademark- Solutions. Under a
Smartsourcing-Registered Trademark- Solutions arrangement, a client can
leverage ARC's technical and project management expertise by having ARC
manage an information technology (IT) function or project. The second
initiative, called General Business (formerly Middle Market), consists of
offering ARC's services to mid-sized companies. Both of these initiatives
contributed significantly to ARC's revenue growth in 1997. From a service
line perspective, Smartsourcing-Registered Trademark- Solutions represented
23% of ARC's total revenue in 1997 versus 7% of total revenue in 1996. From a
market perspective, General Business revenue accounted for 14% of total
revenue in 1997, up from 4% of total revenue in 1996.

GROSS PROFIT. Gross profit increased by 25.2% from $72.5 million in 1996 to
$90.7 million in 1997, primarily as a result of an increase in hours of service
provided to clients. Gross margin declined from 36.8% in 1996 to 34.5% in 1997,
principally from increased volume discounts to our largest clients. ARC offers
its largest clients volume discounts from list prices in order to encourage
increased and continued usage of ARC's services. in addition, these arrangements
provide ARC with the opportunity to sell its value-added services, such as
Smartsourcing-registered trademark- Solutions, to these clients. ARC believes
these arrangements have contributed significantly to its overall revenue growth
as well as growth within its Smartsourcing-registered trademark- Solutions
service line. The gross profit margin was not materially impacted by the
CGI acquisition due to the short period of time that CGI was owned during 1997.

                                                                             5

<PAGE>



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

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased from $51.5 million in 1996 to $68.1 million
in 1997, primarily due to increased commissions, bonuses and staffing
expenses associated with revenue and profitability growth; a full year.of
expenses associated with the General Business and Smartsourcing-Registered
Trademark-Solutions initiatives that were launched in 1996; an increased
number of branch offices and their related operating costs; and one-time
costs incurred in connection with the acquisition and integration of CGI.
Selling, general and administrative expenses decreased as a percentage of
revenue from 26.2% in 1996 to 25.9% in 1997 reflecting greater operating
efficiencies and economies of scale gained from a larger revenue base.

INCOME FROM OPERATIONS. Income from operations increased from $20.9 million
in 1996 to $22.6 million in 1997, and decreased as a percentage of total
revenue from 10.6% to 8.6%, respectively. The 1997 income from operations was
partially impacted by the aforementioned acquisition and integration costs
during the fourth quarter of 1997.

OTHER INCOME. Other income consists of interest income net of interest
expense. Other income decreased in 1997 due to interest expense associated
with the financing of the CGI acquisition.

PROVISION FOR INCOME TAXES. The provision for income taxes decreased from
$8.8 million, or an effective tax rate of 40.0%, in 1996 to $8.7 million, or
an effective tax rate of 38.3%, in 1997. The decrease in the effective tax
rate in 1997 is the result of a tax planning initiative that was implemented
in 1996.

NET INCOME. Net income increased from $13.2 million in 1996 to $14.1 million
in 1997, and decreased as a percentage of total revenue from 6.7% in 1996 to
5.4% in 1997.

DILUTED EARNINGS PER SHARE. Diluted earnings per share increased from $0.82
in 1996 to $0.88 in 1997. Diluted earnings per share amounts reflect the
adoption of Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings Per Share," in 1997 and are restated for all years presented. The
1997 diluted earnings per share was reduced by an estimated $0.07 related to
acquisition and integration costs for CGI.

FISCAL 1996 COMPARED TO FISCAL 1995

REVENUE. Revenue increased by 27.6% from $154.2 million in 1995 to $196.7
million in 1996, primarily as a result of an increase in the hours of service
provided to clients from 4.8 million in 1995 to 5.7 million in 1996, and, to
a lesser extent, an increase in the average revenue per project hour. The
increase in hours of service was primarily from increased.productivity of
existing branch offices. Branch offices opened prior to the beginning of 1995
contributed 86.9% of ARC's revenue growth from 1995 to 1996. The increase in
average revenue per project hour reflects demand for technical employees with
higher skills and an increase in prices.

GROSS PROFIT. Gross profit increased by 27.6% from $56.8 million in 1995 to
$72.5 million in 1996, primarily as a result of an increase in hours of
service provided to clients. Gross margin remained unchanged at 36.8% for
1995 and 1996.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased from $39.8 million in 1995 to $51.5 million
in 1996, primarily due to increased commissions, bonuses and staffing
expenses associated with revenue and profitability growth; start-up expenses
associated with the new Middle Market and Smartsourcing-Registered Trademark-
Solutions initiatives; and an increased number of branch offices and their
related operating costs. Selling, general and administrative expenses
increased as a percentage of revenue from 25.8% in 1995 to 26.2% in 1996,
primarily due to start-up costs associated with the aforementioned
initiatives.

