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     As filed with the Securities and Exchange Commission on June 29, 1998.

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 20-F

            [ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR
                   (g) OF THE SECURITIES EXCHANGE ACT OF 1934

                                       OR

              [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                      For the Year ended December 31, 1997

                                       OR

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

                         Commission File Number 0-13119
                        CORDIANT COMMUNICATIONS GROUP PLC
             (Exact name of Registrant as specified in its charter)

                                     ENGLAND
                 (Jurisdiction of incorporation or organization)

                           121-141 WESTBOURNE TERRACE
                             LONDON W2 6JR, ENGLAND
                    (Address of principal executive offices)

Securities registered or to be registered           Name of each exchange on
  pursuant to Section 12(b) of the Act:                 which registered:
       Ordinary shares of 50p each                       New York Stock
         represented by American                          Exchange, Inc.
            Depositary Shares
              Securities registered or to be registered pursuant to
                         Section 12(g) of the Act: None

        Securities for which there is a reporting obligation pursuant to
                         Section 15(d) of the Act: None

                Indicate the number of outstanding shares of each
of the issuer's classes of capital as of the close of the period covered
                        by the annual report: 221,926,993
                                  -------------

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 which financial statement item the registrant has elected
to follow.

                             Item 17 ( ) Item 18 (X)

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<PAGE>

                                TABLE OF CONTENTS


                                                                            Page



PART I.........................................................................4

      Item 1.   Description of Business........................................4
      Item 2.   Description of Property.......................................24
      Item 3.   Legal Proceedings.............................................25
      Item 4.   Control of Registrant.........................................25
      Item 5.   Nature of Trading Markets.....................................26
      Item 6.   Exchange Controls and Other Limitations 
                 Affecting Security Holders...................................27
      Item 7.   Taxation......................................................27
      Item 8.   Selected Financial Data.......................................32
      Item 9.   Management's Discussion and Analysis of 
                 Financial Condition and Results of Operations................35
      Item 9A.  Quantitative and Qualitative Disclosures 
                 About Market Risk............................................50
      Item 10.  Directors and Executive Officers of Registrant................51
      Item 11.  Compensation of Directors and Officers........................57
      Item 12.  Options to Purchase Securities from 
                 Registrant or Subsidiaries...................................61
      Item 13.  Interest of Management in Certain Transactions................79

PART II.......................................................................80

      Item 14.  Description of Securities to be Registered....................80

PART III......................................................................80

      Item 15.  Defaults Upon Senior Securities...............................80
      Item 16.  Changes in Securities and Changes in 
                 Security for Registered Securities...........................80

PART IV.......................................................................80

      Item 17.  Financial Statements..........................................80
      Item 18.  Financial Statements..........................................81
      Item 19.  Financial Statements and Exhibits.............................81
<PAGE>
INTRODUCTION

     Unless the context otherwise requires, the following definitions shall have
the following meanings in this document:

     "Company" shall mean Cordiant  Communications  Group plc (previously called
Cordiant plc until December 14, 1997).

     "Consolidated   Financial   Statements"  shall  mean  audited  consolidated
financial  statements  and notes  thereto of the Company as of December 31, 1997
and 1996 and for each of the years in the three year period  ended  December 31,
1997 included elsewhere herein.

     "Cordiant"  shall mean  Cordiant  plc (now called  Cordiant  Communications
Group plc) and its subsidiaries in relation to the period prior to the Demerger.

     "Cordiant  Ordinary  Shares" shall mean ordinary  shares of 25p of Cordiant
prior to the Demerger.

     "Demerger"  shall mean the  demerger  on  December  14, 1997 by Cordiant of
Saatchi & Saatchi Holdings Limited in accordance with the Demerger Agreement (as
defined herein).

     "Disposed"  operations refers to businesses  demerged from Cordiant to form
the Saatchi & Saatchi Group, Zenith and other businesses disposed of.

     "Group",  "CCG" and "CCG Group" shall mean the Company and its subsidiaries
from the date of the Demerger.

     "NRG" shall mean National Research Group, Inc. and its subsidiaries, NRG-UK
Ltd. and Movie View, Inc.

     "Ongoing"  operations  refers  to  businesses  that  remain  with the Group
following the Demerger and the disposal of other businesses and excludes Zenith.

     "Ordinary Shares" shall mean ordinary shares of 50p of the Company.

     "Saatchi  & Saatchi"  or  "Saatchi & Saatchi  Group"  shall mean  Saatchi &
Saatchi plc and its subsidiaries from the date of the Demerger.

     "Saatchi  Ordinary  Shares" shall mean ordinary  shares of 10p of Saatchi &
Saatchi plc.

     "Unaudited Combined and Pro Forma Financial Information" shall refer to the
unaudited  financial  information  contained  in Annex A to this  Report,  which
information  assesses the historic  performance  of CCG as if the  post-Demerger
structure and financing arrangements had been in place from January 1, 1996.

     "Zenith"  shall mean Zenith Media  Holdings  Limited and, where the context
requires, its subsidiary undertakings from time to time.

     The Company  publishes  its  consolidated  financial  statements  in pounds
sterling  ("L").  References to "US dollars" or "$" are to United States dollars
and references to "pounds sterling", "L", "pence" or "p" are to UK currency. The
noon  buying  rate in the  City of New  York  for  cable  transfers  in  foreign
currencies  as  announced  by the Federal  Reserve  Bank of New York for customs
purposes  (the "Noon  Buying  Rate") on  December  31,  1997 was L1.00 to $1.64.
Unless otherwise  specified,  translations  into US dollars contained herein are
made at the Noon Buying Rate on December 31, 1997.  The Noon Buying Rate on June
1, 1998 was L1.00 to $1.64.

     References in this document to the "Companies Act" are to the Companies Act
1985, as amended,  of Great Britain and  references to the "Articles" are to the
Company's Memorandum and Articles of Association.


FORWARD LOOKING AND CAUTIONARY STATEMENTS

     This  report  contains  certain  "forward  looking  statements"  within the
meaning of the Private  Securities  Litigation Reform Act of 1995. These forward
looking  statements  include  statements  in the  "Management's  Discussion  and
Analysis of Financial Conditions and Results of Operations--Industry Background"
section relating to trends in the advertising and marketing  services  industry,
particularly with respect to anticipated advertising expenditures in the world's
advertising markets. Actual advertising  expenditures may differ materially from
the estimates  contained  therein  depending  on, among other things,  regional,
national and  international  political  and economic  conditions,  technological
changes,  the  availability  of media  and  regulatory  regimes  in the  world's
advertising  markets.  Additionally,  this report  contains a number of "forward
looking  statements"  relating  to  the  Group's  performance,  particularly  in
"Description  of  Business  -  Organization  and  Services"  and   "Management's
Discussion and Analysis of Financial  Condition and Results of Operations."  The
Group's actual results could differ materially from those anticipated  depending
on, among other things,  gains to or losses from its client base,  the amount of
revenue  derived from clients,  the Group's  exposure to changes in the exchange
rates of major  currencies  against the pound  sterling  (because a  substantial
portion of its  revenues  are derived and costs  incurred  outside of the United
Kingdom) and the overall level of economic activity in the Group's major markets
as  discussed  above.  The Group's  ability to reduce its fixed cost base in the
short term is limited and therefore its trading performance can be significantly
affected by variations in the level of its revenues.





<PAGE>


                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS.


GENERAL

          The businesses that comprise the CCG Group are what remain of Cordiant
after the Demerger of the Saatchi & Saatchi Group in December 1997. Prior to the
Demerger,  Cordiant  was the  holding  company  for a group of  advertising  and
creative marketing communication  businesses,  the two largest of which were the
advertising networks,  Bates Worldwide ("Bates Worldwide") and Saatchi & Saatchi
("S&S").

           The  origins  of Bates  Worldwide  date back to 1940 when Ted Bates &
Company  was  founded in New York by Theodore  Bates and Rosser  Reeves.  It was
Rosser Reeves who first developed the concept of the Unique Selling  Proposition
("U.S.P.(TM)")  and this philosophy  still drives the advertising  strategies of
Bates Worldwide  today. Ted Bates & Company grew rapidly in the 1960s and 1970s,
developing a worldwide network through acquisitions and organic growth. In 1964,
Ted Bates & Company acquired the largest  advertising  agency in Australia,  the
George Patterson Advertising Agency. In 1985, the German agency Scholz & Friends
was acquired.

           In 1986, Ted Bates  Worldwide was acquired by Cordiant.  Earlier that
year, Cordiant had acquired a US agency, Backer and Spielvogel and, in 1987, the
two agencies were merged to form Backer Spielvogel Bates Worldwide.  The network
was later rebranded Bates Worldwide,  although Scholz & Friends was preserved as
a separately  branded  advertising  agency. The combined network formed a second
major component of Cordiant which, at that time, was also  establishing  another
substantial  advertising  network,  S&S. Throughout their period of ownership by
Cordiant, the two networks operated independently.

           During the mid 1980s,  Cordiant  also acquired a number of specialist
marketing  communications  businesses.  In 1985, it acquired  HP:ICM, a business
based in London providing  creative and production  services for conferences and
exhibitions.  In 1987, The Facilities  Group was formed through the amalgamation
of a group of companies providing specialist  advertising production services in
design, print and television.  Following the Demerger, CCG retained a 30 percent
shareholding  in The  Facilities  Group  with the  remainder  held by  Saatchi &
Saatchi.

           In 1988,  Cordiant  formed a single media buying  operation in the UK
called Zenith Media Buying Services. This was created through the acquisition of
Ray Morgan & Partners  which was merged  with the media  buying  departments  of
Cordiant's London advertising  agencies.  This was the first time a major agency
group had  consolidated  its media buying  operations  into a discrete unit. The
operation  was renamed  Zenith Media  Worldwide in 1991 and in 1992 extended its
services  to  include  media  planning.   Zenith  had  expanded  its  operations
internationally  by  opening  offices  in  Europe in 1994 and in the US and Asia
Pacific in 1995.  This  expansion was achieved by combining and  rebranding  the
in-house media  operations of S&S and Bates  Worldwide.  Following the Demerger,
CCG and Saatchi & Saatchi  each  retained a 50 percent  shareholding  in Zenith,
which is accounted for as a joint venture.

           From  the  late  1980s to the end of  1995,  Cordiant's  history  was
characterized by a period of financial and management  instability  which had an
adverse  effect on Cordiant's  businesses.  During the late 1980s,  poor trading
conditions in the advertising industry,  coupled with the requirement to service
debt incurred to fund a number of acquisitions, contributed to a serious decline
in Cordiant's  financial  position.  By 1990,  Cordiant's  accounts  showed that
financial  liabilities had reached almost L700 million. As a result,  during the
early  1990s,  Cordiant  embarked  on a series of  refinancings  and  disposals,
culminating  in a  rights  issue  in  November  1995.  This  series  of  actions
substantially  eliminated  Cordiant's net financial liabilities and restored its
financial stability.

           In early 1995, the Chairman  (Maurice  Saatchi) and four other senior
executives left Cordiant.  As a result, Mars withdrew its worldwide account from
Bates Worldwide,  resulting in a loss of annual billings of  approximately  $350
million.  S&S also lost several high profile  clients  which had  accounted  for
approximately 5 percent of S&S's 1994 revenue.  To restore management  stability
to Cordiant, Bob Seelert was appointed Chief Executive Officer and Charles Scott
was appointed Chairman in July 1995.

           The rights issue in 1995 enabled  Cordiant to be in a better position
to focus on  revenue  growth and margin  improvement.  As part of this  process,
Cordiant decided in April 1997 to propose to Cordiant  Shareholders the demerger
of Cordiant into two autonomous advertising and marketing communications groups.
As a result of the Demerger,  the CCG Group is now comprised of the  advertising
business of Bates  Worldwide and Scholz & Friends,  together  with HP:ICM,  a 30
percent  shareholding in The Facilities  Group and a 50 percent  shareholding in
Zenith.

           The  Group's  principal  corporate  offices  are  located  at 121-141
Westbourne    Terrace,    London    W2   6JR,    England,    telephone    number
011-44-171-262-4343.


CORPORATE DEVELOPMENTS

THE DEMERGER

           On April 21, 1997,  the Board of Directors of Cordiant  announced its
decision  to  recommend  to its  shareholders  that they  approve  a spinoff  or
demerger of Saatchi & Saatchi from Cordiant (the  "Demerger") with the remaining
businesses  renamed CCG. The Demerger was  motivated by the desire to allow each
of CCG and  Saatchi & Saatchi  to stand on its own and to allow the  advertising
agencies  of the CCG  Group  and the  Saatchi  &  Saatchi  Group,  namely  Bates
Worldwide  and S&S, to respond more  quickly to client needs and  opportunities.
The Demerger took effect on December 15, 1997 and, as from the effective date of
the Demerger (the "Effective  Date"), CCG and Saatchi & Saatchi have operated as
separate  public  companies  and neither CCG nor Saatchi & Saatchi  beneficially
owns any shares of the other.  As a result of the  Demerger,  CCG and  Saatchi &
Saatchi each own a 50 percent shareholding in Zenith.

           Prior to the  Demerger,  an internal  reorganization  of Cordiant was
effected  whereby  Cordiant  transferred  the various  assets that comprised the
Saatchi & Saatchi  Group  (including a 50 percent  shareholding  in Zenith) to a
single holding company,  Saatchi & Saatchi Holdings Limited ("Holdings").  After
(i) the Demerger was approved by Cordiant  shareholders  and (ii) all conditions
precedent to the Demerger had been satisfied or waived, the Demerger occurred in
three simultaneous  steps.  First,  Cordiant made a stock dividend to holders of
Cordiant  Ordinary  Shares on the basis that the dividend  would be satisfied by
the  distribution  of the Saatchi  Ordinary  Shares.  Second,  Saatchi & Saatchi
acquired  the  shares  of  Holdings  from  Cordiant.  Third,  Saatchi  & Saatchi
satisfied the stock dividend (the  "Dividend") by issuing its shares directly to
Cordiant shareholders.

THE CONSOLIDATION

           Pursuant to the Demerger,  shares of Saatchi & Saatchi were initially
issued on a one-for-one  basis (i.e.,  each holder of Cordiant  Ordinary  Shares
received the same number of shares of Saatchi & Saatchi).  Immediately following
the stock  dividend,  both the Company  and  Saatchi & Saatchi  effected a share
consolidation or reverse  stock-split (the  "Consolidation"),  so that following
the Demerger and Consolidation  holders of Cordiant Ordinary Shares received one
Ordinary Share and one Saatchi  Ordinary  Share for every two Cordiant  Ordinary
Shares held as at the record date for the Dividend. Holders of Cordiant American
Depositary  Shares received three American  Depositary Shares of the Company and
three  American  Depositary  Shares of Saatchi & Saatchi (each  representing  15
ordinary  shares) for every ten  American  Depositary  Shares of  Cordiant  held
pursuant to  arrangements  made between the  Company,  Saatchi & Saatchi and the
Depositary.

RELATIONSHIP BETWEEN CCG AND SAATCHI & SAATCHI FOLLOWING THE DEMERGER

           As a result of the  Demerger,  the  Company and Saatchi & Saatchi are
separate  publicly  traded  companies and operate  independently  of each other.
Neither  company  has any  interest  in the  shares of the other.  However,  the
Company  and  certain  companies  within  the CCG  Group  entered  into  certain
agreements and arrangements with the Saatchi & Saatchi Group and Zenith in order
to enable the Demerger to be carried out,  allocate  responsibility  for certain
obligations,  provide for certain transitional arrangements and otherwise define
their  relationship  following the Demerger.  The terms of these  agreements and
arrangements are principally governed by the Demerger Agreement, dated September
30,  1997,  between  Cordiant,  Saatchi &  Saatchi,  Holdings  and  Zenith  (the
"Demerger  Agreement"),  and  certain  agreements  required  to be entered  into
pursuant to the Demerger Agreement.  The principal terms of these agreements and
arrangements are described below.

           Property Guarantees

           There are a number of guarantees by CCG companies of  obligations  of
certain  companies  in the  Saatchi & Saatchi  Group that were not  released  in
connection  with the  Demerger.  CCG  guaranteed  the Saatchi & Saatchi  Group's
obligations under a lease of premises at 375 Hudson Street, New York, for a term
expiring on January 31,  2013,  at a current  annual base rent of $17.9  million
subject to rent reviews in 2003 and every five years  thereafter.  The Saatchi &
Saatchi Group currently  occupies  approximately  one half of the premises,  the
balance being sublet to third parties at rates at or below the base rent payable
by  Saatchi &  Saatchi.  CCG also  guarantees  the  Saatchi  &  Saatchi  Group's
obligations  under a lease of  premises  at 21 Dukes  Road,  London,  for a term
expiring on October 31, 2016 with a tenant's right to break on October 31, 2006.
The current annual base rent is L255,882,  subject to rent reviews in 2001, 2006
and 2011. This property is not currently occupied by the Saatchi & Saatchi Group
and the entire  premises  have been  sub-leased  for  L165,000  per annum  until
October 15, 2006 but with a sub-tenant's  right to break on November 1, 2001. In
addition,  CCG has given a guarantee of the liability for deferred consideration
of FFR23 million plus interest  payable in 1998 in respect of the acquisition of
the minority  shareholdings in Saatchi & Saatchi  Advertising  S.A.  (France) in
1996. In the Demerger Agreement, Saatchi & Saatchi agreed to give additional, or
in some cases substitute,  guarantees and to indemnify CCG against any liability
in its preexisting guarantees.

           Bank Guarantees

           Saatchi & Saatchi  gave a guarantee  to the  lenders  under CCG's new
bank  facility  agreement  (described  below)  against  liability  under  a bank
guarantee of up to L5 million at December  31,  1997.  The Company has agreed to
indemnify the Saatchi & Saatchi Group, to the extent that liability arises under
this guarantee in respect of obligations which are the primary responsibility of
the CCG Group.

           Other

           There are a number of existing  guarantees by Saatchi & Saatchi Group
companies  of  obligations  of certain  companies  in the CCG  Group,  including
guarantees in respect of certain leases of premises at Lansdowne House, Berkeley
Square,  London W1. The main guarantees were not released in connection with the
Demerger. In the Demerger Agreement,  the Company agreed to give additional,  or
in some cases substitute  guarantees and to indemnify  Saatchi & Saatchi against
any liability in respect of its existing guarantees.

           New Bank Facilities

           In connection with the Demerger, the management of Cordiant allocated
the  consolidated  indebtedness  of Cordiant  between CCG, the Saatchi & Saatchi
Group, and Zenith.  The amounts  allocated took into account the ability of each
of the  companies to generate cash flow with the  intention of  establishing  an
appropriate capital structure for each company.

           Under an Agreement dated September 30, 1997, among Cordiant,  various
other  members of the CCG Group,  The Bank of New York and  Midland  Bank Plc as
Arrangers and certain banks and financial  institutions (the "Banks"), the Banks
agreed to make available to certain members of the CCG Group a facility of up to
$133  million,  which was  subsequently  reduced by  approximately  $11  million
following the sale of NRG (the "New Bank Facility").  This facility is comprised
of a limited bank  guarantee  facility of L5 million that was made available for
specified  purposes in connection with  Cordiant's  reduction of capital and the
balance as a facility of up to $120 million which was used, in part,  along with
facilities  made  available  to Saatchi & Saatchi and Zenith,  to repay  amounts
drawn down by Cordiant  under its facility  agreement and is also  available for
general corporate purposes of CCG (the "New Bank Facility  Agreement").  Amounts
available  under the New Bank  Facility  will be amortized  over the life of the
facility.

           The New Bank  Facility  Agreement  requires  the Group to comply with
certain  financial and other covenants  relating to gross interest cover,  total
cash cover and maximum gross debt. See "Management's  Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."

           The New  Bank  Facility  will be  reduced  in an  amount  equal to 75
percent of the net proceeds  received (subject to a de minimis of $5 million per
annum) on, or following,  a sale by CCG of any subsidiary (or a material part of
the business of any  subsidiary).  Interest is payable on each advance under the
New Bank  Facility  at a rate per annum  based on the  aggregate  of LIBOR and a
margin of between 1.5 and 0.75  percent per annum,  depending on the CCG Group's
ability to achieve certain financial ratios.

           The New Bank Facility Agreement contains  provisions  whereby, on the
happening of certain  specified  events of default,  the amounts made  available
could be declared  immediately due and payable.  These events of default include
breach of the above covenants and cross default by certain  companies in the CCG
Group in  respect  of  indebtedness  over a  specified  amount or any  change of
control of the Company.

           The New Bank Facility is secured by guarantees  from certain  members
of the CCG Group (or, where guarantees are not possible, share charges over such
companies)  such  that at all  times  the  aggregate  of the  revenues  of those
companies  that have given  guarantees  (or whose shares have been charged) will
equal at least 60 percent of the CCG Group's  consolidated  revenues.  Fixed and
floating  charges  over  the  assets  of  the  Company  and  certain  of  its UK
subsidiaries and share pledges over the shares owned by members of the CCG Group
in various subsidiaries have also been given.

           In  addition  to the  New  Bank  Facility,  Zenith  entered  into  an
agreement (the "Zenith  Facility  Agreement")  providing a L21.5 million secured
reducing multi-currency  revolving credit facility (the "Zenith Facility") which
was used in part,  along with the  facilities  being made  available  to CCG and
Saatchi & Saatchi to repay  amounts  drawn down by Cordiant  under its  facility
agreements and for general corporate purposes of Zenith. The Company and Saatchi
& Saatchi provided unlimited  guarantees to the lenders in respect of the Zenith
Facility and agreed between  themselves that any liability under such guarantees
is to be shared equally.

           Amounts  outstanding  under the Zenith Facility,  which is for a five
year term, are required to be repaid as follows:  L1 million in 1998; L2 million
in each of 1999 and 2000 and L4 million in 2001.  The  Zenith  Facility  will be
reduced by an amount equal to 75 percent of the net proceeds  received  (subject
to a de minimis of $1.5  million per annum) on or  following a sale by Zenith of
any subsidiary (or a material part of the business of any subsidiary).

           Interest  is  payable  on each  advance  under  the  Zenith  Facility
Agreement  at a rate per annum based on the  aggregate  of LIBOR and a margin of
between 1.5 and 0.75 percent per annum, depending on Zenith's ability to achieve
certain financial ratios.

           The Zenith Facility  Agreement requires Zenith to comply with various
financial  covenants  relating to gross interest  cover,  maximum gross debt and
gross capital expenditure.

           The Zenith  Facility  Agreement  contains  provisions  whereby on the
happening of certain specified events of default the amount made available could
be declared  immediately  due and payable.  In addition to  customary  events of
default these events include  defaults by certain  companies in the Zenith group
in respect of  indebtedness  over specified  limits and any change of control of
Zenith.

           The Zenith  Facility is secured by guarantees from certain members of
the Zenith group (or, where guarantees are not possible, share charges over such
companies)  such  that at all  times  the  aggregate  of the  revenues  of those
companies  that have given  guarantees  (or whose shares have been charged) will
equal at least 60 percent of Zenith's consolidated revenues,  fixed and floating
charges over the assets of Zenith and certain of its UK  subsidiaries  and share
pledges over the shares owed in certain of its non-UK subsidiaries.

OWNERSHIP AND OPERATION OF ZENITH MEDIA WORLDWIDE

           Zenith Shareholders' Agreement

           Pursuant to the Demerger Agreement,  the Company,  Saatchi & Saatchi,
Holdings  and Zenith,  with  effect  from the  Effective  Date,  entered  into a
shareholders'  agreement  (the  "Zenith  Shareholders'  Agreement")  in order to
regulate the  relationship  between the Company and Holdings as  shareholders of
Zenith.  Saatchi & Saatchi is a party to the Zenith  Shareholders'  Agreement in
order to  guarantee  the  obligations  of  Holdings.  The  Zenith  Shareholders'
Agreement  provides  that  Zenith  will be managed on a day to day basis by four
executive Directors agreed upon by the shareholders. Two non-executive Directors
will also be appointed by agreement between the shareholders.  In addition, each
shareholder will have the right to appoint one further non-executive Director.

           Pursuant to the Zenith Shareholders' Agreement, the following matters
require  the  consent of both  shareholders  before  they can be  undertaken  by
Zenith: alterations to the capital structure of Zenith; the annual business plan
of Zenith;  and the  entering  into of  contracts by Zenith which are not in the
ordinary course of its business or not on arm's-length terms.

           Seventy-five  percent of the distributable  profits of Zenith will be
distributed to shareholders and divided between them in part by reference to the
proportions in which Zenith receives revenue from clients of each shareholder.
The remainder will be retained by Zenith.

           Following  the  Demerger,  each of the  Company and Saatchi & Saatchi
owns 50 percent of the outstanding  shares of Zenith.  The Zenith  Shareholders'
Agreement  prohibits the transfer of shares in Zenith except as described below.
Transfers  to third  parties are  permitted  either on the  insolvency,  or on a
change of control, of the other shareholder. Otherwise a shareholder is entitled
to sell all of its shares to a third party only if it has first  offered to sell
its  shares  to the  other  shareholder  at a  specified  price  and  the  other
shareholder  has declined that offer.  In those  circumstances,  the sale to the
third  party  must be at a price  being not less than that  offered to the other
shareholder.  Any third party to whom shares are transferred will be required to
agree to be bound by the terms of the Zenith  Shareholders'  Agreement  as if it
was an original party to that agreement.

           The Zenith Shareholders'  Agreement also contains options whereby one
shareholder  is  entitled  to  acquire  all  the  Zenith  shares  of  the  other
shareholder in the event that:

           1. the other shareholder becomes insolvent;

           2. the other  shareholder  is the  subject of a change of control and
following  which  there is a  material  breach  of any of the terms of the media
services agreement  (described below) to which that shareholder is a party which
either is not capable of remedy or is not remedied within a certain period; or

           3. the other shareholder  terminates the media services  agreement to
which it is a party.

           The price  payable  (a) on exercise  of the option  described  in (1)
above will be based on the market value of the Zenith shares and (b) on exercise
of the  options  described  in (2) and (3) above  will be based on the net asset
value of Zenith.  Each  shareholder  also charged its shares in Zenith to secure
all obligations under the new bank facilities for such shareholder's group.

           In the event that a dispute arises in relation to certain  matters of
fundamental  importance  to the future of Zenith  which  cannot be  resolved  by
further  negotiations  between the shareholders then either  shareholder will be
entitled to offer to acquire at any specified  price all of the Zenith shares of
the other  shareholder.  The other  shareholder  will have the option  either to
accept that offer and sell all of its Zenith shares at the specified price or to
purchase  all of the Zenith  shares of the other  shareholder  at the  specified
price.

           The Zenith  Shareholders'  Agreement also provides for the resolution
of potential conflicts between the clients of the shareholders and Zenith.

           The Zenith  Shareholders'  Agreement  will  remain in force until (i)
either shareholder  acquires all of the shares in Zenith held by the other, (ii)
an order is made or resolution is passed for the winding up of Zenith or (iii) a
third party acquires all of the shares of Zenith.

           Prior to the Demerger, Zenith shared office space and facilities such
as computer,  payroll and accounting  systems,  as well as insurance and pension
arrangements  with  members  of the  Cordiant  Group.  These  arrangements  were
formalized  on an arm's length  basis with the  relevant  members of CCG and the
Saatchi & Saatchi Group, where appropriate, prior to the Demerger.

           Both CCG and Saatchi & Saatchi  have  guaranteed  the new Zenith bank
facilities described above.

           Zenith Media Services Agreements

           Pursuant  to  the  Demerger   Agreement,   at  the  time  the  Zenith
Shareholders'  Agreement  was  entered  into,  each of the Company and Saatchi &
Saatchi entered into a media services agreement with Zenith.  Under the terms of
these  agreements  the  shareholders  each  appointed  Zenith  as the  exclusive
supplier of media buying, media planning and certain related services for all of
the  clients,  subject to certain  exceptions,  of each  shareholder.  The media
services agreements also set out the duties of Zenith in respect of each country
in which Zenith operates.

           Each of the media services  agreements will terminate on December 31,
2000 or on any  subsequent  anniversary  of that date provided  either party has
given to the other not less than 12 months' written notice of such termination.

OWNERSHIP AND OPERATION OF THE FACILITIES GROUP

           Pursuant to the Demerger Agreement,  the Company,  Saatchi & Saatchi,
Saatchi & Saatchi (Central  Services) Limited ("SSCSL") and The Facilities Group
Limited ("The  Facilities  Group") entered into a shareholders'  agreement ("The
Facilities Group  Agreement") in order to regulate the relationship  between the
Company and SSCSL as shareholders of The Facilities Group.  Saatchi & Saatchi is
a party to that agreement in order to guarantee the  obligations of SSCSL.  With
effect from the Effective  Date, the Company holds 30 percent of the outstanding
shares of The  Facilities  Group and  Saatchi & Saatchi  holds 70  percent.  The
Facilities  Group  Agreement  provides  that  the day to day  management  of The
Facilities Group will be undertaken by three executive Directors. The Company is
entitled to appoint one of three executives and Saatchi & Saatchi is entitled to
appoint the other two.

           The  distributable  profits of The  Facilities  Group will be divided
between  shareholders in the proportions in which The Facilities  Group receives
revenue from clients of each  shareholder.  Revenue of The Facilities  Group not
attributable to clients of either  shareholder  will be divided in proportion to
the shareholdings.

           The Facilities  Group  Agreement  prohibits the transfer of shares of
The  Facilities  Group except in the  circumstances  described in the agreement.
Transfers to third  parties will be permitted  either on the  insolvency or on a
change of control of the other  shareholder.  Otherwise  a  shareholder  will be
entitled to sell all of its shares to a third party only if it has first offered
to sell its shares to the other  shareholder at a specified  price and the other
shareholder  has declined that offer.  In those  circumstances,  the sale to the
third  party  must be at a price  being not less than that  offered to the other
shareholder.  Any third party to whom shares are transferred will be required to
agree to the terms of The Facilities  Group  Agreement as if it were an original
party to that agreement.

           The  Facilities  Group  Agreement also contains  options  whereby one
shareholder is entitled to acquire all the shares in The Facilities Group of the
other shareholder in the event that:

           1. the other shareholder becomes insolvent; or

           2. the other shareholder suffers a change of control.

           The price  payable on exercise of these  options will be based on the
market value of The Facilities Group shares.

           The Facilities  Group Agreement will remain in force until (i) either
shareholder  acquires  all of the  shares in The  Facilities  Group  held by the
other,  (ii) an order is made or  resolution is passed for the winding up of The
Facilities  Group or  (iii) a third  party  acquires  all of the  shares  of The
Facilities Group.

EMPLOYEE BENEFITS PLANS

           CCG employees are members of a number of pension  schemes  throughout
the  world,  principally  in the UK and  the  US.  CCG  currently  operates  two
principal UK pension  schemes:  a defined  benefits  scheme (the Cordiant  Group
Pension  Scheme) and a defined  contribution  scheme (the  Cordiant  Group Money
Purchase Pension Plan). Since the Demerger,  CCG employees have remained members
of these schemes.

           Employees  of the  Saatchi  &  Saatchi  Group  have  continued  their
membership  in both  schemes  during a  transitional  period,  subject to Inland
Revenue approval. The Company and Saatchi & Saatchi have agreed that, at the end
of a transitional period,  Saatchi & Saatchi's members within the two UK pension
schemes will be given the  opportunity  to transfer to new pension  arrangements
being set up by Saatchi & Saatchi.  A transfer payment determined by the trustee
of the two UK pension schemes,  having taken actuarial  advice,  will be made to
the new Saatchi & Saatchi pension  arrangements in respect of the accrued rights
under the  relevant UK pension  scheme of those  members who request a transfer.
The same  provisions  apply to  employees  of Zenith who are members of CCG's UK
pension schemes.

           The arrangements  with respect to options under the CCG Share Schemes
are   described  in  "Options  to  Purchase   Securities   From   Registrant  or
Subsidiaries."

OTHER PROVISIONS OF THE DEMERGER AGREEMENT

           Operating Arrangements

           The Demerger  Agreement  provides for the  implementation of specific
arrangements  in Eastern Europe and the Middle East where the two groups operate
local offices  jointly and sets out the bases on which these  arrangements  will
continue.  Each agency is owned and managed by S&S, but has been branded jointly
as  "Bates  Saatchi  &  Saatchi  Advertising."  Following  the  Demerger,  Bates
Worldwide and S&S have shared  operating  profits or losses of the local offices
based on the level of revenue  introduced  by each  network.  Subsequent  to the
year-end,  Bates  Worldwide  gave notice of its  intention to end the  operating
arrangements in Poland and the Middle East.

           In addition,  members of both CCG and the Saatchi & Saatchi Group are
parties to existing joint venture  arrangements with third parties in Russia and
Japan.

           Shared Premises and Services

           There are a number of locations in which  offices  leased by a member
of the CCG Group are  occupied  by, or shared  with,  a member of the  Saatchi &
Saatchi  Group,  or  vice  versa.  Pursuant  to the  Demerger  Agreement,  these
arrangements will continue, to the extent practicable, either indefinitely or at
least for a  transitional  period,  generally  on the same  basis on which  such
arrangements  operated prior to the date of the agreement.  The most significant
of these  arrangements  are a sublease  by Saatchi & Saatchi to Zenith of 55,000
square feet at 375 Hudson Street in New York and a sublease by Saatchi & Saatchi
to CCG of 279,000 square feet at 405 Lexington Avenue in New York. In some cases
these  arrangements  are the subject of formal  subleases or licenses;  in other
cases the sharing  arrangements  remain  informal.  The Demerger  Agreement also
contains certain transitional  arrangements in respect of such matters as access
to information, the preparation of accounts and insurance.

           Network Affiliates

           There are over 40  affiliated  agencies  of S&S  around  the world in
which the Saatchi & Saatchi  Group  holds only a minority  interest or no equity
interest.  Prior to the Demerger,  the relationship with these affiliates was in
most cases governed by a "network  membership  agreement"  between the affiliate
and Cordiant,  on behalf of S&S. Under these agreements,  the affiliate is given
the sole license to use the "Saatchi & Saatchi" name in relation to  advertising
services in a specified territory and receives certain services and referrals of
clients from S&S, in return for paying to Cordiant  fees based on income  earned
by the affiliate.  In most cases,  these agreements  provided for termination by
either party on 3 months' notice.

           Pursuant  to the  Demerger  Agreement,  CCG and the Saatchi & Saatchi
Group  endeavored to obtain the agreement of the S&S  affiliates to the novation
of their network membership  agreements,  so that Saatchi & Saatchi succeeded to
all of the rights and obligations of Cordiant under these agreements with effect
from  completion  of the  Demerger.  To the extent that such  agreement  was not
obtained prior to the Effective Date, CCG holds these agreements for the benefit
of the Saatchi & Saatchi Group pending novation or termination and the Saatchi &
Saatchi  Group will be  responsible  for ensuring  that all  obligations  of CCG
thereunder are performed.  Similar  arrangements exist in relation to agreements
with Zenith affiliates.

           Disputes

           The Demerger  Agreement sets out agreed  procedures to be followed by
the Company, Saatchi & Saatchi and Zenith in seeking to resolve any dispute that
may  arise  between  any of  them  under  or in  connection  with  the  Demerger
Agreement, other than disputes arising under the Zenith Shareholders' Agreement.

           Demerger Costs

           Pursuant  to the  Demerger  Agreement,  subject  to  certain  limited
exceptions,  all costs incurred by Cordiant, Saatchi & Saatchi, Zenith and their
respective  subsidiaries  in connection  with the Demerger,  including,  but not
limited  to,  those  relating  to the  pre-Demerger  reconstruction,  Cordiant's
reduction of capital,  all of the new employee share schemes and the new banking
facilities,  were paid by CCG. The  applications for listing of Saatchi Ordinary
Shares and American Depositary Shares on the London and New York Stock Exchanges
were paid by Saatchi & Saatchi. The anticipated costs of the Demerger were taken
into account in determining the manner in which the overall debt of Cordiant was
divided  between  CCG,  Saatchi & Saatchi and  Zenith.  Costs in excess of those
anticipated  were  recorded by CCG and 50 percent of them were  charged  back to
Saatchi & Saatchi.

           Liabilities and Reciprocal Indemnities

           The Demerger Agreement provides that following the Demerger,  each of
the Company,  Saatchi & Saatchi and Zenith will  indemnify,  or procure that its
relevant  subsidiaries  indemnify,  the members of each other group,  subject to
certain   limitations,   against  certain  actual  and  contingent   liabilities
associated with the business of the  indemnifying  group. In addition,  if there
are incurred any liabilities in relation to past disposals of  subsidiaries  not
operated as part of Bates  Worldwide or S&S,  certain  liabilities in connection
with  the  Demerger  process  in  excess  of  the  amounts  contemplated  by the
arrangements  for dividing the existing  Cordiant bank  borrowings  between CCG,
Saatchi & Saatchi and Zenith, or certain other types of liabilities,  these will
be shared  equally by CCG and Saatchi & Saatchi.  The  general  purpose of these
provisions is to ensure that legal effect is given to the principles  upon which
it has been agreed that the assets and liabilities of Cordiant should be divided
between  CCG,  Saatchi & Saatchi and Zenith.  They cover a range of matters,  in
addition  to  the  cross  guarantees  referred  to  above,   including  (without
limitation) UK, US and other tax liabilities and litigation involving members of
more than one group.




<PAGE>



ORGANIZATION AND SERVICES

           The Group's  operations  consist of  advertising  and other  creative
marketing  services  including  direct  marketing,  media  services,  production
services,  interactive  media and market research.  In 1997, the Group's largest
five clients accounted for 18.1 percent of ongoing revenues.  The largest client
accounted  for 5.9 percent of total  ongoing  revenues.  No other single  client
accounted  for more than 5 percent of ongoing  revenues.  The Group's  principal
activities subsequent to the Demerger are organized as follows:

           ORGANIZATION                       ACTIVITIES
Advertising and integrated
  marketing communications
Bates Worldwide                    Advertising, sales promotion,
   - 141 Worldwide                 direct marketing, interactive
   - XM                            media, healthcare advertising,
   - Healthcom                     strategic brand consultancy and
   - Decision Shop                 design services
Scholz & Friends                   Advertising, sales promotion,
                                   direct marketing, interactive
                                   media and design services


Specialist marketing
communications services
HP:ICM                             Conferences, exhibitions and
                                   brand experience events
The Facilities Group1              Pre-production services in
                                   design, print and television
Media services

Zenith Media Worldwide2            Media planning and buying
--------------------
1  Owned 30 percent by the Company, 70 percent by Saatchi & Saatchi
2  Owned 50 percent by the Company, 50 percent by Saatchi & Saatchi


           During 1997,  advertising  services accounted for 98 percent of CCG's
ongoing  revenues and other marketing  communications  services  accounted for 2
percent.

 ADVERTISING AND INTEGRATED MARKETING COMMUNICATIONS

BATES WORLDWIDE

           Bates  Worldwide  is  an  international  advertising  and  integrated
marketing  communications  network.  Headquartered  in New York,  the network is
characterized  by a strong local presence with  entrepreneurial  leadership in a
number of countries,  particularly in Europe and Asia Pacific.  It currently has
more than 160 owned or  affiliated  offices,  located in over 70  countries.  In
1997, Bates Worldwide accounted for 88 percent of CCG's ongoing revenues.

           Advertising services

           The network is  principally  involved in the creation of  advertising
and  marketing   programs  for  products,   services,   brands,   companies  and
organizations.   These  programs  involve  various  media  such  as  television,
magazines, newspapers, cinema, radio, outdoor, electronic and interactive media,
as well as techniques such as direct marketing,  sales promotion and design. The
creation of advertising and marketing materials includes the writing,  designing
and development of concepts. When the concepts have been approved by the client,
Bates  Worldwide  supervises the production of materials  necessary to implement
that program.  These include film, video, print and electronic materials,  which
are produced externally.

           Bates Worldwide performs a strategic planning function which involves
analysis of the particular  product,  service,  brand,  company or  organization
against its competitors and the market.  Bates Worldwide's  creative approach is
driven by the discipline to determine  each brand's Unique Selling  Proposition.
This approach is based on the principle that the consumer tends to remember just
one thing from an advertisement - one strong claim or concept. Bates Worldwide's
U.S.P.(TM)  approach  seeks to identify a unique  benefit or point of difference
from within the brand.  U.S.P.(TM)  means a motivating  idea - a unique claim or
benefit - associated with a particular  brand,  which is to be registered in the
mind of the  consumer.  Especially  long-running  examples of Bates  Worldwide's
U.S.P.(TM) advertising include Certs' "Two mints in one" in the US and Castrol's
"Liquid  Engineering"  in Europe.  The Company  believes that this approach sets
Bates  Worldwide  apart  from  other  advertising  networks.   The  approach  is
process-driven,  involves  rigorous  interrogation of a brand's strengths and is
designed to produce  advertising which is cost-effective and competitive.  Bates
Worldwide also encourages the use of in-house econometric  techniques to monitor
the effectiveness of its advertising for clients.

           The network utilizes a number of methodologies which it has developed
internally.  These include:  Global Scan(TM),  a worldwide consumer attitude and
behavior study; Brand Wheel(TM), a method for identifying and ordering a brand's
functional and psychological benefits; and Brand Essence(TM), a research process
which identifies the fundamental  values which a brand  encapsulates in the mind
of the consumer as the basis for brand positioning,

           Bates  Worldwide  also  evaluates  the  choice  of media to reach the
desired  market most  efficiently.  The  advertising  and  marketing  program is
devised within the limits  imposed by the client's  advertising  budget.  In the
case of global and regional campaigns, Bates Worldwide plans and coordinates the
implementation of the program through its network of national agencies.

           Bates  Worldwide  is involved in buying  media space and time for its
clients.  This is  executed by Zenith,  by Bates  Worldwide's  in-house  team or
sourced from external suppliers.

           Clients

           Bates Worldwide has a broad client base. In 1997, B.A.T accounted for
just under 6 percent of CCG's ongoing revenues. No other single client accounted
for over 5 percent of CCG's  ongoing  revenues  in 1997.  Bates  Worldwide's  10
largest clients accounted for 27 percent of CCG's ongoing revenues in 1997.

           Bates Worldwide's client list includes many prestigious international
companies.  In 1997,  Bates  Worldwide  served  over 30  clients in five or more
countries through its international  network.  In addition,  a number of clients
have appointed  Bates  Worldwide to serve them on a worldwide  basis,  namely in
each of the  Americas,  Europe and Asia  Pacific.  During 1997,  clients  served
worldwide or in five or more countries accounted for approximately 30 percent of
Bates  Worldwide's  revenues.  A representative  selection of Bates  Worldwide's
current multi-national and worldwide clients are set out in the table below.

                       SELECTED CLIENTS OF BATES WORLDWIDE

Clients served worldwide Clients served in five or more countries

B.A.T.                   3M                       Europcar
EDS (Electronic Data     Amnesty International    Estee Lauder
Systems)
Energizer                Ansett Australia         Fort James
Hyundai                  Avis                     Goodman/Fielder
Warner-Lambert           Brown-Forman             Heineken
Wendy's International    Caltex                   Hongkong Bank
                         Campbell Soup Company    Microsoft
                         Center Parcs             Nokia
                         Coca-Cola Company        Pharmacia & Upjohn
                         CPC International        Roche-Nicholas
                         Cussons                  SEAT
                         DHL                      UNICEF

           Reputation and awards

           For the last  three  years,  Bates  Worldwide  has been among the top
three  networks  shortlisted  for  creative  awards at the Cannes  International
Advertising Festival. In 1997, it won two Gold and four Bronze Lions as well.

