<PAGE>   1



                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549
                               -------------------

                                    FORM 10-K

X              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
               OF THE SECURITIES EXCHANGE ACT OF 1934  [FEE REQUIRED]


                                       OR
       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
                     EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

                FOR THE PERIOD FROM JULY 1, 1996 TO JUNE 30, 1997

                         COMMISSION FILE NUMBER: 01-9723

                     PHARMACEUTICAL MARKETING SERVICES INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


                     DELAWARE                              51-0335521
          (State or other jurisdiction of               (I.R.S. employer
          incorporation or organization)               identification no.)

 SUITE 912, 45 ROCKEFELLER PLAZA, NEW YORK                  10111
 (Address of principal executive offices)                 (Zip Code)


       Registrant's telephone number, including area code: (212) 841 0610

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

                                                      NAME OF EACH EXCHANGE
             TITLE OF EACH CLASS                      ON WHICH REGISTERED
             -------------------                      -------------------
                                     None

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                          Common Stock, $.01 par value
                                (Title of Class)

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

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

                  The aggregate market value of the Common Stock of the
registrant held by non-affiliates as of September 12, 1997 was approximately
$139,369,340 million.

                  As of September 12, 1997 there were outstanding 13,245,675
shares of Common Stock of Pharmaceutical Marketing Services Inc.


                                       1
<PAGE>   2
                       DOCUMENTS INCORPORATED BY REFERENCE

                  The registrant's definitive proxy statement for its meeting of
stockholders in connection with its fiscal year ended June 30, 1997, which is to
be filed pursuant to Regulation 14A not later than October 30, 1997 is
incorporated by reference into Part III of this Form 10-K.



                                       2
<PAGE>   3
                                     PART I


ITEM 1.  BUSINESS

INTRODUCTION

               Pharmaceutical Marketing Services Inc., a Delaware corporation
(the "Company" or "PMSI"), provides a range of information services to
pharmaceutical and healthcare companies in the United States, Europe and Japan
to enable them to optimize their financial performance in a value driven
environment. Most of the Company's information services are generated from its
own proprietary databases containing unique prescription, managed care,
healthcare market and medical prescriber data.

               In May 1996, the Company announced that, following the conclusion
of a strategic assessment, it would develop its business as a focused
information services provider to the pharmaceutical and healthcare industries,
and that its communication businesses ("non-database segment") would be
divested. The divestment of this segment was completed during fiscal 1997, with
the exception of the company's point of sale marketing business in France, which
is shown in this annual report and the Company's financial statements as "assets
held for sale". PMSI also disposed of two database businesses that did not meet
performance expectations during fiscal 1997 and completed the sale of its
international medical publishing business in the Netherlands in July 1997.

               PMSI's principal executive offices are located at Suite 912, 45
Rockefeller Plaza, New York, and its telephone number is (212) 841-0610.


DATABASES AND SERVICES

               PMSI provides a range of services that are either database
services or enhanced by the Company's proprietary databases. The services are
comprised of targeting information services, prescription database services with
Source Informatics Inc. ("Source"), and added value services, including
marketing research and consulting services, software and direct marketing
services.

Proprietary Databases

               A variety of proprietary databases provide the foundation of most
of PMSI's business. The Company's prescriber profile databases (the "Prescriber
Profile Databases") contain extensive information on individual prescribers,
including attitudes and prescribing behavior, collected from physicians through
self-administered surveys in seven countries. In addition, the Company jointly
exploits, through a long-term agreement, a database of prescription data (the
"Source Database") created and maintained by Source. This database contained
information relating to over 3 billion prescriptions dispensed by retail and
mail order pharmacies in the United States over the 24-month period ended June
30, 1997. Over 90% of the prescriptions in the Source Database are matched to
about 1.1 million physicians and other prescribers writing them. Data for the
Source Database is collected from retail and mail order pharmacies in the United
States. PMSI has signed definitive 



                                       3
<PAGE>   4
agreements with Source and National Data Corporation ("NDC"), subject to PMSI
stockholder approval, to sell its interest in the Source Database business in
the United States to NDC and to acquire the Source Europe business, which is
developing similar databases in a number of European countries. The Company also
maintains various other comprehensive databases including: healthcare
legislation and key influencers in the United States and the United Kingdom; a
managed care database, which details cost containment measures imposed by United
States managed care organizations ("MCOs") that influence or restrict
physicians' prescribing activities, and which also covers formularies,
administrators and the physicians affiliated with the MCOs; and databases of
pharmaceutical product prices and reimbursement in the United Kingdom.

                 The Company does not hold any identifiable individual patient
data, except with the patients' prior permission for follow-up research or
disease management purposes.

Targeting Information Services

               Through the use of PMSI's targeting information services, a
pharmaceutical company is able to target its promotional programs to the optimal
audience of prescribers and other healthcare professionals who influence or, in
some cases, control prescribing decisions. The Company's targeting services
include the SCRIPTRAC service, which is generated from the Prescriber Profile
Databases and delivered in a PC-software package. It enables pharmaceutical
companies in seven countries to identify prescribers who, because of therapeutic
specialty, practice demographics, or other factors, are the most likely to
prescribe a pharmaceutical company's product. The Company also licenses
SCRIPTRAC to third parties in countries where it does not intend to establish
operations.

               PMSI provides a range of services derived from its managed care
database including the INTEGRATED MANAGED CARE PROFILES service, which enables
pharmaceutical companies to identify, target and prioritize those MCOs that are
most relevant to their own specific pharmaceutical products. Additionally, the
Company has developed information services that identify the influences of
federal and state governments and national healthcare systems. Examples of these
services include STATELINE, a PC-based database product which provides
pharmaceutical companies with detailed information on the health policies of
each of the 50 states and the District of Columbia and on the government
officials involved in shaping those policies; and HIS, also a PC-based database
product which identifies the influencers, buyers, decision makers and
administrators in the United Kingdom's National Health Service.

               The Company also provides a targeting information service to
over-the-counter ("OTC") pharmaceutical companies, the OTC PHYSICIAN DATABASE
SERVICE, which provides managers of OTC products with the ability to target
medical practitioners with a high potential for OTC sales through product
recommendation to patients. The Company has signed a definitive agreement with
NDC, subject to PMSI stockholder approval, to sell the OTC Physician Database
service to NDC.