INCOME FROM OPERATIONS. Income from operations increased from $16.9 million
in 1995 to $20.9 million in 1996, and decreased as a percentage of total
revenue from 11.0% to 10.6%, respectively.

PROVISION FOR INCOME TAXES. The provision for income taxes increased from
$7.3 million, or an effective tax rate of 41.3%, in 1995 to $8.8 million, or
an effective tax rate of 40.0%, in 1996. The decrease in the effective tax
rate in 1996 is the result of a tax planning initiative that was implemented
at the beginning of the year.

NET INCOME. Net income increased from $10.4 million in 1995 to $13.2 million
in 1996, and remained unchanged as a percentage of total revenue at 6.7%.

6

<PAGE>


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


DILUTED EARNINGS PER SHARE. Diluted earnings per share increased from $0.65
in 1995 to $0.82 in 1996. Diluted earnings per share amounts reflect the
adoption of SFAS.No. 128 and are restated for all years presented.

LIQUIDITY AND CAPITAL RESOURCES

ARC has historically financed its operations and capital expenditures through
public and private offerings of equity securities, a bank line of credit and
cash generated from operations. Net cash flow provided by operations was $4.1
million in 1995 and $2.6 million in 1996. Net cash flow used in operations
was $144,000 in 1997. The 1997 net cash flow was impacted by increased
capital spending related to the replacement of the Company's information
technology systems. This initiative was started in 1997 and is expected to be
substantially complete in 1998. The 1997 net cash flow was also impacted by
the aforementioned acquisition and integration costs associated with CGI.
Working capital increased from $34.0 million at December 31, 1995 to $51.8
million at December 31, 1996 and $65.8 million at December 31, 1997. The
increase in working capital from December 31, 1996 to December 31, 1997 was
partially attributable to the acquisition of working capital from CGI.

On June 21, 1995, ARC received $7.2 million of net proceeds from the sale of
314,850 shares of its common stock pursuant to an over-allotment option
granted by ARC in connection with a secondary public offering of shares by
certain selling stockholders of ARC.

ARC financed the acquisition of CGI with cash from short-term investments and
borrowings under a $75.0 million revolving credit facility. As of December
31, 1997, the total borrowings under the revolving credit facility were $73.5
million.

ARC believes its cash balances, funds from operations and borrowing capacity
will be sufficient to fund continued expansion of its office network and to
meet all of its anticipated operating cash requirements for at least the next
12 months.

RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS

In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
130, "Reporting Comprehensive Income," which is effective for fiscal years
beginning after December 15, 1997. SFAS No. 130 establishes standards for
reporting and display of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general-purpose financial
statements. It requires (a) classification of items of other comprehensive
income by their nature in a financial statement and (b) display of the
accumulated-balance of other comprehensive income separate from retained
earnings and additional paid-in capital in the equity section of a statement
of financial position.

In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which is effective for fiscal years
beginning after December 15, 1997. SFAS No. 131 establishes standards for
reporting information about operating segments in annual financial statements
and requires selected information about operating segments in interim
financial reports issued to shareholders. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. SFAS No. 131 supersedes SFAS No. 14, "Financial Reporting for
Segments of Business Enterprise," but retains the requirement to report
information about major customers.

The Company is currently evaluating the impact these statements will have on
its financial statements.

                                                                            7

<PAGE>



CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                                                               DECEMBER 31,
IN THOUSANDS, EXCEPT SHARE DATA                                                                             1997          1996
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                          <C>           <C>