           A  number  of  individual   Bates  Worldwide   agencies  have  strong
reputations  for  client  service  and  creativity.  Delvico  Bates was the most
awarded  agency in Spain for the fifth  consecutive  year in 1997,  according to
Anuncios magazine.  Bates Copenhagen was named Agency of the Year in Denmark for
the seventh time in ten years. Bates Europe won Marketing and Media Magazine's M
& M award for Best Corporate Campaign for its "Success Stories"  advertising for
EDS. Bates USA won two prestigious Effies for JRAP/U.S.  Coast Guard and Wendy's
International.  Five Bates agencies - George Patterson  Bates,  Bates Hong Kong,
Bates USA Southwest,  Delvico Bates and Campaign Palace - won Gold awards at the
London International  Advertising  Festival. XM (Expanded Media) Asia won a Gold
Award in  Pacific  Internet's  Best of the Web  competition  for its work on the
Nokia Mobile  Phones Asia Pacific  website.  In Australia,  Campaign  Palace was
named Television Agency of the Year at the Australian Television Awards in 1997.

           Integrated marketing communications services

           Bates  Worldwide  has  been  developing  a number  of its  integrated
marketing  communications  services  as  separately  branded  operations.  These
businesses have potential for high-margin revenue growth and the Company expects
them to enhance the network's  ability to generate global client  accounts.  The
services provided are set out below.

           141 Worldwide

           141  Worldwide  is a sales  promotion  network  launched in 1997 as a
separately branded operation. 141 Worldwide specializes in merchandising,  point
of  sale  and  other   promotions,   permanent   in-store   displays,   signage,
sponsorships,  special events, direct marketing,  trade mark diversification and
trade mark communication.  141 Worldwide was originally  established in 17 Bates
Worldwide  offices in 17  countries.  141  Worldwide  now has 26 global  offices
including  London,  New York,  Paris and Sydney.  The Company  expects the rapid
development  of offices  to  continue.  141  Worldwide's  international  network
operates to standard practices and a unified philosophy  utilizing two operating
systems. 141 Management System is used by agency personnel to guide clients from
strategic  development  through to  execution  of creative  work.  141  Creative
Project Flow is a  methodology  to help clients  understand  better the creative
process used at the agency.  141  Worldwide's  major clients  include 3M, B.A.T,
Coca-Cola Company, Grand Metropolitan, Warner-Lambert and Wendy's International.

           XM

           XM (Expanded Media) is Bates Worldwide's  interactive media division.
XM's interactive expertise includes the creation of websites, the development of
banner   advertising  for  the  internet  and  the  production  of  CD-Roms  and
interactive  display  units.  Clients served in this area include EDS, Nokia and
Perrier.

           Healthcom

           Healthcom is a specialist  healthcare  advertising and communications
agency  established in the early 1990s. The operation is headquartered in London
and has offices in five countries. Healthcom markets healthcare products both to
the  professional  medical  market and directly to  consumers.  Clients  include
Carter-Wallace, Pharmacia & Upjohn and Warner-Lambert.

           The Decision Shop

           The Decision Shop is a specialist resource to assist clients in brand
positioning,  strategic  research,  econometric  modeling,  analysis of consumer
panel data, evaluation of campaigns and media modeling. The Decision Shop's work
has included  international  repositioning  projects for Electrolux and Smirnoff
and the launch of Nicorette and Zovirax for Warner-Lambert.

           Bates Worldwide also operates  BKS/Bates,  a marketer and producer of
television   programming  to  broadcast  and  cable  networks  in  the  US,  and
Grapplegroup, a graphic design consultancy based in Johannesburg.

SCHOLZ & FRIENDS

           Scholz & Friends,  founded  in 1981,  is the  largest  multi-national
advertising  network  headquartered in Germany in terms of gross income based on
information published by Advertising Age. Scholz & Friends has a strong creative
reputation  in its domestic  market.  After its  acquisition  in 1985,  Scholz &
Friends operated as an independent unit within Bates Worldwide. In 1995 Scholz &
Friends moved to operating as an international  network reporting  independently
from Bates Worldwide to minimize the impact of clients' conflict  policies.  The
network has grown to 13 offices in 11 European  countries.  A London  office was
opened at the end of 1997 and a Paris opening is planned for 1998. CCG currently
owns 90 percent of Scholz & Friends.  During  1997,  the network  accounted  for
approximately 10 percent of CCG's ongoing revenue.

           In addition to advertising,  Scholz & Friends provides clients with a
wide range of marketing  services  including sales promotion,  public relations,
direct marketing,  design and interactive  media. The Berlin agency recently won
the "Best Campaign" award for its "Frankfurter  Allgemeine Zeitung" work for the
second year running.  Scholz & Friends'  major clients  include  Deutsche  Bank,
Deutsche Telekom,  DHL, Henkel,  Lufthansa,  Mobil Europe and Tchibo.  Major new
assignments have recently been won from Buena Vista, Center Parcs,  Europcar and
Messe Frankfurt. The only significant loss in 1997 was Compaq.

SPECIALIST MARKETING COMMUNICATIONS SERVICES

           HP:ICM

           HP:ICM  is  a  leading  specialist  communications  agency  providing
creative and production  consultancy  in the areas of live events,  exhibitions,
film, video,  multimedia and brand  experience.  The company's end products take
many forms, such as displays at visitor centers, exhibition stands, conferences,
internal corporate television networks, trans-continental roadshows, multi-media
training programs and corporate videos.  For the past four years HP:ICM has been
named "Live Event  Marketer of the Year" by Televisual  Magazine.  The agency is
based in  London  although  approximately  half of its  revenues  are  generated
outside the UK.  Some of HP:ICM's  major  assignments  include  work for British
Aerospace,  The Department of Trade & Industry,  General Motors, Halifax plc and
Marks & Spencer.

           The Facilities Group

           Based  in  central   London,   The   Facilities   Group   provides  a
comprehensive  range of technical and creative  services in the areas of design,
print, production,  artwork, audio visual, multimedia and television production.
Its  revenues  derive  from  both CCG and  Saatchi  &  Saatchi  and a number  of
independent  accounts.  New  business  wins from  external  clients  during 1997
included Linklaters, Regus, St. George Plc, Morgan Stanley and Time Products.

           The  business  operates  from a  single  site  and  provides  24 hour
coverage.  This  helps to reduce  production  times  and to add a high  level of
security to clients' projects.  The Facilities Group has expanded its specialist
services  through the recent  introduction  of two new  divisions:  Red Kite, an
interactive media company, and Winkle Films, a film production company.

           As  a  result  of  the  Demerger,   the  Company  has  a  30  percent
shareholding  in The  Facilities  Group with the  remaining  70 percent  held by
Saatchi & Saatchi.

MEDIA SERVICES

           Zenith Media Worldwide

           Zenith Media  Worldwide is a specialist  media  services and planning
agency. It is headquartered in London and has offices or affiliated  agencies in
17 European  countries and five Asia Pacific  countries and has seven offices in
North America. Zenith continues to expand with further offices planned in Europe
and two new offices in North America opening shortly.

           Zenith's  services  include  researching  media markets,  forecasting
media trends and levels of  expenditure,  developing  media  buying  strategies,
planning,  negotiating and executing the details of buying programs,  monitoring
the media to  verify  the  execution  of the  buying  program,  researching  the
effectiveness  of the  program and paying  media  owners.  Zenith's  Advertising
Expenditure  Forecasts,  which are  published  twice  yearly,  are  regarded  as
authoritative by the advertising industry.

           Zenith  provides its services to clients of Bates  Worldwide and S&S.
In addition, in 1997 slightly more than half of its revenues were generated from
Zenith's own client list.  Zenith's major direct clients include BMW/Rover Group
UK, Bristol  Myers-Squibb,  British Telecom,  Calvin Klein,  Darden Restaurants,
Kingfisher, Kraft Jacobs Suchard, Mars and Renault.

           Zenith has made  significant  investment  in its people,  information
technology systems and proprietary software. Zenith's proprietary software helps
to differentiate it from its competitors and to allow it to deliver  competitive
advantage to its clients.  Zenith's  systems,  branded  Zenith  Optimization  of
Media, ZOOM(TM), fall into three areas:

          Infrastructure.   Standardized   hardware  and   software   platforms,
          including desk-to-desk e-mail, are used across the Zenith network.

          Communication.   Zenith  uses  internet  communications  incorporating
          password protected web-sites to share and disseminate information both
          internally and with clients.

          Proprietary media systems.  A number of proprietary media systems have
          been  branded  and  launched  since 1996 to  process,  manipulate  and
          analyze data  efficiently.  Examples of these systems are ZOOM Wizard,
          which  optimizes the allocation of a client's budget by TV station and
          time of day;  ZOOM  Optimizer,  which  generates TV spot  schedules to
          maximize reach and frequency;  ZOOM Merlin,  a portfolio  optimization
          system which generates  multiple  campaign  schedules  simultaneously;
          ZOOM Maps, which models campaign and brand  awareness;  ZOOM Adweight,
          which helps  determine  targets for  effective  advertising  frequency
          levels;  ZOOM Merc, which estimates combined media net reach; and ZOOM
          Futures,  which models  estimated brand sales from media and marketing
          campaigns.

           As a result of the Demerger, CCG and Saatchi & Saatchi each have a 50
percent shareholding in Zenith, and both companies account for Zenith as a joint
venture.  In addition,  both CCG and Saatchi & Saatchi entered into an agreement
in which they agree to use Zenith as their  exclusive  media services  supplier,
subject to certain  exceptions,  until at least  December 31,  2000.  Each media
services  agreement will introduce revised  commercial terms for the purchase of
media  services  from  Zenith.  See  "Description  of  Business--Ownership   and
Operation of Zenith Media Worldwide."


PERSONNEL

           As of May 1, 1998, CCG employed approximately 4,700 people worldwide.
The success of CCG's advertising and media services businesses, like that of all
other advertising agencies, depends largely on the skill and creativity of their
personnel  and  their   relationships  with  clients.   CCG  believes  that  its
relationship with its employees is good.


ACQUISITIONS & DISPOSALS

           Acquisitions

           During 1997, Cordiant made the following acquisitions: a 51% interest
in Grapple Group 141 (Pty) Ltd., a South African company; a further 25% interest
in X/M Harrow Pty Limited,  an Australian  company,  raising its holding to 75%;
and Scholz & Friends  GmbH  acquired a further 33%  interest in Scholz & Friends
Dresden GmbH, in Germany, increasing the Group's effective holding to 76.5%.

           During  1996 the  minority  47.4% of the share  capital  of Saatchi &
Saatchi Advertising SA in France was acquired.  The acquisition was completed in
September  1996, but for accounting  purposes the minority was treated as having
been acquired on January 1, 1996.

           In May 1996,  Cordiant acquired a further 10.7% interest in the share
capital of Scholz & Friends  GmbH in  Germany,  increasing  its  holding to 90%.
During the second half of 1996, Cordiant made the following acquisitions: 51% in
each of two South African agencies,  BLGK Advertising  (Proprietary) Limited and
Saatchi & Saatchi Klerk & Barrett Holdings  (Proprietary)  Limited; the minority
interest in BSB  Saatchi & Saatchi MC Limited in Poland;  and a 50% stake in X/M
Harrow Pty Limited.

           Disposals

           In April 1995,  Cordiant  completed  the sale of the  business of the
Minneapolis  offices  of  Campbell-Mithun-Esty  ("CME").  Prior to and after the
sale,  substantially  all of the other  operations  of CME were either closed or
integrated into Bates Worldwide and S&S. Also in April 1995,  Cordiant completed
the sale of the S&S agencies in Puerto Rico and Mexico.  In September  1995, the
Kobs & Draft Worldwide network ("KDW") was sold to its management. Revenues from
these companies  aggregated  L63.3 million in 1994 and L29.3 million in 1995. In
1996 KDW was sold by its management to The Interpublic Group of Companies.  This
transaction resulted in the receipt of contingent  consideration by Cordiant, as
specified in the 1995 sale agreement  between Cordiant and KDW Management.  As a
result,  Cordiant  recognized  further gains in 1996 and 1997. In December 1995,
Cordiant  committed  to an equity  incentive  scheme  for Bates  Australia  (The
Communications  Group Pty. Ltd.)  involving the sale of 24.9% of that company to
an employee trust. In October 1997, Cordiant completed the sale of NRG. See Note
2 in the Notes to Consolidated Financial Statements.

GEOGRAPHIC COVERAGE

           Bates  Worldwide's   operating   philosophy  is  "Think  Global,  Act
Local(R)".  This is achieved by utilizing the benefits of scale and  consistency
of a worldwide  network while at the same time  exploiting  local market nuance,
opportunity  and expertise.  Most of Bates  Worldwide's  local offices  generate
substantial  local  revenue in their own right as well as serving  international
clients.  In 1997,  approximately 67 percent of Bates Worldwide's  revenues were
derived  from local  clients.  CCG serves  clients in all of the  world's  major
advertising markets.

               GEOGRAPHIC ANALYSIS OF CCG ONGOING REVENUE IN 1997

                                           Percentage   Percentage of
                                             of CCG       worldwide
                                            ongoing      advertising
                                            revenue     expenditure(1)
                                              (%)            (%)
------------------------------------------------------------------------
UK                                            12.6           6.0
North America                                 22.0          37.4
Rest of Europe, Africa and the Middle East    34.1          24.1
Asia Pacific (ex Japan)                       29.8          10.5
Other (Inc. Japan)                             1.5          22.0
                                              ----          ----
Total                                        100.0         100.0


(1) Source: Zenith Media Worldwide,  Advertising Expenditure Forecasts, December
1997

           Although the  percentage of CCG's revenue  derived from North America
is lower than North America's percentage of global advertising expenditures, CCG
has a  significant  presence in this region.  The  Company's  aim is to increase
revenue  from North  America to nearer  that of the  industry  overall,  with an
initial target of 30 percent.

           CCG's  strengths  outside North  America  reflect the vitality of its
local offices.  In 1997 Bates Dorland was the seventh largest advertising agency
in the UK and Scholz & Friends was the eleventh  largest  agency in Germany,  in
terms of gross  income,  according  to  Advertising  Age. In the Rest of Europe,
Africa and the Middle  East,  CCG derives a greater  percentage  of its revenues
than such regions contribute to total advertising expenditures. According to the
rankings  published by  Advertising  Age,  Bates  Worldwide has been the largest
network  in  Norway  and in the top two in  Denmark  for the last 20  years  and
Delvico Bates has been one of the largest  advertising  agencies in Spain for 13
years.

           In Asia Pacific  (excluding  Japan),  Bates Worldwide had the largest
advertising  network in 1997 based on information  published by Advertising Age.
It has  offices  in the  important  markets  of  Hong  Kong,  China,  Singapore,
Malaysia,  and Australia.  It is  particularly  strong in Australia where George
Patterson  Bates,  a 75.1 percent owned  subsidiary of CCG, has been the largest
agency  for  26  years  according  to  Advertising   Age.  Nearly  all  national
advertising markets are dominated by the major worldwide  advertising  networks.
The Japanese  market is the  exception  as it is dominated by domestic  agencies
with limited  international  presence.  In the rest of the world, which includes
Latin America,  the network is primarily  represented by businesses in which CCG
has minority  equity  holdings or an  affiliate  agreement.  Accordingly,  these
businesses are not included within CCG's revenue.  While CCG has a high exposure
to Asia  Pacific,  based on  revenues,  of 31  percent,  about 20  percent is in
Australasia  (Australia  and New Zealand) and only 4 percent in Southeast  Asian
countries that have suffered economic instability in 1997.

COMPETITION

           The   advertising   industry  is  highly   competitive   at  both  an
international  and local level.  CCG's principal  competitors in the advertising
industry  are the  large  multi-national  agencies  based in the US,  the UK and
France as well as smaller agencies which operate in local markets. The principal
competitive  factors include an agency's  reputation,  its creative strength and
quality of client service,  its ability to perceive  clients' needs  accurately,
the  commercial   effectiveness  of  its  ideas,  its  geographic  coverage  and
diversity, its understanding of advertising media and its media buying power. In
addition,  an agency's  ability to maintain its existing clients and develop new
relationships   depends  to  a  significant   degree  on  factors  such  as  the
interpersonal  skills  of  the  individuals  managing  client  accounts.  Normal
practice  in the  industry  is for  agency  contracts  to  have  a  three  month
termination period.

           The Company  believes that the Group is well positioned to compete in
the  advertising  industry.   From  a  client  perspective,   Bates  Worldwide's
reputation is enhanced by being the original U.S.P.(TM) agency. The Company also
believes that the  combination  of the Group's local  presence and its worldwide
network  provides it with one of the  strongest  operating  formats to implement
advertising strategies on a worldwide basis. Furthermore, the process of clients
consolidating  their business in the  advertising  market will continue to offer
opportunities for Bates Worldwide to win new business.

REGULATION

           Governments,  government agencies and industry self-regulatory bodies
in the  various  countries  in which  the  Company  operates  continue  to adopt
legislation  and  regulations  which  directly  or  indirectly  affect the form,
content and  scheduling of advertising  and other  communications  services,  or
otherwise affect the activities of such businesses and their clients. Certain of
the legislation and regulations  relate to considerations  such as truthfulness,
substantiation,  interpretation of claims made and comparative  advertising.  In
addition,  there is a tendency toward  restrictions or prohibitions  relating to
advertising for such products as pharmaceuticals, tobacco and alcohol.


ITEM 2.  DESCRIPTION OF PROPERTY.

           CCG leases all its premises.  The principal  properties leased by CCG
are as follows:


---------------------------------------------------------------------
         Location           Area   Annual Base  Next Rent  Expiration
                           Sq. Ft. Rental-      Review     of Lease
                                   Millions     Date
---------------------------------------------------------------------
405 Lexington Avenue       249,000     $3.2         --       1999
New York, New York(1)

121-141 Westbourne Terrace 62,500      L1.5         --       2003
London, England

Lansdowne House            23,000      L1.2       Various    2013
Berkeley Square London,
England(2)
---------------------------------------------------------------------

(1)  In addition,  CCG has sublet  30,000  square feet on terms  similar to, and
     coterminous  with,  its  obligations.  

(2)  Inaddition,  CCG leases  103,000  square  feet at an annual  rental of L6.5
     million which is sublet for mainly coterminous periods as CCG at an average
     annualized  rental of  approximately  L6.1  million  during 1997. A further
     49,000  square  feet at an  annual  rental of L2.9  million  is sublet on a
     short-term  basis at an average  annualized  rental of  approximately  L1.7
     million during 1997.

           In October 1997, CCG entered into a new lease at 498 Seventh  Avenue,
New York, New York.  CCG is due to begin  occupancy from April 1999. The term of
the lease is approximately  15 years with options to extend if appropriate.  The
agreement is for  initially  204,000  square feet at an annual base rent of $6.0
million subject to rent reviews at five year intervals.

           At December 31, 1997, CCG's owned and leased  properties and fixtures
(including furniture and equipment) had a net book value of L22.8 million ($37.4
million).

           CCG  considers  its  offices  and  other  facilities  to be  in  good
condition.  However,  it has  surplus  office  space  based on the  needs of its
current  business.  At December 31, 1997, L40.2 million ($65.9 million) had been
reserved by the Group for potential costs of surplus space,  primarily in London
and New York City.


ITEM 3.  LEGAL PROCEEDINGS.

           CCG has no material pending legal proceedings.


ITEM 4.  CONTROL OF REGISTRANT.

           The Company is not owned or  controlled  by any  government or by any
other corporation.

           The following  table lists,  as of June 1, 1998,  the total number of
Ordinary Shares owned by the Directors and officers of the Company as a group.

                    Identity of
Title of Class      Person or Company     Amount Owned         Percent
                                    
Ordinary Shares    Directors and             116,513           0.1%
                   officers of the
                   Company as a group

           The Directors have also been notified of the following non-beneficial
holdings  of ten  percent or more of the issued  Ordinary  Share  capital of the
Company as of June 1, 1998:

                     Identity of
Title of Class    Person or Company   Amount Owned       Percent
                                       
Ordinary Shares  Phildrew Nominees     57,136,865         25.7%
                 Ltd./PDFM Ltd.

                 Harris                29,082,578         13.1%
                 Associates, L.P.

                 Trimark               23,185,200         10.4%
                 Investment
                 Management, Inc.



<PAGE>


ITEM 5.  NATURE OF TRADING MARKETS.

           The Company's Ordinary Shares are quoted on the London Stock Exchange
Limited  (the  "London  Stock  Exchange").  The table below sets forth,  for the
quarters  indicated,  the reported high and low middle market quotations for the
Ordinary  Shares on the London Stock  Exchange based on its Daily Official List.
Such  quotations  have been  translated in each case into US dollars at the Noon
Buying Rate on each of the respective dates of such quotations.
<TABLE>
<CAPTION>


                                                               Pence Per             Translated into
                                                            Ordinary Share             US Dollars
                                                          High         Low         High          Low
        <S>      <C>                                     <C>        <C>           <C>           <C>
        1996     First Quarter............                125.0       90.0         2.01         1.40
                 Second Quarter...........                138.0      111.0         2.09         1.72
                 Third Quarter............                120.5      103.0         1.88         1.61
                 Fourth Quarter...........                114.0       90.5         1.78         1.41
        1997     First Quarter............                123.5       98.5         2.01         1.60
                 Second Quarter...........                135.5      120.0         2.22         1.97
                 Third Quarter............                135.0      118.0         2.27         1.90
                 Fourth Quarter...........                134.5      100.0         2.20         1.67
        1998     First Quarter............                123.5       88.5         2.07         1.46
                 Second Quarter...........                135.5      115.5         2.26         1.93
                 (through June 1, 1998)

</TABLE>


           The Ordinary  Shares trade in the United States on the New York Stock
Exchange,  Inc. in the form of American  Depositary  Shares  ("ADSs")  which are
evidenced by American  Depositary  Receipts  ("ADRs").  Each ADS represents five
Ordinary  Shares.  The  depositary  for the ADSs is The  Bank of New  York  (the
"Depositary").  The table below sets forth the high and low sales prices for the
ADSs as  reported  in the New York Stock  Exchange-Composite  Transactions.  The
Company  believes  that,  as of June 1, 1998,  15.8  percent of the  outstanding
Ordinary  Shares,  which are represented by ADSs, were held in the United States
by 606 record  holders and 0.2 percent of the  Ordinary  Shares were held in the
United States by approximately 47 record holders. CCG estimates that, as of June
1,  1998,  an  additional   14.7  percent  of  the  Ordinary  Shares  are  owned
beneficially by US persons giving an aggregate US holding of 30.7 percent.



<PAGE>


                                                            US dollars per
                                                                ADS
                                                         High            Low
1996
      First Quarter                                     5 7/8           4
      Second Quarter                                    6 3/8           5
      Third Quarter                                     5 5/8           4 5/8
      Fourth Quarter                                    5 3/8           4 3/8
1997
      First Quarter                                     6               4 5/8
      Second Quarter                                    6 7/8           5 5/8
      Third Quarter                                     6 11/16         5 1/2
      Fourth Quarter                                    9 1/2           5 3/8
1998
      First Quarter                                    10 11/16         7
      Second Quarter                                   11 1/2           9 1/2
        (through June 1, 1998)


           The Company  delisted from the Paris Bourse upon  consummation of the
Demerger.


ITEM 6.  EXCHANGE CONTROLS AND OTHER
         LIMITATIONS AFFECTING SECURITY HOLDERS.

           There are no  limitations  on the  rights of  nonresident  or foreign
persons to hold or vote the  Ordinary  shares  imposed by the laws of the United
Kingdom or by the  Company's  Articles  other than those which are customary and
generally  applicable to all  shareholders.  In  particular,  Article 151 of the
Company's  Articles provides that a member who has no registered  address within
the United  Kingdom  and has not  notified  the Company in writing of an address
within the United  Kingdom for the  service of notice,  shall not be entitled to
receive notice from the Company.


ITEM 7.  TAXATION.

           The following is a summary of certain UK tax  consequences  generally
applicable to a beneficial  owner of ADRs or Ordinary  Shares in the Company who
is resident in the United  States and not resident in the United  Kingdom (a "US
Holder") for the purposes of the current  double  taxation  convention on income
and  capital  gains  between  the  United  States and the  United  Kingdom  (the
"Convention").

           Subject to the following paragraph,  this summary is based on current
tax law and practice as of the date of this filing and is subject to any changes
in US or UK tax law and practice (including changes in the Convention) occurring
after  that  date.  As the  following  discussion  is only a general  summary of
certain  UK  and  US  federal  income  tax  law   consequences   (not  including
consequences  under any other laws,  including  other federal,  state,  local or
foreign tax laws), it does not purport to address all potential tax consequences
for all types of investors and, consequently, its applicability will depend upon
the  particular   circumstances   of  individual   investors.   Certain  holders
(including,  but not limited to, insurance companies,  tax-exempt organizations,
banks or dealers or traders in  securities  or  currencies,  persons that have a
"functional currency" other than the US dollar,  persons that will hold Ordinary
Shares  (or  ADSs)  as  part  of a  position  in a  "straddle"  or as  part of a
"hedging,"  "conversion" or  "integrated"  transaction for US federal income tax
purposes and persons owning, directly or indirectly, five percent or more of the
voting  shares of the  Company)  may be subject to special  rules not  discussed
below. Investors should,  therefore,  consult their own tax advisers about their
tax  position  in  relation  to  the  Company   including  the   particular  tax
consequences to them of owning and disposing of ADRs or Ordinary Shares.

           The discussion of UK taxation of dividends and refunds of tax credits
is based on current UK tax law as  potentially  amended by the  Finance  (No. 2)
Bill 1998.  The  discussion  assumes  that the Finance (No. 2) Bill 1998 will be
enacted as originally drafted. The discussion of US federal taxation is based on
the Internal  Revenue Code of 1986, as amended to the date hereof,  existing and
proposed  Treasury  Regulations,   administrative  pronouncements  and  judicial
decisions,  each of which as in effect and  available  as of the date hereof and
all of which are  subject  to  change  (possibly  with  retroactive  effect)  or
differing  interpretations  that  could  affect the tax  consequences  described
herein.


UNITED KINGDOM TAXATION OF DIVIDENDS AND REFUNDS OF TAX CREDITS

The Company

           When paying a dividend in respect of the Ordinary Shares, the Company
is generally required to account to the UK Inland Revenue for a payment known as
advance  corporation  tax  ("ACT").  The  rate of ACT is  20/80ths  of the  cash
dividend paid to  Shareholders,  equivalent to 20 percent of the sum of the cash
dividend and the related ACT. The payment of the dividend  generally  gives rise
to a "tax  credit"  in the hands of  certain  shareholders.  The rate of the tax
credit is  currently  20 percent of the sum of the cash  dividend and tax credit
(the "gross dividend"). However, the Finance (No. 2)
Bill 1998 proposes the abolition of ACT as from April 6, 1999.

           The  Company  has  the  option  to  elect  to pay a  "foreign  income
dividend" out of its non-UK source profits or those of its subsidiaries.  To the
extent that the non-UK  source  profits have borne tax in a  jurisdiction  other
than the United Kingdom in respect of which double  taxation  relief is afforded
in the UK, the Company may be able to recover from the UK Inland Revenue the ACT
it bears on the foreign  income  dividend.  A foreign  income  dividend does not
carry a tax credit.

          The Company  will be electing  for the dividend due to be paid in July
1998 to be treated as a foreign income dividend.

           The Company's  ability to pay foreign income  dividends will cease as
from April 6, 1999.

US Resident Shareholders

           For  purposes of the  Convention  and for the  purposes of the United
States  Internal  Revenue Code of 1986, as amended (the "Code"),  the holders of
the ADRs  should be  treated  as the owners of the  underlying  Ordinary  Shares
represented by the ADSs that are evidenced by such ADRs.

Tax Credits under the Convention

           Under the Convention,  certain US Holders who receive a dividend from
a UK company  (other than a foreign  income  dividend)  are  entitled in certain
circumstances to claim from the Inland Revenue payment of the tax credit or part
of the tax credit (a "Tax  Credit  Refund")  to which a UK  resident  individual
would be entitled, subject to a withholding tax. However, as from April 6, 1999,
as a result of a reduction in the rate of tax credit,  the  withholding tax will
eliminate or virtually eliminate the Tax Credit Refund.

           As the Company  will be electing  for the  dividend due to be paid in
July 1998 to be treated as a foreign income dividend,  no Tax Credit Refund will
be due under the Convention in respect of that dividend.

           As the Company does not currently  propose to pay any other  dividend
before April 6, 1999 and as, from that date, the  withholding tax will eliminate
the Tax  Credit  Refund,  the  availability  of Tax  Credit  Refunds  under  the
Convention  is not  discussed  any further in this  summary.  US Holders  should
consult their own tax advisers as to the availability or otherwise of Tax Credit
Refunds as from April 6, 1999.

UNITED KINGDOM TAXATION OF CAPITAL GAINS

           Holders of ADRs or Ordinary  Shares who are US citizens or  residents
of the  United  States  for US  federal  income  tax  purposes,  and who are not
resident  or  ordinarily  resident  in the  United  Kingdom  for UK  income  tax
purposes,  will not normally be liable to UK taxation of capital gains  realized
on the disposal or deemed disposal of their ADRs or Ordinary Shares,  unless the
ADRs or  Ordinary  Shares are held in  connection  with a trade,  profession  or
vocation  carried  on in the  United  Kingdom  through a branch or agency or, in
certain  circumstances,  their non-UK residence is only temporary.  However,  US
citizens  and  residents  holding  ADRs or  Ordinary  Shares  may be liable  for
taxation of such gains under the laws of the United States.

           In the case of an individual US Holder, any such capital gain or loss
will be (i)  mid-term  capital  gain or loss if the US Holder held the  Ordinary
Shares (or ADSs held by or on behalf of the  Depositary in the form of ADRs) for
more than one year but not more than 18 months and (ii) long term  capital  gain
or loss if the US Holder held the Ordinary  Shares (or ADSs held by or on behalf
of the Depositary in the form of ADRs) for more than 18 months. Any net mid-term
capital gain  recognized  by an  individual US Holder will be taxed at a maximum
marginal  US Federal  income tax rate that is less than the rate  applicable  to
ordinary  income,  while  any  net  long  term  capital  gain  recognized  by an
individual US Holder will be subject to a further reduced maximum marginal rate.


UNITED KINGDOM INHERITANCE AND GIFT TAX

           UK Inheritance Tax ("IHT") is a tax charged, broadly, on the value of
an  individual's  estate at his death,  upon  certain  transfers of value (e.g.,
gifts) made by  individuals  during their  lifetime and on certain  transfers of
value  involving  trusts and closely  held  companies.  A transfer of value made
during an individual's lifetime may lead to an immediate liability to IHT (e.g.,
a transfer into a discretionary  trust), or it may be potentially  exempt (e.g.,
an  outright  gift to another  individual),  in which  case it will only  become
chargeable  if the donor dies  within 7 years.  The  transfer  of value which is
deemed to occur on death is an immediately chargeable transfer of value. Special
rules  apply to assets held in trusts,  gifts out of which the donor  reserves a
benefit and gifts to or from closely  held  companies,  which are not  discussed
herein.

           Many chargeable  transfers of value do not in fact result in a charge
to tax  because  IHT is charged at a  "zero-rate"  on  transfers  of value up to
L223,000 (for  chargeable  transfers made on or after April 6, 1998).  In simple
terms, the value of all immediately  chargeable  transfers made within the seven
year period before the transfer  under  consideration  are  aggregated  with the
value  of that  transfer  in  determining  whether  the  limit  of the  L223,000
"zero-rate  band" has been reached.  For transfers of value which (in accordance
with the  aggregation  principle) go beyond the limit of the zero rate band, the
rates of tax are 20 percent on lifetime  chargeable  transfers and 40 percent on
transfers on, or within the period of three years before,  death (with  modified
rules  applying to transfers  within the period from seven to three years before
death).

           IHT is chargeable  upon the worldwide  assets of individuals  who are
domiciled  or deemed to be  domiciled  in the  United  Kingdom,  and upon the UK
situate assets of individuals domiciled elsewhere.

           Accordingly,  an individual who is domiciled in the United States and
is not deemed to be domiciled in the United  Kingdom is only within the scope of
IHT to the extent of his UK situate assets.  These will include  Ordinary Shares
in the Company which are registered in the United  Kingdom.  It is understood to
be the Inland Revenue's normal practice to treat ADRs representing  shares in UK
companies as assets situated in the United Kingdom for IHT purposes.

           The rules  outlined  above will,  in many  cases,  be modified by the
US-UK Convention on Inheritance and Gift Taxes. In general, an individual who is
domiciled  in the US for the  purposes  of that  convention  and who is not a UK
national  will not be  subject to IHT in  relation  to  Ordinary  Shares in a UK
company or ADRs  representing  Ordinary  Shares in a UK company on death or on a
lifetime  gift,  provided that any gift or estate tax due in the USA is paid and
that the  Ordinary  Shares or ADRs are not part of the  business  property  of a
permanent  establishment in the UK or part of the assets of a fixed UK base used
by the holder for the performance of services.

           In the exceptional case where the Ordinary Shares or ADRs are subject
both to IHT and to US  federal  gift or  estate  tax,  the gift  tax  convention
provides a credits system designed to avoid double taxation.


UNITED KINGDOM STAMP DUTY AND STAMP DUTY RESERVE TAX

Transfers of Ordinary Shares for a consideration

           UK  stamp  duty  is  payable  ad  valorem  on  certain  documents  or
instruments  conveying or transferring shares or securities  (including Ordinary
Shares in the Company) on sale and UK stamp duty reserve tax ("SDRT") is imposed
on  agreements  for the  transfer of certain  shares and  securities  (including
Ordinary Shares in the Company) for a  consideration  in money or money's worth.
In the case of stamp duty,  the charge is normally at the rate of L0.50 per L100
(or part of L100) of the  amount  or value of the  consideration  given  for the
transfer  and, in the case of SDRT,  0.5 percent of such amount or value.  Stamp
duty and SDRT are  generally  payable by the  purchaser  but SDRT can in certain
circumstances be collected from persons other than the purchaser (e.g.,  certain
brokers and market makers).  The charge to SDRT is normally  incurred on the day
("the  relevant  day") on which the  agreement  is made or,  if  later,  becomes
unconditional  and it normally  becomes  payable on the seventh day of the month
following that in which it is incurred.  However, if the SDRT is paid and at any
time on or within six years after the relevant day the agreement is completed by
a duly  stamped  transfer,  a claim can be made  within that six year period for
repayment  of the SDRT and, to the extent that it has not been paid,  the charge
will be canceled.

           Consequently,  transfers  of, or  agreements  to  transfer,  Ordinary
Shares in the Company will normally be subject to ad valorem stamp duty or SDRT.

           The  electronic  transfer  system known as CREST permits shares to be
held in uncertificated  form and to be transferred without a written instrument.
The  absence of a written  instrument  of  transfer  results  in such  paperless
transfers  generally being liable to SDRT rather than stamp duty.  Special rules
apply to the collection of SDRT on paperless transfers settled within CREST.

Transfers of Ordinary Shares into ADS form

           UK stamp duty or SDRT will  normally  be payable on any  transfer  of
Ordinary Shares to the Depositary or its nominee, or where the Depositary issues
an ADR in respect of Ordinary  Shares hitherto held for another purpose by it or
its  nominee.  The charge is at the rate of L1.50 per L100 (or part of L100) or,
in the case of SDRT, 1.5 percent:

(i)  in the case of a transfer  of  Ordinary  Shares for  consideration,  of the
     amount or value of the consideration for the transfer, and

(ii) in the case of a transfer of Ordinary  Shares other than for  consideration
     and in the  case of the  issue  of an ADR in  respect  of  Ordinary  Shares
     hitherto held for another purpose, of the value of the Ordinary Shares.

Transfers of Ordinary Shares within the depositary arrangements

           No UK stamp duty will be payable on an instrument transferring an ADR
or on a written  agreement to transfer an ADR,  provided that the  instrument of
transfer or the  agreement  to  transfer  is  executed  and remains at all times
outside  the UK.  Where  these  conditions  are not met,  the  transfer  of,  or
agreement to transfer, an ADR could,  depending on the circumstances,  give rise
to a charge to ad valorem stamp duty.

           No SDRT will be payable in respect of an agreement to transfer an ADR
(whether made in or outside the UK).

Transfers of Ordinary Shares out of ADS form

           Where no sale is  involved,  a  transfer  of  Ordinary  Shares by the
Depositary or its nominee to the holder of an ADR upon  cancellation  of the ADR
is not subject to any ad valorem stamp duty or SDRT, though it will generally be
subject to a fixed UK stamp duty of 50p per instrument of transfer. By contrast,
a transfer of, or agreement to transfer,  Ordinary  Shares  underlying an ADR by
the  Depositary or its nominee at the direction of the ADR seller  directly to a
purchaser for a  consideration  may give rise to a liability to ad valorem stamp
duty or SDRT generally by reference to the amount of value of the  consideration
for the transfer.

Gifts of Ordinary Shares
           A transfer of Ordinary Shares for no consideration  whatsoever is not
chargeable to ad valorem stamp duty or SDRT,  nor would it normally give rise to
the fixed stamp duty of 50p per instrument of transfer.

ITEM 8. SELECTED FINANCIAL DATA.(1) 

(1)  The  Consolidated  Financial  Statements  of the  Company  are  prepared in
     accordance  with UK Generally  Accepted  Accounting  Principles ("UK GAAP")
     which differ in certain  significant  respects  from US Generally  Accepted
     Accounting  Principles ("US GAAP").  Reconciliation to US GAAP is set forth
     in Note 37 in the Notes to Consolidated Financial Statements. The per share
     data have been translated into dollars per ADS where appropriate.

           The  selected  financial  data set forth  below is  derived  from the
Consolidated  Financial  Statements  of  the  Company  and  should  be  read  in
conjunction  with,  and is  qualified  in its  entirety  by  reference  to, such
Consolidated  Financial  Statements,  including the notes thereto. The Company's
Consolidated  Financial Statements as of December 31, 1997 and 1996 and for each
of the years in the three year period ended  December 31, 1997,  which have been
audited by KPMG Audit Plc, are included elsewhere herein.

           Significant changes were made to the Company's capital structure as a
result of the Demerger.  See "Summary Unaudited Combined and Pro Forma Financial
Information"  and  "Unaudited  Combined  and Pro  Forma  Financial  Information"
included  elsewhere in this Report.  The selected financial data set forth below
reflects  the  capital  structure  in place  prior to the  Demerger,  which  was
appropriate  historically to Cordiant and the capital position,  finance charges
and tax  liabilities  included in such data do not  reflect the Group's  capital
position,  finance  charges and tax liabilities in respect of any of the periods
covered  had  the  Group  effected  the  Demerger  prior  to  such  period.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations."




<PAGE>
<TABLE>
<CAPTION>



                                                                                 Year Ended December 31,
                                                                     
                                                      1997        1997       1996        1995        1994       1993
                                                     US$(1)         L          L          L           L           L
                                                                  (In millions, except per share data)
<S>                                                 <C>           <C>       <C>         <C>         <C>         <C>       
CONSOLIDATED INCOME STATEMENT DATA:(2)
AMOUNTS IN ACCORDANCE WITH UK GAAP
     Commission and fee income
        Continuing operations                       $1,207.2      L736.1    L754.9      L761.1      L775.4      L806.0
        Discontinued operations                        -            -          -          -           -            7.4
                                                   ---------    ---------  ---------  ---------   ---------    -------
        Total                                       $1,207.2      L736.1    L754.9      L761.1      L775.4      L813.4
     Profit (loss) before tax, and minority
     interests(3)                                      $56.7       L34.6     L41.8      L(22.6)      L32.4       L19.2
     Net profit (loss)                                 $24.8       L15.1     L24.2      L(37.3)      L13.9        L7.3
     Net profit (loss) per Cordiant Ordinary
     Share basic(4)                                     $0.06        3.4p      5.5p      (12.8)p       4.9p        2.9p



APPROXIMATE AMOUNTS IN ACCORDANCE WITH US GAAP
     Profit (loss) from continuing operations          $13.8        L8.4      L6.9      L(46.8)     L(11.5)     L(24.0)
     Profit from discontinued operations                -           -         -           -           -            2.4
                                                     -------     -------   -------     -------     -------      ------
     Net profit (loss)                                 $13.8        L8.4      L6.9      L(46.8)     L(11.5)     L(21.6)
     Net profit (loss) per Ordinary Share:(2)
       Continuing operations                           $0.06         3.8p      3.1p      (32.0)p      (8.2)p     (18.8)p
       Discontinued operations                          -           -         -           -           -            1.8p
       Net profit (loss) per Ordinary Share(2)         $0.06         3.8p      3.1p      (32.0)p      (8.2)p     (17.0)p
     Net profit (loss) per ADS:(2)
       Continuing operations                           $0.30        19.0p     15.5p     (160.0)p     (40.6)p     (94.2)p
       Discontinued operations                          -           -         -           -           -            9.4p
                                                     -------     -------   -------     -------     -------       ------
       Net profit (loss) per ADS(2)                    $0.30        19.0p     15.5p     (160.0)p     (40.6)p     (84.8)p
     Dividends including tax credit
       Per Ordinary Share                              $0.04         3.0p      2.6p        -           -           -
       Per ADS                                         $0.20        15.0p     13.0p        -           -           -


</TABLE>


<PAGE>

<TABLE>
<CAPTION>




                                                                          December 31,
                                            -------------------------------------------------------------------------
                                                1997          1997        1996        1995        1994       1993
                                               US$(1)          L           L           L           L           L
                                                                         (In millions)

<S>                                            <C>           <C>          <C>         <C>         <C>        <C>        
CONSOLIDATED BALANCE SHEET DATA:
AMOUNTS IN ACCORDANCE WITH UK GAAP
Working capital asset (deficiency)                4.6          2.8        (59.8)      (25.3)      (32.4)     (47.7)
Total assets                                    619.6        377.8        912.4       992.9       972.7      916.1
Long term liabilities, including minority       216.5        132.0        290.1       343.8       474.7      489.4
   interests
Shareholder's deficiency                       (140.5)       (85.7)      (215.3)     (224.9)     (355.5)    (383.3)
APPROXIMATE AMOUNTS IN ACCORDANCE WITH US
   GAAP
Shareholder's funds (deficiency)                 15.1          9.2         (0.4)      (19.0)      (99.4)    (113.0)

</TABLE>


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

(1)  These figures have been  translated into US Dollars at the Noon Buying Rate
     on December 31, 1997 (L1.00-$1.64).
  
(2)  Per  share  and  per  ADS  amounts  have  been   adjusted  to  reflect  the
     Consolidation.

(3)  The  profit(loss)  before  taxes  and  minority  interests  reflects:   (a)
     exceptional costs of L2.2 million,  L16.5 million,  L20.3 million, Lnil and
     L19.1  million  that were  incurred  in 1997,  1996,  1995,  1994 and 1993,
     respectively;  (b) a profit on disposal of  operations of L20.8 million and
     L17.8  million in 1997 and 1996  respectively;  (c) costs  relating  to the
     fundamental  reorganization  of the  Group as a result of the  Demerger  of
     L33.0 million in 1997 (details of (b), (c) and (d) are set out in Note 2 in
     the Notes to Consolidated Financial Statements); and (e) a loss on disposal
     of operations of L34.3 million in 1995. 

(4)  Earnings per Cordiant Ordinary Share on a fully diluted basis have not been
     disclosed as they are not materially different.

DIVIDENDS

           Dividends  recommended  by  the  Company's  Board  in  respect  of  a
particular  fiscal year are paid in the following fiscal year if approved by the
Company's  shareholders.  The  Company  has  paid  and  proposed  the  following
dividends on the Ordinary Shares in respect of the years indicated:

         Year               Dividend per      Total Dividend Amount
                           Ordinary Share          (L million)
                             (in pence)
         1993                    --                    --
         1994                    --                    --
         1995                    --                    --
         1996                    2.0                   4.4
         1997(1)                 1.2                   2.7
--------------------

(1)  If approved by the  Company's  shareholders,  such dividend will be paid in
     July 1998 in the form of a foreign income dividend.