                                       4
<PAGE>   5
Prescription Database Services with Source

               In the United States, PMSI, through an operating venture with
Source, offers a range of services generated from the Source Database, including
the SOURCE PRESCRIPTION DATABASE SERVICE, a comprehensive data service providing
the client with access to the database itself; SOURCE PRESCRIBER, which is an
enhanced targeting service providing physician specific prescribing information;
SOURCE PAYER PRESCRIBER, which provides in-depth information on the links
between physicians and their MCO affiliations; and SOURCE LAUNCHTRAC, which is
used by a pharmaceutical company during and after a new product launch to
identify those physicians who have prescribed the product.

Added Value Services

               The Company provides pharmaceutical companies in the United
States, and internationally in the United Kingdom, Belgium and the Netherlands
with a range of added value and research services that are used (i) to study
specific issues and trends in the marketplace and the broader health care
industry, (ii) to evaluate the effectiveness of marketing programs and (iii) to
analyze in depth particular components of a product marketing program at any
stage of its implementation, and (iv) for consultancy on optimizing company
strategy, marketing programs and product commercialization through its
established support teams in the United States and Europe.

               PMSI's marketing research audits are generated from databases
containing information collected by questionnaire, diary or personal interview,
dispensed prescriptions and secondary research. The results of the audits are
delivered in hard copy or through PC-based data delivery systems. Examples of
the audits are the SOURCE PRESCRIPTION AUDIT, which analyzes pharmaceutical
product consumption; PHYSICIAN DRUG AND DIAGNOSIS AUDIT, which analyzes the
pharmaceuticals prescribed by physicians relative to the associated diagnosis;
the PERSONAL SELLING AUDIT ("PSA"), which analyzes the effectiveness of the
client company's sales activities compared with those of its competitors; and
the HOSPITAL PERSONAL SELLING AUDIT, which complements the PSA by monitoring and
analyzing sales activity in the hospital environment.

               The Company's research services include the MEDICAL ADVERTISING
RECALL SERVICE, which assesses the effectiveness of advertisements in conveying
a specific marketing message; STRATEGIC STUDIES, which report on key
pharmaceutical industry topics, such as pharmaceutical company image and sales
force structure and strategies; and MEDICAL RESEARCH OMNIBUS, which is a monthly
omnibus survey of physicians based on personal interviews. In addition, PMSI has
a CONSUMER RESEARCH capability to respond to the growing importance of consumer
choice in the healthcare process to assist pharmaceutical companies in
determining appropriate marketing strategies.

               PMSI also develops and supplies other innovative services to
healthcare suppliers and providers, including the MEDIPHASE pharmacy dispensary
management software and drug reimbursement database service. In addition, PMSI
provides HEALTHCARE DIRECTORIES of key administrators and managers within the
U.K. healthcare environment; forecasting and resource allocation software
systems designed to help client companies in efficient commercialization of
their products; and DIRECT MARKETING in the United States, where the Company
holds one of the eleven franchises currently in effect with the American Medical
Association (the "AMA") permitting PMSI access to the AMA's physician list.



                                       5
<PAGE>   6
MARKETING AND SALES

               PMSI employs marketing, sales and client service professionals in
each country in which it operates. Many members of the Company's sales and
marketing staff have substantial pharmaceutical industry experience.

               Sales to the healthcare industry accounted for substantially all
of the Company's revenue in fiscal 1997. Virtually every major pharmaceutical
company is a customer of the Company. For the year ended June 30, 1997, PMSI's
ten largest customers were responsible for 33% of its revenue, with no one
customer accounting for more than 10%. Although the Company's business is
dependent upon its relationships within the healthcare and pharmaceutical
industries and the prospects of those industries, the Company's business would
not be materially adversely affected by the loss of any single customer.

ACQUISITION AND DIVESTMENT STRATEGY

               PMSI has been built through a series of strategic acquisitions
that have positioned the Company to provide comprehensive information services
to the pharmaceutical and healthcare industries in major world markets. The
Company intends to use its existing resources, together with the proceeds from
its divestment program, to continue to acquire or enter into joint ventures with
businesses that complement the range of services the Company offers in each of
its markets. Possible candidates include marketing research companies, companies
with pharmaceutical, medical, outcomes or healthcare economic databases,
businesses with demonstrated ability to develop PC-based software that will add
value to PMSI data and other associated companies that would benefit from the
Company's capability in key world markets.

               The Company, from time to time, evaluates possible acquisitions
and frequently has discussions with acquisition prospects. Subsequent to June
30, 1997, the Company announced that it had signed definitive agreements to
acquire the Source Europe business from Source Informatics Inc. (Source), and to
divest its minority interest in the Source Informatics venture in the United
States together with its OTC Physician Survey business. The Company will file a
proxy statement with the SEC, prior to calling a special meeting of PMSI's
common stockholders. Subject to receiving the approval of PMSI common
stockholders, the Company expects the transactions to close before the end of
calendar year 1997.

               On July 30, 1997 the Company announced that it had finalized the
sale of its Dutch and US-based international publishing and communications
operations to Excerpta Medica, the medical communications division of Elsevier
Science for $9 million, resulting in a net gain on sale of approximately $3
million. The sale of these businesses formed part of the program of divestitures
of non-core businesses announced by the Company in May 1996.


Commitments from Acquisitions Prior to Fiscal 1997

               Effective July 1, 1994, the Company acquired 80% of the common
stock of Mediphase Limited ("Mediphase"), a specialist software and information
company in the United Kingdom that has developed and markets retail pharmacy
dispensary management software. As a condition of purchase, the Company obtained
the right to acquire the remaining 20% of the common stock between July 1997 and
July 1999, based upon the number of Mediphase systems installed at certain
dates. In accordance with this, the 




                                       6
<PAGE>   7
minority interest in Mediphase Limited was acquired during July 1997 for $1.7
million. The Company also has commitments to contingent payments for CMA Medical
Data Limited based on operating profit generated in the current fiscal year.

               On April 28, 1993, the Company purchased an 80% holding in IMR
Finance, a French Corporation. During the period October 1, 1996 to December 31,
2002 the Company had the option to acquire the remaining 20% of the outstanding
capital stock of IMR Finance. For the same period, the owners of the minority
interest had the option to require the Company to purchase their holding based
on a multiple of projected pre-tax earnings. During May 1997, the minority
shareholders exercised their option and the Company purchased the remaining 20%
of the outstanding share capital of IMR Finance for $2.6 million.

LONG-TERM AGREEMENTS

               In 1991, PMSI entered into two long-term licensing agreements
with Walsh International Inc. ("Walsh"), one of which was assigned in 1996 to
Source Informatics Inc. ("Source"), the prescription database business which was
spun-off from Walsh in April 1996.