ASSETS

CURRENT ASSETS:
Cash and cash equivalents                                                                                    $    971      $  2,310
Short-term investments                                                                                          7,673        20,868
Trade accounts receivable, net of allowance
    for doubtful accounts, $662 in 1997 and $528 in 1996                                                       83,124        33,207
Prepaid expenses                                                                                                  780           455
Other receivables                                                                                               2,481         2,403
Deferred income taxes                                                                                             800           960
------------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS                                                                                           95,829        60,203
------------------------------------------------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT:
Office equipment                                                                                                7,783         3,103
Furniture and fixtures                                                                                          2,440         1,427
Software                                                                                                        4,835           420
Leasehold improvements                                                                                            730           307
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                               15,788         5,257
Less accumulated depreciation and amortization                                                                  6,562         2,377
------------------------------------------------------------------------------------------------------------------------------------
NET PROPERTY AND EQUIPMENT                                                                                      9,226         2,880
------------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS:
Long-term investments                                                                                             502         1,026
Goodwill, net of amortization, $176 in 1997                                                                    47,624            --
Restricted cash held in escrow                                                                                 20,000            --
Other assets                                                                                                    1,269           294
------------------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER ASSETS                                                                                             69,395         1,320
------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS                                                                                                 $174,450      $ 64,403
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable                                                                                             $  8,261      $    324
Payroll and related expenses                                                                                   11,843         5,969
Accrued expenses                                                                                                9,357         1,632
Income taxes payable                                                                                              573           466
------------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES                                                                                      30,034         8,391
------------------------------------------------------------------------------------------------------------------------------------
Long-term debt                                                                                                 73,500            --
Deferred rent payable                                                                                             271           345
------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES                                                                                             103,805         8,736
------------------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Preferred Stock ($.01 par value; 1,000,000 shares authorized; none issued and outstanding)                         --            --
Common Stock ($.01 par value; 50,000,000 shares authorized;
    15,777,564 and 15,651,391 shares issued in 1997 and 1996, respectively)                                       158           157
Additional paid-in capital                                                                                     23,886        23,003
Unrealized gain (loss) on available-for-sale securities                                                           399          (28)
Cumulative translation adjustment                                                                                  40            43
Retained earnings                                                                                              46,581        32,492
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                               71,064        55,667
LESS:
Treasury shares, at cost (19,000 shares in 1997)                                                                  419            --
------------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY                                                                                     70,645        55,667
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                                   $174,450      $ 64,403
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

8

<PAGE>



CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                                     YEAR ENDED DECEMBER 31,
IN THOUSANDS, EXCEPT PER SHARE DATA                                         1997                1996                1995
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>                  <C>                 <C>
Revenue                                                                  $   262,970          $  196,728          $  154,173
Cost of services                                                             172,248             124,268              97,401
-----------------------------------------------------------------------------------------------------------------------------
Gross profit                                                                  90,722              72,460              56,772
Selling, general and administrative expenses                                  68,122              51,538              39,847
-----------------------------------------------------------------------------------------------------------------------------
Income from operations                                                        22,600              20,922              16,925
Other income, net                                                                232               1,107                 713
-----------------------------------------------------------------------------------------------------------------------------
Income before income taxes                                                    22,832              22,029              17,638
Income taxes                                                                   8,743               8,811               7,280
-----------------------------------------------------------------------------------------------------------------------------
NET INCOME                                                               $    14,089          $   13,218          $   10,358
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
PER SHARE AMOUNTS:
Basic                                                                    $      0.90          $     0.85          $     0.69
Diluted                                                                  $      0.88          $     0.82          $     0.65
-----------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING:
Basic                                                                         15,703              15,523              15,073
Diluted                                                                       16,052              16,077              15,861
-----------------------------------------------------------------------------------------------------------------------------

</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                                                            9

<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------

1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND NATURE OF THE BUSINESS Alternative Resources Corporation
(the "Company") was incorporated in Delaware on March 8, 1988. The Company
provides comprehensive information technology (IT) services that allow
clients to stay focused on mission-critical activities of their business.
Customized solutions vary based on the nature and length of client projects,
the degree of day-to-day management responsibility clients wish to delegate,
and the flexibility desired. The Company historically has focused on five
information technology environments including: 1) help desk, 2) desktop
support, 3) LAN/WAN/telecommunications, 4) client/server, and 5) data center
operations. With the acquisition of CGIsystems on November 7, 1997, ARC
broadened the scope of its services to focus on the following additional
environments: applications development, applications maintenance, groupware,
Internet, Intranet and electronic commerce.

PRINCIPLES OF CONSOLIDATION The operations of the Company are conducted
through a parent holding company and three operating subsidiaries. The
accompanying financial statements include the consolidated financial position
and results of operations of the Company and its subsidiaries with all
intercompany transactions eliminated in their entirety.

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

CASH EQUIVALENTS Cash and cash equivalents include all deposits in banks and
highly liquid investments with original maturities of three months or less.

INVESTMENT SECURITIES Marketable securities purchased after December 31, 1995
are classified as available-for-sale under Statement of Financial Accounting
Standards No. 115 and are recorded at fair market value, with unrealized
holding gains or losses, if any, recorded as a separate component of
stockholders' equity. Marketable securities purchased before December 31,
1995 are classified as held-to-maturity and are recorded at amortized cost.
The Company does not invest in trading securities. The Company uses the
specific identification basis of accounting for individual securities.

GOODWILL Goodwill, which represents the excess of purchase price over fair
value of net assets acquired, is amortized on a straight-line basis over the
expected periods to be benefited. Adjustments to the carrying value of
goodwill are made if the sum of expected future net cash flows from the
business acquired is less than book value.