           In 1997,  the  Demerger  was  carried  out by a demerger  dividend of
Saatchi  Ordinary  Shares.  The  transfer of net  liabilities  arising  from the
Demerger amounted to L134.6 million.  Under UK company law, the ability to pay a
dividend is  dependent  on whether the Company has  distributable  reserves.  At
December 31, 1997 the Company had distributable reserves of L17.5 million.

           The Directors  make dividend  determinations  taking into account the
CCG Group's  results of  operations,  investment  requirements,  cash flow after
repayment of debt and legal and contractual restrictions,  if any. Consideration
is given to the declaration of foreign income dividends, if appropriate.


EXCHANGE RATES

           Fluctuations  in the exchange rate between the pound sterling and the
US dollar will affect the dollar  equivalent of the pound sterling prices of the
Ordinary  Shares on the London  Stock  Exchange  and as a result,  are likely to
affect the market price of the ADSs in the United States. Such fluctuations will
also affect the dollar amounts  received by holders of ADSs on conversion by the
Depositary  of cash  dividends  paid in pounds  sterling on the Ordinary  Shares
represented by the ADSs.

           The  following  table sets  forth,  for the  periods  indicated,  the
average,  high,  low and  period  end Noon  Buying  Rates  for  pounds  sterling
expressed in US dollars per L1.


                                 Average*     High    Low   Period End
1993......................         1.50       1.59    1.42      1.48
1994......................         1.53       1.64    1.46      1.56
1995......................         1.58       1.64    1.53      1.55
1996......................         1.57       1.71    1.49      1.71
1997......................         1.64       1.70    1.58      1.64
--------------------

* The  average of the  exchange  rates on the last day of each month  during the
period.

The Noon Buying Rate for pounds sterling on June 1, 1998 was L1.00 = $1.64.



ITEM 9.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

GENERAL

           The information in "Management's Discussion and Analysis of Financial
Condition and Results of  Operations"  concerning  the results of operations and
the financial condition of CCG refers to the Consolidated  Financial  Statements
included in this Form 20-F which are  prepared in  accordance  with UK GAAP.  UK
GAAP differs in certain  significant  respects  from US GAAP.  The  Consolidated
Financial   Statements  contain  a  reconciliation  of  net  profit  (loss)  and
shareholders'  deficiency to US GAAP. A discussion of the principal  differences
is set out in Note 37 in the Notes to Consolidated Financial Statements.

           CCG's ongoing revenue is generated from  commissions and fees paid by
clients.  In each of the last three years,  between 40 and 55 percent of ongoing
revenue was  commission  based and varied with the level of media and production
expenditure.  The  remainder  was derived  from fees which were  project or time
based, as agreed with the client. With certain clients, an additional element of
remuneration  can be earned by meeting certain  performance  criteria set by the
client.   Bates   Worldwide  and  Scholz  &  Friends   generally   have  ongoing
relationships with their clients which last a number of years. In contrast,  the
majority  of  revenue  from  clients  of  HP:ICM  is based on  project  specific
assignments,  although there is often a  relationship  with the same client over
many years.

           Revenue  in  any  year  is  dependent   primarily  on  the  level  of
expenditure  by  clients  on  existing  assignments  and to a lesser  degree  on
business gains and losses. When business is won or lost there is usually a delay
of some months before revenue is affected. This is primarily because it is usual
in the  advertising  industry for  contracts  to have a three month  termination
clause.  In the case of new  commission  based  work the  delay is longer as the
agency is not paid until the advertisement has appeared in the media.

           The majority of CCG's net operating  costs are staff related and over
the past three  years  equated to  approximately  55  percent of  revenue.  When
revenue  growth is slow or declining in any  particular  operating  unit, CCG is
able over time to reduce headcount, although this can result in severance costs.
Conversely,  staffing can be increased to handle sustained  periods of increased
business  activity.  The  remainder  of net  operating  costs  relate  to leased
properties, depreciation and other administrative costs.

           The  profitability  of new business varies  depending on the terms of
remuneration  negotiated  and on the nature of the  assignment.  In  particular,
profitability  depends on whether revenue is generated by increased  spending on
existing  assignments,  new or existing clients or product categories and on the
number of offices involved in the assignment.

           CCG has offices or  affiliated  agencies in over 70 countries and its
revenues  and costs are  denominated  in a number of  currencies.  Consequently,
exchange rate  movements  between pounds  sterling and several other  currencies
have an impact on the operating result. CCG's costs are generally denominated in
the same currency as the associated  revenue,  thereby  mitigating the impact of
exchange rate movements on operating profit. At the net profit level, the impact
of exchange  rate  movements  is also  affected by the currency in which debt is
denominated and the countries in which CCG's tax charges arise.

           In September 1995,  KDW, a direct  marketing  business,  was sold. In
October 1997, the sale of NRG, a film and entertainment  research business,  was
completed.

           For  the  purpose  of  this  section,   references  to   "underlying"
performance  refers to ongoing  businesses  and  excludes the effect of exchange
rate  movements.  Additionally,  references to  "continuing"  performance of the
demerged Saatchi & Saatchi businesses excludes disposed businesses.

           As part of the Demerger,  CCG entered into a new trading relationship
with Zenith,  the commercial  terms of which differ from the  historical  terms.
These new  trading  arrangements  introduced  revised  commercial  terms for the
purchase of media  services from Zenith.  Further  details of the impact of this
revised  relationship are set out in "Summary  Unaudited  Combined and Pro Forma
Financial   Information"  and  "Unaudited   Combined  and  Pro  Forma  Financial
Information" included elsewhere in this Report.

           For the year ended  December 31,  1998,  following  the  introduction
under UK GAAP of  Financial  Reporting  Standard  10 ("FRS  10")  "Goodwill  and
Intangible  Assets",   additional  goodwill  arising  on  acquisitions  will  be
capitalized   and  amortized  over  its  useful   economic  life.  The  cost  of
acquisitions in advertising  and marketing  communications  normally  includes a
significant proportion of goodwill.  Therefore, FRS 10 may have an impact on the
future results of the Group if a material  level of  acquisition  activity takes
place.


INDUSTRY  BACKGROUND(2)

(2)  Expenditure  information  in this  section  is based  solely  on  estimates
     published by Zenith Media  Worldwide  Ltd. (a  wholly-owned  subsidiary  of
     Zenith) in its Advertising Expenditure Forecasts (December 1997).

           Zenith estimates that the outlook is for advertising  expenditures in
major media  (television,  print,  radio,  cinema and outdoor) to remain  stable
through 2000.

           Zenith  estimates  growth  will  diminish  from its 1995  peak of 8.0
percent to 6.1 percent in 2000.  Zenith  estimates  that there was growth of 6.8
percent in 1997, and forecasts that this rate of growth will slow to 6.4 percent
in 1998 with the overall total underpinned by solid growth in the US and Europe.
Zenith  estimates that North America,  Europe and Asia Pacific  accounted for 90
percent of worldwide advertising expenditures in major media in 1997.

           In Asia Pacific,  the bank and currency  crisis in Southeast  Asia in
mid-1997  is expected  to  adversely  impact  advertising  expenditure  in local
currencies in 1998, followed by a return to growth in 1999.

YEAR 2000 COMPLIANCE

           The inability of computers,  software and other  equipment  utilizing
microprocessors  to recognize  and  properly  process  information  containing a
two-digit year is commonly referred to as the Year 2000 compliance issue. As the
year 2000 approaches,  such systems may be unable to accurately  process certain
date-based  information.  The  Group  has begun an  evaluation  and  remediation
program  with  regard  to Year  2000.  The  remediation  process  may  result in
expenditures in a number of technology based areas as they pertain to millennium
compliance.  To date,  no major risks have been  identified  within CCG, but the
program is continued.  The costs  associated  with Year 2000  compliance are not
expected to be material.

           As the Group also relies on third party vendors and/or  suppliers for
its  applications,  hardware and software the Group intends to communicate  with
other companies with whom it does  significant  business to determine their Year
2000  readiness  and the extent to which the Company is  vulnerable to any third
party Year 2000 issues.  However,  there can be no guarantee that the systems of
other companies on which the Group's systems rely will be timely  converted,  or
that  a  failure  to  convert  by  another  company,  or a  conversion  that  is
incompatible with the Group's systems,  would not have a material adverse effect
on the Group.  Further,  the Group cannot guarantee the accuracy of certificates
of  compliance  knowingly  submitted to us from the  aforementioned  third party
vendors and/or suppliers.  The unanticipated or unexpected compliance failure of
any third party system may precipitate the need for the Group to provide a "fix"
or "work  around" to  remediate  any  compliance  issue,  if the  aforementioned
corrections  are in the  immediate  best interest of the Group and/or any of its
clients.

LIQUIDITY AND CAPITAL RESOURCES

General

           Prior to the Demerger,  operations of CCG, were run  separately  from
the parts of  Cordiant  that  were  demerged  or sold.  However,  CCG's  ongoing
operations were neither  capitalized nor financed as an independent  group.  The
ongoing  business  borrowings and cash resources  were managed  centrally.  Cash
generated or required by Cordiant's  businesses was either  remitted to Cordiant
by way of dividend or intercompany loan, or advanced by Cordiant to subsidiaries
by way of equity  contributions  or  intercompany  loan at the  direction of the
central  treasury  function.  The ongoing  businesses  historical cash flows, in
respect of interest,  taxes paid and financing  are therefore not  indicative of
the cash flows expected following the Demerger.

           The Group's  primary  liquidity  sources are cash flow generated from
operations, the issuance of equity and its banking facilities.

           In connection  with the Demerger,  the  consolidated  indebtedness of
Cordiant  was  allocated  between  CCG,  Saatchi & Saatchi and Zenith.  This new
capital  structure  was put in place on December  14,  1997.  The new  structure
consists of senior debt and equity.  The Group's senior debt consists of the New
Bank  Facility of up to $120  million (and a bank  guarantee  facility now of $8
million)  whose key terms are governed by the New Bank  Facility  Agreement.  Of
this facility,  $21 million is not immediately  available but $13 million of the
total will be  released  following  June 30, 1998 and the  remaining  $8 million
following  September 30, 1998, if CCG has reached certain target ratios. The New
Bank  Facility  provides,   among  other  things,   committed  revolving  credit
facilities at a rate generally between 0.75 - 1.50 percent over LIBOR, depending
on results, with a final maturity in September 2002. The facility will reduce at
six monthly intervals starting in December 1998.

           On December 31, 1997, CCG had drawings of $42 million,  compared with
Cordiant drawings of $135 million against facilities of $218 million on December
31, 1996. The primary reason for the lower facilities was the Demerger.
Facilities are primarily denominated in the same currency as drawings.

           The undrawn element of CCG's facilities is required in part for CCG's
cyclical  working  capital  needs  and in  part  to  allow  CCG to  finance  any
unforeseen  contingency.  Cyclical needs arise each month as a result of country
specific  media  payment  cycles and from  seasonal  variations  in  advertising
activity during the year which affect CCG's cash position.

           The  Group  has  significant  cash  balances  in  its   international
operations. These balances are required primarily to finance the working capital
cycles of the individual  country  operations  and, in certain cases, to provide
the  required  level of working  capital  for media  accreditation  to allow the
agencies to buy media on behalf of their clients.  Procedures to improve the use
of CCG's  international  cash balances are being developed.  The Company is also
examining ways to improve the financial efficiency of the Group.

           The table below sets out on both a  consolidated  and combined  basis
certain cash flow items for the two years ended  December 31, 1997. See "Summary
Unaudited Combined and Pro Forma Financial  Information" and "Unaudited Combined
and Pro Forma Financial Information" included elsewhere in this Report.
<TABLE>
<CAPTION>



                                                                       Consolidated Basis               Combined Basis
                                                               Years ended December 31,            Years ended December 31,
                                                                1997             1996               1997             1996
                                                                     (L million)                         (L million)
<S>                                                            <C>                <C>               <C>               <C>     
Cash flow from operating activities                             61.7               56.9              5.6              17.9
Net cash outflow arising from external Demerger costs          (13.8)               -              (13.6)              -
Cash outflow from returns on investment and service of         (12.3)             (10.1)            (4.0)             (0.7)
   finance
Tax paid                                                       (15.1)              (9.3)            (9.8)             (7.4)
Cash outflow from capital expenditure and financial            (22.5)             (24.8)            (7.0)            (10.3)
   investment

Cash outflow from acquisitions and disposals                   (11.6)             (13.7)          (162.9)             (2.9)
Equity dividend paid                                            (4.4)               -               (4.4)              -
                                                              -------           -------          --------           -------
Cash (outflow)/inflow before financing                         (18.0)              (1.0)          (196.1)             (3.4)
Net cash (outflow)/inflow from financing                        17.1              (11.2)           275.7              (5.0)
                                                              ------              ------          ------            -------
(Decrease)/increase in cash in the period                       (0.9)             (12.2)            79.6              (8.4)
                                                              =======             ======          ======            =======
</TABLE>
 

           Cash Flows from Operating Activities

           Cash generated  from  consolidated  operating  activities in 1997 and
1996 was L61.7  million and L56.9  million and  primarily  reflected an improved
level of operating  profit in 1997 of L24.1 million offset by a deterioration in
cash flow from  working  capital of L2.3  million.  In 1996 the  improvement  in
working  capital of L16.3  million  was partly due to the impact of  exceptional
charges while there was only a L3.2 million improvement in operating profit.

           Cash generated from ongoing  operations was L5.6 million (1996: L17.9
million) and primarily  reflected a  deterioration  in working  capital of L22.6
million in 1997 due to costs  associated  with the  Demerger  and an  underlying
outflow of working capital. In 1996 there was a deterioration in working capital
of L11.5 million due to payments made over the year end.

           Payments  in  respect of  unutilized  property  and other  provisions
within the  consolidated  business,  which have been provided for in prior years
were L19.2 million (1996: L16.9 million). There was an increased payment in 1997
because a premium was paid to terminate a lease  early.  The payments in respect
of ongoing  businesses  were L7.3 million  (1996:  L4.9  million).  There was an
increased  payment because the ongoing  businesses  became liable for certain US
property lease payments,  previously paid by Saatchi & Saatchi,  in anticipation
of the Demerger. These payments are expected to be L6.0 million in 1998 and L5.0
million in 1999. In total property  provisions  amounted to L40.2  million.  The
payments in respect of unutilized  property in general  represent the difference
between the  payments  made by CCG  relating to excess  space and the income CCG
receives  from  subletting  that space.  The majority of the excess space arises
from the restructuring of the former Cordiant businesses in the early 1990s.

           Net Cash Outflows Arising from External Demerger Costs

           In 1997 there were external demerger costs of L13.8 million, of which
L13.6  million were paid by the ongoing  businesses.  These  payments  were made
primarily to external  advisers of the Group.  There were no payments in respect
of the Demerger in 1996.

           Cash Outflows from Returns on Investments and Servicing of Finance

           In 1997,  consolidated  cash outflows  from net interest  expense and
dividends to minorities  were L12.3  million  compared to L10.1 million in 1996.
The increase was largely due to higher bank fees paid under the 1995  facilities
agreement as a new  facilities  agreement  was put in place after the first date
specified in that agreement.

           In 1997,  cash  outflows  from net interest  expense and dividends to
minorities for the ongoing operations were L4.0 million compared to L0.7 million
in 1996.  The  increase  was largely due to higher net  interest  expense due to
inter group transfers to/from Saatchi & Saatchi/Zenith.

           Taxation

           Consolidated net tax payments  increased from L9.3 million in 1996 to
L15.1 million in 1997. In both 1997 and 1996,  cash tax payments were lower than
the tax charges in the statement of operations because of several  non-recurring
recoveries relating to prior years.

           Net tax  payments  by the  ongoing  operations  increased  from  L7.4
million in 1996 to L9.8 million in 1997.  Provisions for tax exist in respect of
prior years.  Payments of these amounts may increase cash tax payments in future
years to a greater amount than in the statement of operations.

           Cash Flows from Investing Activities

           In 1997,  consolidated  capital  expenditure net of the proceeds from
fixed asset disposals decreased to L23.2 million from L24.0 million in 1996. For
the ongoing businesses it decreased to L10.1 million from L10.3 million in 1996.

           On a  consolidated  basis,  acquisitions  of L8.7  million  in  1997,
compared with L23.6 million in 1996 were  considerably  lower, as 1996 primarily
represented the acquisition of the  outstanding  minority  interest in Saatchi &
Saatchi France. For the ongoing businesses acquisitions amounted to L0.8 million
in 1997 compared with L3.3 million in 1996.

           On a consolidated basis, disposals of L40.5 million in 1997, compared
with L9.9 million in 1996, were  considerably  higher due to the disposal of NRG
and the sale of shares  issued to Cordiant  when its interest in KDW was sold in
1996.  Disposals in 1996 related to the sale of Cordiant's  interest in KDW. For
the ongoing businesses  disposals amounted to L23.3 million,  compared with L0.4
million of 1996, reflected the sale of NRG.

           In the ongoing  businesses there was a L185.4 million outflow in 1997
relating to the "fundamental reorganization-demerger".  This was offset by loans
repaid by the demerged businesses of L257.5 million.

           Equity Dividends Paid

           In 1997  the  consolidated  and  ongoing  businesses  paid an  equity
dividend of L4.4 million. In 1996 there was no payment.

           Cash Flows from Financing Activities

           In 1997  consolidated  loans drawn of L115.7 million and consolidated
loans repaid of L98.4 million represent the  implementation of the new financing
arrangements put in place as part of the Demerger. In 1996 repayment of loans of
L11.0 million related to the scheduled debt reduction of L18.0 million.


RESULTS OF OPERATIONS(3)

(3)  See Note 37 in the Notes to Consolidated Financial Statements for a summary
     of differences between UK GAAP and US GAAP.

           As CCG has offices or affiliated  agencies in over 70 countries,  its
revenues  and costs are  denominated  in a number of  currencies.  Consequently,
exchange rate movements  between pounds  sterling and several other  currencies,
the most  important  being the US dollar,  have an impact on the  results of the
Group.  The Group's costs are generally  denominated in the same currency as the
associated revenues,  however,  mitigating the impact of exchange rate movements
on operating profit.

           In 1997 and 1996,  revenues and trading profits on a geographic basis
have been presented to more closely  reflect the management of the operations of
the Group during 1997.  The  comparable  figures for 1995 have been  adjusted to
conform to the 1997 and 1996 presentations.

           FRS 9 "Associates and Joint  Ventures" has been adopted.  The revenue
and net operating  expenses  figures have been restated to reflect certain costs
charged by Zenith,  previously included in net operating expenses,  as a cost of
sales.  These  changes  only affect  "Summary  Unaudited  Combined and Pro Forma
Financial   Information"  and  "Unaudited   Combined  and  Pro  Forma  Financial
Information" included elsewhere in this Report.

           All prior year  earnings per share figures have been adjusted for the
rights issue completed in December 1995.


YEAR ENDED DECEMBER 31, 1997 VS. YEAR ENDED DECEMBER 31, 1996

           Revenue

          Consolidated  revenue decreased by 2 percent.  On an underlying basis,
revenue increased by 7 percent.

           For the ongoing  businesses revenue decreased by 6 percent and, on an
underlying  basis,  increased by 4 percent.  The UK growth of only 3 percent was
disappointing  and reflected a number of account losses and a transition  period
in the  management  of Bates  Dorland  which  impacted  the ability to pitch new
business.  On an  underlying  basis,  Asia  Pacific  increased  by  15  percent,
Australasia  (Australia  and New Zealand)  increased  by 6 percent,  China by 28
percent, and Japan by 86 percent. Malaysia and Thailand declined by a combined 9
percent.  The revenue performances in China and Japan reflected new accounts won
and Malaysia and Thailand  reflected the economic  conditions in those  markets.
Acquisitions  contributed  4  percent.  North  America  was down 9 percent on an
underlying basis due to the loss of Miller Brewing, which had been a loss making
account.  Excluding  Miller  Brewing,  North  America  increased  by  7  percent
reflecting growth from existing clients. The Rest of Europe increased 3 percent.
Germany  was  up 7  percent,  Italy  up 29  percent,  Spain  up 1  percent,  but
Scandinavia  was down 2 percent.  There was a 1 percent  contribution to revenue
growth from acquisitions in this region.

           While North America only accounts for 22 percent of CCG's revenue, it
is a crucial market and the recent  improvement in the new business  performance
is encouraging.  With the economic recovery gaining pace in Continental  Europe,
CCG's  weighting of 34 percent will be of  increasing  benefit.  While CCG has a
high exposure to Asia Pacific of 31 percent,  about 20 percent is in Australasia
and only 4 percent in South East Asian  countries  that have  suffered  economic
instability.

           The businesses demerged into Saatchi & Saatchi increased revenue by 1
percent  to L378.2  million  in 1997 from  L375.3  million  in 1996.  Continuing
Saatchi & Saatchi revenue was up 1 percent to L376.7 million from L373.2 million
in 1996,  and,  on a constant  exchange  rate  basis,  revenues  increased  by 9
percent.  This  increase  reflected  both an  improved  level of  business  from
existing  clients and a number of new business wins, most notably Delta Airlines
at the start of the year. On a constant  exchange rate basis,  growth in all the
regions was between 7 percent and 10 percent.

           Trading Profit Before Exceptional Items

           Consolidated  trading profit before exceptional items increased by 20
percent.  On an  underlying  basis,  trading  profit  before  exceptional  items
increased by 40 percent.

           For the ongoing  businesses  trading profit before  exceptional items
increased by 14 percent and, on an  underlying  basis,  increased by 33 percent.
The UK increased by 71 percent primarily due to a tighter control of costs. Asia
Pacific  decreased  by 26 percent to L3.5  million in 1997 from L4.7  million in
1996. On an underlying basis,  Asia Pacific declined by 21 percent.  Australasia
increased by 4 percent on an underlying basis, but the performance  elsewhere in
Asia  Pacific  was  disappointing  due to the  economic  crisis.  North  America
increased by 58 percent to L6.3 million in 1997 from L4.0 million in 1996. On an
underlying basis, profits increased 70 percent despite the fall in revenue. This
reflected  the  departure  of two major loss making  accounts  and tighter  cost
management.  The Rest of Europe  decreased  by 9 percent to L8.3 million in 1997
from L9.1 million in 1996.  On an  underlying  basis,  the Rest of Europe showed
growth of 24 percent,  which  outpaced the overall  revenue growth and reflected
the control of costs. The pro forma trading profit before  exceptional items for
1997, which takes into account the new trading agreement with Zenith,  was L24.0
million.  See "Summary Unaudited  Combined and Pro Forma Financial  Information"
and "Unaudited Combined and Pro Forma Financial  Information" included elsewhere
in this Report.

           Continuing  Saatchi & Saatchi trading profit before exceptional items
increased  by 28  percent to L29.7  million in 1997 from L23.3  million in 1996.
Continuing  Saatchi & Saatchi trading profit before  exceptional items was up 21
percent to L30.6 million from L25.3 million in 1996, and, on a constant exchange
rate basis,  trading profit before  exceptional  items  increased by 34 percent.
This increase  reflected an improved level of business from existing clients and
a number of new business  wins,  most notably Delta Airlines at the start of the
year. On a constant exchange rate basis, the performance by region varied widely
with Asia Pacific moving into a loss of L1.0 million, the UK flat, North America
increasing by 38 percent and Europe increasing by 132 percent.


           Trading Margins Before Exceptional Items

           The consolidated  trading margin before exceptional items in 1997 was
7.9 percent,  an increase from 6.4 percent in 1996.  For the ongoing  businesses
trading margins before  exceptional items increased by 1.4 percentage  points, a
21  percent  improvement  from  6.6  percent  in 1996 to 8.0  percent  in  1997,
primarily  due to improved  cost  management.  The UK  achieved  margins of 16.7
percent in 1997 against 10 percent in 1996,  reflecting the level of spending by
particular  clients and the tight  control of costs.  Margins are expected to be
significantly  lower in 1998 than in 1997.  Margins in Asia Pacific  declined to
3.6 percent in 1997 from 5.1 percent in 1996 with an uncertain  outlook in 1998.
North America  margins nearly doubled to 9.3 percent in 1997 from 5.1 percent in
1996 and are  expected to improve  further in 1998.  The Rest of Europe  margins
increased  to 7.9 percent in 1997 from 7.5  percent in 1996.  Overall the margin
improvement  was as the  Company  expected,  but the UK and North  America  were
better than expected and Asia Pacific was worse than expected.

           The improvement in trading margins before  exceptional items occurred
for  ongoing  operations  despite an adverse  impact of 0.3  percent  due to new
trading  arrangements  with Zenith.  A further  adverse impact of 0.2 percent is
expected  in 1998 due to such  trading  arrangements.  On a pro forma basis that
reflects the new Zenith trading  arrangements,  trading margins were 7.8 percent
in 1997. See "Summary  Unaudited  Combined and Pro Forma Financial  Information"
and "Unaudited Combined and Pro Forma Financial  Information" included elsewhere
in this Report.

           The  businesses  demerged  into Saatchi & Saatchi  increased  trading
margins  before  exceptional  items to 7.9  percent in 1997 from 6.2  percent in
1996. For the continuing  Saatchi & Saatchi  businesses trading margin increased
to 8.1 percent in 1997 from 6.8 percent in 1996.

           Joint Ventures and Associates

           On a  consolidated  basis  there were no material  joint  ventures or
associates.  The Demerger  resulted in Zenith becoming a joint venture  interest
between CCG and Saatchi & Saatchi and CCG having a 30 percent associate interest
in The Facilities Group, a subsidiary of Saatchi & Saatchi.  The pro forma share
of operating  profits from joint  ventures  and  associates  was L1.9 million in
1997. See "Summary Unaudited  Combined and Pro Forma Financial  Information" and
"Unaudited Combined and Pro Forma Financial  Information"  included elsewhere in
this Report.

YEAR ENDED DECEMBER 31, 1996 VS. YEAR ENDED DECEMBER 31, 1995

           Revenue

           Consolidated  revenue declined by 1 percent to L754.9 million in 1996
from  L761.1  million in 1995  primarily  due to the loss of  several  important
clients  (particularly  British  Airways and Mars) in early 1995 that started to
impact  revenue in the second  half of 1995.  On an  underlying  basis,  revenue
increased by 3 percent.

           For the ongoing  businesses  revenue increased by 3 percent to L329.5
million in 1996  compared to L320.6  million in 1995.  On an  underlying  basis,
revenue  increased by 4 percent.  Revenue gains during 1996 more than offset the
loss of the Mars  account  in the first  half of 1995,  which  started to impact
results from the second half of that year.  Mars was Bates  Worldwide's  largest
client  by  gross   billings  in  1994,   but  revenue  from  the  Mars  account
approximately halved in 1995 and was eliminated in 1996.

          In the UK, revenue from ongoing businesses  decreased to L38.0 million
in 1996  compared with L39.3 million in 1995 with the lost revenue from the Mars
account being partially replaced.

           In North America,  revenue from ongoing businesses decreased to L77.8
million  from L78.9  million in 1995,  with  revenue  lost from the Mars account
being partially replaced.

           The Rest of Europe,  Africa and the Middle  East was static at L120.7
million  compared  to  L120.6  million  in  1995.  Increased  revenues  at Bates
Worldwide,  particularly in Italy, France and Germany, were offset by a decrease
in Spain due to the departure of certain managers.

          In Asia  Pacific,  revenue  from  ongoing  businesses  increased by 14
percent to L93.0 million from L81.8  million in 1995,  due to strong growth from
both local and  multinational  clients.  Bates  Worldwide  increased  underlying
revenue  significantly  in Taiwan  and China  (including  Hong Kong) and also in
Australia.  Japan  performed  poorly,  with a reduction  in  underlying  revenue
largely due to the loss of the Mars business.

           The revenue of the continuing Saatchi & Saatchi businesses  decreased
by 5 percent to L375.3 million in 1996 from L396.0 million in 1995 primarily due
to the sale and closure of the Minneapolis  offices of CME and of KDW.  Revenue,
on a constant exchange rate basis, was flat in 1996 compared to 1995.

           Trading Profit Before Exceptional Items

           Consolidated  trading profit before  exceptional items decreased by 1
percent  to  L48.0  million  in 1996  from  L48.6  million  in 1995  and,  on an
underlying basis,  increased by 2 percent.  For the ongoing  businesses  trading
profit before  exceptional items decreased by 1 percent to L21.6 million in 1996
from L21.7 million in 1995 and by 2 percent, on an underlying basis. The trading
results do not  reflect  the  revised  commercial  terms with  Zenith  which CCG
entered into as part of the Demerger.

           In the UK, trading profit from the ongoing businesses decreased by 26
percent  to L3.8  million  in 1996  from  L5.1  million  in 1995.  The  decrease
primarily  reflected cost increases at Bates Dorland to develop the capabilities
that were central to the launch of its  interactive  capabilities.  In addition,
HP:ICM had a stronger year in 1995 due to a car launch promotion.

           In North America, trading profit from ongoing businesses decreased by
17 percent to L4.0 million in 1996 from L4.8 million in 1995.  On an  underlying
basis,  trading profit  decreased at a similar rate. The decrease was mainly due
to a management decision to maintain service levels for Miller Brewing despite a
reduction in revenue.

           In the Rest of Europe,  Africa and the Middle  East,  trading  profit
from  ongoing  businesses  increased  by 38 percent to L9.1 million in 1996 from
L6.6 million in 1995. On an underlying basis, the increase was 44 percent.  This
increase  reflected the  combination of revenue  increases in Italy,  France and
Germany,  and the  results  of the  management  actions  to reduce  staff  costs
following the loss of Mars in 1995.

           In Asia Pacific,  trading profit from ongoing businesses decreased by
10 percent to L4.7 million in 1996 from L5.2 million in 1995.  On an  underlying
basis, profits fell by 19 percent.  This was principally due to a provision made
for  losses  in a  quasi-subsidiary  in  Indonesia.  Underlying  increases  were
experienced  in Japan,  due to management  action to reduce costs  following the
loss of Mars, and in Australia as a result of revenue increases. Reductions were
experienced in Singapore due to investment  made to develop the business and New
Zealand which suffered client losses.

           For the demerged Saatchi & Saatchi businesses,  trading profit before
exceptional  items  decreased  by 6 percent to L23.3  million in 1996 from L24.7
million in 1995.  This was primarily due to the sale and closure of CME and KDW.
Trading profits before  exceptional  items for the continuing  Saatchi & Saatchi
business  increased by 14 percent to L25.3 million in 1996 from L22.3 million in
1995 and increased by a similar amount on a constant exchange rate basis.

           Trading Margins Before Exceptional Items

           Trading margin before  exceptional  items for the ongoing  businesses
was 7.1 percent in 1996,  compared to 7.2  percent in 1995.  The trading  margin
before  exceptional  items does not reflect the  revised  commercial  terms with
Zenith which CCG has entered into as part of the Demerger.

           Consolidated  trading margins before exceptional items were unchanged
at 6.4 percent. On a geographic basis, trading margins were as follows:

                                                                 1996      1995
                                                                 (%)        (%)
UK........................................................       10.9      11.1
North America.............................................        6.3       5.1
Rest of Europe, Africa and the Middle East................        6.5       7.5
Asia Pacific..............................................        2.9       3.3
Total.....................................................        6.4       6.4

           On a geographic basis, trading margins from the ongoing businesses in
1995 and 1996 were as follows:

                                                                1996      1995
                                                                 (%)       (%)
UK........................................................        9.6     13.0
North America.............................................        5.0      6.1
Rest of Europe, Africa and the Middle East................        7.4      5.5
Asia Pacific..............................................        5.0      6.4
Total.....................................................        6.4      6.8


EXCEPTIONAL OPERATING ITEMS AND DISPOSALS

           On a consolidated basis,  exceptional operating expenses in 1997 were
L2.2 million,  in 1996 were L16.5 million,  and in 1995 were L20.3 million.  The
exceptional  operating  expense in 1997 of L2.2  million  reflected  a provision
against the goodwill  relating to ongoing  operations  in  Indonesia,  which was
taken  in  view  of the  economic  uncertainty  in that  country.  In  1996  the
exceptional  expenses of L16.5  million  included  L0.2  million  related to the
closure of a U.S.  pension plan in ongoing  operations  and L16.3  million which
related  to the  demerged  Saatchi  &  Saatchi  businesses.  The  L16.3  million
comprised  L8.1 million for the closure of a U.S.  pension plan and L8.2 million
for  property  provisions.  In 1995 the  exceptional  expenses of L20.3  million
included  L13.2  million  related to severance and  reorganization  costs in the
ongoing  businesses  following  the  loss  of the  Mars  account,  L0.9  million
litigation and associated costs incurred by ongoing  businesses  relating to the
departure  of a former  Chairman and other  senior  executives  and L6.2 million
which related to the demerged Saatchi & Saatchi businesses.

           Consolidated  profits on businesses disposed of were L20.8 million in
1997, L17.8 million in 1996 and a net loss of L30.3 million in 1995. In 1997 the
profit of L20.8  million  included a profit of L16.5  million on the sale of NRG
and a L4.3 million profit on the sale of shares received as  consideration  when
Cordiant sold its interest in KDW. In 1996 the profit of L17.8  million  related
primarily to the sale of Cordiant's  interest in KDW. The balance  reflected the
receipt of additional proceeds from disposals in prior periods. In 1995 the loss
of L30.3  million  arose  primarily  from the sale and  closure  of CME and also
included a goodwill write-off  connected with the implementation of an incentive
scheme for employees of Bates in Australia (The Communications Group Pty. Ltd.).
The  transactions in 1995 were cash positive but incurred an accounting loss due
to the  write-off  of L50.2  million  of  goodwill  through  the profit and loss
account.  This goodwill had already been eliminated against shareholders' funds.
The receipt of additional  proceeds from  disposals in prior periods  offset the
losses in 1995.

           In 1997  there  were  consolidated  non-operating  expenses  of L33.0
million due to the fundamental  reorganization  of the business to implement the
Demerger.  The amounts payable in relation to the Demerger  including  advisors'
fees,   temporary  staff  and  other  costs  amounted  to  L20.2  million.   The
reorganization  of the Cordiant  head office and its  combination  with the head
offices of Bates  Worldwide  and S&S to form the two successor  operations  cost
L6.7 million. The Demerger also resulted in an inter-group property provision of
L6.1  million.  This  represented  the  difference  between the rent  payable by
Saatchi & Saatchi  and the amount  receivable  from  Zenith for space  sublet to
them.

NET INTEREST EXPENSE AND SIMILAR ITEMS

           Consolidated  net interest expense and similar items amounted to L8.8
million in 1997,  L7.5 million in 1996 and L20.6  million in 1995. In 1997 there
was a small  increase due to a lower level of interest  received  and  increased
bank fees offset by a foreign  exchange  gain.  In 1996 the  decrease  over 1995
reflected the substantial reduction of Cordiant's average net debt following the
1995 rights issue and lower borrowing costs.

           In 1997 as part of the Demerger process,  new financing  arrangements
were put in place to reflect  CCG's  status as a stand alone  company and not as
part of  Cordiant.  Therefore  the Company  believes  that the most  appropriate
indicator of financing charges for CCG are the pro forma financial statements.

           The pro forma net  interest  and  similar  charges  amounted  to L0.7
million in 1997.  Despite an average net cash position CCG would have incurred a
charge  because of its working  capital  cycle (both during each month,  derived
from the media payment cycle in each country,  and seasonally as periods of high
activity improve the cash position), the geographic distribution of its cash and
borrowings,  bank  fees  and  the  share  of  interest  of  joint  ventures  and
associates. See "Summary Unaudited Combined and Pro Forma Financial Information"
and "Unaudited Combined and Pro Forma Financial  Information" included elsewhere
in this Report.

TAXATION

           Excluding disposals, exceptional items and demerger costs, Cordiant's
effective  tax rate was 35.7  percent  in 1997,  36.5  percent  in 1996 and 43.9
percent in 1995.  The reduction in the tax rate between 1995 and 1996  reflected
the change in the geographic mix of taxable profit and the reduction of interest
expense in the U.S. following the 1995 rights issue.

           The  Demerger  has altered the tax  position of CCG.  Therefore,  the
Company  believes that the most  appropriate  indicator of the tax charge is the
pro forma  information.  Since  over 85  percent  of CCG's  business  is located
outside  the UK, the UK is not the  dominant  tax regime for the Group.  The pro
forma tax rate in 1997, excluding exceptional operating items, was 40.0 percent.
See  "Summary  Unaudited  Combined  and Pro  Forma  Financial  Information"  and
"Unaudited Combined and Pro Forma Financial  Information"  included elsewhere in
this Report.

EQUITY MINORITY INTERESTS

           Consolidated  equity  minority  interests  were L2.0 million in 1997,
L2.8 million in 1996 and L2.8 million in 1995.  Equity  minority  interests from
ongoing  businesses  were L1.8  million in 1997,  L2.6  million in 1996 and L1.1
million in 1995.  The  decline  in ongoing  equity  minority  interests  in 1997
reflected the impact of exchange rate movements and the poor trading of one unit
and the increase in 1996 reflected the new incentive scheme in Bates Australia.

RETURN ATTRIBUTABLE TO SHAREHOLDERS

           There was a  consolidated  profit  for the year of L15.1  million  in
1997,  L24.2 million in 1996 and a loss of L37.3  million in 1995,  resulting in
earnings  per share of 3.4p in 1997,  5.5p in 1996 and a loss per share of 12.8p
in 1995.  Excluding  exceptional items the earnings per share were 6.6p in 1997,
5.2p in 1996 and 5.2p in 1995. The earnings per share figures are unadjusted for
the Consolidation that took place as part of the Demerger.

           The Demerger has established a new structure for the Group,  resulted
in new trading  arrangements  with Zenith,  put in place a new capital structure
and altered the tax  position.  Therefore  the Company  believes  that pro forma
statements  give a better  indication  of these  results  of CCG.  The pro forma
profit for the year was L11.0  million in 1997,  resulting in earnings per share
of 5.0p in 1997.  Excluding  all  exceptional  items the pro forma  earnings per
share were 5.9p in 1997. See "Summary Unaudited Combined and Pro Forma Financial
Information"  and  "Unaudited  Combined  and Pro  Forma  Financial  Information"
included elsewhere in this Report.

          A foreign  income  dividend of 1.2p per share has been  recommended in
respect of 1997.  The  comparable  1996 figure was a net  dividend of 1.0p.  Pro
forma  earnings  excluding  exceptional  items covered the dividend 4.9 times in
1997.  Saatchi & Saatchi  recommended  a net dividend of 1.2p in respect of 1997
and the combined dividend from CCG and Saatchi & Saatchi amounts to a 20 percent
increase over the comparable  dividend of 2.0p in respect of 1996.  There was no
dividend  payment in respect of 1995.  In 1997 the Demerger was carried out by a
demerger  dividend  of  shares  in  Saatchi  &  Saatchi.  The  transfer  of  net
liabilities arising from the Demerger amounted to L134.6 million.


SUMMARY UNAUDITED COMBINED AND PRO FORMA FINANCIAL INFORMATION

           The   Consolidated   Statements   of   Operations   included  in  the
Consolidated  Financial  Statements include the results of Saatchi & Saatchi and
Zenith until they were  demerged on December 14, 1997 and treat them as disposed
operations.  By (i) removing from such Consolidated Statements of Operations the
results of the demerged groups of companies,  (ii) accounting for The Facilities
Group  and  Zenith as an  associate  and joint  venture  respectively  and (iii)
reinstating inter-Group trading, it is possible to derive historical information
("Combined Results") as if the CCG businesses had been demerged with effect from
January 1, 1996.  The Combined  Results  still  reflect the former  structure of
Cordiant and do not reflect the new  financing and tax  arrangements  of CCG. To
assess the historic  performance  of CCG as if the  post-Demerger  structure and
financing  arrangements had been in place for 1997, pro forma adjustments to the
Combined Results have been made to derive pro forma results.  Set out below, for
selected  information,  is a reconciliation  of the  Consolidated  Statements of
Operations  included in the  Consolidated  Financial  Statements to the Combined
Results and then to the pro forma results.

          The pro  forma  adjustments  have  been  made to  reflect  principally
changes to the structure of the CCG Group, new trading arrangements with Zenith,
new  financing  arrangements  for CCG and Zenith and the costs of the  Demerger.
Further changes are made to reflect the interest and tax implications.

           Other  than the  Consolidated  Statement  of  Operations  data,  this
information  is  unaudited  and it does not  necessarily  reflect the results of
operations or financial  position of CCG that would have been achieved as of the
dates  indicated,  nor is it  necessarily  indicative  of the future  results of
operations  or future  financial  position of CCG.  The  combined  and pro forma
information has been prepared on the basis of UK GAAP.



<PAGE>

<TABLE>
<CAPTION>


      YEAR ENDED        CONSOLIDATED    DEMERGED                          COMBINED       PRO FORMA    PRO FORMA CCG
  DECEMBER 31, 1997        CORDIANT     OPERATIONS(1)   ADJUSTMENTS(2)      CCG        ADJUSTMENTS(3)      L m
                              Lm             L m             L m            L m             L m
<S>                        <C>            <C>              <C>           <C>              <C>           <C>        
Group turnover             4,206.2        (3,688.3)        1,108.1       1,626.0          (22.7)        1,603.3
                          --------        ---------        -------       -------        --------        -------
Group revenue                736.1          (420.1)             0.1        316.1           (8.5)          307.6
                         ---------       ----------     -----------     --------       ----------     ---------
Operating profit              55.6           (31.5)            -            24.1           (2.3)           21.8
Share of profits less
   losses of joint
   ventures and                
   associated
   undertakings                -              (0.9)            2.2           1.3            0.6             1.9
Non-operating
   exceptional items         (12.2)         (763.9)          626.2        (149.9)         149.9             -
Dividends to Saatchi
& Saatchi                      -             (10.4)            -           (10.4)          10.4             -
Interest receivable/
(payable)                     (8.8)           11.2              2.4          4.8           (5.5)           (0.7)
                        -----------     ----------      -----------    ----------      ---------      ----------
(Loss)/profit before
taxation                      34.6          (795.5)          630.8        (130.1)         153.1            23.0

Taxation                     (17.5)            9.4            (1.4)         (9.5)          (0.7)          (10.2)
                         ----------     ------------    ------------   -----------     ----------     ----------
(Loss)/ profit after
taxation                      17.1          (786.1)          629.4        (139.6)         152.4            12.8
                         ==========       ==========      =========      =========       =======       =========

</TABLE>

--------------------
(1) The results of Saatchi & Saatchi and Zenith.
(2) Adjustments  were made (i) to reinstate  inter-Cordiant  trading and (ii) to
    account for the results of Zenith (a joint venture) and The Facilities Group
    (an associate) on the equity method.
(3) Specific adjustment to the Combined Results were to:

           (a) reduce  trading  profit to reflect the new trading  terms for the
      purchase of media services from Zenith, with an offsetting increase in the
      share of profits from joint ventures;

           (b)  eliminate  inter-Cordiant  interest  receivable  from  Saatchi &
      Saatchi  and Zenith and adjust  external  interest  to reflect the revised
      financing arrangements;

           (c)  eliminate  the  results of NRG, a business  disposed of in 1997,
      substituting notional interest on the proceeds received;

           (d) eliminate exceptional  non-operating Demerger expenses, profit on
      disposal of NRG and dividends paid by  subsidiaries  to Saatchi & Saatchi;
      and

          (e) adjust the tax charge to  reflect  the above  adjustments  and the
     current structure of the Group.

ITEM 9A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

           Not applicable.



<PAGE>


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.