ALPHA DATABASE LICENSE. Source Informatics America Ltd., a subsidiary of Source,
has granted the Company an exclusive license in the United States to use the
Alpha (Source) Database to provide targeting information with respect to the
prescribing behavior of individual prescribers. Due to the movement by clients
towards comprehensive database contracts in the United States, both parties
agreed, as of July 1994, to accelerate the transition, as provided for in the
license agreement, to allocate payments based on the Alpha Database costs for
data updating and maintenance according to the relative historical revenues
generated by Source and PMSI in using the database. Revenues from the
comprehensive database contracts are also allocated to both parties based
principally upon historical percentages of revenue derived from the Alpha
Database. License renewal terms provide the Company with the exclusive option to
maintain the license through 2011. Thereafter, the agreement will be renewed for
successive five-year terms unless terminated by either party. Source has agreed
that, for so long as the Alpha Database license agreement is in effect, it will
not engage in the business of providing physician targeting services.

               Currently, the Company's ability to produce its SOURCE product
line in the United States is dependent upon its partner, Source. Source was
formed in April 1996 through a spin-off of Walsh's prescription database
business, immediately prior to the initial public offering of Walsh. Source
remains a privately held company with limited resources and, due to its
investment in database development in Europe, currently is not profitable. If
Source were not able to fund its part of the operating venture in the United
States, PMSI has the right to an escrowed copy of the Alpha Database and
Source's extrapolation methodology. The economic feasibility of the Company
maintaining the Alpha Database on its own would be dependent upon its ability to
maintain the operating venture's current revenue or generate substantial
additional revenue from services derived from the Alpha Database. PMSI has
signed a definitive agreement with Source, subject to PMSI stockholder approval,
to acquire the Source Europe business and divest its interest in the joint
operating venture with Source in the US. If approved by PMSI common
stockholders, there will be no further dependency upon Source with regard to the
Company's US business.




                                       7
<PAGE>   8
PHYSICIAN DATABASE LICENSE. In the United Kingdom, France, Germany, Spain, the
Netherlands and Belgium, Walsh has licensed to PMSI its Physician Database. The
Company may use such lists only for internal purposes and in connection with the
development and delivery of its SCRIPTRAC database. The initial term of the
license runs through 2001, and the license is renewable for two further
five-year periods, if not terminated by the Company six months prior to the
renewal date. Thereafter, the agreement is renewable for five-year terms unless
terminated by either party. The Company pays Walsh an annual royalty fee for
each physician supplied in the database.

ANNUAL AGREEMENTS

               The Company has entered into the following agreements with Walsh,
or since April 1996, Source, pursuant to which Source or Walsh provides certain
management, marketing and sales, personnel benefits and data processing
services, and subleases facilities, to the Company.

MANAGEMENT AND EXECUTIVE SERVICES AGREEMENT. Source provides certain management
services covering executive management, accounting, legal and other services for
and on behalf of the Company, principally in the United States, where
comprehensive database contracts have been negotiated, and in the United
Kingdom. In Germany and the Netherlands, PMSI provides specific management
services to Walsh. Under the agreement, the services will be provided for
various periods ranging to the end of calendar 1997 and are renewable
automatically for one-year periods in the absence of notice of termination by
any party. Certain management functions in the Company are performed by members
of the management of Source, who also devote significant time to the affairs of
Source. If the services of any such executives were to be unavailable to PMSI
for any reason, it is likely that the cost to the Company of recruiting
full-time management to replace such Source executives would exceed the
management costs to be borne by PMSI under the management services agreement.

DATA PROCESSING AGREEMENT. The Company has contracted for Walsh or Source to
provide specific data processing and software support services to PMSI and its
customers in the United States and certain European countries. The agreement is
automatically renewed on an annual basis if not terminated by either party. The
fees payable by PMSI to Walsh or Source for such services are based either on
allocated costs or on competitive rates for comparable services from alternative
suppliers.

FACILITIES AGREEMENT. PMSI sublets from Source fully furnished office space in
the United States and Walsh sublets similar facilities from the Company in the
United States, the Netherlands and Germany. The initial terms of the subleases
each run through calendar 1997, unless an earlier expiration date is provided in
the relevant lease, and will be renewed automatically in the absence of
termination by either party. Each company pays its pro rata share of the
respective rental charges, based on space occupied.

HEALTH AND BENEFITS AGREEMENT. For certain operations in the United States,
Belgium and the United Kingdom, Walsh or Source provides the employees of the
Company with health insurance and other benefits comparable with those it offers
to its own employees. PMSI reimburses Walsh or Source for its share of the
actual costs of such benefits.




                                       8
<PAGE>   9
BACKLOG

               As of June 30, 1997, the Company had contracts running through
2001 of $103 million of which $45 million are for contracts to be completed by
June 30, 1998.

COMPETITION

The Company's targeting information services in the United States, Japan, and
most European countries are well established, although their market position may
be affected in the future by competitors' efforts to create or acquire enhanced
databases or to develop and market new products. The Company has competitors in
physician targeting in virtually all markets, primarily from IMS, a division of
the Cognizant Corporation, which competes in service and price. Some of the
Company's competitors are divisions of larger companies with significantly more
resources than the Company.

INDUSTRY REGULATION

               The pharmaceutical industry is subject to extensive regulations
in the countries in which the Company operates. A number of governments have
enacted regulations limiting the prices pharmaceutical companies may charge for
drugs. While the Company believes that cost containment measures that may be
adopted by government agencies will cause pharmaceutical companies to seek more
effective means of marketing their products (which will benefit the Company in
the medium and long term), such governmental regulation has caused
pharmaceutical companies to revise or reduce their marketing programs. These
cost containment measures, together with pharmaceutical companies' desire to
increase market share or improve their research pipelines, have caused both
vertical and horizontal integration and several significant mergers.

               In addition to pharmaceutical industry regulation, the Company is
directly subject to certain restrictions on the collection and use of data.
There has been legislation enacted in many countries to regulate the collection,
use and dissemination of certain information that may be deemed to be personal.
All countries of the European Union are required to have data privacy
legislation in effect no later than 1998. In the United States, certain states
have enacted legislation prohibiting the use of personally identifiable
prescription drug information without consent. Because the Company does not
generally receive information regarding the identity of patients, the Company
believes that such state legislation will have no material adverse effect on its
business. There can be no assurance that future legislation or regulations will
not directly or indirectly restrict the dissemination of information regarding
physicians or prescriptions. Such legislation, if enacted, could have a material
adverse effect on the operations of the Company.