PROPERTY AND EQUIPMENT Property and equipment are recorded at cost and
depreciated using the straight-line method over the estimated useful lives of
the respective assets ranging from three to five years. Software includes
development costs for IT projects currently in progress and will be
depreciated upon completion. Leasehold improvements are amortized using the
straight-line method over the life of the related leases, generally three to
five years.

TRANSLATION OF FOREIGN CURRENCIES Assets and liabilities of the Company's
Canadian branch offices are translated at the rate of exchange in effect on
the balance sheet date; income and expenses are translated at the weighted
average rates of exchange prevailing during the year. The related translation
adjustments are reflected as a cumulative translation adjustment in
stockholders' equity. Foreign currency transaction gains and losses for the
years presented were not material.

REVENUE RECOGNITION Revenues are recognized, net of volume discounts, as
services are performed.

INCOME TAXES Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years.in which
those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.

STOCK OPTIONS Prior to January 1, 1996, the Company accounted for its stock
options in accordance with the provisions of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and
related interpretations. Under APB 25, no compensation cost has been
recognized for its stock-based compensation plans. On January 1, 1996, the
Company adopted Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("Statement 123") which permits
entities to recognize as expense over the vesting period the fair value of
all stock-based awards on the date of grant. Alternatively, Statement 123
also allows entities to continue to apply the provisions of APB 25 and
provide pro forma net income and pro forma net income per share

12

<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
CONTINUED


disclosures for its stock-based compensation plans in 1995 and future years
as if the fair-value-based method defined in Statement 123 had been applied.
The Company has elected to continue to apply the provisions of APB 25 and
provide the pro forma disclosure provisions of Statement 123.

FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts of the Company's
financial instruments, except for long-term debt, approximate their fair
values due to the short maturity of these instruments. The carrying amount of
long-term debt approximates its fair value due to its variable.interest rate.

COMPUTATION OF EARNINGS PER SHARE In 1997, the Company adopted Statement of
Financial Accounting Standards No. 128, "Earnings Per Share," and all share
and per share amounts presented have been restated to reflect this change.
Basic earnings per share is based on the weighted average number of common
shares outstanding for the year. Diluted earnings per share is based on the
weighted average number of common shares outstanding and includes the
dilutive effect of unexercised stock options using the treasury stock method.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------
IN THOUSANDS                   1997             1996         1995
-----------------------------------------------------------------------
<S>                           <C>             <C>           <C>
BASIC SHARES                  15,703          15,523        15,073

PLUS: INCREMENTAL
SHARES FROM STOCK OPTIONS        349             554           788
-----------------------------------------------------------------------
 DILUTED SHARES               16,052          16,077        15,861
-----------------------------------------------------------------------
-----------------------------------------------------------------------

</TABLE>

(2) ACQUISITIONS

On November 7, 1997, the Company acquired all of the outstanding stock of
CGI Systems, Inc. (CGI). CGI provides ARC with a range of information
technology services including applications support; network solutions,
including network implementation and Lotus Notes practices; applications
development practices; and applications consulting practices for SAP, data
warehousing and other applications. The acquisition is a strategic expansion
of ARC's service offerings in the IT staffing and managed services area,
which will allow for a broader base of solutions to an increasingly
sophisticated information technology marketplace.

The initial purchase price for CGI was $60.0 million with a potential
additional payout of up to $20.0 million over the next three years if certain
targets are achieved. The purchase price was financed with cash from
short-term investments and borrowings under a $75.0 million revolving credit
facility. The $20.0 million potential additional payout is reported in other
assets as restricted cash held in escrow. Estimated acquisition costs
relating to the purchase of CGI amounted to $2.1 million. These costs included
investment banking and other professional fees, employee severance, costs of
closing office facilities and various other expenses.

The acquisition of CGI was accounted for under the purchase method.
Accordingly, the purchase price has been allocated to identifiable tangible
and intangible assets acquired and liabilities assumed based on their
estimated fair values. The consolidated statements of operations reflect the
results of operations of CGI since the acquisition date. The preliminary
allocation of purchase price resulted in goodwill of $45.7 million which will
be amortized on a straight-line basis over 40 years.