           The Directors and Executive Officers of CCG are as follows:

Name                 Position                                      Age


Michael Bungey*      Director and Chief Executive Officer of       58
                     the Company and Chairman and Chief
                     Executive Officer, Bates Worldwide
Arthur D'Angelo*     Finance Director of the Company               46
Jean de Yturbe*      Director, Chairman, Bates Europe              51
Alex Hamill*         Director, Chief Executive Officer, Bates      55
                     Asia Pacific
Peter M. Schoning*   Director, Chairman and Chief Executive        52
                     Officer, Scholz & Friends
Bill Whitehead*      Director, Chief Executive Officer, Bates      52
                     North America
Charles Scott        Non-executive Chairman of the Company         49
Dudley Fishburn      Non-executive Director                        51
Professor Theodore   Non-executive Director                        73
Levitt
James Tyrrell        Non-executive Director                        57
Dr. Rolf Stomberg    Non-executive Director                        58
Tim Jackson**        Company Secretary                             39
Stuart Howard**      Deputy Finance Director and Treasurer         36
David F. Ham         Group Controller                              32
Stanley Bendelac*    Chief Operating Officer, Bates Europe         56
Les Stern*           Worldwide Planning Director, Bates            50
                     Worldwide
John Fawcett*        Chief Executive Officer, George               48
                     Patterson Bates
Ian Smith*           President, International, Bates Worldwide     48
*     Member of the Executive Committee
**    Mr. Jackson will resign as Company Secretary effective June 26,
      1998 and Stuart Howard will become Company Secretary on such date.

EXECUTIVE DIRECTORS

           Michael Bungey,  Chief Executive  Officer of the Company and Chairman
and Chief Executive Officer, Bates Worldwide. In 1971, Michael Bungey set up his
own agency, Michael Bungey & Partners.  This was merged with Dorland Advertising
in 1984. In 1988 he became Chairman and Chief Executive Officer of Bates Dorland
and Bates  Europe.  In 1993,  he was  appointed  President  and Chief  Operating
Officer of Bates Worldwide,  Chief Executive  Officer in April 1994 and Chairman
in December 1994. He joined the Board of Cordiant in January 1995.

           Arthur  D'Angelo,  Finance  Director of the Company.  Arthur D'Angelo
joined  Saatchi & Saatchi  Holdings  USA in October 1987 as Tax Director and was
subsequently  appointed  President  and Chief  Executive  Officer  of  Saatchi &
Saatchi  Holdings (USA) Inc. He joined Bates USA as Executive Vice President and
Chief  Financial  Officer  in April  1994 and later  that  year was named  Chief
Financial  Officer  of Bates  North  America.  In July 1995 he was  named  Chief
Financial Officer of Bates Worldwide.

           Jean de Yturbe,  Chairman, Bates Europe. Jean de Yturbe was President
of HDM  Europe  from  1985  to 1990  and  Chief  Executive  Officer  of  Eurocom
Advertising  Worldwide  from 1990 to 1992. He joined Bates in July 1993 as Chief
Executive  Officer of Bates  France and was named  Chairman  of Bates  Europe in
April 1995.

           Alex Hamill, Chief Executive Officer, Bates Asia Pacific. Alex Hamill
joined the Ted Bates group in 1968. In 1978 he was appointed  General Manager of
George  Patterson in Australia.  In 1984 he was appointed  Managing  Director of
George  Patterson's  Sydney  office  and in 1987  Managing  Director  of  George
Patterson  Australia.  In 1991 he was  appointed  Chairman  and Chief  Executive
Officer of George  Patterson Bates and Regional  Director for Bates Worldwide in
Asia-Pacific.

           Peter M. Schoning,  Chairman and Chief  Executive  Officer,  Scholz &
Friends. Prior to joining Scholz & Friends, Peter M Schoning worked in a variety
of advertising agencies in Munich,  Paris and Hamburg,  where he, most recently,
was a member of the Lintas  management  team. He joined Scholz & Friends in 1984
as Managing  Director  and was named  Managing  Partner in 1987.  In 1993 he was
appointed  Chief  Executive  Officer at the agency and since 1995 he has led the
agency as Chairman and Chief Executive Officer.

           Bill Whitehead,  Chief Executive Officer,  Bates North America. Prior
to  joining  the Ted Bates  group in 1971,  Bill  Whitehead  worked  for  Foster
Advertising. In 1983 he joined Bates Canada and in 11 years with the agency held
a number of senior  positions,  most  recently as Chairman  and Chief  Executive
Officer.  In May  1994 he was  named  Executive  Director  of  Worldwide  Client
Services  at Bates  Worldwide  and at the same time  Regional  Director of Latin
America for Bates Worldwide.  In December 1994, he was appointed Chief Operating
Officer for Bates North America. In September 1995 he became President and Chief
Operating  Officer of Bates USA. In July 1996 he became Chief Executive  Officer
of Bates North America.

NON EXECUTIVE DIRECTORS

           Charles Scott, Chairman of the Company. Charles Scott worked for Itel
Corporation  before joining IMS  International,  Inc. in 1977 where he was Chief
Financial  Officer  from 1986 until  joining  Cordiant  as Finance  Director  in
January  1990.  He was promoted to Chief  Operating  Officer of Cordiant in July
1991 and its Chief  Executive  Officer in April 1993.  In January  1995,  he was
appointed  Chief  Executive  Officer  and Acting  Chairman.  In July 1995 he was
appointed  executive  Chairman  and in  December  1997 he  became  non-executive
Chairman.  He  is  non-executive  Chairman  of  Robert  Walters  plc  and  is  a
non-executive  director of adidas AG and of Joe's  Developments  Limited.  He is
also non-executive Chairman of Saatchi & Saatchi plc. In addition, he has been a
director of Emcore Corporation since February 1998 and of TBI since May 1998.

           Dudley  Fishburn,  Director.  Dudley  Fishburn  has been a Member  of
Parliament and Parliamentary  Private Secretary at the Foreign Office and at the
Department  of Trade and  Industry.  He is  Associate  Editor of The  Economist,
Treasurer  of  the  National  Trust,  Chairman  of  the  Trustees  of  the  Open
University,  Chairman at HFC Bank plc and a Trustee of the Prison  Reform Trust,
all of which are based in the UK. He is a  non-executive  director of  Household
International, Inc. and Euclidian plc.

          Professor  Theodore  Levitt,  Director.  Theodore  Levitt is Edward W.
Carter Professor of Business  Administration,  Emeritus,  at Harvard  University
Graduate School and serves on the board of Sandford C. Bernstein Funds,  Inc. in
the US.  He is also the  author of  numerous  articles  and books on  economics,
politics,  management  and  marketing  and was  formerly  Editor of the  Harvard
Business Review.

           James  Tyrrell,  Director.  James Tyrrell  joined the Board on May 1,
1998. He is a director of London  International  Group plc and was Group Finance
Director until November 1997.  Previously he was Group Finance Director of Abbey
National  Plc and  Managing  Director  of HMV Shops  Limited.  He is Chairman of
Ferguson International PLC, a non-executive director of Mastercommunications Ltd
and is a Governor of Bradfield College.

          Dr. Rolf Stomberg,  Director. Rolf Stomberg joined the Board on May 1,
1998.  From 1970 to 1997, when he retired from the Main Board, he worked for The
British  Petroleum Company plc where he was Chief Executive Officer for B.P. Oil
International  and a B.P. Group Managing  Director.  He serves on a number of UK
and  continental  boards  and  is  a  Visiting  Professor  at  Imperial  College
Management  School,  London and the  Business  School of  Institut  Francais  de
Petrole in Paris.

EXECUTIVE OFFICERS

           Tim Jackson,  Company  Secretary of the Company.  Tim Jackson  joined
Cordiant in 1986. He became Director of Investor  Relations in 1989 and acted as
Company  Secretary  from January 1995 to May 1995. He is an Associate  member of
the Association of Chartered Certified  Accountants and became Company Secretary
of the Company on Demerger.

           Ian Smith is President,  International,  Bates Worldwide and a member
of the Executive Committee.  He joined the George Patterson Bates agency in 1989
and was named General Manager and New Business Director in 1990. In 1996, he was
appointed Managing Director of George Patterson Bates Australia.

           Stuart Howard,  Deputy Finance Director and Treasurer of the Company.
Stuart  Howard  joined  the  Company  on May  1,  1998  from  WPP  where  he was
International Treasurer.  From 1992 he was Group Finance Director for Metrovideo
and from 1990 to 1992 Deputy  Finance  Director at  McColls.  Prior to that,  he
spent two years as Regional Controller at WPP and four years with KPMG London.

           David  F.  Ham  joined  Cordiant  in May  1996 as  Manager  of  Group
Reporting.  Prior to that he was Group  Accountant  at Alfred  McAlpine plc from
1994 and spent six years at Coopers & Lybrand.  In 1997, he was appointed  Group
Controller of the Company.

           Stanley  Bendelac,  Chief Operating  Officer,  Bates Europe. In 1971,
Stanley Bendelac founded Delvico Bates, an operating unit within Grupo Bates. In
addition to his  responsibilities on the Bates Worldwide Management Board, he is
currently Chairman and Chief Executive Officer of Grupo Bates S.A.

           Les Stern,  Worldwide Planning Director,  Bates Worldwide.  Les Stern
joined Bates Dorland in 1990 as Planning Director. Following secondment to Bates
New York he was made Worldwide Planning Director in 1994. Prior to joining Bates
Worldwide he was Planning  Director at WCRS, having moved there after five years
as Group Account Director at Saatchi & Saatchi.

           John Fawcett,  Chief Executive Officer,  George Patterson Bates. John
Fawcett began his advertising career with George Patterson Bates, and has worked
in various  roles  around the world for Leo Burnett and J. Walter  Thompson.  He
rejoined  George  Patterson  Bates  as a  creative  group  head and  became  the
company's  first National  Creative  Director in March 1989. He was appointed as
its Managing Director Australia in June 1992 and Chief Executive Officer in July
1996, and currently is Chairman of the Bates Worldwide Creative Board.

EFFECT OF DEMERGER

           The Demerger  resulted in a number of changes to the  composition  of
the Cordiant Board and the terms of employment or engagement of Directors:

     (i)  Charles  Scott and  Michael  Bungey  remain  Directors  of the Company
          following  the  Demerger,  but on  different  terms  than prior to the
          Demerger. See "Compensation of Directors and Officers."

    (ii)  Bob Seelert,  Wendy Smyth and Kevin  Roberts  resigned as Directors of
          Cordiant  and took  positions  as  executive  directors  of  Saatchi &
          Saatchi.

    (iii) Five new executive  Directors  were  appointed  (Alex Hamill,  Jean de
          Yturbe, Peter M Schoning, Arthur D'Angelo and Bill Whitehead),  all of
          whom were previously senior executives of Cordiant. With the exception
          of Alex Hamill,  each Director entered into new service  Agreements or
          revised terms of employment with the Company or another company in the
          Group. See "Compensation of Directors and Officers."

     (iv) Dudley  Fishburn and Professor  Theodore  Levitt remain  non-executive
          Directors of the Company, pursuant to new letters of appointment.  Sir
          Peter Walters  resigned as a  non-executive  Director of Cordiant with
          effect  from the  Effective  Date and  joined  the board of  Saatchi &
          Saatchi in  anticipation  of the Demerger.  Dr. Thomas Russell and The
          Hon. Clive Gibson resigned as non-executive Directors of Cordiant. Two
          new  non-executive  Directors,  James  Tyrrell and Dr. Rolf  Stomberg,
          joined the Board with effect from May 1, 1998.


RE-ELECTION OF DIRECTORS

           The  Articles  of the  Company  provide  that at the  Annual  General
Meeting in every year,  one-third  of the  Directors  for the time being,  or if
their  number is not three or a multiple  of three  then the  number  nearest to
one-third,  shall retire from office, the Directors to retire in each year being
those who have been longest in office since their last election,  but as between
persons who became  Directors on the same day those to retire shall (unless they
otherwise  agree among  themselves)  be determined  by lot. A retiring  Director
shall be eligible for  re-election.  Any Director not  re-elected  at the Annual
General Meeting shall retain office until the Meeting appoints another person in
this  place,  or if it does not  appoint  a  replacement,  until  the end of the
Meeting.

CORPORATE GOVERNANCE

           The  Company  complied  throughout  the  year  with  the Code of Best
Practice  included in the Cadbury  report on the financial  aspects of corporate
governance and continues to comply.  In addition,  the Company has complied with
the   recommendations   of  the  Greenbury   Committee's  report  on  Directors'
remuneration and the provisions of the Code of Best Practices in that report and
annexed to the London Stock Exchange's Listing Rules.

           A  separate  Audit  Committee  and  a  Remuneration  and  Nominations
Committee exist, both of which are comprised of solely non-executive directors.

           The main duties of the Audit  Committee are to oversee the affairs of
the Group,  to review the  financial  statements  and  preliminary  and  interim
results, to review the findings of the external auditors, to direct the internal
audit function and monitor the management accounting procedures,  to investigate
any  irregularities  and to make  recommendations  to the Board  concerning  the
appointment and remuneration of external  auditors.  The Audit Committee,  which
met twice  during  1997,  is  comprised  of  Charles  Scott  (Chairman),  Dudley
Fishburn, Dr. Rolf Stomberg, James Tyrrell and Prof. Theodore Levitt.

           The main duties of the Remuneration and Nominations  Committee are to
determine the  remuneration,  benefits and terms and conditions of employment of
the  executive  Directors and of the Company's  most senior  employees.  It also
deals with nominations to the Board, for which the Chief Executive  Officer also
joins the  Committee  The  Committee  members  are Dudley  Fishburn  (Chairman),
Charles Scott,  James Tyrrell,  Dr. Rolf Stomberg and Professor Theodore Levitt.
The Committee,  which met five times in 1997, makes recommendations to the Board
on the remuneration of the executive  Directors and senior executives drawing on
independent external advice as necessary.  In setting levels of remuneration and
performance  targets for  incentive  plans,  the  Committee  takes into  account
prevailing  market  compensation  practice  and the current  performance  of the
Company.

           In  carrying  out  its  duties,   the  Remuneration  and  Nominations
Committee  carefully  considers  the  provisions  of  the  Greenbury  Report  on
Directors' remuneration and the provisions of the Codes of Best Practice annexed
to The London Stock  Exchange's  Listing  Rules.  It is the Company's  policy to
establish  a  remuneration  strategy  which  rewards  performance  and  enhances
shareholder   value  by  creating  a  greater   community  of  interest  between
shareholders and employees.

           The Executive  Committee consists of Michael Bungey,  Chief Executive
Officer; Arthur D'Angelo,  Finance Director;  William Whitehead, Jean de Yturbe,
Alex  Hamill  and Peter M.  Schoning,  the  Executive  Directors;  plus  Stanley
Bendelac,  John Fawcett, Ian Smith and Les Stern, senior executives within Bates
Worldwide.

           The  Executive  Committee  has  as  its  purpose  to  deal  with  the
day-to-day and ongoing  operational issues and to improve the communications and
co-ordination  between the Company and the principal  operating divisions of the
group.  The Cordiant  Executive  Committee met on two occasions  during 1997. In
addition,  an extended  form of the  Committee met on a regular basis from March
1997 with regard to the Demerger.

DIRECTORS' INTERESTS
                    Beneficially    Ordinary Share     Equity
                       Owned           Options      Participation
                  Ordinary Shares                        Rights
    
A. D'Angelo             960            328,681          593,401
M. Bungey            55,990            647,020          890,110
D. Fishburn               -                  -                -
A. Hamill                 -            397,343          593,401
T. Levitt            18,796                  -                -
P. Schoning               -            132,426          593,401
C. Scott*            39,214            787,583                -
R. Stomberg               -                  -                -
J. Levitt                 -                  -                -
W. Whitehead            787            255,356          593,401
J. de Yturbe              -            260,996          593,401

--------------------
*Includes spouse's interests



<PAGE>


ITEM 11.  COMPENSATION OF DIRECTORS AND OFFICERS.

           In 1997, the aggregate amount of compensation paid or accrued for all
Directors and  executive  officers as a group (26 persons) who served during the
year, was L4,313,416  ($7,074,002).  Such compensation was mainly in the form of
salaries and fees and included L240,332 ($394,144) set aside for pension plans.

           The table  below  reports  remuneration  by the  Company for the year
ended December 31, 1997. The compensation  for executive  directors for 1997 was
approved by the remuneration  committee of Cordiant.  With respect to the senior
managers  appointed  to the  Board in  mid-December,  the table  reflects  their
remuneration from appointment to December 31, 1997.



<PAGE>
<TABLE>
<CAPTION>


                                                                                                                
                                                                                                             
                                                                As         Benefits    Pension     One-off         Total   
                                   Salary       Bonus       Percentage    in Kind(1)   Costs(2)    Payment      Remuneration
                                    L000        L000        of Salary        L000        L000        L000          L000
<S>                                 <C>         <C>            <C>            <C>        <C>          <C>        <C>       
CURRENT EXECUTIVE DIRECTORS:
Michael Bungey (Chief
Executive Officer)(3)(4)             654         197            30%           107         58          -          1,016
Arthur D'Angelo(5)                     8           3            38%             -          -          -             11
Jean de Yturbe(5)                      8           4            50%             1          1          -             14
Alex Hamill(5)                        14           7            50%             -          -          -             21
Peter M. Schoning(5)                  11           8            72%             -          -          -             19
William Whitehead(5)                  11           5            45%             1          -          -             17

CURRENT NON-EXECUTIVE
DIRECTORS:
Charles Scott (Chairman)(6)          300         153            51%             7         92        404            956
Dudley Fishburn                       33           -             -              -          -          -             33
Professor Theodore Levitt             30           -             -              -          -          -             30

FORMER DIRECTORS:
The Hon. Clive Gibson(7)              28           -             -              -          -          -             28
Dr. Thomas Russell(7)                 28           -             -              -          -          -             28
Robert Seelert(7)                    487         237            49%            35         39          -            798
Wendy Smyth(3)(7)                    158          56            35%            13          -          -            227
Sir Peter Walters(7)                  31           -             -              -          -          -             31
Edward Wax(8)                        182          93            51%             6          7          -            288
Kevin Roberts(9)(10)                 144          99            69%             -          -        158            401

</TABLE>

--------------------
(1)  Benefits in kind include  such items as club  memberships,  company  cars,
     medical insurance, life insurance,  relocation and travel allowances.  Mr.
     Bungey, who is a UK citizen and who has been relocated to the US, receives
     a sum  equivalent  to school fees in the UK for his  children and a travel
     allowance for flights from the US to the UK for his wife and children each
     year.
(2)  The  amounts for  pension  costs  disclosed  in the  executive  Directors'
     remuneration  are  based  on the cash  cost to the  employing  company  of
     defined contribution schemes.
(3)  Michael  Bungey and Wendy Smyth were members of the Cordiant Group Pension
     Scheme, a defined benefit scheme,  during the year. In addition to amounts
     disclosed above, the amount of the increase in pension during the year was
     L4,303 in respect of M.  Bungey  and  L2,344 in respect of W.  Smyth.  The
     total annual accrued pension (including inflation) as at December 31, 1997
     was L50,308 (M.  Bungey) and L42,264 (W.  Smyth).  The accrued  benefit is
     that which would be paid  annually on  retirement  based on service to the
     end of the year. The transfer  values (net of members'  contributions)  of
     the  relevant   increase  in  accrued  benefit  are  L47,460  and  L16,525
     respectively.
(4)  Michael  Bungey's  salary  includes  an amount of L205,166 as part of a tax
     equalisation scheme in respect of tax paid on his remuneration under US tax
     law. 
(5)  Appointed  December  15,  1997.  
(6)  Mr.  Scott was  executive  Chairman  of  Cordiant  in 1996 and 1997 and his
     remuneration   above   reflects  that  role.  On  September  30,  1997,  in
     consideration  for the termination of his former  employment  contract with
     the Company,  it was agreed that he was to receive a lump-sum payment based
     on the  termination  clauses of that  contract.  
(7)  Resigned  December 15, 1997.  
(8)  Resigned May 20, 1997.  
(9)  Appointed  May 21, 1997;  resigned  December 15, 1997.  
(10) Kevin  Roberts  received a sign-on  bonus of  L158,000  on  appointment  as
     Director  and Chief  Executive  Officer  of  Saatchi & Saatchi  Advertising
     Worldwide.

      Salaries for 1998 for  Directors and senior  executives  were reviewed and
amended as part of the Demerger to take into account their revised roles. In the
future, they will be reviewed annually.

      In addition to salary,  all senior  executives  are eligible for an annual
performance-related  bonus that is non-pensionable.  For the year ended December
31, 1997 the annual bonus paid to each  executive  Director was a percentage  of
salary based on, with respect to Mr. Scott,  the attainment of budgeted  revenue
and  profitability  of the Cordiant  Group,  with respect to Messrs.  Bungey and
D'Angelo,  a combination of the attainment of budgeted revenue and profitability
for the Bates Worldwide  network and the Cordiant Group and for Messrs.  Hamill,
de Yturbe, Schoning and Whitehead on the performance of the businesses that they
head.  Bonuses in 1998 will be  calculated  with  respect to Messrs.  Bungey and
D'Angelo on the  performance of CCG, with respect to Messrs.  Hamill,  Whitehead
and de Yturbe by reference to a combination  of the  performance  of CCG and the
business  that each  Director  heads,  and with  respect to Mr.  Schoning on the
performance of Scholz & Friends. As a non-executive Director, Mr. Scott will not
be eligible for bonuses in the future.

      For all executive Directors only base salary is pensionable; their pension
arrangements are as follows:

      a)    Mr.  Bungey is a member of the Cordiant  Group  Pension  Scheme.  In
            addition, CCG contributes 6% of his salary plus L15,000 per annum to
            a small self-administered fund.

      b)    Mr.  Hamill is a member of the George  Patterson  1993 Holding Board
            Superannuation Plan.

      c)    Mr. D'Angelo is entitled to an annual pension contribution of $7,500
            and is a member of the Bates Advertising USA, Inc 401k plan.

      d)    Mr.  Whitehead is a member of the Bates  Advertising  USA Inc.  401k
            plan and is also  entitled to a pension  from the age of 60 from his
            previous employer, Bates Canada Inc.




<PAGE>



SERVICE AGREEMENTS

           The Directors' service agreements are described in the table below.

<TABLE>
<CAPTION>

                                                                                              
                                                                                              
                                                                                  MONTHS'     PAYMENTS ON EXCEPTIONAL
                             EMPLOYING COMPANY              DATE OF AGREEMENT      NOTICE     TERMINATION
<S>                          <C>                            <C>                      <C>      <C> 
EXECUTIVE DIRECTORS
A. D'Angelo                  Bates Advertising USA          Sep 1997                 12       24 months(1)
M. Bungey                    CCG                            Sep 1997                 12       24 months(1)
A. Hamill                    The Communications Group       Feb 1997                 24       Consultancy fees until age 60(2)
P. M Schoning                Scholz & Friends               Jan 88-Jan 98         12-24(3)    24 months(1)
W. Whitehead                 Bates Advertising USA          Sep 1997                 12       18 months(1)
J. de Yturbe                 Bates France                   June 93-Sep 97           12       18 months(1)

NON-EXECUTIVE DIRECTORS                                                                                     TERM
C. Scott                     CCG                            Apr 1998                          One or two years from demerger(4)
T. Levitt                    CCG                            Sep 1997                          One year from Demerger
D. Fishburn                  CCG                            Sep 1997                          Three years from Demerger
R. Stomberg                  CCG                            Mar 1998                          Three years from May 1, 1998
J. Tyrrell                   CCG                            Apr 1998                          Three years from May 1, 1998

</TABLE>

--------------------
(1)  On termination by the Company within two years of a change of control.
(2)  Consultancy fees payable between the date of termination for any reason and
     his 60th birthday.
(3)  At least 12 months ending on a financial year end.
(4)  Mr.  Scott has  parallel  contracts  as  Chairman of both CCG and Saatchi &
     Saatchi and will relinquish one directorship on December 31, 1998. The term
     of  his  remaining  directorship  will  be  for a  further  year.  If  both
     directorships  terminate before December 31, 1998, he will be entitled to a
     sum  equivalent to the fees which would  otherwise  have been payable up to
     the  second  anniversary  of  the  Demerger,  shared  equally  between  the
     companies. If termination occurs in the second year, he will be entitled to
     an equivalent payment by his employing company.

           The arrangements for termination of a senior executive's contract are
decided by the Remuneration and Nominations  Committee after  consultation  with
the  Group's  Chief  Executive  Officer.  In some  cases  the  Remuneration  and
Nominations Committee will recommend a clean break with the individual concerned
and a  one-off  payment  will be made at the time of  termination  based on that
individual's   contractual   position.  In  other  cases  the  Remuneration  and
Nominations  Committee will recommend  that the  contractual  entitlement of the
individual be paid in installments following  termination.  Special arrangements
were negotiated in respect of the termination of Mr. Scott's contract  following
the Demerger.

NON-EXECUTIVE DIRECTORS

           The  Board of  Directors  fixes  the  remuneration  of  non-executive
Directors for all the services normally expected of them as members of the Board
of Directors and its Committees.  The  remuneration  cannot exceed,  without the
approval of  shareholders in General  Meeting,  a basic fee of L20,000 per annum
per Director,  together with  allowances of L600 per Director for each Board and
Committee meeting attended in person,  L500 for each Board and Committee meeting
attended  by  telephone  and L250 per  quarter  for acting as  Chairman  for any
Committee of the Board of Directors.  The basis on which non-executive Directors
were paid in 1997 remained the same as applied in 1996 and is intended to remain
the  same in  1998.  The  Board  of  Directors  retains  discretion  to  approve
additional  payments for special services.  The  non-executive  Directors do not
participate  in any of the incentive or benefit  schemes of the Group,  with the
exception  of Charles  Scott,  who  retains an  interest  in options  granted in
connection with his former executive contract. Mr. Scott had a contract with the
Company and Saatchi & Saatchi for his services to each group dated September 30,
1997.  This  contract  has been  replaced  with  effect from April 1, 1998 by an
agreement under which Kirkal Limited,  a company controlled by Mr. Scott and his
wife,  provides Mr.  Scott's  services to each group on  substantially  the same
terms.

           New non-executive Director letters of appointment,  which took effect
on the Effective  Date, were entered into for both Dudley Fishburn and Professor
Theodore  Levitt dated  September 17, 1997 and September 16, 1997  respectively.
Dudley Fishburn is appointed for a term of three years,  and Professor  Theodore
Levitt for a term of one year,  with effect from the Effective Date. They are to
be paid  annual  fees of  L20,000  each  plus  certain  sums for  attendance  at
meetings, in accordance with the provisions of the Articles of Association.

           Dr. Rolf  Stomberg  and James  Tyrrell were  appointed  non-executive
Directors for a period of three years  commencing May 1, 1998 under  appointment
letters dated March 31 and April 8, 1998, respectively.

ITEM 12.  OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES.

SHARE SCHEMES PRIOR TO THE DEMERGER AND DEMERGER SCHEMES

           The Cordiant  share schemes  consisted of one savings  related scheme
(described  below) and three executive share option  schemes,  specifically  the
Performance Share Option Scheme (the "Performance  Scheme"), the Executive Share
Option  Scheme  (the  "Executive  No 1 Scheme")  primarily  for  executives  not
resident in the United  Kingdom and the Executive  Share Option Scheme No 2 (the
"Executive  No 2 Scheme")  and,  together  with the  Executive  No. 1 Scheme and
Performance Scheme, the "Share Schemes".

           The  Executive No 2 Scheme was approved by the Inland  Revenue  under
the terms of the Finance Act 1984 and was intended only for executives  resident
in the United  Kingdom.  The Executive No 1 Scheme and the Executive No 2 Scheme
both expired in April 1994 although  existing options  subsisting at the date of
expiration  remain  exercisable in accordance with their terms.  The Performance
Scheme was adopted at the  Extraordinary  General  Meeting of  Cordiant  held on
March 16,  1995 and was  approved by the Inland  Revenue on May 1, 1995.  It was
intended for executives resident throughout the world.

           Options  granted to  participants  in the Executive No 1 Scheme,  the
Executive No 2 Scheme and the Performance  Scheme (which includes super options)
were for  Cordiant  Ordinary  Shares at a price  equivalent  to the London Stock
Exchange  middle market  quotation on the day preceding the date of grant of the
options.

           The  performance  targets for options  granted under the  Performance
Scheme  depend on whether  the option is an ordinary  option or a super  option.
Ordinary  options require the CCG Group's  earnings per share to grow over three
years at 6 percent  more than the growth in the UK Retail  Price  Index over the
same period.  Super options require growth in the CCG Group's earnings per share
which over a five year period would place it in the top quartile of the FTSE 100
companies ranked by growth in earnings per share over the same period.

          The  performance  targets  for  the  Executive  No 1  Scheme  and  the
Executive No 2 Scheme are identical to the ordinary  performance targets for the
Performance Scheme.

           No further options will be granted under these schemes  following the
Demerger.  Holders of executive  options  employed by the Company retained their
options under the Share Schemes following the Demerger.  The Consolidation ratio
was determined with a view to preserving,  as far as  practicable,  the value of
the  options  under the  existing  Share  Schemes.  Accordingly,  following  the
Consolidation,  no  adjustment  was made to the number of shares  subject to the
options or the exercise price payable.

           Holders of  executive  options  under the Share  Schemes  employed by
Saatchi & Saatchi were  invited to cancel their  options in return for the grant
of replacement options over Saatchi Ordinary Shares. Each replacement option was
for the same number of Saatchi  Ordinary Shares and has the same exercise price,
exercise period and performance  conditions as the relevant existing option. The
intention was that the replacement options be, as far as practicable, equivalent
to the existing options. For Charles Scott,  employees who ceased to be employed
as a result of the Demerger and employees of Zenith and The Facilities Group who
held executive options under the Share Schemes, the same principles apply except
that their  replacement  options were split 50/50 between  options over Ordinary
Shares and options over Saatchi Ordinary Shares.

           Cordiant's savings related share option scheme ("Sharesave 1995") was
adopted at  Cordiant's  Extraordinary  General  Meeting  held on March 16, 1995.
Inland  Revenue  approval  for  Sharesave  1995 was  obtained  on May 15,  1995.
Eligible employees in the UK were invited to save a fixed amount per month for a
period of five  years and  applied  for an  option at a  predetermined  exercise
price.  The exercise  price was fixed at the date of invitation at a price which
was not less than the  higher of a share's  nominal  value or 80  percent of its
market value at the time. When the option is exercised,  the accumulated savings
and interest/bonus are used to pay the exercise price.

           Under Sharesave 1995, employees of CCG retained their original number
of options  without  adjustment  for the  Consolidation.  Employees of Saatchi &
Saatchi who held such  options  also  retained  them but were granted a parallel
unapproved  option over Saatchi  Ordinary Shares which will be exercisable  with
the accumulated  savings and  interest/bonus  under  Sharesave 1995.  (Sharesave
1995, together with such parallel schemes being the "SAYE Schemes") Employees of
Zenith and The Facilities  Group had their parallel  options split 50/50 between
Ordinary Shares and Saatchi Ordinary Shares.

           The  replacement  options  described above were granted under schemes
(the "Demerger Schemes") which mirrored, as far as practicable, the terms of the
Share  Schemes to which they  related.  None of the  Demerger  Schemes have been
approved by the Inland Revenue.

           No options  can be  granted  under a  Demerger  Scheme  other than to
replace an option  which an option  holder  under one of the Share  Schemes  has
agreed to cancel (or, in the case of the SAYE  Schemes,  to run in parallel with
an option under Sharesave 1995).

OWNERSHIP SCHEMES

           Cordiant  operated  "ownership  schemes"  prior to the Demerger which
allocated  "network  shares" to key executives,  the value of the network shares
increasing or decreasing in line with the network's  performance against target.
These  schemes  have been  replaced  by the  Equity  Participation  Plan and the
Performance Option Scheme.  Accrued benefits up to the date of the Demerger were
frozen  at 50  percent  of  the  value  at  December  31,  1997  in  respect  of
participants in the Equity  Participation Plan and the Performance Option Scheme
and will be paid to executives  in future years in accordance  with the terms of
the schemes.

           Awards  to  Directors  under the  ownership  schemes  were  valued as
follows:

                        Value at Dec.31, 1997     Value at Dec. 31, 1996
                            
M. Bungey                  L113,978                L103,900
A. D'Angelo                  66,387                  62,340
J. de Yturbe                113,978                 103,900
P.M. Schoning               113,978                 103,900
W. Whitehead                 68,387                  62,340

           No awards were made under the schemes  during 1997.  On acceptance of
the invitation to participate in the Equity  Participation  Plan, the Directors'
awards under the ownership  schemes  crystallized  at 50 percent of the value at
December 31, 1997.

NEW CCG SHARE SCHEMES

(a)  THE CORDIANT  COMMUNICATIONS  GROUP EQUITY  PARTICIPATION PLAN (THE "EQUITY
     PARTICIPATION PLAN")

      The principal terms of the Equity Participation Plan are set out below.

(i)   Administration

      The Equity Participation Plan is operated in conjunction with the Cordiant
Communications  Group Employee Benefit Trust (the "Trust") which was established
at the same time as the Equity Participation Plan.

      The Trustee of the Trust, in exercising its discretion, takes into account
the recommendations of the Remuneration Committee.

      Further details of the Trust are set out below.

(ii)  Eligibility

      Employees  and  executive  Directors of the  Company,  who are required to
devote  substantially  all their  working time to the business of any company in
CCG, are eligible to participate in the Equity Participation Plan.

(iii) Participation in the Equity Participation Plan

      The Trustee will invite selected eligible employees and Directors to pay a
certain amount of money (not  exceeding  Ll50,000) to enable them to participate
in the Equity Participation Plan. The payment made by participants to the Trust,
which must be made within 120 days of the award being made, is non-refundable.

      Normally, awards to participants will only be made within the period of 42
days following the  announcement  of the Company's  results for any period or at
any time if the Trustee determines that exceptional  circumstances  (such as the
recruitment of a senior employee or executive director) so warrant.

      The  maximum  number of  Ordinary  Shares  which  participants  may become
entitled  to acquire  will be eight times the number that could have been bought
with the original  investment  at market value on the day  preceding the date of
award.  The exact  number of  Ordinary  Shares  which  may be  acquired  will be
determined by the performance formula described below.

(iv)  Performance Formula and number of shares vesting

           With the  exception  of  Directors  of the  Company,  the  number  of
Ordinary  Shares that a participant  may acquire will be determined by measuring
the growth in earnings  per share  ("EPS") of CCG over a three year period ("EPS
Performance").   For  the  initial  awards  the  base  year  for  measuring  EPS
Performance  is the year ended  December 31, 1997.  The EPS figure used for that
year is 6.46p.  EPS will be the fully  diluted  EPS  calculated  on the basis of
"headline  earnings"  using the Institute of Investment  Management and Research
guidelines  (although the Trustee will have the ability to adjust this figure if
the Trustee considers it appropriate to exclude  exceptional  items, such as the
costs of the Demerger and other significant non-recurring items).

           If EPS Performance is less than the annual  percentage  growth in the
UK Retail Price Index plus 2 percent (the  "Hurdle  Rate") then the  participant
will be entitled to acquire 10 Ordinary Shares:

           If EPS Performance is equal to or greater than the Hurdle Rate then.

      (a)  where EPS  Performance  is 5 percent per annum,  12.5  percent of the
           award  vests,  which is the same number of Ordinary  Shares which the
           participant could have bought with his original investment;

      (b)  where EPS  Performance  is 15 percent  per  annum,  40 percent of the
           award vests, so the participant will be entitled to acquire 3.2 times
           the number of  Ordinary  Shares  which he could have  bought with his
           original investment; and

      (c)  where EPS  Performance  is 25  percent  per  annum,  all of the award
           vests, so the participant will be entitled to acquire eight times the
           number  of  Ordinary  Shares  which he  could  have  bought  with his
           original investment.

           The percentage of the award that vests for EPS Performance  between 5
percent  per annum and 15 percent per annum and for EPS  Performance  between 15
percent per annum and 25 percent per annum increases on a straight line basis.

           For participants  who are Directors of the Company,  only one half of
their awards will vest based on EPS Performance.  The other half of their awards
will vest based on the total shareholder return ("TSR") of CCG over a three year
period  ("TSR  Performance")  relative  to the TSR of a group of major  publicly
traded  advertising  groups  (the  "Comparator  Group")  over the  same  period.
Initially the Comparator  Group  consisted of the following 10 groups:  CCG, GGT
Group, Grey Advertising,  Havas Advertising,  Omnicom Group, Publicis, Saatchi &
Saatchi,  The Interpublic Group of Companies,  True North Communications and WPP
Group.

           The  percentage  of the  award  that  vests  will  be  determined  by
reference to the ranking attained by CCG as follows:

                                                            PERCENTAGE
                                                             OF AWARD
                                                            THAT VESTS
RANKING                                                        (%)


1st or 2nd...............................................       100
3rd......................................................        75
4th......................................................        50
5th......................................................        25
6th......................................................     18.75
7th......................................................      12.5
8th......................................................     9.375
9th......................................................     3.125
10th.....................................................       nil

(v)   Acquisition of Ordinary Shares

           Once the  performance  formula  has been  applied  and the  number of
Ordinary  Shares  determined,  a participant  may acquire one half of the vested
number of Ordinary  Shares.  The remaining  half may only be acquired  after the
fourth  anniversary  of the date the award was made.  Ordinary  Shares cannot be
acquired after the seventh anniversary of the date of the award.

(vi)  Takeover

           In the event of a takeover of the Company  prior to the  announcement
of the CCG  Group's  results  for its  financial  year ending in 2000 (the "2000
results"),  a  participant  who received an award prior to the  announcement  of
CCG's results for its financial year ending in 1998 (the "1998 results") will be
entitled to acquire the number of Ordinary Shares  determined in accordance with
the following provisions:

     (a)  if the  takeover  occurs  after the date of the award but  before  the
          announcement  of the 1998  results,  the  participant  may acquire one
          third of the maximum possible number of Ordinary Shares;

     (b)  if the takeover occurs after the  announcement of the 1998 results but
          before the announcement of CCG's results for its financial year ending
          in 1999 (the "1999 results"), the participant may acquire:

     (i)  one third of the maximum possible number of Ordinary Shares; plus

     (ii) one third of the number of Ordinary  Shares which would have vested if
          the EPS Performance  (and, if appropriate,  TSR Performance) for CCG's
          1998 financial year had been achieved over the full three years of the
          performance measurement period; and

     (c)  if the takeover occurs after the  announcement of the 1999 results but
          before the  announcement  of the 2000  results,  the  participant  may
          acquire:

     (i)  one third of the maximum possible number of Ordinary Shares; plus

     (ii) two thirds of the number of CCG Shares  which would have vested if the
          EPS Performance (and, if appropriate,  TSR Performance) over CCG's two
          financial  years 1998 and 1999 had been  achieved  over the full three
          years of the performance measurement period.

          Equivalent provisions will apply for participants who receive an award
after the announcement of the 1998 results.

(vii) Cessation of employment

           If a participant  ceases to be employed by CCG or a subsidiary of CCG
before the award  vests  because  of  injury,  disability,  ill  health,  death,
redundancy,  retirement,  because the company which employs him or with which he
holds  office  leaves  CCG or  because  the  business  to which  his  office  or
employment  relates is transferred  outside CCG, or other  circumstances  at the
Trustee's  discretion,  the participant will be entitled to acquire a proportion
of the  maximum  number of Ordinary  Shares  which  would  ultimately  have been
receivable.  For the purpose of  determining  the  proportion  of the award that
vests,  the cessation of employment will be treated as occurring on the next day
on which CCG  announces  its results for its  financial  year.  The  Performance
Formula will then be applied as if the EPS Performance (and, if appropriate, the
TSR  Performance) had been achieved over the full three years of the performance
measurement period.

           A participant  who was granted an award prior to the  announcement of
the 1998  results  will be able  immediately  following  such  determination  to
acquire:

      (a)  one  third  of the  number  of  Ordinary  Shares  so  determined,  if
           cessation occurs on or before the announcement of the 1998 results;

      (b)  two  thirds  of the  number of  Ordinary  Shares  so  determined,  if
           cessation occurs after the announcement of the 1998 results but on or
           before the announcement of the 1999 results; and

     (c)  all of the Ordinary  Shares so determined,  if cessation  occurs after
          the announcement of the 1999 results.

          Equivalent provisions will apply for participants who receive an award
after the announcement of the 1998 results.

           However,  if a participant  ceases  employment for other reasons,  he
will only be  entitled to receive 10  Ordinary  Shares,  with the result that he
will effectively lose his initial investment.

(viii)     Variation of share capital

           The  rights  of   participants   following   any   rights   issue  or
capitalization  issue or other  variation  of share  capital will be adjusted in
such manner as the Trustee may determine  subject to written  confirmation  from
CCG's auditors that such adjustment is in their opinion fair and reasonable.

(ix)  Limits on the Equity Participation Plan

           An aggregate of not more than 6 percent of the issued  ordinary share
capital of CCG from time to time may be issued or become  issuable  pursuant  to
the Equity Participation Plan.

(x)   Amendments to the Scheme

           The Board will have the power to administer,  interpret and, with the
concurrence  of the Trustee,  amend the  provisions of the Equity  Participation
Plan. However, no amendment may be made to provisions relating to:

     (a)  the eligibility conditions;

     (b)  the limit rules;

     (c)  the  calculation  of a  participant's  entitlement  under  the  Equity
          Participation Plan;

     (d)  the terms of the awards or the Ordinary  Shares  received  pursuant to
          them; or

     (e)  the variation of share capital rule

to the advantage of participants  without the prior approval of the shareholders
in general meeting (except for minor amendments to benefit the administration of
the Equity  Participation Plan, to take account of a change in legislation or to
obtain or maintain  favorable tax, exchange control or regulatory  treatment for
participants or for CCG or for subsidiaries of CCG).

           No amendment to the limits  mentioned above may be made without prior
approval of the shareholders. No amendment may be made which adversely affects a
participant's  rights  under an award made  prior to the date of such  amendment
without the participant's consent.

(xi)  Pension

      The  benefits  received  under  the  Equity  Participation  Plan  are  not
pensionable.

(xii) Termination

           The  Trustee  will  invite no  further  participation  in the  Equity
Participation Plan after December 15, 2000 and the Board may terminate it at any
time, but the rights of existing participants will not thereby be affected.

(B)  THE CORDIANT  COMMUNICATIONS  GROUP  PERFORMANCE  SHARE OPTION  SCHEME (THE
     "PERFORMANCE OPTION SCHEME")

           The  principal  terms of the  Performance  Option  Scheme are set out
below.

(i)   Administration

           The   Performance   Option   Scheme  will  normally  be  operated  in
conjunction with the Trust. The Trustee will, in exercising its discretion, take
into account the recommendations of the Remuneration Committee.

           However,  the rules  provide that the  Performance  Option Scheme may
also be operated by CCG, in which case  references  to the Trust and the Trustee
in this summary should be read as being  references to CCG and the  Remuneration
Committee as appropriate.

           Further details of the Trust are set out below.

(ii)  Eligibility

           Employees and executive  Directors of the Company who are required to
devote  substantially  all their  working time to the business of any company in
CCG will be eligible to participate in the Performance  Option Scheme.  However,
participants in the Equity Participation Plan will not be eligible to be granted
options under the Performance Option Scheme.

           Participants in the Performance Option Scheme will be selected at the
discretion of the Trustee.

(iii) Exercise price

           The exercise  price for an option will be  determined  by the Trustee
but may not be less than the higher of the nominal  value of an  Ordinary  Share
(if the option is an option to subscribe for an Ordinary  Shares) and its market
value.  Market  value  will be taken to be the  middle  market  quotation  of an
Ordinary  Share on the  dealing  day of the London  Stock  Exchange  immediately
preceding  the date of grant as  derived  from the  Daily  Official  List of the
London Stock Exchange.

(iv)  Grant of options

           Normally,  options  may only be  granted  by the  Trustee  within the
period of 42 days following the announcement of CCG's results for any period and
at any time if the Trustee  determines that exceptional  circumstances  (such as
the recruitment of a senior employee or executive Director) so warrant.