               The Market Research Code of Conduct, a pharmaceutical
industry-promulgated code of conduct to which the Company adheres, provides that
the identity of the individual researched may never be disclosed to the company
sponsoring such research without such individual's consent. PMSI supplies only
aggregated statistics to the sponsoring company when information is generated
from market research databases. As recommended by the board of directors of the
Pharmaceutical Manufacturer's Association, the PMSI databases do not contain
patient names, thus preserving confidentiality. Data provided at the physician
level is obtained from prescribing activity by product or therapy class over a
given period. Pharmaceutical companies receive information as to the projected
prescribing levels of particular physicians. The Company does not hold any
identifiable individual patient data, 




                                       9
<PAGE>   10
except on a temporary basis with the patients' prior permission for follow-up
research and disease management purposes.

EMPLOYEES

               As of June 30, 1997, the Company's operations had approximately
595 full-time employees. Of these employees, 287 are located in the United
States, with the remainder located in Europe and Japan. In the Netherlands and
France, PMSI has Workers Committees, a legal requirement in those countries.
There are no collective bargaining agreements in effect with employees of the
Company. The Company considers its relationships with its employees to be good.


ITEM 2.   PROPERTIES

               PMSI leases or subleases space in various locations in the United
States, Europe and Japan. In those instances in which the Company is a
sublessee, Walsh or Source is the sublessor, and the subleases have terms
extending through calendar 1997, prior to renewal options. The Company's
principal office facilities in the United States are located in Phoenix, Arizona
and Newtown, Pennsylvania. The Company's usage of such facilities aggregates
approximately 18,400 square feet for which the aggregate sublease rentals were
$300,000 in 1997. In addition, the Company rents approximately 28,000 square
feet of office facilities in Newtown, Pennsylvania, for $448,000 per annum under
a lease expiring in 2000. The Company owns approximately 30,000 square feet of
office and warehouse facilities in the Netherlands with a recorded cost of
approximately $5.3 million.

ITEM 3.  LEGAL PROCEEDINGS

               The Company is not a party to any outstanding material legal
proceedings.


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

               None.






                                       10
<PAGE>   11
                                     PART II

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

               The Company's Common Stock is traded on the NASDAQ National
Market System under the symbol PMRX.

               The reported high and low closing sales prices for the Company's
Common Stock as reported by NASDAQ for each full quarterly period within the two
most recent fiscal years were:

<TABLE>
<CAPTION>
               Calendar Year Period             High                          Low
               --------------------             ----                          ---

<S>                                            <C>                         <C> 
               1995
               Third Quarter                   12 3/4                        9
               Fourth Quarter                  16 1/4                       10

               1996
               First Quarter                   16 1/4                       12
               Second Quarter                  13 1/2                       9 3/8
               Third Quarter                   10 1/8                       6 1/8
               Fourth Quarter                  11 1/2                       8 5/8

               1997
               First Quarter                   10 3/4                       8 3/4
               Second Quarter                  11 5/8                       8 3/4
</TABLE>


               As of September 12, 1997, there were approximately 1,132 holders
of record of the Company's Common Stock.

               The Company has never paid dividends to holders of its Common
Stock. The Company intends to retain all earnings to finance the operation and
growth of its business and does not anticipate paying cash dividends in the
foreseeable future.






                                       11
<PAGE>   12
ITEM 6.  SELECTED FINANCIAL DATA

                             SELECTED FINANCIAL DATA
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

     The selected financial data set forth below have been derived from the
audited consolidated financial statements of PMSI for the year ended December
31, 1992, the six month transition period ended June 30, 1993 and the years
ended June 30, 1994, 1995, 1996 and 1997, and should be read in conjunction with
Management's Discussion and Analysis of Results of Operations and Financial
Condition and the historical consolidated financial statements, including the
notes thereto, included elsewhere in this Report.

<TABLE>
<CAPTION>
                                                          Six Months
                                           Year Ended       Ended
                                           December 31,    June 30,                        Year Ended June 30,                
                                           ------------   ----------      -----------------------------------------------------
Statement of Operations Data:                 1992           1993           1994           1995           1996           1997  
-----------------------------                -------       --------       --------       --------       --------       --------
<S>                                       <C>             <C>            <C>            <C>            <C>            <C>
Revenue                                    $  73,007       $ 34,654       $ 76,876       $ 89,893       $ 93,027       $ 98,485
Production costs                             (40,074)       (19,674)       (43,168)       (49,991)       (51,605)       (54,457)
Selling, general and administrative          (21,186)       (10,790)       (25,791)       (29,773)       (34,208)       (34,847)
Amortization of intangible assets             (2,430)          (811)        (1,541)        (1,889)        (2,012)        (1,733)
Income from assets held for sale               --             --             --             --             --                76
Impairment of long-lived assets                --             --             --             --            (2,368)         --    
Restructuring costs                            --             --            (1,820)         --            (2,314)         --   
                                           ---------       --------       --------       --------       --------       --------
Operating income                               9,317          3,379          4,556          8,240            520          7,524
Interest and other income                        910          1,683          2,805          2,940          2,503          3,299
Interest expense                                 (70)        (1,818)        (3,032)        (2,915)        (2,633)        (3,490)
                                           ---------       --------       --------       --------       --------       --------
Income from continuing operations
  before income taxes                         10,157          3,244          4,329          8,265            390          7,333
Income tax provision                          (3,859)        (1,167)        (1,662)        (2,950)        (1,156)        (2,655)
Minority interest                             --              --             --                (3)            57            (17)
                                           ---------       --------       --------       --------       --------       --------
Income (loss) from continuing operations       6,298          2,077          2,667          5,312           (709)         4,661

Income (loss) from discontinued
  operations, net                               (170)            65          2,057           (131)        (8,915)        (9,914)
                                           ---------       --------       --------       --------       --------       --------
Net income (loss)                          $   6,128       $  2,142       $  4,724       $  5,181       $ (9,624)      $ (5,253)
                                           =========       ========       ========       ========       ========       ========
Net income (loss) per share:

Continuing operations                          0.49            0.16           0.21           0.41          (0.05)          0.35
Discontinued operations, net                  (0.01)          --              0.15          (0.01)         (0.68)         (0.75)
                                           ---------       --------       --------       --------       --------       --------
Net income (loss) per share                $   0.48        $   0.16       $   0.36       $   0.40       $  (0.73)      $  (0.40)
                                           =========       ========       ========       ========       ========       ========
Common stock and in 1992, 1993, 1994
1995 and 1997 common stock equivalents       12,876          13,157         13,297         13,053         13,124         13,297