The following pro forma information combines the consolidated results of
operations as if the acquisition of CGI had been consummated as of January 1,
1996, and includes the impact of certain acquisition-related adjustments.
Acquisition adjustments include the amortization of goodwill and other
intangibles, interest expense related to the acquisition debt and the related
income tax effects. This summary is provided for informational purposes only.
Since the financial information set forth below is based upon operating
results of CGI when it was not under the control or management of ARC, the
information presented is not indicative of the results which would have
actually been obtained had the acquisition been completed as of January 1,
1996, nor are they indicative of future results.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
                                                                           (UNAUDITED)
IN THOUSANDS, EXCEPT PER SHARE DATA                                    1997           1996
-----------------------------------------------------------------------------------------------
<S>                                                               <C>             <C>
REVENUE                                                           $  315,360      $  236,839
NET INCOME                                                            13,326          11,101
NET INCOME PER SHARE                                                    0.83            0.69
-----------------------------------------------------------------------------------------------
</TABLE>

                                                                            13

<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
CONTINUED


(3) INVESTMENTS

The aggregate fair value and amortized cost of investments.is as follows (in
thousands):

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
                                                              GROSS
                                                            UNREALIZED
                                                              HOLDING
                                     AGGREGATE     ----------------------------    AMORTIZED
                                     FAIR VALUE        GAINS         (LOSSES)      COST BASIS
------------------------------------------------------------------------------------------------
<S>                                 <C>             <C>             <C>           <C>
DECEMBER 31, 1997

AVAILABLE-FOR-SALE:
  EQUITY SECURITIES                 $     4,374     $    519        $   (157)     $    4,012
  US TREASURY AND FEDERAL
  AGENCY DEBT SECURITIES                    500            1              --             499
  STATE AND MUNICIPAL
  DEBT SECURITIES                         1,009            9              --           1,000
  CORPORATE DEBT
  SECURITIES                              2,292           35              (8)          2,265
------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS                   $     8,175     $    564        $   (165)     $    7,776
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------

DECEMBER 31, 1996

AVAILABLE-FOR-SALE:
  US TREASURY AND FEDERAL
  AGENCY DEBT SECURITIES            $     7,275     $     31        $    (14)     $    7,258
  STATE AND MUNICIPAL
  DEBT SECURITIES                         7,299            4             (29)          7,324
  CORPORATE DEBT
  SECURITIES                              4,880            3             (23)          4,900
------------------------------------------------------------------------------------------------
TOTAL                                    19,454           38             (66)         19,482
------------------------------------------------------------------------------------------------

HELD-TO-MATURITY:
  US TREASURY AND FEDERAL
  AGENCY DEBT SECURITIES                    760            6              --             754
  STATE AND MUNICIPAL
  DEBT SECURITIES                         1,680            1              (7)          1,686
------------------------------------------------------------------------------------------------
TOTAL                                     2,440            7              (7)          2,440
------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS                   $    21,894         $ 45        $    (73)     $   21,922
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------

</TABLE>

The aggregate fair value and amortized cost of debt securities by contractual
maturity as of December 31, 1997 was (in thousands):

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
                                                                  AGGREGATE         AMORTIZED
                                                                  FAIR VALUE       COST BASIS
-----------------------------------------------------------------------------------------------
<S>                                                               <C>             <C>


MATURITY WITHIN 1 YEAR                                              $  3,271      $    3,263
MATURITY AFTER 1 THROUGH 5 YEARS                                         128             119
MATURITY AFTER 5 THROUGH 10 YEARS                                        123             122
MATURITY AFTER 10 YEARS                                                  279             259
-----------------------------------------------------------------------------------------------
DEBT SECURITIES                                                     $  3,801      $    3,763
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------

</TABLE>

Proceeds from the sales of available-for-sale securities were $14,949,000 in
1997 and $628,000 in 1996. Gross realized gains and losses on those sales
were not significant.

(4) LONG-TERM BORROWINGS

The Company entered into a $75.0 million revolving credit facility to, in
part, finance the acquisition of CGI and to meet anticipated cash needs. As
of December 31, 1997, the total borrowings under the revolving credit
facility were $73.5 million. The average interest rate on the revolving
credit facility was 6.7% in 1997 and is based on LIBOR plus 7/8%. The credit
facility expires in the year 2000.

(5) STOCKHOLDERS' EQUITY

In 1994, the Company accrued $700,000 as an estimate of the costs to be
incurred for registration rights granted to Wind Point Partners II, L.P.,
with a corresponding reduction in additional paid-in-capital. Approximately
$200,000 and $225,000 were utilized for registration rights exercised in 1995
and 1994, respectively, and additional paid-in-capital was increased by
$275,000 as the remaining registration rights expired.

On May 22, 1995, the Company's Board of Directors approved a two-for-one
split of the Company's Common Stock. All common share and per share amounts
have been adjusted retroactively to give effect to the stock split.

In June 1995, the Company issued 314,850 shares of Common Stock in connection
with a secondary public offering of the Company's Common Stock.

In April 1996, the Company amended the Certificate of Incorporation to
increase the number of authorized shares.of Common Stock to 50,000,000.