           Options will lapse unless the option holder agrees within 120 days of
the grant of the option to sacrifice an aggregate  amount of salary and/or bonus
(not  exceeding  L50,000) over a period not  exceeding  three years equal to one
eleventh of the aggregate  exercise  price of the Ordinary  Shares under option.
The amount so sacrificed is not offset against the exercise price payable.

(v)   Performance Formula and number of shares vesting

           The number of Ordinary  Shares to be  acquired  on  exercise  will be
determined by measuring EPS Performance,  as for the Equity  Participation Plan.
The EPS Performance  and the Hurdle Rate for the Performance  Option Scheme will
be the same as for the Equity Participation Plan.

           If EPS  Performance  is less than the  Hurdle  Rate  then the  option
holder will not be entitled to acquire any  Ordinary  Shares and the option will
lapse.

           If EPS Performance is equal to or greater than the Hurdle Rate then:

     (a)  where EPS  Performance  is 5 percent per annum,  the option holder may
          exercise his option in respect of 30 percent of the number of Ordinary
          Shares under option;

     (b)  where EPS Performance is 15 percent per annum, the option holder may
           exercise  his  option  in  respect  of 65  percent  of the  number of
           Ordinary Shares under option; and

     (c)  where EPS  Performance is 25 percent per annum,  the option holder may
          exercise his option in full.

           The  percentage  of Ordinary  Shares over which the option holder may
exercise  his  option  for EPS  Performance  between 5 percent  per annum and 15
percent  per annum and for EPS  Performance  between 15 percent per annum and 25
percent per annum increases on a straight line basis.

(vi)  Exercise of options

           Once the  Performance  Formula has been applied an option  holder may
exercise his option over one half of the number of Ordinary Shares determined by
the  Performance  Formula.  The  remaining  half may only be acquired  after the
fourth anniversary of the date of grant.

           Options may not be exercised in any event more than seven years after
the date of grant.

(vii) Takeover

           In the event of a takeover of the Company  prior to the  announcement
of CCG's 2000  results,  an option holder who was granted an option prior to the
announcement  of CCG's 1998  results  will be entitled to exercise his option in
accordance with the following provisions:

      (a)  if the  takeover  occurs  after the date of the award but  before the
           announcement of the 1998 results,  the option holder may exercise his
           option in respect of one third of the number of Ordinary Shares under
           option;

      (b)  if the takeover occurs after the announcement of the 1998 results but
           before the  announcement  of the 1999 results,  the option holder may
           exercise his option in respect of:

           (i)  one third of the number of Ordinary Shares under option; plus

           (ii) one third of the number of  Ordinary  Shares in respect of which
                he could have  exercised his option if the EPS  Performance  for
                the CCG Group's 1998  financial  year had been achieved over the
                full three years of the performance measurement period; and

      (c)  if the takeover occurs after the announcement of the 1999 results but
           before the  announcement  of the 2000 results,  the option holder may
           exercise his option in respect of:

           (i)  one third of the number of Ordinary Shares under option; plus

           (ii) two thirds of the number of Ordinary  Shares in respect of which
                he could have exercised his option if the EPS  Performance  over
                the CCG  Group's  two  financial  years  1998  and 1999 had been
                achieved   over  the  full  three   years  of  the   performance
                measurement period.

          Equivalent  provisions  will apply for option  holders who are granted
options after the announcement of the 1998 results.

(viii)     Cessation of employment

           If an  option  holder  ceases  to be  employed  by the  Company  or a
subsidiary  of CCG  before  his  option  may be  exercised  because  of  injury,
disability, ill health, death, redundancy, retirement, because the company which
employs him or with which he holds office  leaves CCG or because the business to
which his office or  employment  relates is  transferred  outside  CCG, or other
circumstances at the Trustee's discretion, the option holder will be entitled to
exercise his option in respect of a proportion of the number of Ordinary  Shares
under option.  For the purpose of determining  the number of Ordinary  Shares in
respect of which the option  holder may  exercise his option,  the  cessation of
employment  will be treated as  occurring on the next day on which the CCG Group
announces its results for its financial year. The Performance  Formula will then
be applied as if the EPS Performance had been achieved over the full three years
of the performance measurement period.

           An option holder who was granted an option prior to the  announcement
of the 1998 results will be able  immediately  following such  determination  to
exercise his option in respect of:

      (a)  one  third  of the  number  of  Ordinary  Shares  so  determined,  if
           cessation occurs on or before the announcement of the 1998 results;

      (b)  two  thirds  of the  number of  Ordinary  Shares  so  determined,  if
           cessation occurs after the announcement of the 1998 results but on or
           before the announcement of the 1999 results; and

      (c) all of the Ordinary  Shares so determined,  if cessation  occurs after
the announcement of the 1999 results.

          Equivalent  provisions  will apply for option  holders who are granted
options after the announcement of the 1998 results.

           However,  if a participant  ceases employment for other reasons,  his
option will lapse.

(ix)  Variation of share capital

           On  a  variation   of  the   Company's   share   capital  by  way  of
capitalisation or rights issue, sub-division,  consolidation or a reduction, the
exercise price and the number of shares  comprised in an option can be varied at
the discretion of the Trustee subject to certification  from CCG's auditors that
in their opinion the variation is fair and reasonable.

(x)   Limits on the Performance Option Scheme

           An  aggregate  of not more than 3.5  percent of the  issued  ordinary
share capital of the Company from time to time may be issued or become  issuable
pursuant to the Performance Option Scheme.

(xi)  Amendments to the Performance Option Scheme

           The Board of Directors has power to  administer,  interpret and, with
the approval of the Trustee,  amend the Performance  Option Scheme. No amendment
may be made to provisions relating to:

     (a)  the eligibility conditions;

     (b)  the limit rules;

     (c)  the variation of share capital rule;

     (d)  the rules  governing the terms of the options or shares to be received
          by option holders; or

     (e)  the  rules   governing  the   calculation   of  the  option   holder's
          entitlements under the Performance Option Scheme

to the advantage of option holders without the prior approval of shareholders in
general meeting (except for minor  amendments to benefit the  administration  of
the  Performance  Option Scheme or to take account of a change in legislation or
to obtain or maintain  favorable tax,  exchange control or regulatory  treatment
for option holders, the Company or subsidiaries of CCG).

           No amendment may be made which  adversely  affects an option holder's
rights under options granted to him prior to the date of such amendment  without
his consent.

(xii) Pension

           The benefits  received  under the  Performance  Option Scheme are not
pensionable.

(xiii)     Termination

           The  Trustee  will grant no  further  options  under the  Performance
Option  Scheme after  December 15, 2000 and the Board of Directors may terminate
it at any time,  but the rights of existing  option  holders will not thereby be
affected.

(C)   THE CORDIANT COMMUNICATIONS GROUP EMPLOYEE BENEFIT TRUST (THE "TRUST")

           The Trust was established  prior to the Effective Date. The principal
terms of the Trust are as set out below.

      (i)  The  Trust is a  discretionary  employee  benefit  trust of which all
           employees of CCG will be potential beneficiaries.

      (ii) The  trustee of the Trust (the  "Trustee")  is a  corporate  trustee.
           Executive Directors of the Company will not be directors of, nor have
           a direct or indirect interest in, the trustee company.

     (iii) The main purpose of the Trust is to operate the Equity  Participation
           Plan  and  the   Performance   Option   Scheme.   Having   considered
           recommendations received from the Remuneration Committee, the Trustee
           will make  awards  (which  may or may not be in the form of  options)
           under which participants will be entitled to acquire Ordinary Shares.
           Alternatively  the  Trustee  may  agree to  deliver  Ordinary  Shares
           following the exercise of awards made by CCG.

      (iv) The  Trustee  may  purchase  Ordinary  Shares in the  market  for the
           purpose of awards  made under the Equity  Participation  Plan and the
           Performance  Option Scheme.  Alternatively,  the Company may grant to
           the Trustee one or more options to subscribe for Ordinary Shares. The
           exercise  price under such  options  will not be less than the middle
           market  quotation of Ordinary Shares as derived from the London Stock
           Exchange  Daily  Official List for the dealing day preceding the date
           of grant.

      (v)  The  Trustee is not  permitted  to  purchase  Ordinary  Shares in the
           market  without prior  shareholder  approval if such  purchase  would
           result in the Trust holding  (excluding any Ordinary Shares which the
           Trustee subscribed for) more than 5 percent of the Company.

     (vi) The Trustee will fund the  acquisition of Ordinary  Shares through one
          or more of the following:

          (a)  by non-recourse loan or loans from CCG companies:
          (b)  by contributions from CCG companies; and
          (c)  by payments  from the  participants  in the Equity  Participation
               Plan and the Performance Option Scheme.

    (vii) The  Trustee  is  required  to waive  its  right to any  dividends  on
          Ordinary Shares while they are held within the Trust.

(D) THE ZENITH EXECUTIVE INCENTIVE PLAN (THE "ZENITH INCENTIVE PLAN")

The Zenith  Incentive  Plan was  established to enable  participants  to acquire
Ordinary  Shares and Saatchi  Ordinary  Shares  through the  exercise of options
and/or in certain  circumstances to be paid a cash bonus. The principal terms of
the Zenith Incentive Plan are set forth below:

The Zenith  Incentive Plan is operated in conjunction  with the Zenith  Employee
Benefit Trust (the "Zenith  Trust"),  the Trustee of which (the "Trustee") will,
in  exercising  its  discretion,  take into account the  recommendations  of the
non-executive Directors of Zenith.

The Trustee can invite  selected  eligible  employees  and directors to invest a
certain amount of money (not exceeding L70,000) to enable them to participate in
the Zenith  Incentive Plan.  Awards will lapse unless such investment is, at the
discretion  of the Trustee,  either made by a payment to the Trustee  within 120
days of the award being made or is made by the participant agreeing to sacrifice
that amount of salary and/or bonus over a period not exceeding three years.  The
investment  is  non-refundable  and is not offset  against  the  exercise  price
payable.

The  non-refundable  investment  to be  provided  by  participants  who  wish to
participate  in  the  Zenith   Incentive  Plan  shall  be  one  sixteenth  of  a
participant's  maximum  entitlement  under the Zenith  Incentive  Plan. An award
comprises:

           (a) an  option  over the  same  proportion  of the  total  number  of
      Ordinary   Shares   available  for  the  Zenith   Incentive  Plan  as  the
      participant's   maximum  entitlement  bears  to  L3.6  million  being  the
      aggregate  maximum  entitlement for all  participants  available under the
      Zenith Incentive Plan (the "CCG Option");

          (b)  an option over the same number of Saatchi Ordinary Shares as the
      number of Ordinary Shares under the participant's CCG Option (the "Saatchi
      Option"); and

          (c)  a  contingent  cash  award  of  up  to  a  participant's  maximum
      entitlement.

The  exercise  price for the CCG  Option  and the  Saatchi  Option is the middle
market  quotation of the  underlying  shares on the day  preceding  the date the
options are granted.

The exact number of shares which may be acquired  and/or the cash award  payable
will be determined by the performance formula described below.

A participant's maximum entitlement will be reduced proportionately if one month
after the end of the third year of the performance  period the FTSE 100 Index is
lower than on the date the award was made. A  participant's  actual  entitlement
will be determined  by measuring  the growth in operating  profit (as defined in
the rules of the Zenith Incentive Plan) over a three year period,  with the base
year being the year ending  December 31, 1997 for the initial award  ("Operating
Profit Performance") as follows:

          (a) If Operating Profit  Performance is less than 5 percent per annum,
     the award lapses;

          (b)  If  Operating  Profit  Performance  is  5  percent  per  annum  a
     participant's entitlement will be determined as 12.5 percent of his maximum
     entitlement;

          (c)  if  Operating  Profit  Performance  is 15  percent  per  annum  a
     participant's  entitlement  will be determined as 40 percent of his maximum
     entitlement; and

          (d) if Operating Profit  Performance is equal to or exceeds 25 percent
     per annum a participant's  entitlement will be determined as 100 percent of
     the maximum entitlement.

A participant's entitlement in respect of Operating Profit Performance between 5
percent  per annum and 15 percent per annum and between 15 percent per annum and
25 percent per annum increases on a straight line basis.

Awards  will be  satisfied  so far as  possible  by the CCG  Options and Saatchi
Options  becoming  exercisable  to the same extent.  The  balance,  if any, of a
participant's entitlement will be satisfied by the payment of cash by the Zenith
Trust or any company in the Zenith group.

Once the Performance Formula have been applied, the extent of vesting of the CCG
Option and the Saatchi Option determined and the cash sum, if any, quantified, a
participant  will be  entitled  to  receive  one  half of his  entitlement.  The
remaining half can only be acquired after the fourth anniversary of the date the
award was made.  The award will lapse on the seventh  anniversary of the date of
grant.

           The Trustee  will be required to waive its rights to any  dividend on
Ordinary Shares or Saatchi Ordinary Shares while they are held within the Trust.



<PAGE>


           The  following  chart  shows as of June 1, 1998 the  total  number of
Ordinary  Shares  subject to  outstanding  options,  the  purchase  price of the
Ordinary Shares pursuant to the options and the expiration date of the options:

<TABLE>
<CAPTION>
     
          SCHEME            DATE OF GRANT   NUMBER OF SHARES    EXERCISE PRICE(1)  EXERCISEABLE

<S>                           <C>              <C>                <C>               <C>            
Executive No.1 Scheme         Jun 1991         879,903            134p              Jun 1998
                              Sep 1991          19,209            134p              Sep 1998
                              Apr 1992         513,323*           107p              Apr 1999
Executive No. 1               Jun 1991          30,186            134p              Jun 1998
Replacement Scheme            Apr 1992          40,134*           107p              Apr 1999
Executive No. 2 Scheme        Jul 1988           1,997            2250p             Jul 1998
                              Jun 1991         486,132            134p              Jun 2001
                              Sep 1991         107,022            134p              Sep 2001
                              Apr 1992          34,301            107p              Apr 2002
                              Apr 1992         417,838*           107p              Apr 2002
Executive No. 2               Jun 1991         378,235            134p              Jun 2001
Replacement Scheme            Apr 1992          78,895            107p              Apr 2002
                              Apr 1992          21,610            107p              Apr 2002
Sharesave 1995                Jun 1995       1,571,058             64p              Jul 2000 to Dec 2000

Performance Option Scheme     May 1995         612,618             73p              May 1998 to May 2005
                              Aug 1995         612,616             95p              Aug 1998 to Aug 2005
                              Apr 1996         542,500            130p              Apr 1999 to Apr 2006
                              Apr 1996         630,000*           130p              Apr 2001 to Apr 2003
                              Apr 1997         762,500            131p              Apr 2000 to Apr 2007
                              Apr 1997         762,500*           131p              Apr 2002 to Apr 2004
Replacement Performance       May 1995          99,316             73p              May 1998 to May 2009
Scheme                        May 1995         109,926*            73p              May 2000 to Dec 2004
                              Aug 1995          99,318             95p              Aug 1998 to Dec 2004
                              Apr 1996         122,500            130p              Apr 1999 to Dec 2004
                              Apr 1996         272,500*           130p              Apr 2001 to Dec 2004
                              Apr 1997         195,000            131p              Apr 2000 to Dec 2004
                              Apr 1997         195,000*           131p              Apr 2002 to Dec 2004
Performance Share Option      Dec 1997       5,770,370            105p              Dec 2000 to Dec 2004
Scheme (PSOS)(2)              May 1998       1,585,426            123p              May 2001 to May 2005
Equity Participation Plan     Dec 1997      11,024,853            105p              Dec 2000 to Dec 2004
(EPP)(3)
Zenith Executive              Dec 1997           1,078,807        109p              Dec 2000 to Dec 2004
Incentive Plan(4)
</TABLE>

(1)  All  exercise  prices  have been  rounded  down to the nearest  pence.  

(2)  Grantees  of  Performance  Share  Options  had a  maximum  of 150 days from
     invitation  to  participate  in the  options  to  agree  to a  salary/bonus
     sacrifice. 

(3) Grantees of awards under the Equity Participation Plan had a
     maximum  of 150  days  from  invitation  in which  to make  payment  to the
     Trustee.  

(4)  Grantees  under the Zenith plan had a maximum of 120 days to
     make  payment  or agree to a salary or bonus  sacrifice.  

*  Denotes  super  options.



<PAGE>


           Changes in the  number of  Ordinary  Shares  issuable  under  options
outstanding  under  the  Share  Schemes,   the  Demerger  Schemes,   the  Equity
Participation  Plan,  the  Performance  Option  Scheme,  the  Zenith  Scheme and
Sharesave 1995 during the financial year are as follows:

                                   Share Schemes      SAYE scheme
                                  Ordinary Shares    Ordinary Shares

At beginning of the year............12,589,854         1,963,435
Options exercised...................(159,692)          (13,211)
Options granted.....................26,037,467         196,117(1)
Option lapsed.......................(1,064,485)        (325,562)
Options cancelled...................(9,357,905)               -
                                    -----------        --------
At year end                         28,045,239         1,624,662
                                    ==========         =========

------------------------------------
(1)   These are parallel  options issued in connection with the Demerger and are
      not  reflected in the total options  outstanding  at the year end, as they
      will be  exercisable  in lieu of, and not in  addition  to,  the  original
      options.



           As of June 1, 1998, the number of Ordinary Shares subject to options,
excluding  phantom options,  granted to the Directors and executive  officers of
the Company was 9,681,784.



<PAGE>


           The table below  describes the various  share options  awarded to the
Directors of the Company as of June 1, 1998.
<TABLE>
<CAPTION>
                                             EXECUTIVE DIRECTORS' SHARE OPTIONS


                                 DATE OF          EXERCISE      NUMBER
SCHEME                            GRANT           PRICE (p)     SHARES           TOTAL PRICE        EXERCISE PERIOD
<S>                             <C>               <C>           <C>              <C>                <C>
C. SCOTT
Replacement Executive No. 2     06/18/1991          134         222,502           L298,153             To Jun 2001
Replacement Executive No. 2     06/18/1991          134          20,582            L27,580             To Jun 2001
Replacement Executive No. 2     04/10/1992          107          68,605            L73,407             To Apr 2002
Replacement Executive No. 2*    04/10/1992          107          10,290            L11,010             To Apr 2002
Executive No. 2 Scheme*         04/10/1992          107          34,302            L36,703             To Jun 1998
Replacement Performance*        05/03/1995           73         109,926            L80,246             May 2000-May
                                                                                                       2002

Sharesave                       06/01/1995           64          21,376            L13,681             To Jun 1998
Replacement Performance*        04/19/1996          130         150,000           L195,000             Apr 2001-Apr 2003
Replacement Performance         04/23/1997          131          75,000            L98,250             Apr 2002-Dec 2004
Replacement Performance*        04/23/1997          131          75,000            L98,250             Apr 2000-Dec 2004

JEAN DE YTURBE
Performance Option Scheme       05/03/1995           73          40,498            L29,564            To May 2005
Performance Option Scheme       08/11/1995           94          40,498            L38,068            Aug 1998-Aug 2005
Performance Option Scheme       04/19/1996          130          45,000            L58,500            Apr 1999-Apr 2006
Performance Option Scheme*      04/19/1996          130          45,000            L58,500            Apr 2001-Apr 2003
Performance Option Scheme       04/23/1997          131          45,000            L58,950            Apr 2000-Apr 2007
Performance Option Scheme*      04/23/1997          131          45,000            L58,950            Apr 2002-Apr 2007

W. WHITEHEAD
Executive No. 1 Scheme          06/18/1991          134          19,209            L25,740            To Jun 1998
Executive No. 1 Scheme*         04/10/1992          107          13,721            L14,681            To Apr 1999
Performance Option Scheme       05/03/1995           73          21,213            L15,485            To May 2005
Performance Option Scheme       08/11/1995           94          21,213            L19,940            Aug 1998-Aug 2005
Performance Option Scheme       04/19/1996          130          45,000            L58,500            Apr 1999-Apr 2006
Performance Option Scheme*      04/19/1996          130          45,000            L58,500            Apr 2001-Apr 2003
Performance Option Scheme       04/23/1997          131          45,000            L58,950            Apr 2000-Apr 2007
Performance Option Scheme*      04/23/1997          131          45,000            L58,950            Apr 2002-Apr 2007

P. SCHONING
Performance Option Scheme       05/03/1995           73          21,213            L15,485             To May 2005
Performance Option Scheme       08/11/1995           94          21,213            L19,940             Aug 1998-Aug 2005
Performance Option Scheme       04/19/1996          130          17,500            L22,750             Apr 1999-Apr 2006
Performance Option Scheme*      04/19/1996          130          17,500            L22,750             Apr 2001-Apr 2003
Performance Option Scheme       04/23/1997          131          27,500            L36,025             Apr 2000-Apr 2007
Performance Option Scheme*      04/23/1997          131          27,500            L36,025             Apr 2002-Apr 2007

</TABLE>
<PAGE>
<TABLE>
                 EXECUTIVE DIRECTORS' SHARE OPTIONS (CONTINUED)

                                 DATE OF          EXERCISE      NUMBER
SCHEME                            GRANT           PRICE (p)     SHARES           TOTAL PRICE        EXERCISE PERIOD
<S>                             <C>               <C>           <C>              <C>                <C>
ALEX HAMILL
Executive No. 1 Scheme          06/18/1991          134          68,605             L92,931            To Jun 1998
Executive No. 1 Scheme*         04/10/1992          107          54,884             L58,726            To Apr 1999
Performance Option Scheme       05/03/1995           73          46,927             L34,257            To May 2005
Performance Option Scheme       08/11/1995           94          46,927             L44,111            Aug 1998-Aug 2005
Performance Option Scheme       04/19/1996          130          45,000             L58,500            Apr 1999-Apr 2006
Performance Option Scheme*      04/19/1996          130          45,000             L58,500            Apr 2001-Apr 2003
Performance Option Scheme       04/23/1997          131          45,000             L58,950            Apr 2000-Apr 2007
Performance Option Scheme*      04/23/1997          131          45,000             L58,950            Apr 2002-Apr 2007

A. D'ANGELO
Executive No. 1 Scheme          06/18/1991          134           61,745            L82,738            To Jun 1998
Executive No. 1 Scheme*         04/10/1992          107           50,082            L53,588            To Apr 1999
Performance Option Scheme       05/03/1995           73           33,427            L24,402            To May 2005
Performance Option Scheme       08/11/1995           94           33,427            L31,421            Aug 1998-Aug 2005
Performance Option Scheme       04/19/1996          130           37,500            L48,750            Apr 1999-Apr 2006
Performance Option Scheme*      04/19/1996          130           37,500            L48,750            Apr 2001-Apr 2003
Performance Option Scheme       04/23/1997          131           37,500            L49,125            Apr 2000-Apr 2007
Performance Option Scheme*      04/23/1997          131           37,500            L49,125            Apr 2002-Apr 2007

M. BUNGEY
Executive No. 2 Scheme          06/18/1991          134          137,211           L183,863            To Jun 2001
Executive No. 2 Scheme*         04/10/1992          107           74,814            L80,051            To Apr 2002
Performance Option Scheme       05/03/1995           73           67,498            L49,274            To May 2005
Performance Option Scheme       08/11/1995           94           67,497            L63,447            Aug 1998-Aug 2005
Performance Option Scheme*      04/19/1996          130          150,000           L195,000            Apr 2001-Apr 2003
Performance Option Scheme       04/23/1997          131           75,000            L98,250            Apr 2000-Apr 2007
Performance Option Scheme*      04/23/1997          131           75,000            L98,250            Apr 2002-Apr 2007

</TABLE>




-----------------------
During 1997,  Cordiant  Ordinary Shares traded on the London Stock Exchange at a
high of 135p, a low of 98p and closed at 109p on December 31, 1997. 

All exercise  prices for the share option  schemes have been rounded down to the
nearest pence.

The options marked * are super options.

No Directors  exercised options under any of the share option schemes during the
year.

<PAGE>
ITEM 13.  INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS.

           Pursuant to a shareholder  agreement  with the Company,  TCG Employee
Nominee Pty Limited,  as Trustee of the TCG Employee Trust ("the Trust"),  holds
24.9 percent of the issued  Ordinary Share capital of The  Communications  Group
Pty Limited, the Company's principal Australian subsidiary ("TCG"). The Trust is
a unit trust set up for the benefit of  employees  of TCG and its  subsidiaries.
Mr.  Hamill is a director  and  shareholder  of the  Trustee  and is  personally
entitled to units  representing  approximately  11.6 percent of the  outstanding
units in the Trust. Mr. John Fawcett holds 10.28 percent and Mr. Ian Smith holds
8.2 percent of the outstanding units.  Westpac Banking  Corporation  ("Westpac")
has agreed to lend the Trustee up to A$5 million to finance  loans to  employees
to purchase  units in the Trust and eventual  repurchases of units by the Trust.
This loan is secured by a charge  over the shares in TCG held by the Trust.  The
Company  has granted to Westpac a put option  which  provides  that,  if Westpac
acquires TCG shares as a result of enforcing the  security,  the Company will be
obliged to purchase  such shares at a price  equivalent  to the unpaid amount of
the loan.  The  outstanding  amount of the loan from  Westpac to the Trustee was
A$1,500,000  as at January 1, 1997 and  A$1,300,000 as at December 31, 1997. The
Company  has also  agreed  with the  Trustee  that in the event that the Company
acquires TCG shares  pursuant to the put option,  then in certain  circumstances
the Company  will make  payments to the Trustee by reference to the value of the
TCG shares in excess of the amount of the loan.


                                     PART II


ITEM 14.   DESCRIPTION OF SECURITIES TO BE REGISTERED.

           Not Applicable.

                                    PART III



ITEM 15.   DEFAULTS UPON SENIOR SECURITIES.

           None.

ITEM 16.   CHANGES IN SECURITIES AND CHANGES IN
           SECURITY FOR REGISTERED SECURITIES.

           None.


                                     PART IV



ITEM 17.   FINANCIAL STATEMENTS.

           The Company has elected to provide financial  statements for 1997 and
the related information pursuant to Item 18.

ITEM 18.   FINANCIAL STATEMENTS.

           The  Company's  financial  statements  and the report  thereon by its
Independent  Auditor  listed below and set forth on pages F-1 to F-54 herein are
hereby incorporated by reference into this Item 18.

      (a)  Independent Auditor's Report dated May 26, 1998.

      (b)  Consolidated  balance  sheets of the Company and  subsidiaries  as at
           December 31, 1997 and 1996.

      (c)  Consolidated statements of operations,  shareholders'  deficiency and
           other share capital, total recognized gains and losses and cash flows
           of the Company and  subsidiaries  for the years  ended  December  31,
           1997, 1996 and 1995.

      (d)  Notes to consolidated financial statements.


ITEM 19.  FINANCIAL STATEMENTS AND EXHIBITS.

      (a) Financial Statements

          (1) Consolidated  balance sheets of the Company and subsidiaries as at
              December 31, 1997 and 1996. (Page F-5)

          (2) Consolidated  statements of operations,  shareholders'  deficiency
              and other share  capital,  total  recognized  gains and losses and
              cash flows of the  Company  and  subsidiaries  for the years ended
              December 31, 1997,  1996 and 1995.  (Page F-2,  F-3, F-4, F-6, F-7
              and F-8)

          (3) Notes to consolidated financial statements. (Pages F-9 to F-54)

      (b) Exhibits

          1.1 Consent of Independent Auditor.

          2.1 Amended Articles of the Company.

          3.1 Upon the request of the  Securities and Exchange  Commission,  the
              Company  hereby  agrees to provide the  Commission  with a list of
              subsidiaries of Cordiant Communications Group plc.



<PAGE>
                                   SIGNATURES


           Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant  certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused  this annual  report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                              CORDIANT COMMUNICATIONS GROUP PLC


                                              By:   /s/ David F. Ham
                                                 -------------------------------
                                                 NAME:  David F. Ham
                                                 TITLE:  Group Controller


Date:  June 29, 1998
<PAGE>
                         CORDIANT COMMUNICATIONS GROUP
                                AND SUBSIDIARIES

                          INDEPENDENT AUDITOR'S REPORT

The Board of Directors and Shareholders of Cordiant Communications Group plc:

We have audited the accompanying balance sheets of Cordiant Communications Group
plc and  subsidiaries  as of  December  31,  1997  and  1996,  and  the  related
consolidated statements of operations,  shareholders' deficiency and other share
capital,  total recognized gains and losses 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 audit in accordance with generally  accepted auditing standards
in the United States. 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  Cordiant
Communications  Group plc and  subsidiaries  at December 31, 1997, the financial
position of Cordiant plc and  subsidiaries at December 31, 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 in the United Kingdom.

Generally accepted  accounting  principles in the United Kingdom vary in certain
significant respects from generally accepted accounting principles in the United
States.  Application of generally accepted  accounting  principles in the United
States would have affected  results of  operations  for each of the years in the
three year period  ended  December  31,  1997 and  shareholders'  deficiency  at
December  31,  1997  and  1996  to  the  extent  summarized  in  note  37 to the
consolidated financial statements.



                                                     KPMG Audit Plc
London, England                                      CHARTERED ACCOUNTANTS
May 26, 1998, except as                              REGISTERED AUDITOR
to Note 34, which is as
of June 18, 1998


<PAGE>



<TABLE>

<CAPTION>


                         CORDIANT COMMUNICATIONS GROUP
                                AND SUBSIDIARIES


                      CONSOLIDATED STATEMENTS OF OPERATIONS




                                                                            Year ended December 31, 1997
                                                               --------------------------------------------------------

                                                                    Ongoing           Disposed
                                                                  operations         operations           Total
                                                    Notes          L million         L million          L million
<S>                                                 <C>           <C>                <C>                <C>     
Turnover                                                            1,576.1            2,630.1           4,206.2
                                                                    -------            -------           -------
Commission and fee income                                             308.2              427.9             736.1

Operating and administration expenses                 3              (276.2)            (378.1)           (654.3)

Depreciation                                                           (9.6)             (16.6)            (26.2)
                                                                    -------            -------           -------
Operating profit                                                       22.4               33.2              55.6

Profit on disposal of businesses                      2                16.5                4.3              20.8

Fundamental reorganization - demerger                 6              (970.6)             937.6             (33.0)
                                                                    -------            -------           -------
Profit (loss) before interest and taxation                           (931.7)             975.1              43.4

Net interest payable and similar charges              8                 3.5              (12.3)             (8.8)
                                                                    -------            -------           -------
Profit (loss) before taxation                                        (928.2)             962.8              34.6

Taxation                                              9                (8.1)              (9.4)            (17.5)
                                                                    -------            -------           -------
Profit (loss) after taxation                                         (936.3)             953.4              17.1

Minority interests                                                     (1.8)              (0.2)             (2.0)
                                                                    -------            -------           -------
Net profit (loss)                                                    (938.1)             953.2              15.1
                                                                    =======            ======= 
Dividend proposed on equity shares                                                                          (2.7)

Dividend on demerger                                                                                       134.6
                                                                                                         -------
Profit retained for year                                                                                   147.0
                                                                                                         =======
Net earnings per Cordiant Ordinary Share
   (Basic)                                           10                                                      3.4p

</TABLE>



To assist in the  understanding  of the Group the  Company  has  classified  the
results of Cordiant into ongoing and disposed operations.

There is no difference  between the total reported results in the financial year
and that on an historical cost basis.

See accompanying notes to the consolidated financial statements.



<PAGE>

                         CORDIANT COMMUNICATIONS GROUP
                                AND SUBSIDIARIES


<TABLE>

<CAPTION>


                                                                                  Year ended December 31, 1996
                                                                   ------------------------------------------------------------

                                                                       Ongoing              Disposed
                                                                      operations           operations              Total
                                                    Notes             L million            L million             L million  
<S>                                                 <C>               <C>                  <C>                   <C>     
Turnover                                                                1,568.7               2,555.0               4,123.7
                                                                        -------               -------               -------
Commission and fee income                                                 329.5                 425.4                 754.9

Operating and administration expenses                 3                  (298.4)               (399.2)               (697.6)

Depreciation                                                               (9.7)                (16.1)                (25.8)
                                                                        -------               -------               -------
Operating profit                                                           21.4                  10.1                  31.5

Profit on disposal of businesses                      2                    -                     17.8                  17.8
                                                                        -------               -------               -------       
Profit before interest and taxation                                        21.4                  27.9                  49.3

Net interest payable and similar charges              8                     5.8                 (13.3)                 (7.5)
                                                                        -------               -------               -------
Profit before taxation                                                     27.2                  14.6                  41.8

Taxation                                              9                    (9.6)                 (5.2)                (14.8)
                                                                        -------               -------               -------
Profit after taxation                                                      17.6                   9.4                  27.0

Minority interests                                                         (2.6)                 (0.2)                 (2.8)
                                                                        -------               -------               -------
Net profit                                                                 15.0                   9.2                  24.2
                                                                        =======               =======               

Dividend proposed on equity shares                                                                                     (4.4)
                                                                                                                     ------
Profit retained for year                                                                                               19.8
                                                                                                                     ======
Net earnings per Cordiant Ordinary Share
   (Basic)                                           10                                                                 5.5p

</TABLE>

To assist in the  understanding  of the Group the  Company  has  classified  the
results of Cordiant into ongoing and disposed operations.

There is no difference  between the total reported results in the financial year
and that on an historical cost basis.

See accompanying notes to the consolidated financial statements.



<PAGE>

                         CORDIANT COMMUNICATIONS GROUP
                                AND SUBSIDIARIES



<TABLE>
<CAPTION>
                                                                              Year ended December 31, 1995
                                                                  ------------------------------------------------------

                                                                         Ongoing         Disposed
                                                                       operations      operations          Total
                                                         Notes          L million       L million        L million
<S>                                                      <C>            <C>             <C>              <C>     
Turnover                                                                 1,527.6          2,644.7         4,172.3
                                                                         -------          -------         -------
Commission and fee income                                                  320.6            440.5           761.1

Operating and administration expenses                      3              (302.7)          (404.4)         (707.1)

Depreciation                                                               (10.2)           (15.5)          (25.7)
                                                                         -------          -------         -------
Operating profit                                                             7.7             20.6            28.3

Loss on disposal of businesses                             2                (5.9)           (28.4)          (34.3)

Profit on disposal of discontinued
   operations                                              5                 0.5              3.5             4.0
                                                                         -------          -------         -------
Profit (loss) before interest and taxation                                   2.3             (4.3)           (2.0)

Net interest payable and similar charges                   8                 3.4            (24.0)          (20.6)
                                                                         -------          -------         -------
Profit (loss) before taxation                                                5.7            (28.3)          (22.6)

Taxation                                                   9                (4.3)            (7.6)          (11.9)
                                                                         -------          -------         -------
Profit (loss) after taxation                                                 1.4            (35.9)          (34.5)

Minority interests                                                          (1.1)            (1.7)           (2.8)
                                                                         -------          -------         -------
Net profit (loss) retained for year                                          0.3            (37.6)          (37.3)
                                                                         =======          ========        
Dividend proposed on equity shares                                                                           -   
                                                                                                          -------
Profit (loss) retained for year                                                                             (37.3)
                                                                                                          ========

Net earnings (loss) per Cordiant Ordinary
   Share (Basic):

Continuing operations                                                                                       (14.2)p

Discontinued operations                                                                                       1.4p
                                                                                                          ---------
Net                                                        10                                               (12.8)p
                                                                                                          =========   

</TABLE>

To assist in the  understanding  of the Group the  Company  has  classified  the
results of Cordiant into ongoing and disposed operation.

There is no difference  between the total reported results in the financial year
and that on an historical cost basis.

See accompanying notes to the consolidated financial statements.


<PAGE>

<TABLE>

<CAPTION>


                         CORDIANT COMMUNICATIONS GROUP
                                AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

                                                                                           December 31,
                                                                                     1997               1996
                                                                Notes              L million         L million
<S>                                                             <C>                <C>               <C>                 
ASSETS

Current assets:
   Cash and short-term deposits                                                          61.7            113.7
   Short-Term Investments                                         11                      0.2             12.1
   Accounts and other receivables, prepayments and accrued
     income                                                       12/13                 254.3            616.4
   Billable production                                            13                     18.1             35.6
                                                                                      -------          -------
     Total current assets                                                               334.3            777.8

Long-Term Investments                                             14                      3.5              6.9

Long-term receivables:

   Accounts and other receivables, prepayments and accrued
     income                                                       12                     15.5             11.3
Property and equipment                                            15                     24.5            116.4
                                                                                      -------          -------
     Total assets                                                                       377.8            912.4
                                                                                      =======          =======

LIABILITIES AND SHAREHOLDERS' DEFICIENCY

Current liabilities:
   Bank loans, overdrafts and other loans                         16                      8.4             52.8
   Accounts payable, other liabilities and accrued expenses       17                    301.5            739.7
   Taxation and social security                                   22                     21.6             45.1
                                                                                      -------          -------
     Total current liabilities                                                          331.5            837.6
                                                                                      -------          -------
Long-term liabilities:
   Accounts payable, other liabilities and accrued expenses       17                      1.6             11.5
   Provision for joint venture deficit                            18                     14.3              -
   Property, pension and other provisions                         18                     57.3            136.9
   Long-term debt                                                 19                     28.4             88.9
   Deferred taxation                                              21                      0.5              1.1
   Taxation                                                       22                     23.8             43.6
   Minority interests                                                                     6.1              8.1
                                                                                      -------          -------
     Total long-term liabilities                                                        132.0            290.1
                                                                                      -------          -------
     Total liabilities                                                                  463.5          1,127.7
                                                                                      -------          -------
Shareholders' deficiency:
   Share capital
     Allotted, called up and fully paid:
       221,926,993 Ordinary Shares of 50p each (1996:
           443,682,881 Cordiant Ordinary Shares of 25p each)      23                    111.0            110.9
       Nil Deferred shares of 5p each (1996:  2,384,598,152)      23                      -              119.2
   Share premium                                                                          -              137.3
   Capital redemption reserve                                                             -               86.5
   Special reserve                                                                       25.7              -
   Goodwill reserves                                                                   (113.2)          (235.6)
   Accumulated deficit                                                                 (109.2)          (433.6)
                                                                                      -------          -------
     Shareholders' deficiency                                                           (85.7)          (215.3)
                                                                                      -------          -------
     Total liabilities and shareholders' deficiency                                     377.8            912.4
                                                                                      =======          =======
See accompanying notes to the consolidated financial statements.

</TABLE>


<PAGE>


<TABLE>

<CAPTION>

                          CORDIANT COMMUNICATIONS GROUP
                                AND SUBSIDIARIES


               CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIENCY
                             AND OTHER SHARE CAPITAL


                                    Years ended December 31, 1997, 1996, 1995
                                                                                                  Accumu-
                                               Premiums     Capital                                lated        Total
                                    Share      in Excess   Redemption   * Special    Goodwill     Earnings  Shareholders'
                                   Capital   of Par Value   Reserve     Reserves     Reserves    (Deficit)   Deficiency
                                  L million    L million   L million    L million    L million   L million    L million
                                  ---------    ---------   ---------    ---------    ---------   ---------    ---------
<S>                                 <C>          <C>          <C>         <C>        <C>          <C>         <C>       
At January 1, 1995                   174.3        65.5         86.5         -         (257.1)      (424.7)     (355.5)
Loss for the year                     -            -           -            -            -          (37.3)      (37.3)
Shares issued net of expenses         55.7        71.5         -            -            -           -          127.2
Merger reserve arising in year        -            -           -            -            0.9         -            0.9
Goodwill acquired and written off     -            -           -            -          (12.2)        -          (12.2)
Elimination of goodwill reserves
   on disposals                       -            -           -            -           50.2         -           50.2
Translation adjustment                -            -           -            -            -            1.8         1.8
                                     -----       -----         ----        --         ------       -------     -------   

At December 31, 1995                 230.0       137.0         86.5         -         (218.2)      (460.2)     (224.9)
Profit for the year                   -            -           -            -            -           19.8        19.8
Shares issued net of expenses          0.1         0.3         -            -            -           -            0.4
Goodwill acquired and written off     -            -           -            -          (17.4)        -          (17.4)
Translation adjustment                -            -           -            -            -            6.8         6.8
                                     -----       -----         ----        --         ------       -------     -------   

At December 31, 1996                 230.1       137.3         86.5         -         (235.6)      (433.6)     (215.3)
Issues of Ordinary shares net of       0.1         -           -            -            -            -           0.1
   expenses
Net goodwill arising in year          -            -           -            -           (1.7)         -          (1.7)
Elimination of goodwill reserves
   on demerger                        -            -           -            -          124.1       (124.1)        -
Profit retained for the year          -            -           -            -            -          147.0       147.0
Translation adjustment                -            -           -            -            -          (15.8)      (15.8)
*Reduction of capital               (119.2)     (137.3)       (86.5)       25.7          -          317.3         -   
                                     -----       -----         ----        ----       ------       -------     -------   
At December 31, 1997                 111.0        -            -           25.7       (113.2)      (109.2)      (85.7)
                                     =====       =====         ====        ====       =======      =======     =======

</TABLE>

During 1995,  Cordiant issued 1,344,107  Cordiant Ordinary Shares at 25p each to
finance  the  acquisition  of all of the issued  share  capital  of Laing  Henry
Limited,  a UK advertising  agency.  Cordiant recorded the issuance of shares at
the nominal value of the shares issued and  established a merger reserve of L0.9
million for the excess of the market value of the shares issued over the nominal
value  recorded.  The merger  reserve was utilized for the write-off of goodwill
arising from the acquisition.

As at December 31, 1997, the Accumulated  Deficit included  cumulative  exchange
translation losses of L27.0 million (1996: L11.2 million).

* As part of the  Demerger,  Cordiant  applied  to the High  Court of Justice in
England and Wales (the "Court") to approve a reduction of capital in the form of
the deferred shares, the share premium account and capital  redemption  reserve.
The Court's  approval was  granted,  with effect from  November 28, 1997,  which
permitted  the reduction of capital to be applied first to making up the deficit
resulting from the pre-demerger  reconstruction and then to create  distribution
reserves in an amount equal to the amount of the demerger  dividend.  The excess
capital was credited to a special reserve which is non-distributable  other than
for the purpose of paying up shares in a bonus issue of fully paid shares.

See accompanying notes to the consolidated financial statements.




<PAGE>

<TABLE>
<CAPTION>

                         CORDIANT COMMUNICATIONS GROUP
                                AND SUBSIDIARIES

          CONSOLIDATED STATEMENTS OF TOTAL RECOGNIZED GAINS AND LOSSES


                                                                            Year ended
                                                                           December 31,
                                                     ----------------------------------------------------------
                                                             1997                 1996               1995
                                                             ----                 ----               ----
                                                          L million             L million         L million
<S>                                                       <C>                   <C>               <C>
Profit (loss) for the financial year                         15.1                   24.2            (37.3)
Translation adjustment                                      (15.8)                   6.8              1.8
                                                            ------                  ----            ------ 
Total (losses) gains recognized for the                      (0.7)                  31.0            (35.5)
  financial year                                            ======                  ====            ======

</TABLE>

See accompanying notes to the consolidated financial statements.