</TABLE>

<TABLE>
<CAPTION>
                                           December 31,                                June 30,                
                                           ------------   ---------------------------------------------------------------------
Balance Sheet Data:                           1992           1993           1994           1995           1996           1997  
-------------------                          -------       --------       --------       --------       --------       --------
<S>                                        <C>            <C>            <C>            <C>            <C>            <C>

Working capital (1)                        $ 36,972        $ 74,428       $ 74,553       $ 72,901       $ 47,627       $ 64,210
Total assets (2)                             91,427         189,028        189,229        187,681        173,408        167,202
Long-term debt, excluding current portion     --             69,423         69,248         69,295         69,131         69,552
Stockholders' equity                         62,277          64,398         73,525         86,697         72,954         63,744
</TABLE>

(1) As of June 30, 1995 and 1996, includes net current assets of discontinued
    operations of $15,032 and $9,276, respectively. As of June 30, 1997 includes
    net current assets held for sale of $4,236.

(2) As of June 30, 1995 and 1996, includes total assets of discontinued
    operations of $50,032 and $42,871, respectively. As of June 30, 1997
    includes net assets held for sale of $23,033.


                                       12
<PAGE>   13
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF 
         OPERATIONS AND FINANCIAL CONDITION

OVERVIEW

               The following discussion and analysis contains "forward looking"
statements, within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, that involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the "forward looking" statements.

               Much of PMSI's business is based upon proprietary databases,
computer technology and product know-how, and assets that are generally
difficult, time-consuming or costly for third parties to duplicate. The
Company's strategy is to take advantage of its operating leverage and grow the
business by increasing the market penetration of existing products and services,
by developing products and services for different national markets, and by
creating new information services from data in the PMSI databases or from
linking such data with data from third parties to meet the evolving information
needs of the pharmaceutical and healthcare industry.

               The Company's future results will be dependent in part upon
management's ability to take advantage of the operating leverage in the PMSI
business by increasing revenues from both existing and new services.

Revenue

               Revenue for the year ended June 30, 1997 was $98.5 million, an
increase of $5.5 million (6%) over revenue for the year ended June 30, 1996.
Revenues grew significantly in the United States market research and database
businesses, Japanese information services and UK market research division. This
growth was partially offset by the revenue reduction of $1.0 million, due to the
divestment of poorly performing database businesses at the end of fiscal 1996
and during this year. Currency exchange rate movements when compared to 1996
rates, principally in Japan and the Netherlands, negatively impacted the year's
revenue by $3.5 million, or 4%.

               Revenue for the year ended June 30, 1996 was $93.0 million, an
increase of $3.1 million (4%) over revenue for the year ended June 30, 1995.
Revenues demonstrated growth in the United States market research and database
businesses, Japan, our European Scriptrac businesses and from acquisitions
completed in fiscal 1995. This was offset by a continued decrease in revenue in
the United States direct marketing business due to the phasing out of low margin
programs and the restructuring of the United Kingdom market research businesses.







                                       13
<PAGE>   14
Production Costs

         PMSI's production costs include the costs of data collection, outside
supplies and services, internal computer costs and the costs attributable to
personnel involved in the production of the Company's products and services.

         Production costs for the year ended June 30, 1997 were $54.5 million
(55% of revenue), compared to $51.6 million (55% of revenue) for the year ended
June 30, 1996. The 6% increase in costs was primarily attributable to revenue
growth and new product development in Japan and Europe.

         Production costs for the year ended June 30, 1996 were $51.6 million
(55% of revenue), compared to $50.0 million (56% of revenue) for the year ended
June 30, 1995. The increase was primarily attributable to revenue growth,
including from acquisitions completed in late fiscal 1995, and the launch of
Scriptrac in Spain.


Selling, General and Administrative Expenses

         Selling, general and administrative expenses were $34.8 million (35% of
revenues) for the year ended June 30, 1997 as compared to $34.2 million (37% of
revenues) for the same period in 1996. This was due to a reduction in general
and administrative expenses arising from improved cost control in the US and
following the divestment of poorly performing database businesses with
disproportionately high general and administrative expenses.

         Selling, general and administrative expenses increased by $4.4 million
to $34.2 million (37% of revenues) for the year ended June 30, 1996 as compared
to $29.8 million (33% of revenues) for the same period in 1995. The increase was
attributable to acquisitions completed in late fiscal 1995, new product
development for which no revenue was generated and increases in staff to support
additional clients for existing services.


Amortization of Intangible Assets

         Acquired databases, software and other purchased intangibles are valued
at their fair value at the date of acquisition and are amortized over periods of
up to five years. Goodwill is amortized over periods between 5 and 40 years. The
cost of updating and maintaining databases is expensed as incurred, as is the
cost of developing software for internal use.

         In the Company's consolidated financial statements, amortization
has been recorded as follows (in thousands):

<TABLE>
<CAPTION>
                  1995             1996             1997
                  ----             ----             ----
<S>               <C>              <C>             <C>
Databases         $   46           $  126          $    6
Software             248              247             205
Goodwill           1,595            1,639           1,522
                  ------           ------          ------
Total             $1,889           $2,012          $1,733
                  ======           ======          ======
</TABLE>



                                       14
<PAGE>   15
         For the year ended June 30, 1997 compared to the same period in 1996,
database, software and goodwill amortization decreased due to the effects of the
charge for the impairment of long lived assets recorded during fiscal 1996.

         For the year ended June 30, 1996 compared to the same period in 1995,
database, software and goodwill amortization increased due to the inclusion for
the full year of acquisitions completed in 1995.

Impairment of Long Lived Assets and Restructuring Costs

         In the third quarter of fiscal 1996, the Company recorded $2.4 million
write-down in the value of long lived assets, primarily goodwill and databases
pursuant to the adoption of FAS 121, "Accounting for the Impairment of Long
Lived Assets and Long Lived Assets to be Disposed of". In addition, the Company
recorded $2.3 million of restructuring costs. These charges to earnings, $0.24
per share after tax effect, were primarily related to the disposal of two
database businesses that did not meet performance expectations. At June 30,
1996, accrued liabilities and accounts payable included $0.9 million for
restructuring liabilities. All such liabilities were paid during fiscal 1997.

Interest and Other Income/Interest Expense

         PMSI invests its excess cash with major banks, and cash equivalents and
marketable securities in a professionally managed fund.