(6) LEASES

The Company leases its office facilities under noncancelable operating
leases. Rental expense for operating leases during 1997, 1996 and 1995 was
$3,258,000, $2,257,000 and $1,608,000, respectively.

Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) as of December 31,
1997 are (in thousands):

<TABLE>
<CAPTION>
----------------------------------------------------------------------
YEAR ENDING DECEMBER 31,                                    AMOUNT
----------------------------------------------------------------------
<S>                                                     <C>
1998                                                    $    3,474

1999                                                         3,259

2000                                                         2,799

2001                                                         2,132

2002                                                         1,196

THEREAFTER                                                   2,256
----------------------------------------------------------------------
TOTAL                                                   $   15,116
----------------------------------------------------------------------
----------------------------------------------------------------------

</TABLE>

14

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
CONTINUED

(7) OTHER INCOME, NET

Other income, net, for the years ended December 31, 1997, 1996 and 1995 is
comprised of the following (in thousands):

<TABLE>
<CAPTION>
----------------------------------------------------------------------
                                1997            1996          1995
----------------------------------------------------------------------
<S>                         <C>             <C>            <C>
INTEREST INCOME             $    992        $  1,107       $   713
INTEREST EXPENSE                (760)             --            --
----------------------------------------------------------------------
                            $    232        $  1,107       $   713
----------------------------------------------------------------------
----------------------------------------------------------------------

</TABLE>

(8) INCOME TAXES

Income tax expense (benefit) is summarized as follows for the years ended
December 31, 1997, 1996 and 1995 (in thousands):

<TABLE>
<CAPTION>
----------------------------------------------------------------------
                                1997            1996          1995
----------------------------------------------------------------------
<S>                         <C>             <C>           <C>
CURRENT:

FEDERAL                     $  7,553        $  8,312      $  6,230
STATE                          1,030           1,150         1,376
----------------------------------------------------------------------
TOTAL CURRENT                  8,583           9,462         7,606
----------------------------------------------------------------------
DEFERRED:

FEDERAL                          140            (576)         (279)
STATE                             20             (75)          (47)
----------------------------------------------------------------------
TOTAL DEFERRED                   160            (651)         (326)
----------------------------------------------------------------------
                            $  8,743        $  8,811      $  7,280
----------------------------------------------------------------------
----------------------------------------------------------------------

</TABLE>

The reasons for the difference between the effective tax rate and the
corporate Federal income tax rate for the years ended December 31, 1997, 1996
and 1995 are as follows:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
                                                 PERCENTAGE OF EARNINGS BEFORE TAXES

                                                    1997          1996         1995
-----------------------------------------------------------------------------------------
<S>                                                <C>            <C>          <C>
FEDERAL INCOME TAX RATE                            35.0%          35.0%        35.0%

ITEMS AFFECTING FEDERAL INCOME TAX RATE:

STATE INCOME TAX, NET OF FEDERAL TAX BENEFIT        2.8            4.1          5.1

OTHER                                               0.5            0.9          1.2
-----------------------------------------------------------------------------------------
EFFECTIVE INCOME TAX RATE                          38.3%          40.0%        41.3%
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------

</TABLE>

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1997 and 1996 are as follows.(in thousands):

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
                                                                        1997            1996
------------------------------------------------------------------------------------------------
<S>                                                                <C>               <C>

DEFERRED TAX ASSETS:

  PROPERTY AND EQUIPMENT--DEPRECIATION                              $    197         $    71
  ACCOUNTS RECEIVABLE
  VALUATION ALLOWANCE                                                    445             271
  DEFERRED RENT PAYABLE                                                  109             138
  ACCRUED LIABILITIES                                                    872             519
------------------------------------------------------------------------------------------------
GROSS DEFERRED TAX ASSETS                                              1,623             999
------------------------------------------------------------------------------------------------
DEFERRED TAX LIABILITIES:

  SOFTWARE DEVELOPMENT COSTS                                            (480)             --
  ACQUISITION-RELATED ACCRUALS                                          (239)             --
  OTHER                                                                 (104)            (39)
------------------------------------------------------------------------------------------------
GROSS DEFERRED TAX LIABILITIES                                          (823)            (39)
------------------------------------------------------------------------------------------------
NET DEFERRED TAX ASSET                                              $    800         $   960
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------

</TABLE>

No valuation allowance for deferred tax assets has been recorded as the
Company believes it is more likely than not the deferred tax assets will be
realized in the future.