<PAGE>

<TABLE>
<CAPTION>
                         CORDIANT COMMUNICATIONS GROUP
                                AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                                Year ended December 31,
                                                            Notes          1997             1996         1995
                                                            -----          ----             ----         ----
                                                                         L million        L million    L million
<S>                                                         <C>             <C>              <C>          <C>   

Ongoing operations                                                            5.6             17.5         22.0
Disposed operations                                                          56.1             39.4         (5.4)
                                                                             ----             ----         -----

Net cash inflow from operating activities                     27             61.7             56.9         16.6
                                                                             ----             ----         -----

Net cash outflow arising from external Demerger costs                       (13.8)            -            -   
                                                                             ----             ----         -----

Returns on investments and servicing of finance
   interest received                                                          5.3              7.3          7.8

Interest paid (including bank fees)                                         (13.6)           (15.2)       (21.8)
Interest element of finance lease rental payments                            (0.1)            (0.1)        (0.1)
Dividends paid to minorities                                                 (1.9)            (1.2)        (2.3)
Bank fees                                                                    (2.0)            (0.9)        (4.6)
                                                                             ----             ----         -----
Net cash outflow from returns on investments and
   servicing of finance                                                     (12.3)           (10.1)       (21.0)
                                                                            ------           ------       ------

Taxation
UK corporation tax repaid                                                     -                0.1          2.0
Overseas tax paid                                                           (15.1)            (9.4)        (8.0)
                                                                            ------           ------       ------
Tax paid                                                                    (15.1)            (9.3)        (6.0)
                                                                            ------           ------       ------
Capital expenditure and financial investment

Purchase of tangible fixed assets                                           (25.8)           (26.9)       (26.6)
Sale of tangible fixed assets                                                 2.6              2.9          5.5
Purchase of other fixed asset investments                                    (0.5)            (0.9)        (0.1)
Sale of other fixed asset investments                                         1.2              0.1          0.2
                                                                            ------           ------       ------
Net cash outflow from capital expenditure and
   financial investment                                                     (22.5)           (24.8)       (21.0)
                                                                            ------           ------       ------

Acquisitions and disposals

Purchase of subsidiary undertakings                                          (9.3)           (25.3)        (7.3)
Cash acquired with subsidiaries                                               0.6              1.7          -
Sale of subsidiary undertakings                                              41.6              9.9         30.4
Cash in businesses sold                                                      (1.1)            -            (3.7)
Cash in businesses demerged                                                 (43.4)            -            -   
                                                                            ------           ------       ------
Net cash outflow from acquisitions and disposals                            (11.6)           (13.7)        19.4
                                                                            ------           ------       ------

Equity dividends paid                                                        (4.4)            -            -   
                                                                            ------           ------       ------

Total net cash outflow before financing                                     (18.0)            (1.0)       (12.0)
                                                                            ------           ------       ------

Financing activities

Issues of Ordinary Share capital                                              0.1              -          133.0
Costs of share issues                                                         -                -           (6.4)
Capital subscribed by minorities                                              -                0.2          -
Net borrowings (loan repayments)                                             17.3            (11.0)      (128.4)
Capital element of finance lease rental payments                             (0.3)            (0.4)        (0.4)
                                                                            ------           ------       ------
Net cash inflow (outflow) from financing                                     17.1            (11.2)        (2.2)
                                                                            ------           ------       ------

Decrease in cash                                                             (0.9)           (12.2)       (14.2)
                                                                             =====           ======       ======

See accompanying notes to the consolidated financial statements.

</TABLE>


<PAGE>

                         CORDIANT COMMUNICATIONS GROUP
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ACCOUNTING POLICIES

          The Demerger of Saatchi & Saatchi from Cordiant which took effect from
December 15, 1997 has fundamentally changed the Group. Prior to the Demerger, an
internal  reorganization  of Cordiant was effected whereby Cordiant  transferred
the various  assets that  comprised the Saatchi & Saatchi Group  (including a 50
percent  shareholding in Zenith) to a single holding company,  Saatchi & Saatchi
Holdings  Limited  ("Holdings").  The  Demerger  occurred in three  simultaneous
steps.  First,  Cordiant made a stock  dividend to holders of Cordiant  Ordinary
Shares on the basis that the dividend would be satisfied by the  distribution of
the Saatchi  Ordinary Shares.  Second,  Saatchi & Saatchi acquired the shares of
Holdings from Cordiant.  Third,  Saatchi & Saatchi  satisfied the stock dividend
(the "Dividend") by issuing its shares directly to Cordiant shareholders.

          Pursuant to the Demerger,  shares of Saatchi & Saatchi were  initially
issued on a one-for-one  basis (i.e.,  each holder of Cordiant  Ordinary  Shares
received the same number of shares of Saatchi & Saatchi).  Immediately following
the  Dividend,  both  the  Company  and  Saatchi  &  Saatchi  effected  a  share
consolidation or reverse  stock-split (the  "Consolidation"),  so that following
the Demerger and Consolidation  holders of Cordiant Ordinary Shares received one
Ordinary Share and one Saatchi  Ordinary  Share for every two Cordiant  Ordinary
Shares held as at the record date for the Dividend.

          To assist in an  understanding  of CCG going forward,  the Company has
classified,   where  appropriate,  the  consolidated  financial  statements  and
associated notes between ongoing operations and disposed operations. As a result
of the Demerger,  the Company and Saatchi & Saatchi are separate publicly traded
companies  and operate  independently  of each other.  However,  the Company and
certain   companies  within  CCG  have  entered  into  certain   agreements  and
arrangements   with  the  Saatchi  &  Saatchi   Group  and  Zenith  to  allocate
responsibility   for  certain   obligations  and  to  provide  for  transitional
arrangements.  These  agreements  and  arrangements  relate  primarily  to:  (i)
guarantees (for property and bank facilities,  among others); (ii) the ownership
and operation of Zenith;  (iii) the  ownership  and operation of The  Facilities
Group;  (iv)  operating  arrangements  of joint  offices;  and (v)  arrangements
regarding shared premises.

The  consolidated  financial  statements have been prepared under the historical
cost accounting rules and in accordance with applicable UK accounting standards.

The  preparation  of the  financial  statements  in  conformity  with  generally
accepted  accounting  principles requires the Group's management (as is the case
with the  management of all companies) 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.

The following  paragraphs  describe the significant  accounting policies used in
preparing the consolidated financial statements.

(a)     Basis of Consolidation

The  consolidated  financial  statements  include the  financial  statements  of
Cordiant  Communications  Group  plc  and  all its  subsidiaries.  All  material
intra-group transactions and balances have been eliminated on consolidation.

(b)     Ongoing Operations

A business is classified  as an ongoing  operation if it remained with the Group
following the Demerger and the disposal of other businesses and excludes Zenith.

(c)     Disposed Operations

Disposed operations refer to advertising related businesses demerged to form the
Saatchi & Saatchi Group, Zenith and other businesses disposed of.

(d)     Discontinued Operations

A  business  is  classified  as  a  discontinued  operation  if  it  is  clearly
distinguishable,  has a material effect on the nature and focus of the reporting
entity's  operations  and  represents  a  material  reduction  in its  operating
activities resulting from its withdrawal from a particular class of business.

(e)     Income Recognition

Commission and fee income is recognized generally when work is billed to clients
and  excludes  sales taxes and intra group  transactions.  Billings  are usually
rendered upon presentation date for media advertising and upon the completion of
radio, television and print production.

(f)     Long Term Property Provisions

Provision  is made on an  undiscounted  basis for the future  rental and related
costs of leasehold  property (net of assumed sublease income) where the property
is vacant or currently not planned to be used for ongoing operations.

(g)     Pension Costs

Retirement benefits for employees of most companies in the Group are provided by
either  defined  contribution  or defined  benefit  schemes  which are funded by
contributions  from  Group  companies  and  employees.   The  Group's  share  of
contributions to defined  contribution schemes is charged against profits of the
year for which they are payable and the cost of  providing  defined  benefits is
charged  against  the  profits,   in  accordance  with  the  recommendations  of
independent  actuaries,  in such a way as to provide for liabilities evenly over
the remaining working lives of the employees.

(h)     Leases

Where the Group enters into a lease which entails taking  substantially  all the
risks and rewards of  ownership  of an asset,  the lease is treated as a finance
lease.  The asset is recorded in the balance sheet as a tangible fixed asset and
is depreciated over the shorter of its estimated useful life and the lease term.
Future  installments under such leases, net of finance charges,  are included in
creditors. Rentals payable are apportioned between the finance element, which is
charged to the  statement of  operations  as interest,  and the capital  element
which reduces the outstanding obligation for future installments.

All other leases are  operating  leases and the rental  charges are taken to the
statement of operations on a straight-line basis over the life of the lease.

(i)     Goodwill

Goodwill in respect of acquisitions, including any additional goodwill estimated
to arise from contingent  capital payments,  is written off directly to reserves
in the year in which  the  transaction  arises.  A charge is  recognized  in the
Group's  statement of operations  in respect of any permanent  diminution in the
value of acquisition goodwill. Goodwill written off directly to reserves and not
previously  charged to the Group's statement of operations  because of permanent
diminution in value, is included in determining the profit or loss on disposal.

(j)     Property and Equipment

Property  and  equipment  are  stated  at  historical   cost  less   accumulated
depreciation.  Additions,  improvements  and  major  renewals  are  capitalized.
Maintenance, repairs and minor renewals are expensed as incurred.

The cost of property and equipment less estimated  residual value is written off
by equal annual  installments  over the expected  estimated  useful lives of the
assets as follows:

Owned and long-term leasehold  properties             50 years
Short-term leasehold  properties  
  with terms less than 50 years                       Period of lease
Furniture  and  equipment                             Between 4 and 10 years
Motor vehicles                                        4 years

(k)     Joint Ventures and Associated Undertakings

The Group's share of the profits less losses of all  significant  joint ventures
and associated  undertakings is included in the Group's  statement of operations
on a gross equity and equity accounting basis  respectively.  The carrying value
of significant  joint ventures and associated  undertakings in the Group balance
sheet is calculated by reference to the Group's equity in the net assets of such
undertakings.

(l)     Billable Production

Billable  production is valued at the lower of cost or net realizable  value and
comprises mainly outlays incurred on behalf of clients.

(m)     Short-Term Investments

Short-term   investments,   including  money  market  investments,   are  valued
individually  at the lower of market value on date of receipt or net  realizable
value at the balance sheet date. No credit is taken in the financial  statements
for any increase in market value at the balance sheet date.

(n)     Deferred Taxation

Deferred taxation is provided at the anticipated tax rates on timing differences
arising  from the  inclusion  of items of income  and  expenditure  in  taxation
computations  in periods  different  from those in which  they are  included  in
financial statements to the extent that it is probable that a liability or asset
will crystallize in the foreseeable future.

No provision is made for deferred tax on unremitted overseas earnings unless the
Group expects them to be remitted.

(o)     Foreign Currencies

Transactions  in foreign  currency  are  recorded at the rate of exchange at the
date of the transaction or, if hedged forward, at the rate of exchange under the
related forward currency contract.

Statements of operations of overseas  subsidiaries  are translated into sterling
at the average  rates  during the year with the year end  adjustment  to closing
rates being taken to reserves.  Assets and  liabilities  in foreign  currencies,
including  those of overseas  subsidiaries,  are  translated  using the rates of
exchange ruling at the balance sheet date.

Gains or losses on  translation  of opening  net  assets are taken to  reserves.
Exchange  differences  arising  from  the  retranslation  of  long-term  foreign
currency borrowings used to finance foreign currency  investments are also taken
to  reserves.  All other  exchange  differences  are taken to the  statement  of
operations.

The Group's principal  trading  currencies and the exchange rates used against L
sterling are as follows:


<TABLE>

<CAPTION>
                                                           Average Rate                           Closing Rates
                                                     Year ended December 31,                      December 31,
                                             -----------------------------------------     ----------------------------
<S>                                          <C>           <C>          <C>                <C>             <C> 
                                             1997          1996         1995               1997            1996
US Dollar                                    1.64          1.56         1.58               1.65            1.71
French Franc                                 9.55          7.99         7.87               9.90            8.90
Deutschmark                                  2.84          2.35         2.26               2.96            2.64
Australian Dollar                            2.21          2.00         2.13               2.52            2.15
Spanish Pesetas                              240           198          197                251             223
Italian Lira                                 2,790         2,409        2,571              2,909           2,602

</TABLE>

<PAGE>


NOTE 2 - ACQUISITIONS, DISPOSALS AND CONTINGENT AND DEFERRED CAPITAL PAYMENTS*

* Where  applicable in this Note,  translations  from US dollars are made at the
rates at which the transactions were concluded.

Acquisitions

In December 1996, Cordiant acquired a 50% interest in X/M Harrow Pty Limited, an
Australian  company.  The  acquisition  was  completed in December 1996 for L0.5
million.  In  November  1997,  Cordiant  acquired a further 25%  interest  for a
deferred payment,  based on adjusted revenue in the years to 2000,  estimated at
cash consideration L0.3 million.

In July 1997,  Cordiant  acquired a 51% interest in the share capital of Grapple
Group 141 (Pty) Ltd., in South Africa, for cash consideration of L0.2 million.

In December  1997,  Scholz & Friends GmbH acquired a further 33% interest in the
share capital of Scholz & Friends Dresden GmbH, in Germany,  raising the Group's
effective  holding to 76.5%.  Estimated  deferred  consideration of L2.2 million
will be paid in 2000.

In December 1994,  Cordiant  agreed to acquire the remaining  38.3% of the share
capital of Grupo BSB S.A. and BSB  Especialazades  S.A., its two subsidiaries in
Spain  which  are part of the  Bates  Worldwide  network.  The  acquisition  was
completed in January 1995 for an initial  payment of L1.9 million,  with further
payments,  based on profitability  payable in the years to 1997, to a maximum of
L9.7  million.  Under  the  acquisition  agreement,  L1.9  million  was  paid on
acquisition,  L2.5 million in 1995,  L1.3 million in 1996 and a final payment of
L5.0 million in 1997.

With effect from January 1996 Cordiant acquired an additional 47.4% of the share
capital  of Saatchi & Saatchi  Advertising  SA in France.  The  acquisition  was
completed in September 1996 for an initial  consideration of L17.5 million and a
further payment of L2.9 million in 1997.

In May 1996,  Cordiant acquired a further 10.7% interest in the share capital of
Scholz & Friends  GmbH in Germany,  raising its stake to 90%.  Consideration  of
L2.3 million was paid in cash.

During 1996 Cordiant issued a total of 392,482 Cordiant Ordinary Shares as final
consideration  to  the  vendors  of  Adaptus   International  A/S,  a  Norwegian
subsidiary and Campaign Palace, Sydney, an Australian subsidiary.

During  1996  Cordiant  acquired  51%  interests  in each  of  BLGK  Advertising
(Proprietary)   Limited  and  Saatchi  &  Saatchi   Klerk  &  Barrett   Holdings
(Proprietary)  Limited,  both  companies  based in South  Africa.  Cordiant also
acquired  the  minority  interest of BSB Saatchi & Saatchi MC Limited in Poland.
The  consideration  paid in 1996 for all these  acquisitions was L3.7 million in
cash with a further consideration of L0.4 million paid in cash in March 1997.

These  acquisitions  were accounted for under the purchase method of accounting.
Accordingly,  the statements of operations reflect the results of operations for
new subsidiaries since the date of acquisition.


Disposals

The profit (loss) on disposal of businesses is discussed by year below:

(a)      The profit on disposal of businesses in 1997

The profit on disposal of  businesses  in 1997 of L20.8  million  arose from the
sale of NRG and the  disposal  of the  Interpublic  Group of  Companies  ("IPG")
shares  received by Cordiant due to clauses in the sale agreement of KDW in 1995
(see (c) below).

In  October  1997,  Cordiant  sold NRG for a gross cash  consideration  of $53.1
million (L32.4 million).  The gross  consideration  included $13.1 million (L8.0
million)  payable to  certain of NRG's  directors  under  terms of an  agreement
entered  into in 1995.  Net assets  disposed of were  estimated  at $7.5 million
(L4.6  million).  After  accounting for provisions  totalling $5.4 million (L3.3
million) for additional tax, professional fees and determination of the disposed
balance sheet, the profit on sale was $27.1 million (L16.5 million).

(b)      The profit on disposal of businesses in 1996

The  profit on  disposal  of  businesses  in 1996 of L17.8  million  arose  from
additional  consideration received regarding the sale of KDW (see (c) below) and
further consideration of L1.3 million for disposals in prior years.

(c)      The loss on disposal of businesses in 1995

The loss on  disposal  in 1995 of L34.3  million  arose from sale and closure of
CME,  the  sale  of KDW  and  the  partial  disposal  of  Bates  Australia  (The
Communications  Group Pty.  Ltd.).  The loss included the non-cash  write-off of
L50.2 million of acquired goodwill. Details of the disposals are as follows:

     (i)  In April  1995,  Cordiant  disposed  of the  assets  and  liabilities,
          business  and  undertakings  of CME to IPG (51%) and CME's  management
          (49%).  Consideration of $41.4 million (L26.7 million) was received in
          cash. Net liabilities disposed were $3.1 million (L2.0 million).

     (ii) In April 1995  Cordiant  completed  the sale of the  Saatchi & Saatchi
          Advertising Worldwide agencies in Puerto Rico and Mexico to Nazca S&S.
          Consideration  for the sale was a 30%  holding  in Nazca  S&S group of
          companies.

At  an  Extraordinary   General  Meeting  of  Cordiant  on  September  1,  1995,
shareholders approved the sale of KDW to its management. Consideration was $13.7
million (L8.8 million) in cash,  $9.5 million (L6.1 million) in the form of a 10
per cent subordinated loan note of the purchaser, $4.0 million (L2.5 million) in
the  form of  redeemable  preferred  stock  in the  purchaser  and  warrants  to
subscribe for shares of common stock in the purchaser representing approximately
25% of the  purchaser's  fully diluted  equity share  capital,  exercisable at a
price of $250,000 (L161,000) in aggregate.  The net assets of KDW at the date of
disposal were L5.5 million after settling intra-group balances.

In 1996 KDW was sold to IPG and, as a result,  Cordiant  exercised  its right to
take up the  warrants  and  recognized  a  further  gain of L16.5  million.  The
additional  consideration received was $13.5 million (L8.7 million) in cash from
the repayment of a loan note and redeemable  preferred  stock, and $18.5 million
(L11.9 million) in shares of IPG.

In July 1997,  all the IPG shares were  disposed of for  consideration  of $28.0
million (L17.1  million) in cash resulting in a further gain on disposal of L4.3
million.

In December  1995  Cordiant  committed to an equity  incentive  scheme for Bates
Australia (The  Communications  Group Pty. Ltd.)  involving the sale of 24.9% of
that company to an employee trust.

Contingent and Deferred Capital Payments

The Group may make  capital  payments in future  years as a result of  contracts
entered into to acquire  additional  interests in  subsidiaries  and  associated
companies.  Such payments are  contingent  on the levels of profits  achieved by
those  companies and may be partially paid by the issue of shares at the Group's
option.   In  addition,   the  Group  is  committed  to  pay  certain   deferred
consideration  payments.  CCG estimates that, at the rates of exchange ruling at
December 31, 1997, the total payments (including  interest) that may be made are
as follows:


<TABLE>

<CAPTION>

                               Contingent          Deferred           1997             1996
                                Payments           Payments           Total            Total
                                --------           --------           -----            -----
                                L million         L million         L million       L million
<S>                               <C>               <C>               <C>              <C>
Due within 1 year                   -                0.1               0.1              9.4
Due within years 2-5               3.6                -                3.6              5.2
                                   ---               ---               ---              ---
                                   3.6               0.1               3.7             14.6
                                   ===               ===               ===             ====
</TABLE>

<PAGE>


NOTE 3 - OPERATING AND ADMINISTRATIVE EXPENSES

Operating and administrative  expenses from continuing  operations  included the
following:


<TABLE>

<CAPTION>
                                                                      Year ended
                                                                      December 31,
                                                       ------------------------------------------ 
                                                         1997            1996             1995
                                                         ----            ----             ----
                                                       L million       L million         L million

<S>                                                       <C>             <C>             <C>  
Staff and associated costs (see note 7)                   407.3           426.4           434.3

Hire of plant and machinery - operating leases
   (see note 26)                                            2.9             3.1             3.2

Hire of other assets - leasehold property net of
   sublease income (see note 26)                           47.7            48.3            52.4

(Profit) loss on sale of tangible fixed assets             (0.8)            0.2            (1.5)

Auditor's remuneration, including expenses                  2.6             2.5             2.5

Auditor's remuneration, other than audit fees*              0.4             0.9             0.8

Other administrative expenses, including
   exceptional items                                      194.2           216.2           215.4
                                                          -----           -----           -----
                                                          654.3           697.6           707.1
                                                          =====           =====           =====

</TABLE>


*In addition to non-audit fees paid to our auditor shown above,  additional fees
of L6.8 million  relating to work in respect of the Demerger are included in the
fundamental  reorganization cost (see note 6). Work performed primarily included
due-diligence, work associated with the circular to shareholders relating to the
demerger  and the listing  particulars  of Saatchi & Saatchi,  and advice on the
fundamental reorganization of Cordiant.

Cordiant made  charitable  donations in the United Kingdom of L58,000,  L34,000,
and L72,000 in the years ended December 31, 1997, 1996 and 1995, respectively.



<PAGE>

NOTE 4 - EXCEPTIONAL OPERATING ITEMS

Included  in  Operating  and  Administrative  Expenses  in Note 3 above  are the
following exceptional items:


<TABLE>

<CAPTION>

                                         Ongoing   Disposed  Total     Ongoing    Disposed    Total     Ongoing    Disposed   Total
                                       operations operations 1997     operations operations    1996    operations operations  1995
                                           Lm         Lm      Lm          Lm        Lm          Lm        Lm         Lm        Lm
<S>                                        <C>      <C>       <C>        <C>       <C>        <C>        <C>         <C>       <C> 
Termination of a
defined benefits
pension plan .......................       --        --        --        0.2        8.1        8.3        --         --         --

Leasehold property
provisions .........................       --        --        --        --         8.2        8.2        --         --         --

Goodwill written off ...............      2.2        --       2.2        --         --         --         --         --         --

Severance and
reorganization costs ...............       --        --        --        --         --         --        13.2        3.8       17.0

Litigation and
associated costs ...................       --        --        --         --        --         --         0.9        2.4        3.3
                                           ---       ---       ---        ---       ----       ----       ---        ---        ---

                                           2.2        --       2.2        0.2       16.3       16.5       14.1        6.2       20.3
                                           ===                 ===        ===       ====       ====       ====        ===       ====
</TABLE>

The  pension  plan  costs  arose  from a  decision  taken as part of  Cordiant's
efficiency program to terminate the defined benefits plan in the USA. The scheme
was frozen at June 30, 1996 and terminated on December 31, 1996.

The  leasehold  property  provision  arose from the  decision to vacate  surplus
office space with an estimated future net rental shortfall of L8.2 million.

The  goodwill  written  off relates to the Group's  Indonesian  subsidiary.  The
decision was taken in view of the economic uncertainty in that country.

The litigation and associated costs in 1995 were related to the departure of the
former Chairman of Cordiant and other senior executives.


NOTE 5 - DISCONTINUED OPERATIONS

The profit on disposal of  discontinued  operations of L4.0 million for the year
ended December 31, 1995, arose from deferred  payments received from consultancy
operations sold in prior years.



<PAGE>


NOTE 6 - FUNDAMENTAL REORGANIZATION - DEMERGER

In order to implement the Demerger,  inter-group debt and subsidiaries had to be
eliminated.  This was carried out by sale,  assignment,  waiver or other  means.
Surpluses and losses arising from these transactions are shown below.

<TABLE>

<CAPTION>

                                                                           Ongoing      Disposed         Total
                                                                         operations    operations         1997
                                                                          Lmillion      Lmillion        Lmillion
                                                                          --------      --------        --------
<S>                                                                          <C>       <C>              <C>    
Surplus/(loss) on inter-group debt                                           875.0     (1,011.8)        (136.8)

Surplus/(loss) on transfer of subsidiaries                                    72.7         64.1          136.8

Amounts payable in relation to the demerger                                   16.3          3.9           20.2

Head office reorganization                                                     6.6          0.1            6.7

Inter-group property provisions                                                  -          6.1            6.1
                                                                             -----       -------         -----
Fundamental reorganization - demerger                                        970.6       (937.6)          33.0

</TABLE>

Amounts  payable in relation to the Demerger  include  external  advisors' fees,
temporary staff and other costs.

As a result of the Demerger,  the Cordiant head office has been  reorganized and
combined with the head offices of Bates Worldwide and Saatchi & Saatchi.

Property  provisions,  which will have no cash impact,  arose as a result of the
Demerger and  represented  the  difference  between  rental payable by Saatchi &
Saatchi and the amounts receivable from Zenith for space sublet to them.



<PAGE>


NOTE 7 - EMPLOYEES


<TABLE>

<CAPTION>

Average number of employees of Cordiant by geographic area                     Year ended
                                                                              December 31,
                                                              ----------------------------------------------
                                                                   1997               1996             1995
                                                                   ----               ----             ----
<S>                                                              <C>                <C>              <C>   
UK                                                                  509                574              644
North America                                                       914              1,096            1,111
Rest of Europe, Africa and Middle East                            1,565              1,601            1,577
Asia Pacific                                                      1,672              1,595            1,419
                                                                  -----              -----            -----
Ongoing operations                                                4,660              4,866            4,751
Disposed operations                                               5,938              5,343            5,819
                                                                  -----              -----            -----
                                                                 10,598             10,209           10,570
                                                                 ------             ------           ------
<CAPTION>


                                              Ongoing  Disposed   Total   Ongoing   Disposed    Total   Ongoing    Disposed   Total
                                            operations operations 1997   operations operations  1996   operations operations   1995
                                                Lm        Lm       Lm         Lm       Lm        Lm         Lm        Lm        Lm
                                                --        --       --         --       --        --         --        --        --
<S>                                           <C>       <C>       <C>       <C>       <C>       <C>        <C>       <C>       <C>  
Wages and salaries ......................     156.1     204.5     360.6     162.4     204.9     367.3      163.0     217.3     380.3
Social security costs ...................      15.6      18.7      34.3      17.0      20.2      37.2       17.3      20.3      37.6
Pension costs - see note 25..............       4.5       7.9      12.4       5.7      16.2      21.9*       6.9       9.5      16.4
                                                ---       ---      ----       ---      ----      ----        ---       ---      ----
                                              176.2     231.1     407.3     185.1     241.3     426.4      187.2     247.1     434.3
                                              -----     -----     -----     -----     -----     -----      -----     -----     -----


*  Included  in the  pension  cost  for  1996  of  L21.9  million  there  was an
exceptional  charge of L8.3 million to terminate  the defined  benefits  pension
plan in the USA (see note 4).

</TABLE>



<PAGE>


NOTE 8 - NET INTEREST AND SIMILAR CHARGES


<TABLE>

<CAPTION>

                                                                         Year ended
                                                                        December 31,
                                                          ----------------------------------------
                                                             1997           1996              1995
                                                             ----           ----              ----
                                                          L million      L million         L million
                                                        
<S>                                                          <C>            <C>               <C> 
Interest payable and similar charges:
On bank loans, overdraft facilities and other loans
   required to be repaid within five years                   13.4           13.1              23.3
   On capitalized leases and hire purchase                    0.1            0.1               0.1
   On other loans                                             0.4            0.4               0.4
   Bank fees                                                  1.9            1.1               0.7
   Exceptional bank fees                                       -             -                 3.9
                                                             ----           ---               ----
                                                             15.8           14.7              28.4
                                                             ----           ----              ----

Interest receivable and similar items:
On cash and deposits                                         (5.3)          (6.5)             (7.4)
Note interest                                                (0.3)          (0.7)             (0.4)
Foreign exchange                                             (1.4)             -                -
                                                             ----           ----              ----
                                                             (7.0)          (7.2)             (7.8)
                                                             ----           ----              ---- 
Net interest payable                                          8.8            7.5              20.6
                                                              ===            ===              ====
</TABLE>


The exceptional  bank fees in 1995 of L3.9 million arose from the  renegotiation
of bank facilities in April 1995 which were superseded by the subsequent  rights
issue and amended bank facility.

NOTE 9 - TAXES ON INCOME

Taxes on income were made up as follows:


<TABLE>

<CAPTION>
                                                                       Year ended
                                                                      December 31,
                                                     ---------------------------------------------
                                                        1997             1996               1995
                                                        ----             ----               ----
                                                     L million         L million         L million

<S>                                                     <C>               <C>               <C> 
UK corporation tax:
ACT written off                                          -                 1.1               -
Currently payable                                        0.7               1.1               0.3
Relief for overseas tax                                 (0.5)             (0.6)             (0.4)
Deferred                                                 0.2              (0.5)             (0.8)
                                                         ---              ----              ---- 
                                                         0.4               1.1              (0.9)

Overseas taxation:
Currently payable                                       17.9              13.1              14.3
Deferred                                                (0.8)              0.6              (1.5)
                                                        ----               ---              ---- 
                                                        17.5              14.8              11.9
                                                        ====              ====              ====

</TABLE>


The corporate tax effect of the operating and  non-operating  exceptional  items
was a tax credit of Lnil,  Lnil and L2.1 million in the years ended December 31,
1997, 1996 and 1995,  respectively.  The 1995 tax charge reflected the fact that
the loss on disposal of operations  and the  exceptional  expenses were, in most
cases, either not recognized for tax purposes or added to existing losses.



<PAGE>


The above  charges  reconcile as follows with the  standard UK  corporation  tax
rates:



<TABLE>


<CAPTION>

                                                               Year ended December 31,
                                                       ---------------------------------------
                                                       1997              1996             1995
                                                       ----              ----             ----
                                                     L million        L million        L million


<S>                                                    <C>             <C>              <C>   
Tax charge in financial statements                    (17.5)          (14.8)            (11.9)
Tax charge (credit) on pre-tax  profit
   (loss) at 31.5% (1996 and 1995:  33%)               10.9            13.8              (7.5)
                                                       ----            ----              ---- 
Difference                                             (6.6)           (1.0)            (19.4)
                                                       ====            ====             ===== 

Deferred tax credits not available                      6.0             1.5              (6.7)
Permanent differences between
   expenditures charged in arriving at
   income and expenditures allowed for
     tax purposes:

    UK                                                  2.1             0.8              (3.3)
    US                                                 (0.5)            0.4               1.4
    Rest of World                                       0.7            (1.1)              0.1
    Disposal of minority interest                       -               -                (2.0)
    Demerger                                          (10.4)            -                 -
    Goodwill                                           (0.7)            -                 -
    Unrelieved profit/(losses)                          3.1             1.4              (6.6)
Difference between UK and
   overseas standard tax rates                         (4.0)           (2.3)             (3.0)
Irrecoverable ACT                                       -              (1.1)              -
Other items                                            (2.9)           (0.6)              0.7
                                                       ----            ----               ---
Difference above                                       (6.6)           (1.0)            (19.4)
                                                       ====            ====             ===== 

The components of income (loss) before taxation are as follows:

<CAPTION>


                                                                            Year Ended
                                                                            December 31,
                                                 --------------------------------------------------------------
                                                       1997                  1996                  1995
                                                       ----                  ----                  ----
                                                     L million             L million            L million

<S>                                                    <C>                   <C>                     <C>
Domestic (UK)                                          (17.0)*               11.5                    9.6
Foreign                                                 51.6                 30.3                  (32.2)
                                                        ----                 ----                  ------
                                                        34.6                 41.8                  (22.6)
                                                        ====                 ====                  ======
</TABLE>


*    The loss before  taxation in the UK in 1997  incorporated  L26.5 million of
     the fundamental reorganization expense of L33.0 million (see note 6).

At December 31, 1997 the Group had L100 million of operating loss  carryforwards
expiring  between  1998 and 2011.  Additionally,  the Group had L18  million  of
operating loss  carryforwards  which had no expiration date. It is possible that
all or part of the operating loss  carryforwards  expiring between 1998 and 2011
may be  restricted  or  eliminated  under  any of  several  statutory/regulatory
provisions  or  judicially-created  doctrines.   Moreover,  the  operating  loss
carryforwards  are generally only available to offset future income of the Group
within  the  tax  jurisdiction  where  the  operating  loss  arose,  and are not
transferable between jurisdictions.

NOTE 10 - EARNINGS (LOSS) PER CORDIANT ORDINARY SHARE

Basic  earnings  (loss)  per  Cordiant  Ordinary  Share has been  calculated  on
earnings of L15.1  million  (1996:  earnings  L24.2  million,  1995:  loss L37.3
million)  based  on  443,852,410  shares  (1996:   443,615,772   shares;   1995:
292,441,558  shares)  being the  weighted  average  number of Cordiant  Ordinary
Shares in issue during the periods.  The number of Cordiant  Ordinary  Shares in
issue has not been adjusted to reflect the Consolidation following the Demerger.
The Company  believes that as the earnings  include the demerged  businesses for
substantially  the whole year, the number of Cordiant  Ordinary  Shares in issue
used to calculate  earnings per Cordiant Ordinary Share should remain unaltered.
The number of Ordinary Shares in issue at December 31, 1997 was 221,926,993.

Share options  outstanding under the employee share schemes are considered to be
common stock equivalents, and are included in the earnings per share calculation
only when they are dilutive.

Earnings per share on the nil  distribution  (earnings  exclude any  irrevocable
advance  corporation tax (ACT) and any unrelieved  overseas tax arising from the
payment or proposed  payment of dividends) and fully diluted bases have not been
disclosed as they are not materially different.

NOTE 11 - SHORT-TERM INVESTMENTS

Short-term  investments comprised overseas unlisted investments of L0.2 million.
In 1996 short-term  investments  comprised  overseas listed investments of L12.1
million with an aggregate market value of L12.3 million.

NOTE 12 - ACCOUNTS AND OTHER RECEIVABLES, PREPAYMENTS AND ACCRUED INCOME



<TABLE>


<CAPTION>
                                                                      1997               1996
                                                                      ----               ----
                                                                   L million          L million

<S>                                                                   <C>                 <C>  
Due within one year:
Trade receivables (net of allowances for doubtful debts)              219.0               534.7
Associated companies                                                   -                    0.4
Amounts due from Saatchi & Saatchi                                     8.8                  -
Amounts due from Zenith                                                0.4                  -
Other receivables                                                      7.7                 22.7
Prepayments and accrued income                                        18.4                 58.6
                                                                      ----                 ----
                                                                     254.3                616.4
                                                                     =====                =====
Due after one year:
Other receivables                                                     14.8                  9.0
Prepayments and accrued income                                         0.7                  2.3
                                                                       ---                  ---
                                                                      15.5                 11.3
                                                                      ====                 ====
</TABLE>


Amounts due from  Saatchi & Saatchi and Zenith as at December  31, 1997  reflect
trading balances only.

Reference  should be made to Note 13 concerning  the amounts of  allowances  for
doubtful debts for each of the years presented.


<PAGE>


NOTE 13 - VALUATION AND QUALIFYING ACCOUNTS


<TABLE>


<CAPTION>

                                                                     
                                                                      Additions
                                                   Balance at         charged to                         Balance
                                                   beginning          costs and                         at end of
                                                   of period          expenses       Deductions*         period
                  Description                                                        
                                                     L million        L million        L million         L million
<S>                                                   <C>             <C>              <C>               <C> 
Year ended December 31, 1997:
   Allowance for doubtful accounts (deducted
   from accounts receivable)                          L18.0            L -             L(10.7)**          L7.3
                                                      -----            ---             -------            ----
   Allowance for non-recoverable billable
   production (deducted from billable
   production)                                        L4.6             L -              L(1.4)**          L3.2
                                                      -----            ---             -------            ----
Year ended December 31, 1996:
   Allowance for doubtful accounts (deducted
   from accounts receivable)                         L20.0             L -              L(2.0)            L18.0
                                                      -----            ---             -------            -----
   Allowance for nonrecoverable billable
   production (deducted from billable
   production)                                       L 3.5             L1.1             L -              L 4.6
                                                      -----            ---             -------           -----
Year ended December 31, 1995:
   Allowance for doubtful accounts (deducted

   from accounts receivable)                         L20.8            L -               L(0.8)           L20.0
                                                      -----            ---             -------           -----
   Allowance for nonrecoverable billable
   production (deducted from billable
   production)                                       L 5.0            L -               L(1.5)           L 3.5
                                                      -----            ---             -------           -----

</TABLE>

*    Substantially  represents amounts utilized against specific  nonrecoverable
     billable production and bad debts arising during the periods.

**   The  deductions  in 1997 include  demerged  allowances  of L8.1 million for
     doubtful accounts and L2.0 million for nonrecoverable billable production.



<PAGE>


NOTE 14 - LONG-TERM INVESTMENTS



<TABLE>


<CAPTION>

                                                   Associated        Long term          Works
                                                  undertakings      investments         of art               Total
                                                  ------------      -----------         ------               -----
                                                    L million        L million         L million           L million

<S>                                                    <C>            <C>                <C>                 <C>  
Cost:
At beginning of year                                    3.9            10.2               3.7                17.8
Translation adjustment                                 (0.1)           (0.1)               -                 (0.2)
Transfer of investment in subsidiaries                 (0.4)             -                 -                 (0.4)
Loans repaid                                           (0.2)             -                 -                 (0.2)
Additions                                               -               0.1                -                  0.1

Disposals - net demerger adjustments                   (0.7)          (0.8)              (3.6)               (5.1)
          - other                                      (0.1)          (5.8)              (0.1)               (6.0)
                                                       -----          -----              -----               -----

At end of year                                          2.4             3.6                -                  6.0
                                                        ===             ===               ===                 ===
                                                       
Provisions:
At beginning of year                                    2.2             8.7                -                 10.9
Disposals - net demerger adjustments                   (2.2)           (0.4)               -                 (2.6)
          - other                                       -              (5.8)               -                 (5.8)
                                                       -----          -----              -----               -----
At end of year                                          -               2.5                -                  2.5
                                                       =====           ====              =====               =====

Net book value:
At beginning of year                                    1.7             1.5               3.7                 6.9

At end of year                                          2.4             1.1                 -                 3.5

</TABLE>


Long term  investments  include  unlisted loan notes and  redeemable  preference
shares with a face value of  approximately  L2.4 million  (1996:  L8.2  million)
issued by the  purchasers of companies  disposed of by Cordiant which are due on
various dates commencing in 1998 and which are fully provided.

The Group's  investment in Zenith,  a joint  venture,  is  represented  by a net
deficit and is described as a provision (see Note 18).



<PAGE>


NOTE 15 - PROPERTY AND EQUIPMENT


<TABLE>

<CAPTION>


                                              Leasehold        Leasehold
                             Freehold          property         property     Furniture and                                 
                             property          - long           - short        equipment     Motor vehicles         Total    
                             --------          ------           -------        ---------     --------------         -----    
                            L million         L million        L million      L million         L million         L million

<S>                            <C>              <C>              <C>            <C>              <C>               <C>    
Cost:
At beginning of year           11.1              1.6              90.5          154.1            10.2               267.5
Translation adjustment         (1.2)             -                 0.9           (4.5)           (0.3)               (5.1)
Additions                        -               0.2               5.3           17.8             1.4                24.7
Companies acquired               -               0.1               -              0.3              -                  0.4
Disposals -demerger            (9.8)            (1.4)            (75.9)        (101.4)           (4.0)             (192.5)
          - other              (0.1)            (0.2)             (1.6)          (7.6)           (2.6)              (12.1)
                               -----            -----             -----          ----             ---                ----
At end of year                  -                0.3              19.2           58.7             4.7                82.9
                               =====            =====             ====           ====             ===                ====

Depreciation:
At beginning of year            2.8              0.5              34.3          106.9             6.6               151.1
Translation adjustment         (0.3)            -                 (0.1)          (3.6)           (0.3)               (4.3)
Charge for the year             0.2              0.1               6.1           18.1             1.7                26.2
Disposals -demerger            (2.7)            (0.3)            (24.9)         (74.1)           (2.8)             (104.8)
          - other               -               (0.1)             (1.6)          (5.9)           (2.2)               (9.8)
                               -----            -----             -----          ----             ---                ----

At end of year                  -                0.2              13.8           41.4             3.0                58.4
                               =====            =====             ====           ====             ===                ====

Net book value:
At beginning of year            8.3              1.1              56.2           47.2             3.6               116.4

At end of year                  -                0.1               5.4           17.3             1.7                24.5

Net book value of assets
held under finance leases
 included above:
At beginning of year            -                -                 -              0.3             0.1                 0.4

At end of year                  -                -                 -               -              0.1                 0.1

</TABLE>


Net book  value of land and  buildings  at end of year was L5.5  million  (1996:
L65.6 million).

Depreciation  attributable  to owned  property and  equipment  was L25.9 million
(1996:  L25.1 million;  1995:L25.0  million);  and depreciation  attributable to
assets held under finance leases was L0.3 million (1996: L0.7 million; 1995:L0.7
million).

At December 31, 1997 and 1996, the commitments in respect of capital expenditure
on  properties,  furniture  and  equipment  were L0.5 million and L1.2  million,
respectively.



<PAGE>




NOTE 16 - BANK LOANS, OVERDRAFTS AND OTHER LOANS

                                       Balance at end of     Weighted average
                                             period           interest rate
                                             ------           -------------

                                             Year ended December 31, 1997
                                             ----------------------------

                                           L million                %
Bank loans and overdrafts                    7.8                   4.8
Other loans                                  0.6                   8.0
                                             ---
                                             8.4                   5.0
                                             === 

                                             Year ended December 31, 1996
                                             ----------------------------
                                           L million                %
Bank loans and overdrafts                    48.3                  6.2
Other loans                                   4.5                  8.6
                                             ----
                                             52.8                  6.4
                                             ====

Bank loans and overdrafts include Lnil million (December 31, 1996: L0.5 million)
in respect of the current portion of long-term debt.

An  amount  of L0.1  million  (1996:L1.0  million)  included  in bank  loans and
overdrafts is secured by liens over assets.



<PAGE>


NOTE 17 - ACCOUNTS PAYABLE, OTHER LIABILITIES AND ACCRUED EXPENSES

<TABLE>

<CAPTION>
                                                                  December 31, 1997            December 31, 1996
                                                            ------------------------------    -------------------
                                                            Due Within one    Due After    Due Within    Due After
                                                                 year          one year     one year      one year
                                                                 ----          --------     --------      --------
                                                               L million      L million     L million    L million

<S>                                                              <C>             <C>            <C>          <C> 

Accounts payable                                                 194.2            -             512.7         -
Associated companies                                               -              -               0.7         -
Payments on account                                               28.9            -              69.9         -
Finance leases                                                     0.1            0.1             0.3         0.2
Proposed dividends - equity shareholders                           2.7            -               4.4         -
Amounts due to Saatchi & Saatchi                                  5.1             -               -           -
Amounts due to Zenith                                            11.3             -               -           -
Other payables                                                   59.2             1.5           151.7        11.3
                                                                 ----             ---           -----        ----

                                                                 301.5           1.6            739.7        11.5
                                                                 =====           ===            =====        ====
</TABLE>

An amount of L4.0 million (December 31, 1996:L27.2 million) included in accounts
payable is  secured by related  trade  receivables.  Liabilities  under  finance
leases are secured on the assets leased.

NOTE 18 - PROPERTY, PENSION AND OTHER PROVISIONS


<TABLE>


<CAPTION>
                                                 Pensions and
                                                   similar
                                                 employment
                                    Property     obligations          Other           Total       Joint Venture
                                   ---------     -----------          -----           -----       -------------
                                    L million      L million         L million       L million       L million
                                                      
<S>                                 <C>            <C>                <C>            <C>              <C>   
At beginning of year                105.7           29.6               1.6           136.9              -
Translation adjustment                3.9            0.6              (0.1)            4.4              -
Profit and loss account               6.1            3.7               0.9            10.7              -
Utilized                            (19.2)          (1.8)             (0.7)          (21.7)             -
Demerger                            (56.3)         (15.5)             (1.2)          (73.0)           (14.3)
                                    -----          -----              ----           -----            ----- 
At end of year                       40.2           16.6               0.5            57.3            (14.3)
                                     ====           ====               ===            ====            ===== 
</TABLE>


Property  provisions relate to future payments on vacant properties and assigned
leases, and are analyzed by year as follows:


                                                           1997         1996
                                                           ----         ----
                                                        L million    L million

     Under one year                                          6.0         16.7
     One to two years                                        5.0         12.6
     Two to five years                                       9.6         24.6
     Over five years                                        19.6         51.8
                                                            40.2        105.7


<PAGE>

Provisions for joint venture deficit:
The Group share of net liabilities of Zenith is as shown below.