         For the year ended June 30, 1997, the Company's net interest expense
was $0.2 million as compared to $0.1 million for the same period in 1996. An
increased return on the Company's investments was offset by an increase in the
interest expense, due to the allocation of enterprise interest to discontinued
operations for a full year in 1996, but only for part of fiscal 1997.

         For the year ended June 30, 1996, the Company's net interest expense
was $0.1 million as compared to interest income just under $0.1 million for the
same period in the preceding year. The increased cost was primarily attributable
to a decrease in funds invested.

Income Tax Provision

         The tax provisions of $3.0 million, $1.2 million and $2.7 million for
the years ended June 30, 1995, 1996 and 1997, respectively, reflect taxes
payable in respect of profitable foreign and domestic operations. At June 30,
1997, there were foreign net operating loss carryforwards of approximately $10.0
million available to reduce future foreign income taxes payable.

           Deferred tax assets recognized by the Company result from the
anticipated carryback of future tax deductions to offset income taxes previously
provided and the utilization of future tax deductions to reduce taxes payable on
future taxable income. The reduction in the deferred tax asset recognized in the
balance sheet at June 30, 1997 is due to the utilization of net operating losses
in Japan and the UK. A valuation allowance has been made against a significant
part of the net operating losses established in the current year, due to the
expectation of further statutory tax losses in certain foreign jurisdictions.





                                       15
<PAGE>   16
Discontinued Operations

         Following the decision to divest the Company's non-database segment, a
$5.7 million loss on disposal was recorded during fiscal 1996. This, together
with the net loss for the period through March 31, 1996 of $3.2 million were
classified as the "loss from discontinued operations, net" in the 1996 statement
of operations.

         During fiscal 1997, the Company recorded a further net charge for the
loss on disposal of discontinued operations of $9.9 million. This arose from
changes to the original estimates of net proceeds and income expected to be
generated during the disposal period.

         At the end of the measurement period, one business from the
discontinued non-database segment still remained to be sold and the results of
this business subsequent to the measurement period have been included within
operating income from continuing operations as "income from assets held for
sale". Its net assets, together with the remaining accrual for the loss expected
to be generated on disposition, are recorded in the balance sheet as "net
current assets held for sale" and "net assets held for sale". It remains
management's intention to sell the Company's French point of sale business.

Currency Fluctuations

         As an international company, PMSI is affected by fluctuations in
foreign currency exchange rates. Although most of the Company's services are
priced in the local currency of the business unit providing the service, the
effects of foreign currency fluctuations are mitigated by the fact that expenses
of foreign subsidiaries are incurred in the same currency as sales. The reported
net income of foreign subsidiaries will be affected by changes in the exchange
rates of foreign currencies against the United States dollar. The magnitude of
the effects on the Company of future exchange rate changes will be dependent
upon the relative contributions to the Company's results of its United States
and non-United States operations. The foreign currency risk applicable to the
Company's operations has not been hedged.

Quarterly Results

         The production costs of the Company's pharmaceutical information
services (which are expensed as incurred) have a relatively high fixed direct
cost component because of the relatively constant cost of maintaining the
databases from which the services are derived. Once these fixed costs are
covered, a higher gross margin is achieved on incremental revenues. The
Company's overall gross profit margin in any quarter and any improvement in such
margin over time will therefore be highly dependent on the relative gross profit
margins of the Company's various products and services that contribute to
revenue in such quarter and the relative revenue growth rates for such products
and services.

         Historically, quarter to quarter comparisons of the Company's results
of operations have not necessarily been indicative of these trends, principally
as a result of: (i) timing of acquisitions and divestments to create the PMSI
business; (ii) revenue reductions resulting from product changes or
discontinuations in the post-acquisition period; (iii) cost of investing in the
turnaround or profit improvement of certain acquired businesses; (iv) write
downs of asset values and (v) the investment in new products and services.




                                       16
<PAGE>   17
Liquidity and Capital Resources

         At June 30, 1997, the Company's cash and cash equivalents and
marketable securities totaled $64.5 million and its current ratio was 2.9:1. The
current ratio at June 30, 1996 was 2.6:1.

         During the year ended June 30, 1997, cash and cash equivalents and
short-term marketable securities increased due to the switch from long-term to
short-term marketable securities and proceeds from the sale of assets relating
to the discontinued operations. The Company anticipates that capital
expenditures in fiscal 1998 will be less than $3.0 million and will be funded
from internally generated funds.

         The Company anticipates that existing cash, together with internally
generated funds, will provide the Company with the resources that are needed to
satisfy the Company's working capital requirements in fiscal 1998 and subsequent
years.

         The timing and magnitude of future acquisitions will continue to be the
single most important factor in determining the Company's long-term capital
needs. The Company signed definitive agreements, subsequent to the year-end, to
acquire the Source Europe business from Source Informatics Inc. (Source), and to
divest its minority interest in the Source Informatics venture in the United
States together with its OTC Physician Survey business. The working capital
injection necessary to fund the Source Europe business during fiscal 1998 and
subsequently, will be provided from the proceeds of the sale of the joint
operating venture and OTC businesses in the US as well as the Company's own
internally generated funds.


SUBSEQUENT EVENTS

         On August 20, 1997 the Company announced that it had signed definitive
agreements to acquire the Source Europe business and to divest its minority
interest in the Source Informatics venture in the United States together with
its OTC Physician Survey business in a three way transaction with National Data
Corporation (NDC) and Source Informatics Inc. (Source). Under these agreements,
PMSI will receive (i) the Source Europe business, (ii) 918,254 PMSI common
shares held by Source, (iii) $15.5 million in cash, and (iv) 1,059,829
registered shares in NDC.

         The Company will file a proxy statement with the SEC, prior to calling
a special meeting of PMSI's common stockholders. Subject to receiving the
approval of PMSI common stockholders, the Company expects the transactions to
close before the end of calendar year 1997.

         On July 30, 1997 the Company announced that it had finalized the sale
of its Dutch and US-based international publishing and communications operations
to Excerpta Medica, the medical communications division of Elsevier Science for
$9 million, resulting in a net gain on sale of approximately $3 million. The
sale of these businesses formed part of the program of divestitures of non-core
businesses announced by the Company in May 1996.





                                       17
<PAGE>   18
Year 2000

         Scriptrac for Windows client software used for delivering Scriptrac has
been developed to ensure compliance with the Year 2000. The US joint operating
venture has successfully tested its software to ensure Year 2000 compliance.