(9) EMPLOYEE SAVINGS PLAN

The Company maintains a defined contribution benefit plan ("the Plan"). The
Plan covers each employee who has completed 1,000 hours of service in a
12-month period commencing with the start of employment. Contributions to the
Plan are based on percentages of employee salaries plus a matching
contribution by the Company in an amount to be determined at the Company's
discretion. Vesting in the Company's contributions is based on length of
service over a five-year period. Contributions by the Company on behalf of
all employees approximated $175,000, $131,000 and $77,000 during 1997, 1996
and 1995, respectively.

(10) STOCK OPTIONS

During 1994, the Company amended and restated the stock option plan adopted
in 1992. Under the amended and restated Incentive Stock Option Plan ("Option
Plan"), officers and key employees may be granted non-qualified stock
options, incentive stock options, performance units, and stock appreciation
rights. The Option Plan also provides for automatic annual grants to each
non-affiliate director of non-qualified stock options to purchase up to 5,000
shares of Common Stock. The purchase price per share for such options will be
equal to the fair market value of a share of Common Stock on the date of
grant. Any such options will be exercisable one year after the date of grant
and will terminate upon the earlier of 90 days following the date on which
such director ceases to serve on the Board or 10 years after the date of
grant.

                                                                            15

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
CONTINUED

The exercise price of incentive stock options granted under the Option Plan
must be equal to at least 100% of the fair market value of the Company's
Common Stock subject to the option on the date of grant. The incentive stock
options granted by the Company may not be exercised during the first six
months from the date granted and, thereafter, generally become exercisable at
a rate of 2.38% of the total shares subject to the option on and after the
first day of each calendar month. The maximum term of a stock option under
the Option Plan is 10 years.

In the event employment is terminated for any reason other than gross and
willful misconduct, death or disability, vested options are exercisable
within 30 days after such termination of employment. Termination due to gross
and willful misconduct terminates the option as of the date of the
misconduct. Upon death or disablement, vested options are exercisable within
six months after the date of death or disablement by the executors,
administrators or applicable guardian of the optionee.

The fair value of each option is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 1997 and 1996, respectively: risk-free
interest rates of 6.0% and 6.0%; expected lives of 4 years and 4 years;
expected volatility of 47% and 32%; and no dividends are expected to be paid.

The following net income and earnings per share data reflect the pro forma
effects of the stock-based compensation cost for the Company's Option Plan in
accordance with Statement 123 (in thousands, except per share data):

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
                                                          1997          1996        1995
--------------------------------------------------------------------------------------------
<S>                         <C>                        <C>           <C>         <C>

NET INCOME                  AS REPORTED                $ 14,089      $ 13,218    $ 10,358
                            PRO FORMA                    11,002        11,337      10,059

BASIC EARNINGS              AS REPORTED                $   0.90      $   0.85    $   0.69
PER SHARE                   PRO FORMA                      0.70          0.73        0.71

DILUTED EARNINGS            AS REPORTED                $   0.88      $   0.82        0.65
PER SHARE                   PRO FORMA                      0.69          0.71        0.63
--------------------------------------------------------------------------------------------
</TABLE>

Stock option transactions for the years ended December 31, 1995, 1996 and
1997 are summarized as follows (in thousands, except price data):

<TABLE>
<CAPTION>
--------------------------------------------------------------------------
                                                          WEIGHTED
                                                           AVERAGE
                                           SHARES      EXERCISE PRICE
--------------------------------------------------------------------------
<S>                                       <C>          <C>
BALANCE AT DECEMBER 31,1994                1,395           $7.75
--------------------------------------------------------------------------
--------------------------------------------------------------------------
OPTIONS GRANTED                            1,401           27.83
OPTIONS CANCELED                            (305)          11.41
OPTIONS EXERCISED                           (251)           3.24
--------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1995               2,240           20.04
--------------------------------------------------------------------------
--------------------------------------------------------------------------
OPTIONS GRANTED                            1,092           22.62
OPTIONS CANCELED                            (406)          21.60
OPTIONS EXERCISED                           (304)           9.58
--------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996               2,622           22.08
--------------------------------------------------------------------------
--------------------------------------------------------------------------
OPTIONS GRANTED                            1,832           20.35
OPTIONS CANCELED                          (1,202)          28.61
OPTIONS EXERCISED                           (126)           9.17
--------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1997               3,126          $19.28
--------------------------------------------------------------------------
--------------------------------------------------------------------------

</TABLE>

For the years ended December 31, 1997, 1996 and 1995 there were 662,000,
472,000 and 127,000 options exercisable, respectively. As of December 31,
1997 no stock options were available for future grants. The weighted-average
grant-date fair values of options granted during 1997, 1996 and 1995 were
$8.22, $8.88 and $9.42 per share, respectively.