                                                                   1997
                                                                   ----
                                                                 L million

Fixed assets                                                         1.8
Current assets                                                      49.8
                                                                    ----
Share of gross assets                                               51.6
                                                                    ----

Liabilities due within one year                                    (64.3)
Liabilities due after one year                                      (1.6)
                                                                    -----
Share of gross liabilities                                         (65.9)
                                                                   ------
  
Share of joint venture net liabilities                             (14.3)
                                                                   ======

The Group share of the results of Zenith post-Demerger are not material.

NOTE 19 - LONG-TERM DEBT

                                                    1997             1996
                                                    ----             ----
                                                  L million       L million
Loan stock                                           -                6.2
Bank loans                                          25.2             79.1
Other loans                                          3.2              3.6
                                                    ----             ----
                                                    28.4             88.9
                                                    ====             ====

The loan stock was repaid during the year.

An amount of L25.2  million  (1996:L79.1  million) of the Group's  borrowings is
secured by  guarantees  from and  charges  over the assets of the  Company and a
number of its subsidiaries.

At December 31, 1997, the Group had committed core banking facilities  totalling
L53.6 million (1996:L127.2  million) of which L25.2 million (1996:L79.1 million)
were being utilized.  An additional  US$21.0 million (L12.7 million) will become
available  during 1998 if the Group has reached  certain  target  ratios.  These
facilities will be reduced in accordance with the following schedule:


<TABLE>


<CAPTION>

                    1998               1999               2000              2001               2002
                    ----               ----               ----              ----               ----
<S>                 <C>                <C>                <C>               <C>                <C>
    US$m            5.0                6.0                15.0              20.0               the balance
    Lm              3.0                3.6                 9.1              12.1               the balance

</TABLE>

Interest is payable on each  advance  under the  facilities  at a rate per annum
based on the aggregate of LIBOR and a margin of between 0.75% and 1.5% per annum
depending upon the ability of the Group to improve certain financial ratios.

The facilities  agreement  contains certain covenants  relating to the financial
performance of the Group.  As of December 31, 1997 there had been no breaches of
covenants or other defaults under the agreement  which have caused or are likely
to cause an early repayment of the debt to be enforced.

In addition, the Group has various uncommitted facilities.

NOTE 20 - GUARANTEES AND CONTINGENT LIABILITIES

L29.8 million  (1996:  L84.9  million) of the Group's  borrowings are secured by
guarantees from and charges over the assets of the Group.

The Company has also guaranteed the operating lease commitments (all relating to
leasehold  property)  of  certain  subsidiary  undertakings.  The leases are for
various  periods up to the year 2013 and the total  obligations  at December 31,
1997  amounted to L163.4  million  (1996:L184.2  million)  and in  addition  the
Company has given  other  guarantees  in respect of  liabilities  of  subsidiary
undertakings  incurred  in the  normal  course of  business  amounting  to L26.0
million (1996:L0.3 million).

Cordiant  gave a number of  guarantees  in respect of  obligations  of Saatchi &
Saatchi  companies  which remain in force.  Saatchi & Saatchi has  undertaken to
indemnify CCG for any liability under these guarantees. They include:

(a)  Guarantees of operating lease commitments  related to a leasehold  property
     in New York.  The lease expires in the year 2013 and the total  obligations
     at December 31, 1997 were L202.5 million (1996: L209.6 million); and

(b)  a guarantee  of L2.4  million  (1996:  L5.5  million)  relating to deferred
     consideration  payable  for the  acquisition  of  minority  interests  in a
     subsidiary.

Following the Demerger,  CCG has agreed to indemnify  Saatchi & Saatchi  against
liabilities  incurred by the Saatchi & Saatchi  Group under  guarantees  of bank
borrowings and other obligations where those liabilities are the  responsibility
of CCG.

CCG and Saatchi & Saatchi have each  guaranteed  Zenith's bank facility of L21.5
million and have  agreed  between  themselves  to share  equally  any  liability
arising  therefrom.  Borrowings drawn down under the Zenith facility at December
31, 1997 were L2.4 million.  There is no  comparative as Zenith was a subsidiary
of Cordiant and did not have its own bank facility.

Other guarantees given by the Group to third parties amounted to L5.9 million at
December 31, 1997 (1996: L6.3 million).

NOTE 21 - DEFERRED TAXATION

                                                   1997          1996
                                                   ----          ---- 
                                                 L million     L million

Provisions for UK deferred taxation                -               1.5
Provisions for overseas deferred taxation          0.5            (0.4)
                                                   ---             ---
                                                   0.5             1.1
                                                   ===             ===

The Group has no material  deferred  tax  liabilities  unprovided  in respect of
accelerated capital allowances.

Unremitted  earnings  of  subsidiaries  which  have been or are  intended  to be
permanently   reinvested  to  meet  media   accreditation  and  working  capital
requirements,  exclusive  of amounts  which if remitted in the near future would
result in little or no tax by operation of relevant statutes normally in effect,
aggregated L67 million (1996: L117 million).

Under US GAAP temporary  differences at the appropriate tax rate at December 31,
1997 and 1996 are as follows:


<TABLE>

<CAPTION>
                                                                           Assets (Liabilities)
                                                                         ------------------------
                                                                           1997           1996
                                                                           ----           ---- 
                                                                         L million      L million
<S>                                                                      <C>            <C>
Deferred Tax Assets

Accrued property rental expense                                              7.8           43.7
Accrued compensation                                                         5.2           13.1
Capital loss carryforwards                                                  12.1           18.3
Operating loss carryforwards*                                               48.2          188.9
Interest disallowed under Section 163(j) of the IRC                          -             28.6
Provision for notes receivable and other long term receivables               -              1.8
Other                                                                       13.1           20.2
                                                                            ----           ----  
Total deferred tax assets                                                   86.4          314.6
Valuation allowance                                                        (85.8)        (300.5)
                                                                            ----          -----
Net deferred tax asset                                                       0.6           14.1
                                                                             ===           ====

<CAPTION>
                                                                           Assets (Liabilities)
                                                                         ------------------------
                                                                           1997           1996
                                                                         L million      L million
<S>                                                                      <C>            <C>
Deferred Tax Liabilities

Accelerated depreciation on tangible assets                                 -              (6.9)
Difference in basis of intangible assets                                   (0.4)           (3.5)
Other                                                                      (0.7)           (4.8)
                                                                           -----          ------ 
Total deferred tax liabilities                                             (1.1)          (15.2)
                                                                           -----          ------ 

Net deferred tax liability                                                 (0.5)           (1.1)
                                                                           =====           =====

</TABLE>


* See Note 9 for a  discussion  of  potential  restrictions  on  operating  loss
carryforwards.

There are no  material  differences  between  UK GAAP and US GAAP.  A  valuation
allowance is provided to reduce the deferred tax assets to a level which,  based
on the weight of available evidence,  will more likely than not be realized. The
net deferred  asset reflects  management's  estimate of the amount which will be
realized based on this criteria.

The net change in the  valuation  allowance  for deferred tax assets during 1997
amounted to a decrease of L214.7 million.

NOTE 22 -  TAXATION

This largely represents  corporation tax liabilities due to be paid in more than
one year from the date of the financial  statements.  Tax  liabilities due to be
settled in less than one year are included under current liabilities.

NOTE 23 - SHARE CAPITAL


<TABLE>

<CAPTION>
                                                                                        December 31,
                                                                             -----------------------------------
                                                                                   1997              1996
                                                                                 L million         L million
<S>                                                                              <C>               <C>
Authorized share capital of the Company                                            150.5            269.7
                                                                                   =====            =====

Allotted, called up and fully paid:

221,926,993 Ordinary Shares of 50p each
(1996:  443,682,881 Cordiant Ordinary Shares of 25p each)                          111.0            110.9
                                                                                   
Nil deferred shares of 5p each (1996:  2,384,598,152)                                  -            119.2
                                                                                   -----            -----
Called up share capital of the Company                                             111.0            230.1
                                                                                   =====            =====
</TABLE>

The  Deferred  shares  were  cancelled  as part of the  reduction  of capital on
November 28, 1997.

During the year Cordiant  issued 171,105  Cordiant  Ordinary  Shares of 25p each
pursuant to receipt of notices to exercise options from employees of Cordiant.

On December 14, 1997, the Cordiant Ordinary Shares of 25p each were consolidated
on a one for two basis into Ordinary Shares of 50p each.

NOTE 24 - EMPLOYEE SHARE SCHEMES

Cordiant had three executive share option schemes and one savings-related  share
option scheme prior to the Demerger.  Of these schemes only one of the executive
share option schemes,  the  Performance  Option Scheme operated during the year.
The schemes were  comprised of the Executive  Share Option Scheme (the "Number 1
Scheme")  primarily  for  executives  not  resident in the United  Kingdom;  the
Executive Share Option Scheme (the "Number 2 Scheme"), which was approved by the
Inland  Revenue  under the terms of the  Income and  Corporation  Taxes Act 1988
("ICTA") and was intended only for  executives  resident in the United  Kingdom;
and the Performance  Option Scheme,  an Inland Revenue  approved scheme intended
for executives resident throughout the world.

Options granted to participants in the Number 1 Scheme,  the Number 2 Scheme and
the Performance  Option Scheme (which includes Super Options) were over Cordiant
Ordinary Shares at a price equivalent to The London Stock Exchange middle market
quotation on the day preceding the date of the grant of the option.

The performance targets for options under the schemes are as follows:

For  ordinary  options  under the Number 1 and Number 2 Scheme,  there must have
been an increase in the  Group's  earnings  per share over any three year period
following  the grant of at least 2% more than the  increase in the Retail  Price
Index ("RPI") over the same period.  For ordinary  options under the Performance
Option Scheme, the increase must be at least 6% above RPI.

Super  options  under all three  schemes  cannot be  exercised  before the fifth
anniversary  of the date of grant and then only if the  growth in  earnings  per
share from the date of grant has been such as would place the Company in the top
quartile of the FTSE 100 companies ranked by reference to growth in earnings per
share.

Under the savings-related  scheme, eligible employees in the United Kingdom were
invited  to save a fixed  amount  per month for a period of five years and apply
for an option at a predetermined exercise price. The exercise price was fixed at
the date of invitation and may not be less than the higher of a share's  nominal
value or 80% of its market  value.  Market value is the middle market price of a
share on The London  Stock  Exchange  on the dealing day (or the average of such
prices on the three  dealing  days)  before the  invitation  was made.  When the
option is exercised,  the accumulated savings and interest/bonus are used to pay
the exercise price.

All the above schemes  expired in 1997 or earlier,  though options granted under
the schemes are still  outstanding.  As part of the demerger process,  Saatchi &
Saatchi employees  holding Cordiant  executive or  savings-related  options were
invited to take replacement executive or parallel  savings-related  options over
Saatchi Ordinary Shares. Similarly, employees of Zenith and The Facilities Group
have replacement and/or parallel options split 50-50 between Ordinary Shares and
Saatchi Ordinary Shares.

Two new  share-based  incentive  schemes were  introduced in connection with the
Demerger,  the Equity  Participation  Plan ("The  Plan") and  Performance  Share
Option Scheme.

In order to participate in The Plan,  individuals have to pay a cash sum and the
benefits (if any) depend upon the performance of the Group. Participants will be
eligible to receive  shares if Earnings Per Share ("EPS")  growth is higher than
the  annual  increase  in the UK Retail  Price  index  plus 2% over a three year
period.  If  growth is below  this  hurdle  rate  participants  will lose  their
investment.  Participants  will receive shares based on a scale of EPS growth up
to a maximum of eight times the number of shares  that they could have  acquired
with their original investment.  To achieve the maximum allocation would require
EPS growth of 25% per annum.

One half of shares vesting will normally be received by participants after three
years  with the  remainder  issued  one year  later.  If the Group is taken over
earlier,  a proportion of the shares will vest,  determined by the timing of the
takeover and the performance of the Group up to the previous year end.

Awards to participants who are Directors of the Company will vest as to one half
on the basis of EPS growth as described above. The other half will be determined
on total  shareholder  return  compared  with a group of major  publicly  quoted
advertising  groups. In that case, the maximum number of shares will vest if CCG
is first or second of the comparator  group.  In December 1997, 59 employees and
Directors were invited to  participate  in The Plan.  Cash payments are required
amounting in total to L1,589,000 which, if maximum  performance  targets were to
be met, would give rise to an issue of 12,104,000 shares.

The  Performance  Share Option  Scheme has broadly  similar aims to The Plan but
with lower potential  benefits and risks.  Options granted under the Performance
Share Option Scheme have an exercise  price equal to market price at the time of
grant.  Participants  have been  invited to join the  Performance  Share  Option
Scheme  for which  they have to agree to a salary  or bonus  sacrifice  of up to
L50,000 over the next three  years.  The sum payable will be one eleventh of the
exercise  price of the options.  This  sacrifice  will not be offset against the
exercise price payable.

Participants  will be  eligible  to  exercise  their  options  dependent  on the
performance of the Group over a three year period.  If EPS growth is higher than
the UK Retail Price Index plus 2% participants  may exercise a proportion of the
options based on a scale of EPS growth.  Full exercise  would require EPS growth
of 25% per annum.

One half of the eligible  options may normally be exercisable  after three years
with the  remainder  one year  later.  If the  Group is taken  over  earlier,  a
proportion of the options will become  exercisable,  determined by the timing of
the takeover and the performance of the Group up to the previous year end.

In December 1997, 73 employees  were invited to  participate in the  Performance
Share Option Scheme.  Options over 6,837,000 shares have been granted subject to
salary or bonus sacrifices amounting to L653,000.

The Company also approved an incentive scheme for senior executives of its joint
venture, Zenith. To participate, executives have to invest in the scheme by cash
payment or salary or bonus  sacrifice.  The scheme is set up on the basis that a
fixed  monetary  amount of benefit is  determined  which will be  delivered by a
combination  of options over shares and, if  necessary,  cash.  A  participant's
actual  entitlement  will be  determined  by  measuring  the growth in  Zenith's
operating  profit over a three year period.  In December 1997,  invitations were
made to  participate  in the  scheme  which,  if  accepted,  would  give rise to
1,079,000 options over Ordinary Shares being granted at a price of 109p.



<PAGE>


Changes  in the  number of  Cordiant  Ordinary  Shares  issuable  under  options
outstanding under the Company's  executive share option schemes during the three
year period ended December 31, 1997 were as follows:

<TABLE>

<CAPTION>
                                                                  Year ended
Cordiant Ordinary Shares:                                         December 31,
                                       ---------------------------------------------------------------
                                                1997                  1996                1995
                                                             (Number of Shares)
<S>                                          <C>                  <C>                   <C>
At beginning of year                         12,589,854           10,190,722             6,218,205
Rights issue adjustment                               -                    -             1,776,541
Options issued during year                   26,037,467            3,645,000             3,115,893
Options exercised during year                  (159,692)             (13,722)                    -
Options lapsed during year                   (1,064,485)          (1,232,146)             (919,917)
Options cancelled during year                (9,357,905)                    -                    -
                                             -----------           ----------           ----------   

At end of year                               28,045,239*           12,589,854           10,190,722
                                             ==========            ==========           ==========
<FN>
*  At end of 1997 total reflects Ordinary Shares.
</FN>

</TABLE>

Changes  in the  number of  Cordiant  Ordinary  Shares  issuable  under  options
outstanding under Sharesave 1995 during the three year period ended December 31,
1997 were as follows:


<TABLE>

<CAPTION>
                                                                   Year ended
Cordiant Ordinary Shares:                                         December 31,
                                       ---------------------------------------------------------------
                                                1997                  1996                1995
                                                             (Number of Shares)
<S>                                           <C>                  <C>                   <C>
At beginning of year                          1,963,435            2,205,916                 1,887
Rights issue adjustment                                                    -                   539
Options issued during year                      196,117**                  -             2,330,962
Options exercised during year                   (13,211)              (9,093)                    -
Options lapsed during year                     (325,562)            (233,388)             (127,472)
                                              ---------            ---------             ---------
At end of year                                1,624,662*           1,963,435             2,205,916
                                              =========            =========             =========
<FN>
*  At end of 1997 total reflects Ordinary Shares.

** These are parallel options issued in connection with the Demerger and are not
reflected  in the total  options  outstanding  at the year end,  as they will be
exercisable in lieu of, and not in addition to, the original options.
</FN>

</TABLE>


<PAGE>


Options  outstanding  at December  31,  1997 under the  Company's  Share  Option
Schemes are shown below:


<TABLE>

<CAPTION>
                                               DATE OF        NUMBER OF     EXERCISE
                 SCHEME                         GRANT          SHARES         PRICE     EXERCISABLE
<S>                                          <C>             <C>             <C>          <C>
Number 1 Scheme                              Jun 1991           879,903       134p        Jun 1998
                                             Sep 1991            19,209       134p        Sep 1998
                                             Apr 1992           513,323*      107p        Apr 1999
--------------------------------------------------------------------------------------------------------------
Replacement 1 Scheme                         Jun 1991            30,186       134p        Jun 1998
                                             Apr 1992            40,134*      107p        Apr 1999
--------------------------------------------------------------------------------------------------------------
Number 2 Scheme                              Jul 1988             1,997      2250p        Jul 1998
                                             Jun 1991           486,132       134p        Jun 2001
                                             Sep 1991           107,022       134p        Sep 2001
                                             Apr 1992            34,301       107p        Apr 2002
                                             Apr 1992           417,838*      107p        Apr 2002
--------------------------------------------------------------------------------------------------------------
Replacement 2 Scheme                         Jun 1991           378,235       134p        Jun 2001
                                             Apr 1992            78,895       107p        Apr 2002
                                             Apr 1992            21,610*      107p        Apr 2002
--------------------------------------------------------------------------------------------------------------
Sharesave                                    Jun 1995         1,624,662        64p        Jul 2000 to Dec 2000
--------------------------------------------------------------------------------------------------------------
Performance Option Scheme                    May 1995           612,618        73p        May 1998 to May 2005
                                             Aug 1995           612,616        95p        Aug 1998 to Aug 2005
                                             Apr 1996           542,500       130p        Apr 1999 to Apr 2006
                                             Apr 1996           630,000*      130p        Apr 2001 to Apr 2003
                                             Apr 1997           762,500       131p        Apr 2000 to Apr 2007
                                             Apr 1997           762,500*      131p        Apr 2002 to Apr 2004
--------------------------------------------------------------------------------------------------------------
Replacement Performance Scheme               May 1995            99,316        73p        May 1998 to May 2004
                                             May 1995           109,926*       73p        May 2000 to Dec 2004
                                             Aug 1995            99,318        95p        Aug 1998 to Dec 2004
                                             Apr 1996           122,500       130p        Apr 1999 to Dec 2004
                                             Apr 1996           272,500*      130p        Apr 2001 to Dec 2004
                                             Apr 1997           195,000       131p        Apr 2000 to Dec 2004
                                             Apr 1997           195,000*      131p        Apr 2002 to Dec 2004
--------------------------------------------------------------------------------------------------------------
Performance Share Option Scheme(1)           Dec 1997         6,837,444       105p        Dec 2000 to Dec 2004
--------------------------------------------------------------------------------------------------------------
Equity Participation Plan(2)                 Dec 1997        12,103,909       105p        Dec 2000 to Dec 2004
--------------------------------------------------------------------------------------------------------------
Zenith Executive Incentive Plan(3)           Dec 1997         1,078,807       109p        Dec 2000 to Dec 2004
<FN>
The options marked * are super options.
Exercise prices have been rounded to the nearest pence.
(1)  Grantees  of  Performance  Share  Options  had a  maximum  of 150 days from
     invitation  to  participate  in the  options  to  agree  to a  salary/bonus
     sacrifice.
(2)  Grantees of awards under the Equity Participation Plan had a maximum of 150
     days from invitation in which to make payment to the Trustee.
(3)  Grantees under the Zenith plan had a maximum of 120 days to make payment or
     agree to a salary or bonus sacrifice.
</FN>

</TABLE>


NOTE 25 - POST RETIREMENT BENEFITS

In the United  Kingdom,  CCG operates one defined  benefit  scheme and a defined
contribution plan. The defined benefit scheme, The Cordiant Group Pension Scheme
("The Scheme"),  was closed to new members in 1990 with new employees after that
date  joining a defined  contribution  plan.  Employees of Saatchi & Saatchi and
Zenith  remain  members of The Scheme under  transitional  arrangements.  In the
United  States,  Cordiant  operated  one  defined  benefit  plan and a number of
defined  contribution  plans. The US defined benefit plan was frozen at June 30,
1996 and terminated on December 31, 1996. A number of plans of various types are
operated in other countries, but none of these is material in size.

The majority of schemes are externally  funded and the  investments  are held by
independent  investment managers on behalf of the trustees.  None of the schemes
holds  investments  in,  or  has  made  loans  to,  the  Company  or  any of its
subsidiaries.  The  assets of the plans are held in various  diverse  investment
portfolios including equities and government and corporate bonds.

The major  schemes,  which  cover the  majority of scheme  members,  are defined
contribution schemes. The basis for determining contributions is a percentage of
salary.

The benefits  accruing  under the defined  benefit plans are based  primarily on
years of service and employees' compensation near retirement. The funding policy
for the  plans  is  consistent  with  local  requirements  in the  countries  of
establishment.  Obligations  under the defined benefit plans are  systematically
provided for by depositing  funds with trustees or separate  foundations,  under
insurance policies, or by financial statement accruals.

CCG  offers  no post  retirement  benefits,  other  than  pensions,  to  current
employees. Post retirement benefits for retired employees,  under a scheme which
is no longer in operation, are not significant.

The total pension expense for both ongoing and disposed operations for all plans
(charged in arriving at operating income) was L12.4 million,  L21.9* million and
L16.4  million  for  the  years  ended   December  31,  1997,   1996  and  1995,
respectively.  Of these amounts,  L1.4 million,  L10.6 million* and L3.7 million
were  attributable  to defined  benefit  schemes in the years ended December 31,
1997, 1996 and 1995, respectively.

*Included an exceptional termination provision of L8.3 million.



<PAGE>


The net pension cost in respect of defined  benefit plans in the United  States,
computed  in  accordance  with  FAS 87,  and the  United  Kingdom,  computed  in
accordance with SSAP 24, is composed of the following:


<TABLE>

<CAPTION>
                                                                   Year ended December 31,
                                                      --------------------------------------------------
                                                           1997*             1996             1995
                                                         L million        L million        L million
<S>                                                      <C>              <C>              <C>
Service cost - benefits earned during the period             0.7              1.5              2.6
Interest cost on projected benefit obligations               2.1              4.0              4.2
Less:  Actual return on plan
    assets (net of deferred losses)                         (4.1)            (4.6)            (6.7)
Net amortization and deferral                                1.7             (0.2)             2.6
                                                             ---              ---              ---
Net pension cost                                             0.4              0.7              2.7
Additional income due to termination of plan                  -              (1.5)              -
                                                             ---              ---              ---
Net expense (income)                                         0.4             (0.8)             2.7
                                                             ===              ===              ===
</TABLE>

There are no material differences between UK GAAP and US GAAP.

At  December  31,  1997 and 1996,  the funded  status of these  defined  benefit
pension plans was as follows:



<TABLE>

<CAPTION>
                                                             Assets Exceed Accumulated Benefits
                                                             -----------------------------------
                                                               1997*                     1996
                                                             L million                 L million
<S>                                                          <C>                       <C>
Actuarial present value of benefit obligations:
  Vested benefit obligations                                    25.4                     43.8
                                                                ----                     ----
Accumulated benefit obligation                                  25.4                     45.1
Effect of assumed increase in
compensation levels                                              4.2                      3.8
                                                                ----                     ----
Projected benefit obligations                                   29.6                     48.9
Plan assets at fair value                                       31.7                     51.9
                                                                ----                     ----
Excess of plan assets
  over projected benefit obligations                             2.1                      3.0
Unrecognized net loss                                            0.4                      5.2
Unrecognized net transition (asset)                             (0.4)                    (0.9)
Prepaid pensions                                                 2.1                      7.3
                                                                 ===                      ===
<FN>
* The 1997 costs and estimated funded status represent The Scheme only as the US
defined benefit plan was terminated on December 31, 1996.
</FN>

</TABLE>

The above tables are in accordance with FAS 87.



<PAGE>


Assumptions for these plans under FAS 87 were as follows:

                                        UK Schemes                 US Schemes
                                      -------------               ------------
                                      1997     1996               1997    1996

Return on investments                 9.0%     9.0%               N/A     6.0%
Salary increases                      5.0%     6.0%               N/A     5.5%
Discount rates                        7.0%     8.0%               N/A     8.0%


NOTE 26 - LEASES

The Group leases certain properties and equipment under operating leases.

Minimum  payments for operating  leases,  before  provisions for vacant property
(see Note 18),  having initial or remaining  non-cancellable  terms in excess of
one year are as follows:


<TABLE>

<CAPTION>
Years Ending                                                     Sublease
December 31                                       Minimum         Rental         Net
                                                  Payments        Income      Payments
                                                 L million       L million    L million
<S>                                              <C>             <C>          <C>
1998                                                 27.5            8.1          19.4
1999                                                 25.4            8.0          17.4
2000                                                 22.7            8.2          14.5
2001                                                 19.6            9.1          10.5
2002                                                 18.2            9.0           9.2
Thereafter                                          120.0          104.2          15.8
                                                    -----          -----          ----
Total minimum lease payments                        233.4          146.6          86.8
                                                    =====          =====          ====
</TABLE>

Total expense for all operating leases was:


<TABLE>

<CAPTION>
                                                                          Year ended
                                                                          December 31,
                                                         --------------------------------------------
                                                           1997               1996             1995
                                                         L million         L million        L million
<S>                                                      <C>               <C>              <C>
Total operating lease expense                             65.2                 65.7             69.6
Sublease rental income                                   (14.6)               (14.3)           (14.0)
                                                          ----                 ----             ----
Net operating lease expense                               50.6                 51.4             55.6
                                                          ====                 ====             ====
</TABLE>


<PAGE>


NOTE 27 - CONSOLIDATED STATEMENTS OF CASH FLOWS - SUPPLEMENTAL INFORMATION

Reconciliation of Trading Profit to Net
Cash Flow from Operating Activities


<TABLE>

<CAPTION>
                                                                            Year ended
                                                                           December 31,
                                                            ------------------------------------------
                                                              1997            1996             1995
                                                            L million       L million        L million
<S>                                                         <C>             <C>              <C>
Trading profit                                                  55.6           31.5              28.3
Depreciation                                                    26.2           25.8              25.7
(Profit) loss on sale of tangible fixed assets                  (0.8)           0.2              (1.5)
(Increase) decrease in billable production                      (5.5)           3.5              (9.4)
(Increase) decrease in receivables                             (35.3)           0.2             (54.8)
Increase in creditors                                           38.5           12.6              38.6
Utilization of property and reorganization
  provisions                                                   (19.2)         (16.9)            (10.3)
Exceptional non-cash item - goodwill write-off                   2.2             -                 -
                                                                ----           ----              ---- 
Net cash inflow from operating
  activities                                                    61.7           56.9              16.6
                                                                ====           ====              ====
</TABLE>


<PAGE>


Analysis of changes in net debt



<TABLE>

<CAPTION>
                                                                                   Exchange &
                                             At Jan 1                               non cash     At Dec 31
                                               1997     Cash flows    Demerger      movements       1997
                                            L million   L million    L million      L million    L million
<S>                                         <C>         <C>          <C>          <C>            <C>
Cash at bank and in hand                       113.7      (41.6)         -           (10.4)          61.7
Bank overdrafts                                (47.8)      40.7          -            (0.6)          (7.7)
                                                ----       ----          --           ----           ----  
Cash                                            65.9       (0.9)         -           (11.0)          54.0
                                                ----       ----          --           ----           ----
External debt due within 1 year                 (5.0)       3.2          0.6           0.5           (0.7)
External debt due after 1 year                 (88.9)     (20.5)        83.8          (2.8)         (28.4)
Finance leases                                  (0.5)       0.3          0.2          (0.2)          (0.2)
                                                ----       ----          --           ----           ----  
Financing                                      (94.4)     (17.0)        84.6          (2.5)         (29.3)
                                                ----       ----         ----          ----           ----  
Net (debt) funds                               (28.5)     (17.9)        84.6         (13.5)          24.7
                                                ====       ====         ====          ====           ====
</TABLE>

On  December  14,  1997,  the net  assets of Saatchi & Saatchi  and Zenith  were
demerged. On demerger, they had net debt of L41.2 million. Net cash amounting to
L43.4 million is shown as an outflow in the cash flow  statement,  external debt
of L84.6 million is included in the analysis of movement in net debt above.


<TABLE>

<CAPTION>
                                        At Jan. 1, 1996     Cash flows       Exchange      At Dec. 31, 1996
                                           L million        L million        L million         L million
<S>                                        <C>              <C>              <C>               <C>
Cash at bank and in hand                      134.5            (9.4)           (11.4)            113.7
Overdrafts                                    (48.2)           (2.8)             3.2             (47.8)
                                               ----            ----              ---              ----
Cash                                           86.3           (12.2)            (8.2)             65.9
                                               ----            ----              ---              ----
External debt due within 1 year                (0.8)           (4.8)             0.6              (5.0)
External debt due after 1 year               (113.7)           15.8              9.0             (88.9)
Finance leases                                 (0.5)            0.1             (0.1)             (0.5)
                                               ----            ----              ---              ----
Financing                                    (115.0)           11.1              9.5             (94.4)
                                              -----            ----              ---              ----
Net debt                                      (28.7)           (1.1)             1.3             (28.5)
                                               ----            ----              ---              ----
</TABLE>

<TABLE>

<CAPTION>
                                         At Jan 1, 1995     Cash flows       Exchange       At Dec 31, 1995
                                           L million        L million        L million         L million
<S>                                        <C>              <C>              <C>               <C>
Cash at bank and in hand                      137.2            (6.6)             3.9             134.5
Overdrafts                                    (40.2)           (7.6)            (0.4)            (48.2)
                                               ----            ----              ---              ---- 
Cash                                           97.0           (14.2)             3.5              86.3
External debt due within 1 year               (10.5)            9.7              -                (0.8)
External debt due after 1 year               (232.3)          118.6              -              (113.7)
Finance leases                                 (1.0)            0.5              -                (0.5)
                                              -----           -----              --              ----- 
Financing                                    (243.8)          128.8              -              (115.0)
                                              -----           -----              ---             ----- 
Net debt                                     (146.8)          114.6              3.5             (28.7)
                                              =====           =====              ===              ====  
</TABLE>



<PAGE>


The effects of the  acquisitions  and disposals of subsidiaries and the Demerger
in 1997

                              Acquisitions       Disposals
                               L million         L million

Goodwill                           3.9                -
Tangible fixed assets              0.5              (0.6)
Work in progress                   0.1                -
Debtors                           (0.3)             (7.3)
Investments (current)              -                (0.1)
Sale proceeds:
  - cash (net)                     -                40.5
  - investments (current)          -               (12.5)
                                   ---              ----
                                   4.2              20.0
                                   ===              ====

                              Acquisitions       Disposals
                               L million         L million

Loans and finance leases          0.3                 -
Creditors                         3.2               (1.0)
Cost of acquisitions and
  deferred payments
  - cash (net)                    8.7                 -
  - minorities                   (0.3)               0.2
  - accruals (net)               (7.7)                -
Net profit on disposals            -                20.8
                                  ---               ----
                                  4.2               20.0
                                  ===               ====

There were no material  acquisitions during the year and payments were mainly in
respect of costs accrued in previous years. The goodwill arising on acquisitions
includes L2.2 million written off in the year.

The Demerger  dividend of L134.6  million  represented  the net  liabilities  of
Saatchi & Saatchi plc at the time of the Demerger. Proceeds of disposals include
L17.1  million  in respect of the sale of  current  asset  investments  of L12.5
million which represents  realization of shares received as consideration  for a
prior year disposal.

Demerger


                               Saatchi
                              & Saatchi           Zenith
                              L million          L million
Tangible fixed assets            84.4                3.4
Fixed asset investments           4.0                0.1
Work in progress                 20.0                 -
Debtors                         263.4               90.6
Current investments               0.2                 -
Cash                             57.5                9.1
                                -----              -----
                                429.5              103.2
                                =====              =====

                                Saatchi
                               & Saatchi          Zenith
                               L million         L million
Loans                             82.0               2.4
Overdrafts                        20.8               2.6
Other creditors and provisions   444.8             126.8
Minority interests                 2.2                -
                                 -----             -----
                                 549.8             131.8
Transfer to Saatchi & Saatchi     14.3             (14.3)
Demerger dividend               (134.6)               -
Provision for deficit               -              (14.3)
                                 -----             -----
                                 429.5             103.2
                                 =====             =====

<PAGE>


NOTE 28 - OPERATIONS BY GEOGRAPHIC AREA


<TABLE>

<CAPTION>
                                              United        North      Rest of      Asia
                                              Kingdom      America      Europe     Pacific      Total
                                             L million    L million   L million   L million   L million
<S>                                          <C>          <C>         <C>         <C>         <C>
Year ended December 31, 1997:
Commission and fee income                       115.4        268.7        203.3      148.7        736.1
Trading profit                                   14.0         29.2         12.1        2.5         57.8
Exceptional operating expense                     -            -            -          2.2          2.2
Operating profit                                 14.0         29.2         12.1        0.3         55.6
Total assets employed                            41.2         83.2         92.4      161.0        377.8
Net liabilities (assets) before financial        73.1         20.1         (1.4)      12.5        104.3
items
Depreciation expense                              6.0         11.0          4.8        4.4         26.2
Additions to properties, furniture, etc.          4.4          8.3          4.5        7.5         24.7


Year ended December 31, 1996:
Commission and fee income                       113.4        269.1        218.1      154.3        754.9
Trading profit                                   12.4         17.0         14.2        4.4         48.0
Exceptional operating expense                     -           16.5          -          -           16.5
Operating profit                                 12.4          0.5         14.2        4.4         31.5
Total assets employed                           135.4        316.2        213.6      247.2        912.4
Net liabilities before financial items           72.6         82.7         22.6        0.8        178.7
Depreciation expense                              6.3          9.8          5.3        4.4         25.8
Additions to properties, furniture, etc.          6.3          6.7          4.8        6.2         24.0

Year ended December 31, 1995:
Commission and fee income                       111.7        278.8        232.2      138.4        761.1
Trading profit                                   12.4         14.2         17.5        4.5         48.6
Exceptional operating expense                     2.4         12.6          3.1        2.2         20.3
Operating profit                                 10.0          1.6         14.4        2.3         28.3
Total assets employed                           159.6        334.9        268.7      229.7        992.9
Net liabilities before financial items           83.7         64.3         12.4       17.8        178.2
Depreciation expense                              6.2          9.8          5.5        4.2         25.7
Additions to properties, furniture, etc.          5.9          8.7          5.6        5.8         26.0

</TABLE>


<PAGE>


ONGOING GEOGRAPHIC ANALYSIS

To  enable  a  fuller  understanding  of  the  trading  performance   additional
geographic analysis of ongoing operations is provided below:


<TABLE>

<CAPTION>
                                            United        North       Rest of       Asia
                                            Kingdom      America       Europe     Pacific       Total
                                           L million    L million    L million    L million   L million
<S>                                        <C>          <C>          <C>          <C>         <C>
Year ended December 31, 1997:
Commission and fee income                      39.0         67.7        105.0         96.5      308.2
Trading profit                                  6.5          6.3          8.3          3.5       24.6
Exceptional operating expense                   -            -            -            2.2        2.2
Operating profit                                6.5          6.3          8.3          1.3       22.4
Depreciation expense                            1.8          2.8          2.4          2.6        9.6
</TABLE>


<TABLE>

<CAPTION>
                                            United        North       Rest of       Asia
                                            Kingdom      America       Europe     Pacific       Total
                                           L million    L million    L million    L million   L million
<S>                                        <C>          <C>          <C>          <C>         <C>
Year ended December 31, 1996:
Commission and fee income                      38.0         77.8        120.7         93.0      329.5
Trading profit                                  3.8          4.0          9.1          4.7       21.6
Exceptional operating expense                   -            0.2          -            -          0.2
Operating profit                                3.8          3.8          9.1          4.7       21.4
Depreciation expense                            1.9          2.8          2.6          2.4        9.7
</TABLE>


<TABLE>

<CAPTION>
                                            United        North       Rest of       Asia
                                            Kingdom      America       Europe     Pacific       Total
                                           L million    L million    L million    L million   L million
<S>                                        <C>          <C>          <C>          <C>         <C>
Year ended December 31, 1995:
Commission and fee income                      39.3         78.9        120.6         81.8      320.6
Trading profit                                  5.1          4.9          6.6          5.2       21.8
Exceptional operating expense                   1.0         10.6          1.4          1.1       14.1
Operating profit (loss)                         4.1         (5.7)         5.2          4.1        7.7
Depreciation expense                            1.7          3.0          3.0          2.5       10.2

</TABLE>


The geographic analysis of revenue,  trading profit and net liabilities has been
prepared on a basis that more closely  reflects the management of the operations
of the Group.

The Directors  consider  that there is only one  continuing  business  activity,
namely  advertising and marketing  services,  and that it is more appropriate to
show a  geographic  analysis of revenue  than  turnover.  Revenue by  geographic
destination is not materially different from revenue by geographic origin.

The Group's  customers are located  throughout the world.  During 1997, 1996 and
1995 no  clients  accounted  for more than 10% of either  Cordiant's  revenue or
CCG's ongoing revenue.



<PAGE>


NOTE 29 - DIRECTORS' EMOLUMENTS

The total  emoluments,  pension costs and fees for the year ending  December 31,
1997 were  L3,918,318  (1996:  L3,595,159)  of which  L150,800  were fees (1996:
L126,700).

The emoluments,  excluding  pension  contributions,  of the Chairman and highest
paid UK Director, were:

Year Ended December 31, 1997

Charles Scott (Chairman and highest paid UK Director)                   L864,115

Year ended December 31, 1996

Charles Scott (Chairman and highest paid UK Director):                  L492,529

NOTE 30 - DIRECTORS' INTERESTS

The  interests  of the  Directors  who  were in  office  at the  year end in the
Company's  share  capital  appearing in the register  maintained  by the Company
pursuant to Section 325 of the Companies Act of 1985 were as set out below.


<TABLE>

<CAPTION>
                                             Beneficially owned                       Ordinary Share options
                                               Ordinary Shares                    and equity participation rights
                                         ---------------------------              -------------------------------
                                                December 31,                               December 31,
                                         ---------------------------              -------------------------------
                                         1997                1996(1)                1997                  1996
<S>                                    <C>                    <C>              <C>                    <C>
Michael Bungey                         55,990                 28,490           1,537,130                497,020
Arthur D'Angelo                           960                    960*            922,082                328,681*
Jean de Yturbe                            nil                    nil*            854,397                260,996*
Alex Hamill                               nil                    nil*            990,744                397,343*
Peter Schoning                            nil                    nil*            725,827                132,426*
Bill Whitehead                            787                    788*            848,757                255,356*
Charles Scott                          39,214**               39,215**           787,583**            1,219,489**
Dudley Fishburn                           nil                    nil                 nil                    nil
Theodore Levitt                        18,796                 18,796                 nil                    nil
<FN>
*     On appointment
**    Includes spouse's interest.
(1)   Adjusted for the one-for-two share consolidation.
</FN>

</TABLE>


The  Directors'  interests in the Company's  share capital have not changed from
December 31, 1997 to June 1, 1998.





<PAGE>


NOTE 31 - RELATED PARTIES

During  1997 and 1996  transactions  in the  ordinary  course of  business  with
associated companies were as follows:

                                                       1997              1996
                                                        Lm                Lm

                Media services                         30.1              32.0
                Production                              7.8               5.0
                                                       37.9              37.0

The year end balances  with  associated  companies are disclosed in Notes 12 and
17.

Contracts  of  significance  which  were  entered  into by the Group  during the
financial  year in which the  directors of a  subsidiary  company had a material
interest, details of which are given in Note 2, were as follows:

In March 1997,  Cordiant made a deferred payment of L0.4 million relating to the
acquisition in 1996 of the minority interest in BSB Saatchi & Saatchi MC Limited
in Poland.

In July 1997,  Cordiant  acquired a 51% interest in the share capital of Grapple
Group 141 (Pty) Ltd for consideration of R1.8 million (L0.2 million).

In November 1997, Cordiant acquired a further 25% minority interest in the share
capital of X/M Harrow Pty Ltd in  Australia.  Estimated  cash  payments of A$0.6
million (L0.3 million) will be made in 2000.

In December 1997,  Cordiant  acquired a further 33% interest in Scholz & Friends
Dresden GmbH, in Germany.  Deferred  consideration of L2.2 million is payable in
2000.

During 1997 Cordiant  made deferred  payments  totalling  FFR31.3  million (L2.9
million) relating to the acquisition in 1996 of the minority interest in Saatchi
& Saatchi Advertising SA in France.

During 1997 Cordiant made deferred  payments  totalling  Pts1,206  million (L5.0
million)  relating to the acquisition in 1994 of the minority  interest in Grupo
Bates SA in Spain.

In October 1997,  Cordiant sold NRG. NRG provided services to the film industry.
Consideration  of L24.4 million was received which was after  deducting a fee of
L8.0  million  payable  to  certain  of NRG's  directors  under  the terms of an
agreement entered into in 1995.

Transitional  arrangements have been agreed for the provision by each of CCG and
Saatchi & Saatchi to the other of certain services.

With effect from January 1, 1996,  Cordiant acquired the 47.4% minority interest
in the share capital of Saatchi & Saatchi  Advertising  SA in France held by the
management.

In February 1996,  Cordiant  issued 327,960  Ordinary Shares at a price of L1.09
per share as further  consideration to the vendors of Adaptus International A/S,
a Norwegian subsidiary.

In May 1996,  Cordiant  issued 64,522  Ordinary  Shares at a price of L1.344 per
share as further consideration to the vendors of Campaign Palace, Sydney.

In May 1996,  Cordiant  acquired a further 10.7% minority  interest in the share
capital of Scholz & Friends GmbH in Germany.

In October  1996,  Cordiant  acquired  the 49%  minority  interest  in the share
capital of BSB Saatchi & Saatchi MC Limited in Poland.

During 1996 Cordiant made deferred  payments  totalling L1.3 million relating to
the acquisition in 1994 of the minority interest in Grupo Bates SA Spain.

NOTE 32 - FAIR VALUE OF FINANCIAL INSTRUMENTS

Short-Term  Investments - Short-term  investments  comprise Lnil million  (1996:
L12.1  million) of listed  investments  which had a market value at December 31,
1997 of Lnil million (1996: L12.3 million).

Long-Term  Investments - Long-term investments included Lnil million (1996: L0.3
million) of listed  investments  which had a market value of Lnil million (1996:
L0.3  million).  Long-term  investments  also  included  unlisted loan notes and
redeemable  preference  shares with a face value of  approximately  L2.4 million
(1996:  L8.2  million)  issued by the  purchasers  of  companies  disposed of by
Cordiant which are due on various  dates.  The Group has made full provision for
these financial instruments.

Net borrowings  (excluding foreign exchange contracts) - The book value of cash,
short term deposits and short term  borrowings  approximate to their fair values
because of the short term maturity of these instruments.  The fair value of long
term  borrowings  approximates to their carrying value at December 31, 1997 with
the exception of Convertible  Unsecured Loan Stock 2015 which had a par value of
Lnil  million at December  31, 1997 (1996:  L6.2  million) and a market value of
Lnil million at December 31, 1997 (1996: L3.9 million).