         The internal systems within the PMSI local operations are to be
reviewed for the impact of the year 2000. No significant impact on the Company's
financials is expected.

Recently Issued Accounting Standards

         In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share",
which is effective for financial statements issued for periods ending after
December 15, 1997. The new standard requires changes to computation,
presentation and disclosure requirements of primary and fully diluted earnings
per share. The Company has reviewed the impact of the new standard on the
financial statements and related disclosures and determined that the calculated
earnings per share will not be significantly affected.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         See the Financial Statements and Supplementary Data listed in the Index
to Consolidated Financial Statements and Financial Statement Schedules that
appear elsewhere in this Annual Report.


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON 
        ACCOUNTING AND FINANCIAL DISCLOSURE

         None.






                                       18
<PAGE>   19
             PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES

            INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL
                               STATEMENT SCHEDULE
--------------------------------------------------------------------------------



<TABLE>
<CAPTION>
                                                                                                                   PAGE
                                                                                                                   ----

<S>                                                                                                               <C>
Report of Independent Accountants..............................................................................    F-1

Financial Statements:

        Consolidated Balance Sheets as of June 30, 1996 and 1997...............................................    F-2

        Consolidated Statements of Operations for the Years Ended
        June 30, 1995, 1996 and 1997...........................................................................    F-3

        Consolidated Statements of Stockholders' Equity
        for the Years Ended June 30, 1995, 1996 and 1997.......................................................    F-4

        Consolidated Statements of Cash Flows for the Years Ended
        June 30, 1995, 1996 and 1997...........................................................................    F-5

        Notes to Consolidated Financial Statements.............................................................    F-7

Report of Independent Accountants on Financial
Statement Schedule.............................................................................................    S-1

Financial Statement Schedule:

Schedule II - Valuation and Qualifying Accounts for the Years
Ended June 30, 1995, 1996 and 1997.............................................................................    S-2
</TABLE>


All financial statement schedules not mentioned above are omitted for the reason
that they are not required or are not applicable, or the information is included
in the Consolidated Financial Statements or the Notes thereto.




                                       19
<PAGE>   20
REPORT OF INDEPENDENT ACCOUNTANTS



To the Board of Directors and Stockholders of
Pharmaceutical Marketing Services Inc.



               We have audited the accompanying consolidated balance sheets of
Pharmaceutical Marketing Services Inc. and Subsidiaries as of June 30, 1996 and
1997 and the related consolidated statements of operations, stockholders' equity
and cash flows for the years ended June 30, 1995, 1996 and 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

               We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

               In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Pharmaceutical Marketing Services Inc. and Subsidiaries as of June 30, 1996 and
1997 and the consolidated results of their operations and their cash flows for
the years ended June 30, 1995, 1996 and 1997 in conformity with generally
accepted accounting principles.






                                                        COOPERS & LYBRAND L.L.P.

Stamford, Connecticut
September 9, 1997




                                      F-1
<PAGE>   21
             PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                      (in thousands, except share numbers)
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>


                                                       June 30, 1996    June 30, 1997
                                                       -------------    -------------
<S>                                                        <C>             <C>
                                       ASSETS

Current assets
  Cash and cash equivalents                                $ 12,669        $ 32,414
  Marketable securities                                      16,174          24,738
  Accounts receivable, principally trade
    (less allowance for doubtful accounts
    of $400 and $388, respectively)                          29,283          27,442
  Work in process                                             2,986           3,798
  Prepaid expenses and other current assets                   7,398           4,905
  Net current assets held for sale                               --           4,236
  Net current assets of discontinued operations               9,276              --
                                                           --------        --------
    Total current assets                                     77,786          97,533

Marketable securities                                        18,515           7,384
Property and equipment, net                                   9,004          11,761
Goodwill, net                                                25,895          25,303
Other assets, net                                             8,613           6,424
Net assets held for sale                                         --          18,797
Net assets of discontinued operations                        33,595              --
                                                           --------        --------
    Total assets                                           $173,408        $167,202
                                                           ========        ========
                       LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
  Current maturities of long-term debt                     $    219        $    407
  Accounts payable                                            4,411           5,036
  Accrued liabilities
    (including employee compensation and
    benefits of $2,347 and $3,234, respectively)             11,489          10,507
  Unearned income                                            14,040          17,373
                                                           --------        --------
    Total current liabilities                                30,159          33,323

Long-term debt                                               69,131          69,552
Other liabilities                                             1,164             583
                                                           --------        --------
    Total liabilities                                       100,454         103,458

Commitments and contingencies

Stockholders' equity
  Common stock, $0.01 par value, 25,000,000
    shares authorized and 13,169,275 and 13,199,475
    shares, issued and outstanding, respectively                132             132
  Paid-in capital                                            86,923          87,179
  Accumulated deficit                                       (14,776)        (20,029)
  Cumulative translation adjustment                             722          (3,534)
  Unrealized loss on investments, net of
    income tax benefits of $32 and $3, respectively             (47)             (4)
                                                           --------        --------
      Total stockholders' equity                             72,954          63,744
                                                           --------        --------
      Total liabilities and stockholders' equity           $173,408        $167,202
                                                           --------        --------
</TABLE>

The accompanying notes are an integral part of these financial statements


                                      F-2
<PAGE>   22
             PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands,except for per share data)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                        YEAR ENDED JUNE 30,
                                                -----------------------------------
                                                  1995         1996         1997
                                                  ----         ----         ----
<S>                                             <C>          <C>          <C>
Revenue                                         $ 89,893     $ 93,027     $ 98,485
Production costs                                 (49,991)     (51,605)     (54,457)
Selling, general and administrative expenses     (29,773)     (34,208)     (34,847)
Amortization of intangible assets                 (1,889)      (2,012)      (1,733)
Income from assets held for sale                      --           --           76
Impairment of long lived assets                       --       (2,368)          --
Restructuring costs                                   --       (2,314)          --
                                                --------     --------     --------
Operating income                                   8,240          520        7,524
Interest and other income                          2,940        2,503        3,299
Interest expense                                  (2,915)      (2,633)      (3,490)
                                                --------     --------     --------
Income from continuing operations
  before income taxes                              8,265          390        7,333
Income tax provision                              (2,950)      (1,156)      (2,655)
Minority interest                                     (3)          57          (17)
                                                --------     --------     --------
Income (loss) from continuing operations           5,312         (709)       4,661
Discontinued operations:
Loss from discontinued operations, net              (131)      (8,915)      (9,914)
                                                --------     --------     --------
Net income (loss)                               $  5,181     $ (9,624)    $ (5,253)
                                                ========     ========     ========
Income (loss) per share:
  Continuing operations                         $   0.41     $  (0.05)    $   0.35
  Discontinued operations, net                     (0.01)       (0.68)       (0.75)
                                                --------     --------     --------
Net income (loss) per share                     $   0.40     $  (0.73)    $  (0.40)
                                                ========     ========     ========
Common stock and, in 1995 and 1997,
  common stock equivalents                        13,053       13,124       13,297