The following table summarizes information about the stock options
outstanding as of December 31, 1997 (options in thousands):

<TABLE>
<CAPTION>

         OPTIONS OUTSTANDING                          OPTIONS EXERCISABLE
-----------------------------------------------  -----------------------------
                          AVERAGE      WEIGHTED                   WEIGHTED
  RANGE OF                REMAINING     AVERAGE                   AVERAGE
  EXERCISE     NUMBER    CONTRACTUAL   EXERCISE      NUMBER       EXERCISE
  PRICES     OUTSTANDING    LIFE        PRICE     EXERCISABLE      PRICE
------------------------------------------------------------------------------
<S>          <C>         <C>           <C>        <C>             <C>
$0.28-15.99      791        7.9 years  $13.22         323         $10.64
16.00-17.99      582        8.8         17.31          77          17.31
18.00-20.99      720        8.8         19.98         138          19.83
21.00-24.99      817        9.7         23.12          --             --
25.00-38.12      216        7.9         29.82         124          30.34
------------------------------------------------------------------------------
$0.28-38.12    3,126        8.7         19.28         662          17.03

</TABLE>

16

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
CONTINUED


(11) EMPLOYEE STOCK PURCHASE PLAN

In 1995, the stockholders of the Company approved the Alternative Resources
Corporation Employee Stock Purchase Plan (the "Stock Purchase Plan"). An
aggregate of 300,000 shares of the Company's Common Stock (subject to
adjustment for any dividend, stock split or other relevant changes in the
Company's capitalization) may be sold pursuant to the Stock Purchase Plan.
The Stock Purchase Plan covers each employee who has completed 1,000 hours of
service during the last 12 calendar months preceding the enrollment date. The
Stock Purchase Plan enables employees to purchase the Company's Common Stock
at 85% of the market price. Employees may purchase the Company's Common Stock
through the Stock Purchase Plan only by payroll deduction. Payroll deductions
may not exceed.20% of the employee's gross pay or $21,250 in any one.year.
During 1997, all Stock Purchase Plan shares were purchased on the open
market. In 1997, 1996 and 1995, the Company's matching portion to the Stock
Purchase Plan amounted to $199,000, $195,000 and $149,000, respectively.

(12) CONCENTRATION OF CREDIT RISK

The Company provides services to clients including systems integrators,
telecommunications companies, banking and financial services entities,
manufacturers, distributors, health care providers and utilities throughout
the United States. In 1997, 1996 and 1995, the largest client accounted for
approximately 15%, 13% and 11%, the second largest client accounted for
approximately 14%, 10% and 7% and the third largest client accounted for 12%,
11% and 15% of the Company's total revenues, respectively.

(13) LEGAL PROCEEDINGS

The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position, results of operations or liquidity.

                                                                            17

<PAGE>

INDEPENDENT AUDITORS' REPORT
-------------------------------------------------------------------------------

THE BOARD OF DIRECTORS AND STOCKHOLDERS
ALTERNATIVE RESOURCES CORPORATION:

We have audited the accompanying consolidated balance sheets of Alternative
Resources Corporation and subsidiaries (the Company) as of December 31, 1997
and 1996, and the related consolidated statements of operations, changes in
stockholders' equity, and cash flows for each of the years.in the three-year
period ended December 31, 1997. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based.on our
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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Alternative Resources Corporation and subsidiaries as of December 31, 1997
and 1996, and the results of their operations and their cash flows for each
of the years in the three-year period ended December 31, 1997 in conformity
with generally accepted accounting principles.

/s/ KPMG PEAT MARWICK LLP

Chicago, Illinois
January 28, 1998


18
<PAGE>
                              STOCKHOLDER INFORMATION

     ARC's Common Stock is traded on the Nasdaq National Market under the
symbol "ALRC." No cash dividends have been paid on the common stock since the
initial trading. As of December 31, 1997, ARC had 177 stockholders of record
(including brokerage firms and other nominees) and 15,777,564 outstanding
shares of Common Stock. The table shows the reported high and low sale prices
of the Common Stock, for the periods indicated, during the years ended
December 31, 1996 and 1997:


<TABLE>
<CAPTION>

                                            1997                      1996
                                       HIGH        LOW          HIGH        LOW
<S>                                   <C>        <C>           <C>          <C>
FIRST QUARTER                         $17 7/8    $13 3/4       $33 1/4      $24
SECOND QUARTER                         22 1/2     13 1/2        44 1/2       30 1/2
THIRD QUARTER                          25 1/2     19 3/4        37 1/2       20 1/2
FOURTH QUARTER                         27 3/8     18 1/2        33 3/4       13 1/2
</TABLE>

                                                                   19