Foreign exchange forward contracts - Foreign exchange forward contracts are used
to hedge  existing  and  identified  future  foreign  currency  commitments.  At
December 31, 1997 the Group had L18.3 million  (1996:  L27.9 million) of forward
contracts outstanding, the fair value of which was not materially different from
the contracted amount.  Financial  instruments are only used to hedge underlying
commercial  exposures.  Realized  or  unrealized  gains and  losses  on  forward
contracts, which hedge firm third party commitments, are recognized in income in
the same period as the underlying  transaction.  The Group does not speculate in
derivative financial instruments.

The counterparties to the Group's financial  instruments are major international
financial  institutions.  It is Group practice to monitor the financial standing
of these  counterparties on an on-going basis. The Group does not anticipate any
material adverse effect on its financial position resulting from its involvement
in  the  agreements,  nor  does  it  anticipate  non-performance  by  any of its
counterparties.

Fair value  estimates  are made at a specific  point in time,  based on relevant
market  information  and  information  about  the  financial  instrument.  These
estimates  are  subjective  in nature and involve  uncertainties  and matters of
significant judgment and therefore cannot be determined with precision.  Changes
in assumptions could significantly affect the estimates.

NOTE 33 - PRINCIPAL SUBSIDIARIES

Except where  otherwise  indicated,  the Company  indirectly  owned 100% of each
class of the issued shares of the  subsidiary  undertakings  listed  below.  All
these subsidiary  undertakings are advertising and marketing services companies.
The  country  of  operation  and   registration  of  the  principal   subsidiary
undertakings were as follows:

England               Bates Dorland Ltd.
                      The Facilities Group Ltd.
                      (30% Ordinary)
                      Zenith Media Holdings Ltd.
                      (50% Ordinary)

Australia             The Communications Group Pty. Ltd.
                      (75.1% Ordinary)

Denmark               Bates Gruppen AS

Germany               Scholz & Friends GmbH
                      (90% Ordinary)

Norway                Bates Gruppen AS

Spain                 Grupo Bates SA

US                    Bates Advertising USA, Inc.

In the opinion of the Company, these undertakings principally affect the results
and assets of the Group.  In addition to the  companies  shown above,  the Group
also holds investments in other subsidiaries and associated undertakings. A full
list of subsidiaries,  joint ventures and associated  undertakings will be filed
with the Registrar of Companies.

The  results  of the Group  were  principally  affected  by the above  companies
together  with the Saatchi & Saatchi  Group which was demerged from the Group on
December 14, 1997.

As provided for in the Zenith  shareholders'  agreement 75% of the distributable
profits of Zenith will be distributed to  shareholders  and divided between them
in part by reference to the  proportions in which Zenith  receives  revenue from
clients of each shareholder. The remainder will be retained in Zenith.

NOTE 34 - SUBSEQUENT EVENTS

On June 18, 1998,  Miller Brewing Company  ("Miller"),  a former client of Bates
Worldwide,  commenced  an action in the  United  States  District  Court for the
Eastern  District of Wisconsin  against Bates  Advertising  USA, Inc. and Zenith
Media  Services,  Inc.  (the  "Defendants").   The  suit  seeks  damages  in  an
unspecified  amount,  attorneys' costs and seeks equitable relief, as necessary,
to cause the  Defendants  to fulfill their alleged  obligations  to Miller.  The
Company  believes  that  the  Defendants  have   meritorious   defenses  to  the
allegations  and  intends  to  pursue  them  vigorously.  At  this  stage  it is
impossible to estimate the ultimate outcome of this litigation.

NOTE 35 - NATURE OF BUSINESS

The Group is a  multi-national  advertising  and  marketing  services  business.
Ninety-eight  percent of the Group's  ongoing  revenue is  generated  by its two
advertising  networks. An analysis of revenue and assets by geographic region is
set out in Note 28 to the consolidated financial statements.

NOTE 36 - COMPANIES ACT 1985

The Consolidated  Financial  Statements do not constitute  "statutory  accounts"
within the meaning of the Companies Act 1985 of England and Wales for any of the
three years ended December 31, 1997.  Statutory  accounts for 1995 and 1996 have
been filed with the United  Kingdom's  Registrar  of  Companies;  the  statutory
accounts for 1997 will be filed following the Company's  Annual General Meeting.
The auditor has reported on these accounts.  Their reports were  unqualified and
did not contain statements under Section 237(2) or (3) of that Act.

NOTE 37 - UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

The consolidated  financial  statements have been prepared in accordance with UK
generally  accepted  accounting  principles  (UK GAAP)  which  differ in certain
significant respects from US generally accepted accounting principles (US GAAP).
A description of the  significant  differences  between UK GAAP and US GAAP that
are applicable to the Group is set out below:

(A) DIVIDENDS

Under UK GAAP,  ordinary  dividends  proposed  are  provided  for in the year in
respect of which they are  recommended by the Board of Directors for approval by
the  shareholders.  Under US GAAP,  such  dividends  are not  provided for until
declared by the Board of Directors.

(B) GOODWILL AND US PURCHASE ACCOUNTING

Under  US  GAAP,  goodwill  and  identifiable  intangible  assets  acquired  are
capitalized and amortized against income; intangible assets being amortized over
their  economic  lives  which  range  from  three to 20 years and the  remaining
goodwill are amortized over 40 years. For US GAAP purposes, management review on
an annual basis the carrying value of goodwill and identifiable  intangibles for
impairment by a comparison of the carrying amount of an asset to future net cash
flows expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying  amount of the assets  exceed the fair  value of the  assets.  Under UK
GAAP,  purchased  goodwill  arising after  ascribing fair values to all tangible
assets and liabilities acquired is written off against reserves.

On  disposal  of a  subsidiary,  under UK GAAP the gain or loss on  disposal  is
calculated after taking account of goodwill  previously written off to reserves.
Under US GAAP the gain or loss on disposal is calculated after taking account of
any related unamortized goodwill and intangible assets. A GAAP difference arises
from amortization  charged under US GAAP for which no equivalent charge has been
recognized  under UK GAAP.  For the year ended December 31, 1998, the Group will
be  required  under UK GAAP to  capitalize  and  amortize  additional  purchased
goodwill.

(C) PROPERTY LEASES

Under US GAAP, total rental  payments,  inclusive of increases in rental charges
specified in the lease, are recognized on a straight line basis over the term of
the lease. These increases are recognized when payable under UK GAAP.

(D) LONG-TERM PROPERTY PROVISIONS

Under US GAAP,  provisions  for  properties  which are  vacant  and  surplus  to
requirements or let at a loss are provided on a discounted  basis after allowing
for estimated  subrental income,  and amortization of the discount is charged to
interest expense.

Under UK GAAP,  provision is made on an  undiscounted  basis for the future rent
expense  and related  cost of  leasehold  property  (net of  estimated  sublease
income)  where the  property is vacant or  currently  not planned to be used for
ongoing operations.

(E) PENSION

The  Statement of Financial  Accounting  Standards  ("SFAS") No. 88,  Employers'
Accounting for  Settlements  and  Curtailment  of Defined  Benefit Plans and for
Termination  Benefits  specifies  the  accounting  treatment  under  US GAAP for
circumstances  in which there has been an irrevocable  transaction that relieves
the employer of primary  responsibility  for a pension  benefit  obligation  and
eliminates  significant  risks related to the  obligation and the assets used to
effect the settlement.  As a result of the curtailment and termination of the US
scheme during 1996, the related termination  liability was accrued in full under
UK GAAP and the additional US GAAP accrual was reversed.  Additionally, under US
GAAP, CCG has previously  recognized an additional minimum pension liability for
the  US  underfunded  plan,  representing  the  excess  of  accumulated  benefit
obligations  over  the  plan's  assets.  As a  result  of  the  curtailment  and
termination  of the plan during 1996,  Cordiant  recorded  the full  termination
liability under UK GAAP and the additional US GAAP accrual was reversed.

(F) DEFERRED TAXATION

UK GAAP requires that no provision for deferred  taxation  should be recorded if
there is  reasonable  evidence  that such  taxation  will not be  payable in the
foreseeable  future.  US GAAP  requires  full  provision  of  deferred  taxation
liabilities  and  permits   deferred  tax  assets  to  be  recognized  if  their
realization  is  considered  to be more likely  than not.  There are no deferred
taxation  differences  presented in the reconciliation below because CCG has net
deferred tax assets and considers that it is more likely than not that they will
not be recovered.

(G) COMPENSATION COSTS

Under UK GAAP the Company does not recognize any  compensation  for  performance
based share  options.  Under US GAAP  compensation  expense is recorded over the
vesting period for the excess of the market price of underlying  shares over the
exercise price.

(H) EMPLOYEE SHARE SCHEMES

The Company has adopted SFAS 123, Accounting for Stock-Based Compensation, 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, SFAS 123 also allows entities to continue to apply the provisions
of APB Opinion  No. 25 and  provide pro forma net income and pro forma  earnings
per share  disclosures  for share option grants made in 1995 and future years as
if the  fair-value-based  method  defined  in SFAS  123 had  been  applied.  The
Directors have elected to continue to apply the provisions of APB Opinion No. 25
and  provide  pro  forma  disclosure   provisions  of  SFAS  123.   Accordingly,
compensation expense is recorded on the date of grant only if the current market
price of the underlying  stock exceeded the exercise  price.  Under SFAS 123 the
calculation  of the option value is made using an  acceptable  pricing  model to
include certain expected parameters. If the compensation cost of the options had
been  determined  based on the fair  value at the grant  dates for 1997 and 1996
consistent  with the method  prescribed by SFAS No. 123,  Cordiant's US GAAP net
profit/(loss)  and  earnings/(loss)  per share  would have been  adjusted to the
revised amounts indicated below:



<PAGE>


<TABLE>

<CAPTION>
                                                                            Year ended December 31,
                                                                   -----------------------------------------
                                                                   1997              1996               1995
<S>                                                                <C>               <C>              <C>
Net profit in Lmillion - as reported                               L8.4              L6.9             L(46.8)
                       - revised                                   L7.9              L6.5             L(47.0)

EARNINGS PER SHARE WHICH REFLECT CONSOLIDATION

Earnings per share in pence - as reported                          3.8p              3.1p             (32.0)p
                            - as revised                           3.5p              2.9p             (32.0)p

</TABLE>

The pro forma diluted earnings per share is the same as the revised earnings per
share figure  presented  above.  The revised  amounts were  determined  based on
employee share scheme awards in 1997, 1996 and 1995 only.  Compensation  cost is
recognized  over the expected  life of the option (i.e.  between 3 1/2 and 6 1/2
years).  The revised amounts for compensation  cost may not be indicative of the
effects on net earnings and earnings per share for future years.  Under SFAS No.
123,  the  weighted  average  fair value of each option grant is estimated to be
33.3p and 57.1p for options  granted during the year ended December 31, 1997 and
year ended December 31, 1996, respectively.  The fair values have been estimated
using the Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 1997 and 1996 respectively; dividend yield of nil
and nil per cent,  expected  volatility of 22%  throughout,  risk-free  interest
rates of 7.2% and 8.2% and expected lives of between 3 1/2 and 6 1/2 years.

(I) CASH FLOWS

The  Consolidated  Statement  of Cash  Flows  is  prepared  in  accordance  with
Financial  Reporting  Standard No. 1 (revised) `Cash Flow Statements' ("FRS 1").
Its  objectives  and  principles  are  similar  to those set out in SFAS 95. The
principal difference between the standards relates to classification.  Under FRS
1, the  Group  presents  its cash  flows  for:  (a)  operating  activities;  (b)
exceptional  non-operating  items;  (c) returns on investments  and servicing of
finance;  (d) taxation:  (e) capital expenditure and financial  investment;  (f)
acquisition and disposals; (g) equity dividend paid; and (h) financing.  SFAS 95
requires  only  three  categories  of cash flow  activity:  (a)  operating;  (b)
investing; and (c) financing.  Cash flows from exceptional  non-operating items,
returns on investments and servicing of finance,  and taxation shown under FRS 1
would be  included  as  operating  activities  under  SFAS 95.  The  payment  of
dividends  would be included as a financing  activity  under SFAS 95. Changes in
bank  overdrafts are included within cash  equivalents  under FRS 1 and would be
considered a financing activity under SFAS 95. Had bank overdrafts been shown as
a financing activity in the Consolidated  Statement of Cash Flows the overdrafts
repaid (drawn) would have been L40.7 million,  L(2.8) million and L(7.6) million
in the years ended December 31, 1997, 1996 and 1995 respectively.  The repayment
of L40.7  million  in 1997  includes  overdrafts  of  L23.4  million  that  were
demerged.

(J) PROSPECTIVE ACCOUNTING CHANGES

(i) SFAS 130,  Reporting  Comprehensive  Income,  was issued in June 1997 and is
effective for fiscal years beginning  after December 15, 1997.  Reclassification
of financial statements for earlier periods provided for comparative purposes is
required.

This statement  requires that all items that are required to be recognized under
accounting  standards as  components  of  comprehensive  income be reported in a
financial  statement  that is  displayed  with  the  same  prominence  as  other
financial statements. It requires that an enterprise (a) classify items of other
comprehensive  income by their nature in a financial  statement  and (b) display
the accumulated balance of other  comprehensive  income separately from retained
earnings and additional  paid-in capital in the equity section of a statement of
financial position.  The Company is currently reviewing the likely impact on the
classification of items included in shareholders' deficiency.

(ii)  SFAS  131,  Disclosures  about  Segments  of  an  Enterprise  and  Related
Information, was issued in June 1997 and is effective for fiscal years beginning
after  December  15,  1997.  In the  initial  year  of  application  comparative
information for earlier years is to be restated.

This  statement  requires  that  companies  disclose  segment  data based on how
management makes decisions about allocating  resources to segments and measuring
their performance.  It also requires entity-wide  disclosures about the products
and services an entity provides, the material countries in which it holds assets
and reports revenues and its major customers. The Company is currently reviewing
the likely impact on the level of disclosure  currently provided in its combined
financial statements.

<PAGE>



<TABLE>
<CAPTION>
                                                                                    Year ended
                                                                                   December 31,
                                                                       -------------------------------------

EFFECTS ON NET EARNINGS OF DIFFERENCES BETWEEN US AND UK GAAP             1997         1996         1995
                                                                           Lm           Lm           Lm
                                                                       ------------ ------------ -----------
<S>                                                             <C>       <C>           <C>          <C>
Profit for the year in conformity with UK GAAP                             15.1          24.2        (37.3)
US GAAP ADJUSTMENTS:
Amortization of goodwill and other intangibles                  (b)        (9.5)         (9.5)        (9.2)
Release of  accumulated  goodwill  amortization  of  companies
  disposed                                                      (b)         -             -            6.2
Straight lining of property leases                              (c)        (1.0)         (2.4)        (2.4)
Decrease in long-term property provisions                       (d)        11.0           0.3          2.7
Amortization of discount on property provisions                 (d)        (6.9)         (7.5)        (7.0)
Pension                                                         (e)         -             1.8          0.2
Compensation costs                                              (g)        (0.3)          -            - 
                                                                            ---           ---         ----                          
NET PROFIT  APPLICABLE TO ORDINARY  SHAREHOLDERS IN CONFORMITY
  WITH US GAAP                                                              8.4           6.9        (46.8)
                                                                            ===           ===         ====

Net profit per Ordinary Share - basic                                       3.8p          3.1p       (32.0)p
Average number of Ordinary Shares (in millions)(1)                        221.9         221.8        146.2
Net profit per Ordinary Share - diluted                                     3.8p          3.1p       (32.0)p
Average number of Ordinary Shares - diluted (in millions)(1)              224.1         222.7        146.2
                                                                          =====         =====        =====
<FN>
(1)  Average  number  of  Ordinary  Shares  has been  adjusted  to  reflect  the
     Consolidation.
</FN>

</TABLE>



<PAGE>


<TABLE>

<CAPTION>
                                                                             December 31,
                                                                       -------------------------
CUMULATIVE EFFECT ON SHAREHOLDERS' FUNDS (DEFICIENCY) OF                  1997         1996
DIFFERENCES BETWEEN US AND UK GAAP                                         Lm           Lm
<S>                                                             <C>       <C>          <C>
Equity shareholders' deficiency in conformity with UK GAAP
                                                                          (85.7)       (215.3)
US GAAP ADJUSTMENTS:
Dividends                                                       (a)         2.7           4.4
Goodwill and US purchase accounting in respect of acquisitions
                                                                (b)        76.9         198.2
Straight lining of property leases                              (c)         -           (21.9)
Discount on property provisions                                 (d)        15.3          34.2
                                                                           ----          ----
EQUITY SHAREHOLDERS' FUNDS (DEFICIENCY) IN CONFORMITY WITH US
  GAAP                                                                      9.2          (0.4)
                                                                            ===           ===
</TABLE>

<PAGE>
                                                                         ANNEX A












             UNAUDITED COMBINED AND PRO FORMA FINANCIAL INFORMATION



<PAGE>
                                                                                
                                  INTRODUCTION


         The  following  information  is  provided  to  assist  in  judging  the
performance  of CCG.  Other than  consolidated  balance sheet  information as of
December 31, 1997,  this  information  is unaudited and it does not  necessarily
reflect the results of operations  or financial  position of CCG that would have
been achieved as of the dates indicated, nor is it necessarily indicative of the
future results of operations or future financial position of CCG.



<PAGE>
<TABLE>
                 CORDIANT COMMUNICATIONS GROUP AND SUBSIDIARIES
                            (COMBINED AND PRO FORMA)

          UNAUDITED COMBINED AND PRO FORMA STATEMENT OF OPERATIONS(1)

<CAPTION>
                                          Combined Basis                 Pro Forma Basis
                                     1997               1996                  1997
                                      Lm                 Lm                    Lm                  Notes
                               ------------------ ------------------ ------------------------ -----------------
<S>                                 <C>                <C>                <C>                     <C>
Turnover

Group and share of joint             2,351.1            2,301.3            1,965.9
venture
Less: share of joint venture          (725.1)            (704.1)            (362.6)
                                     -------            -------            -------
Group Turnover                       1,626.0            1,597.2            1,603.3

Cost of sales                       (1,309.9)          (1,257.7)          (1,295.7)
Revenue
---------------------------------------------------------------------------------------------------------------
  Ongoing businesses and
    share of joint venture             329.1              349.8              319.1
  Disposed businesses                    7.9               10.0                -
  Less:  Share of joint venture        (20.9)             (20.3)             (11.5)
---------------------------------------------------------------------------------------------------------------
Group revenue                          316.1              339.5              307.6

Net operating expenses                (292.0)            (315.2)            (285.8)
---------------------------------------------------------------------------------------------------------------
  Trading profit before
    exceptional operating
    items
    Ongoing businesses                  24.6               21.6               24.0
    Disposed businesses                  1.7                2.9                -
  Exceptional operating expenses -
    ongoing businesses                  (2.2)              (0.2)              (2.2)
---------------------------------------------------------------------------------------------------------------
Operating profit                        24.1               24.3               21.8

Share of operating profits
    Joint venture                        0.9                0.1                1.5
    Associated companies                 0.4                0.2                0.4
Non-operating exceptional items
  Profit on disposal of businesses      16.5                 -                  -
  Fundamental reorganization
    - demerger                        (166.4)                -                  -
                                       -----               ----               ---- 
(Loss)/profit before                  (124.5)              24.6               23.7
  interest and taxation

<PAGE>

(Loss)/profit before                  (124.5)              24.6               23.7
  interest and taxation

Net dividends paid to
  Saatchi & Saatchi
  companies prior to demerger          (10.4)              (7.8)               -
Net interest
  receivable/(payable) and
  similar charges
    Group                                3.6                5.7               (0.6)
    Joint venture                        1.2                1.1               (0.1)
                                       -----               ----                --- 
(Loss)/profit before taxation         (130.1)              23.6               23.0
Taxation                                (9.5)             (10.4)             (10.2)
                                       -----               ----               ----
(Loss)/profit after taxation          (139.6)              13.2               12.8
Minority interests                      (1.8)              (2.6)              (1.8)
                                       -----               ----               ---- 
Net (loss)/profit                     (141.4)              10.6               11.0
                                                                              ----
Dividends proposed on equity
shares                                  (2.7)              (4.4)
                                       -----                ---                        
Retained (loss)/profit                (144.1)               6.2
                                       =====                ===

(Loss)/earnings per Ordinary Shares    (63.7)p              4.8p               5.0p               C
Adjusted weighted average
number of Ordinary Shares in
issue (millions)(2)                    221.9              221.8              221.9

<FN>
(1)  The basis of preparation  of combined and pro forma  information is set out
     in note A. The 1996 combined  revenue and net operating  expenses have been
     restated from the figures  presented in the circular to shareholders  dated
     September  30,  1997,  to  reclassify  certain  costs  charged  by  Zenith,
     previously included in net operating expenses, as a cost of sales.

(2)  Adjusted  for  the  one for two  share  consolidation  (see  Note 23 of the
     Consolidated Financial Statements).
</FN>

</TABLE>


<PAGE>


       NOTES TO UNAUDITED COMBINED AND PRO FORMA STATEMENT OF OPERATIONS


NOTE A - BASIS OF PREPARATION

The combined statement of operations has been prepared as if the businesses that
have been demerged had been demerged  throughout the two periods presented.  Pro
forma  information  is  presented  as  if  certain  new  financing  and  trading
arrangements  had also been in place for the same period.  Because of the nature
of pro forma  information,  it cannot give a true picture of the Group's results
and is given  for  illustrative  purposes  only.  Specific  adjustments  made in
preparing the pro forma information were to:

(i)  reduce  trading profit to reflect the new trading terms for the purchase of
     media  services from Zenith,  with an  offsetting  increase in the share of
     profits from joint ventures;

(ii) eliminate  inter-Cordiant  interest  receivable  from Saatchi & Saatchi and
     Zenith and  adjust  external  interest  to reflect  the  revised  financing
     arrangements;

(iii)eliminate the results of NRG, a business disposed of in 1997,  substituting
     notional interest on the proceeds received;

(iv) eliminate exceptional  non-operating demerger expenses,  profit on disposal
     of NRG and dividends paid by subsidiaries to Saatchi & Saatchi; and

(v)  adjust the tax charge to reflect the adjustments and the current  structure
     of the Group.



<PAGE>

NOTE B - PRO FORMA ADJUSTMENTS

Selected information setting out the adjustments is given below.


<TABLE>

<CAPTION>
                                                                                         Exceptional
                                             Revised                                     non-operating
                              Combined       Zenith        Refinancing        NRG         items and
                             Unadjusted      trading         and tax       adjustment     dividends      Pro forma
                                 Lm            Lm              Lm              Lm            Lm              Lm
                            ------------- -------------- ---------------- ------------- -------------- -------------
<S>                            <C>              <C>            <C>             <C>           <C>          <C>
Group turnover                 1,626.0            -              -             (22.7)           -         1,603.3
                               -------           ---            --              ----           --         -------
Group revenue                    316.1          (0.6)            -              (7.9)           -           307.6
                                 -----           ---            --               ---           --           -----
Operating profit                  24.1          (0.6)            -              (1.7)           -            21.8
Share of profits less
  losses of joint venture
  and associated
  undertakings                     1.3           0.6             -                -             -             1.9
Non-operating exceptional
  items                         (149.9)           -              -             (16.5)        166.4             -
Dividends to Saatchi &
  Saatchi                        (10.4)           -              -                -           10.4             -
Interest receivable/(payable)      4.8          (1.2)          (5.9)             1.6            -            (0.7)
                                 -----           ---            ---             ----           --             --- 
(Loss)/profit before
  taxation                      (130.1)         (1.2)          (5.9)           (16.6)        176.8           23.0
Taxation                          (9.5)           -            (1.4)             0.7            -           (10.2)
                                 -----           ---            ---             ----         -----           ----
(Loss)/profit after
  taxation                      (139.6)         (1.2)          (7.3)           (15.9)        176.8           12.8
                                 =====           ===            ===             ====         =====           ====
</TABLE>

NOTE C - EARNINGS PER ORDINARY SHARE(3)

(3)  Basic, undiluted.

The  earnings per Ordinary  Share are based on the  weighted  average  number of
Ordinary  Shares in issue during the year ended December 31, 1997,  after taking
account of the one for two share  consolidation,  of 221.9 million (1996:  221.8
million).




<PAGE>

               CONSOLIDATED AND UNAUDITED COMBINED BALANCE SHEETS


<TABLE>

<CAPTION>
                                                                  Notes    Consolidated*         Combined
                                                                             Audited             unaudited
                                                                               1997                1996
                                                                                Lm                  Lm
<S>                                                                 <C>         <C>                 <C>
ASSETS

Current assets:
   Cash and short-term deposits                                                   61.7                60.0
   Short-Term Investments
     Shares - unlisted                                                             0.2                  -
   Accounts and other receivables, prepayments and accrued          E            254.3               602.4
     income
   Billable production                                                            18.1                14.9
                                                                                 -----               -----
     Total current assets                                                        334.3               677.3
Investments                                                         F              3.5                65.0
Long-term receivables:
   Accounts and other receivables, prepayments and accrued          E             15.5                 0.7
     income
Property and equipment                                                            24.5                25.3
                                                                                 -----               -----  
     Total assets                                                                377.8               768.3
                                                                                 =====               ===== 

LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current liabilities:
   Bank loans, overdrafts and other loans                           G              8.4                79.3
   Accounts payable, other liabilities and accrued expenses         H            301.5               491.5
   Taxation and social security                                                   21.6                24.0
                                                                                 -----               -----
     Total current liabilities                                                   331.5               594.8
                                                                                 -----               -----

Long-term liabilities:
   Accounts payable, other liabilities and accrued expenses         H              1.6                 1.0
   Provision for joint venture deficit                              I             14.3                 1.3
   Property, pension and other provisions                           J             57.3                62.2
   Long-term debt                                                   K             28.4                 9.8
   Deferred taxation                                                               0.5                 1.1
   Taxation                                                                       23.8                24.8
   Minority interests                                                              6.1                 7.5
                                                                                 -----               ----- 
     Total long-term liabilities                                                 132.0               107.7
                                                                                 -----               ----- 
     Total liabilities                                                           463.5               702.5
                                                                                 -----               ----- 
Shareholders' (deficiency) funds
   Share capital
     Allotted, called up and fully paid:
       221,926,993 Ordinary Shares of 50p each (1996:
           443,682,881 Cordiant Ordinary Shares of 25p each)        L            111.0               110.9
       Nil Deferred shares of 5p each (1996:  2,384,598,152)        L               -                119.2
   Share premium                                                    L               -                137.3
   Capital redemption reserve                                       L               -                 86.5
   Special reserve                                                  L             25.7                  -
   Goodwill reserves                                                L           (113.2)             (111.3)
   Accumulated deficit                                              L           (109.2)             (276.8)
                                                                                 -----               -----
     Shareholders' (deficiency) funds                                            (85.7)               65.8
                                                                                 -----                ---- 
     Total liabilities and shareholders' deficiency                              377.8               768.3
                                                                                 =====               =====
<FN>
*    Following  the  completion of the Demerger the  consolidated  balance sheet
     fully  reflects the  adjustments  made in the  preparation  of the combined
     balance sheet.
</FN>

</TABLE>
See  accompanying  notes to the consolidated  and unaudited  combined  financial
information.



<PAGE>

NOTE D - BASIS OF PREPARATION

The combined balance sheet for 1996 includes:

(i)  the assets and liabilities of CCG.

(ii) the  investment  in and net  amounts  due from  Saatchi & Saatchi  at their
     estimated net realizable value, under the demerger arrangements.

(iii)Group share of the assets and liabilities of Zenith,  equity accounted as a
     50% joint venture.

(iv) Group share of the assets and liabilities of The Facilities  Group,  equity
     accounted as a 30% associate.


NOTE E - ACCOUNTS AND OTHER RECEIVABLES, PREPAYMENTS AND ACCRUED INCOME
                                                   1997        1996
                                                    Lm          Lm
                                                    --          --
Due within one year:
Trade receivables (net of allowances for
   doubtful debts)                                 219.0      255.5
Associated companies                                 -          0.4
Amounts due from Saatchi & Saatchi                   8.8      315.6
Amounts due from Zenith                              0.4        5.3
Other receivables                                    7.7       10.9
Prepayments and accrued income                      18.4       14.7
                                                   -----      -----
                                                   254.3      602.4
                                                   -----      -----
Due after one year:
Other receivables including prepayments
  and accrued income                                15.5        0.7
                                                    ----        ---

Amounts due from  Saatchi & Saatchi and Zenith as at December  31, 1997  reflect
trading balances only.



<PAGE>

<TABLE>

                                          Investments in             Associated    Long term     Works of
                                         Saatchi & Saatchi          undertakings   investments    art            Total
                                              Lm                         Lm           Lm           Lm             Lm
                                              --                         --           --           --             --

Cost:
<S>                                           <C>                        <C>          <C>           <C>          <C> 
At beginning of year                          78.5                       2.8          1.1           3.7          86.1
Translation adjustment                         -                        (0.2)          -             -           (0.2)
Share of profit for year                       -                         0.4           -             -            0.4
Loans repaid                                   -                        (0.2)          -             -           (0.2)
Transfer to investment in subsidiaries         -                        (0.4)          -             -           (0.4)
Disposals                                    (78.5)                       -            -           (3.7)        (82.2)
                                             -----                       ---          ---          ----         ----- 
At end of year                                 -                         2.4          1.1            -            3.5
                                             -----                       ---          ---          ----         -----


Provisions:
At beginning of year                          21.1                        -            -             -           21.1
Disposals                                    (21.1)                       -            -             -          (21.1)
                                             -----                       ---          ---          ----         -----
At end of year                                 -                          -            -             -             -
                                             -----                       ---          ---          ----         -----
Net book value:
At beginning of year                          57.4                       2.8          1.1          3.7           65.0

At end of year                                  -                        2.4          1.1            -            3.5

</TABLE>

The principal subsidiaries,  joint ventures and associates are listed in Note 14
of the Consolidated Financial Statements.


<PAGE>


NOTE G - BANK LOANS, OVERDRAFTS AND OTHER LOANS
                                               1997                  1996
                                               ----                  ----
                                              Lmillion             Lmillion
Bank loans and overdrafts                       7.8                  78.7
Other loans                                     0.6                   0.6
                                                ---                   ---
                                                8.4                  79.3
                                                ===                  ====


An amount of L0.1  million  (1996:  L0.2  million)  included  in bank  loans and
overdrafts is secured by charges over assets.

NOTE H - ACCOUNTS PAYABLE, OTHER LIABILITIES AND ACCRUED EXPENSES

<TABLE>

<CAPTION>

                                                                  December 31, 1997            December 31, 1996
                                                            ------------------------------ --------------------------
                                                            Due Within one    Due After    Due Within    Due After
                                                                 year          one year     one year      one year
                                                                 ----          --------     --------      --------
                                                               L million      L million     L million    L million

<S>                                                              <C>              <C>           <C>           <C>
Accounts payable                                                 194.2            -             214.6         -
Associated companies                                               -              -               0.7         -
Finance leases                                                     0.1            0.1             0.1         -
Proposed dividends - equity shareholders                           2.7            -               4.4         -
Amounts due to Saatchi & Saatchi                                   5.1            -             177.2         -
Amounts due to Zenith                                             11.3            -              17.0         -
Other payables including payments on account                      88.1            1.5            77.5         1.0
                                                                  ----            ---            ----         ---
                                                                 301.5            1.6           491.5         1.0
                                                                 =====            ===           =====         ===
</TABLE>

An amount of L4.0 million (December 31, 1996: L2.8 million) included in accounts
payable is  secured by related  trade  receivables.  Liabilities  under  finance
leases are secured on the assets leased.

The amounts due to Saatchi & Saatchi and Zenith at December  31, 1997  represent
trading balances only.

NOTE I - PROVISION FOR JOINT VENTURE DEFICIT

                                               1997                  1996
                                               ----                  ----
                                             Lmillion              Lmillion
Share of total assets                          51.6                  65.7
Share of total liabilities                    (65.9)                (67.0)
                                              ------                ------
                                              (14.3)                 (1.3)
                                              ======                ======
                                              



<PAGE>


NOTE J - PROPERTY, PENSION AND OTHER PROVISIONS


<TABLE>


<CAPTION>

                                                 Pensions and
                                                   similar
                                                  employment
                                  Property        obligations         Other           Total    
                                  --------        -----------         -----           -----    
                                  L million        L million        L million       L million  
<S>                                  <C>            <C>                <C>            <C> 
At beginning of year                 44.9           16.4               0.9            62.2
Translation adjustment                2.6            0.5              (0.3)            2.8
Profit and loss account               -              0.7              (0.1)            0.6
Utilized                             (7.3)          (1.0)               -             (8.3)
                                     ----           ----               ---            ---- 
At end of year                       40.2           16.6               0.5            57.3
                                     ====           ====               ===            ====
</TABLE>

Property  provisions relate to future payments on vacant properties and assigned
leases, and are analyzed by year as follows:

                                               1997         1996
                                               ----         ----
                                            L million    L million

     Under one year                              6.0          6.5
     One to two years                            5.0          4.9
     Two to five years                           9.6         12.9
     Over five years                            19.6         20.6
                                                ----         ----
                                                40.2         44.9
                                                ====         ====


NOTE K - LONG-TERM DEBT

                                               1997                  1996
                                               ----                  ----
                                             Lmillion              Lmillion

Loan stock                                       -                     6.2
Bank loans                                      25.2                   -
Other loans                                      3.2                   3.6
                                                 ---                   ---
                                                28.4                   9.8
                                                ====                   ===

The loan stock was repaid during the year.

An amount of L25.2 million (1996:  L79.1  million) of the Group's  borrowings is
secured by  guarantees  from and  charges  over the assets of the  Company and a
number of its subsidiaries.

At December 31, 1997 the Group had committed core banking  facilities  totalling
L53.6 million of which L25.2 million were being utilized.



<PAGE>


NOTE L - RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' (DEFICIENCY) FUNDS


<TABLE>


<CAPTION>

                                                                          Capital
                                                                         redemption                     Profit       Total    Total
                                          Share     Deferred    Share     reserve   Special   Goodwill  and loss    31 Dec   31 Dec
                                          capital    shares    premium      L m     reserve    reserve  account      1997      1996
                                           L m        L m        L m        L m       L m        L m      L m         L m       L m
<S>                                       <C>        <C>       <C>          <C>      <C>      <C>        <C>         <C>       <C>
At  beginning of year                     110.9      119.2      137.3       86.5      --      (111.3)    (276.8)     65.8      70.0
Issues of Ordinary shares
 net of expenses                            0.1       --         --         --        --       --         --          0.1       0.4

Net goodwill arising in year               --         --         --         --        --        (1.9)     --         (1.9)     (3.7)
                          
Profit retained for the year               --         --         --         --        --       --        (144.1)    (144.1)     6.2

Translation adjustment                     --         --         --         --        --       --         (5.6)      (5.6)     (7.1)

Reduction of capital                       --       (119.2)    (137.3)     (86.5)    25.7      --         317.3       --         --
                                          -----     ------     ------     -----      ----     ------     -----      -----      ----

At end of year                            111.0       --         --         --        25.7    (113.2)    (109.2)    (85.7)     65.8
                                          =====     ======     ======     =====       ====    ======     ======     =====      ====
</TABLE>

<PAGE>


<TABLE>

                                                                                    UNAUDITED COMBINED STATEMENTS OF CASH FLOWS
<CAPTION>

                                                                                                 1997           1996
                                                                                    Notes         Lm             Lm
                                                                                    -----         --             --
<S>                                                                                  <C>        <C>              <C>  
Net cash inflow from operating activities                                             M           5.6             17.9
                                                                                                 ----             ----
Net cash outflow arising from external demerger costs                                           (13.6)            -
                                                                                                 ----             ----
Returns on investments and servicing of finance
   Interest received                                                                              2.4              3.6
   Interest paid                                                                                 (4.5)            (3.2)
   Interest element of finance lease rental payments                                             (0.1)             -
   Dividends paid to minorities                                                                  (1.8)            (1.1)
                                                                                                 ----             ---- 
Net cash outflow from returns on investments and servicing of finance                            (4.0)            (0.7)
                                                                                                 ----             ---- 
Taxation
   Overseas tax paid                                                                             (9.8)            (7.4)
                                                                                                 ----             ---- 
Capital expenditure and financial investment
   Purchase of tangible fixed assets                                                            (11.8)           (11.9)
   Sale of tangible fixed assets                                                                  1.7              1.6
   Purchase of other fixed asset investments                                                     (0.4)            (0.9)
   Sale of other fixed asset investments                                                          3.5              0.9
                                                                                                  ---              ---
Net cash outflow from capital expenditure and financial investment                               (7.0)           (10.3)
                                                                                                 ----            ----- 
Acquisitions and disposals
   Purchase of subsidiary undertakings                                                           (1.4)            (4.5)
   Cash acquired with subsidiaries                                                                0.6              1.2
   Sale of subsidiary undertakings                                                               24.4              0.4
   Cash in businesses sold                                                                       (1.1)               -
   Fundamental reorganization - demerger                                                       (185.4)               -
                                                                                               ------             ----
Net cash outflow from acquisitions and disposals                                               (162.9)            (2.9)
                                                                                               ------             ---- 
Equity dividends paid                                                                            (4.4)               -
                                                                                                 ----             ---- 
Total net cash outflow before financing                                                        (196.1)            (3.4)
                                                                                               ------             ---- 
Financing
   Issue of Ordinary share capital                                                                0.1                -
   Capital subscribed by minorities                                                               -                0.2
   External loans drawn                                                                         116.7              5.7(1)
   External loans repaid                                                                        (98.5)               -
   Loans repaid by/(to) Saatchi & Saatchi/Zenith                                                257.5            (10.8)
   Capital element of finance lease rental payments                                              (0.1)            (0.1)
                                                                                                 ----             ---- 
Net cash inflow/(outflow) from financing                                                        275.7             (5.0)
                                                                                                -----             ---- 
Increase/(decrease) in cash                                                                      79.6             (8.4)
                                                                                                 ====             ==== 

(1)  For 1996 the  external  loans drawn  represents  the net of external  loans
     drawn and repaid.  The  information  is not  available to provide  separate
     analysis  as the funding of  Cordiant  was  managed on a group  rather than
     combined basis.
</TABLE>



<PAGE>

              NOTES TO UNAUDITED COMBINED STATEMENTS OF CASH FLOWS

NOTE M - RECONCILIATION OF OPERATING PROFIT TO OPERATING CASH FLOWS

                                                   1997           1996
                                                    L m            L m
                                                    ---            ---
Operating profit                                   24.1           24.3
Depreciation                                        9.9           10.0
Gain on sale of tangible fixed assets              (0.7)           -
(Increase)/decrease in work in progress            (5.2)           0.2
(Increase)/decrease in debtors                    (29.6)           2.8
Increase/(decrease) in creditors                   12.2          (14.5)
Utilization of property provisions                 (7.3)          (4.9)
Exceptional non-cash expense                        2.2            -
                                                    ---           ----
Net cash flow from operating activities             5.6           17.9
                                                    ---           ----


<PAGE>


RECONCILIATION OF UNAUDITED COMBINED AND CONSOLIDATED RESULTS


Historical  information  presented  in this  Annex  is  made up of the  combined
businesses  of CCG  as  constituted  during  the  year  (pro  forma  information
illustrates  this  information  as if the  Demerger  had already  taken  place).
Consolidated  information  presented on pages F-2 to F-54  includes the results,
assets and  liabilities of Saatchi & Saatchi and Zenith until they were demerged
on  December  14,  1997.  Set  out  below,  for  selected   information,   is  a
reconciliation of the combined and consolidated results.


<TABLE>

<CAPTION>

1997                               Combined       Saatchi &
                                     CCG          Saatchi         Zenith       Adjustments(1)    Consolidated
                                      Lm            Lm              Lm               Lm               Lm
                            --------------- -------------- --------------- ---------------- ----------------
<S>                              <C>            <C>             <C>             <C>               <C>      
Turnover
Group and share of joint
   venture                         2,351.1        2,469.6         1,709.6        (2,203.3)          4,327.0
Less:  share of joint
   venture                         (725.1)        (490.9)               -          1,216.0                -
                                   ------         ------          -------          -------          -------
Group turnover                     1,626.0        1,978.7         1,709.6          (987.3)          4,327.0
Cost of sales                     (1,309.9)      (1,600.5)       (1,667.7)            987.2        (3,590.9)
Revenue
------------------------------------------------------------------------------------------------------------
    Ongoing businesses
      and share of joint
      venture                        329.1          397.7            41.9           (42.0)            726.7
    Disposed businesses                7.9            1.5               -                -              9.4
      Less:  share of
      joint venture                 (20.9)         (21.0)               -             41.9                -
------------------------------------------------------------------------------------------------------------
Group revenue                        316.1          378.2            41.9            (0.1)            736.1
Net operating expenses              (292.0)        (348.5)          (40.1)              0.1          (680.5)
------------------------------------------------------------------------------------------------------------
Trading profit from
   continuing operations
   (before exceptional
   operating expenses)
   Ongoing businesses                 24.6           30.6             1.8                -             57.0
   Disposed businesses                 1.7          (0.9)               -                -              0.8
Exceptional operating
   expenses                          (2.2)              -               -                -            (2.2)
------------------------------------------------------------------------------------------------------------
Operating profit                      24.1           29.7             1.8                -             55.6

<PAGE>

                                 RECONCILIATION OF UNAUDITED COMBINED AND CONSOLIDATED RESULTS (Continued)
<CAPTION>
1997                               Combined       Saatchi &
                                     CCG          Saatchi         Zenith       Adjustments(1)    Consolidated
                                      Lm            Lm              Lm               Lm               Lm
                            --------------- -------------- --------------- ---------------- ----------------
<S>                              <C>            <C>             <C>                  <C>          <C>      

Operating profit                      24.1           29.7             1.8              -             55.6
Share of profits less
     loss of joint
     venture and
     associated companies              1.3            0.9               -          (2.2)                -
Non-operating exceptional
     items
     Profit on disposal
     of businesses                    16.5            4.3               -              -             20.8
     Fundamental
     reorganization-demerger
                                    (166.4)          764.5           (4.9)        (626.2)           (33.0)
                                    ------           -----           ----         ------            ----- 
(Loss)/profit before
     interest and taxation          (124.5)          799.4           (3.1)        (628.4)             43.4
Net dividends paid to
     Saatchi & Saatchi
     companies prior to
     demerger                       (10.4)           10.4               -              -                -
Net interest
     receivable/payable
     and similar charges              4.8          (13.4)             2.2          (2.4)            (8.8)
                                      ---          -----              ---          ----             ---- 
(Loss)/profit before
     taxation                      (130.1)          796.4           (0.9)        (630.8)             34.6
Taxation                             (9.5)           (8.2)          (1.2)           1.4             (17.5)
                                    ------           -----           ----         ------            ----- 
(Loss)/profit after
     taxation                      (139.6)          788.2           (2.1)        (629.4)             17.1
Minority interests                   (1.8)           (0.6)             -            0.4              (2.0)
                                    ------           -----           ----         ------            ----- 
Net (loss)/profit                  (141.4)          787.6           (2.1)        (629.0)             15.1
                                   ======           =====           ====          ======             ====


(1)  Adjustments were made to eliminate
         i)  inter-Cordiant trading
        ii)  the equity accounting by CCG and Saatchi & Saatchi of their 50% holdings in Zenith, and
       iii)  for the 30% share of The Facilities Group treated as an associate by CCG with a corresponding minority
             interest in Saatchi & Saatchi.
</TABLE>


<PAGE>



                                 EXHIBIT INDEX

Exhibit               Description

1.1            Consent of Independent Auditor.

2.1            Amended Articles of the Company.

3.1            Upon the request of the Securities and Exchange  Commission,  the
               Company  hereby agrees to provide the  Commission  with a list of
               subsidiaries of Cordiant Communications Group plc.