</TABLE>




    The accompanying notes are an integral part of these financial statements



                                      F-3
<PAGE>   23
             PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (in thousands)
------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                               Common Stock                                               Unrealized
                           -------------------                              Cumulative      Loss on         Total
                           No. of                  Paid-in    Accumulated   Translation    Marketable   Stockholders'
                           Shares     Amount       Capital      Deficit      Adjustment    Securities      Equity
                           ------     ------       -------    -----------   -----------    ----------   -------------
<S>                        <C>        <C>          <C>        <C>           <C>            <C>          <C>
Balance June 30, 1994....  12,810     $ 128        $83,048    $(10,333)     $     682                   $ 73,525

Net income...............      --        --             --       5,181             --                      5,181
Stock options exercised..      17        --            340          --             --                        340
Shares issued for IMR
  acquisition............     258         3          2,788          --             --                      2,791

Adjustment to beginning
  balance for change in
  accounting principle,
  net of income tax
  benefit of $31.........      --        --             --          --             --      $  (48)           (48)

Change in unrealized loss,
  net of income tax
  provision of $29.......      --        --             --          --             --          46             46

Foreign currency
 translation.............      --        --             --          --          4,862          --          4,862
                           -------     -----        --------    ---------    ---------     -------        -------
Balance June 30, 1995....  13,085       131          86,176       (5,152)       5,544          (2)        86,697

Net loss.................      --        --              --       (9,624)          --          --         (9,624)
Stock options exercised..      84         1             747           --           --          --            748
Change in unrealized loss
  on marketable
  securities, net of
  income tax benefit
  of $30.................      --        --              --           --           --          (45)          (45)
Foreign currency
  translation............      --        --              --           --       (4,822)          --        (4,822)
                           -------     -----        --------    ---------    ---------     -------        -------
Balance June 30, 1996....  13,169       132          86,923      (14,776)         722          (47)       72,954

Net loss.................      --        --              --       (5,253)          --           --        (5,253)
Stock options exercised..      30        --             256           --           --           --           256
Change in unrealized loss
  on marketable
  securities, net of
  income tax provision
  of $29.................      --        --              --           --           --           43            43
Foreign currency
  translation............      --        --              --           --       (4,256)          --        (4,256)
                           -------     -----        --------    ---------    ---------     -------        -------
Balance June 30, 1997....  13,199      $132         $87,179     $(20,029)    $ (3,534)     $    (4)       $63,744
                           -------     -----        --------    ---------    ---------     -------        -------
</TABLE>
          







    The accompanying notes are an integral part of these financial statements



                                      F-4
<PAGE>   24
             PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                          Year Ended June 30,
                                   ----------------------------------
                                     1995        1996           1997
                                   ------      ------        --------
<S>                                <C>       <C>           <C>
Cash flows provided by
 (used in) operating activities:
  Net income (loss)............... $5,181      $(9,624)      $ (5,253)
  Loss from discontinued
   operations.....................    131        8,915          9,914

Adjustments to reconcile net
 income (loss) to net cash
 provided by (used in) operating
 activities:
  Depreciation and amortization...  2,989        3,354          3,715
  Loss on disposal of fixed
   assets.........................      6           18             --
  Loss on disposal of database
   businesses, net................     --           --            773
  Deferred taxes..................   (719)        (789)           953
  Minority interest share of net
   income (loss)..................      3          (57)            17
  Restructuring costs.............     --        2,314             --
  Impairment of long lived
   assets.........................     --        2,368             --

Change in operating assets and
 liabilities, net of effect of
 acquisitions:
  Accounts receivable............. (1,352)      (5,716)           881
  Work-in-process.................    554         (781)          (986)
  Prepaid expenses and other
   assets.........................   (262)        (822)         3,471
  Accounts payable and accrued
   liabilities....................  4,540       (6,221)          (561)
  Unearned income.................   (127)       5,156          3,199
  Other liabilities...............    933          200              5
                                   -------      -------        -------
  Total adjustments...............  6,565         (976)        11,467
                                   -------      -------        -------
Net cash provided by (used in)
 operating activities............. 11,877       (1,685)        16,128
                                   -------      -------        -------
Cash flows provided by (used in)
 investing activities: 
  Capital expenditures............ (5,279)      (2,166)        (4,592)
  Proceeds from disposal of fixed
   assets.........................    503          115             66
  Proceeds from business
   disposed.......................     --           --          4,285
  Sale (purchase) of marketable
   securities, net................ (11,854)     (5,743)         2,610
  Acquisition and contingent
   payments....................... (11,270)       (624)        (2,799)
                                    -------      -------        -------
Net cash used in investing
 activities....................... (27,900)     (8,418)          (430)
                                    -------      -------        -------
Cash flows provided by (used in)
 financing activities:
  Net proceeds from options
   exercised......................     148         748            256
  Repayments of long-term debt
   and capital lease obligations..     (22)       (245)          (195)
                                    -------      -------        -------
Net cash provided by financing 
 activities.......................     126         503             61
                                    -------      -------        -------
Effect of discontinued
 operations....................... (10,510)     (2,038)         5,838
Effect of exchange rate
 movements........................   1,984      (3,521)        (1,852)
                                    -------      -------        ------- 
Net (decrease) increase in cash
 and cash equivalents............. (24,423)    (15,159)        19,745
Cash and cash equivalents at
 beginning of period..............  52,251      27,828         12,669
                                    -------      -------        -------
Cash and cash equivalents at end
 of period........................ $27,828      $12,669        $32,414  
                                   -------      -------        -------
</TABLE>


    The accompanying notes are an integral part of these financial statements



                                      F-5
<PAGE>   25

             PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
                                 (in thousands)

-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                YEAR ENDED JUNE 30,
                                        1995            1996            1997
                                        ----            ----            ----
<S>                                     <C>             <C>             <C>
Supplemental information:

Cash paid during the period for:
  Interest                              $  4,724        $ 4,474         $ 4,521
  Income taxes                          $  1,875        $ 1,381         $ 1,694

Supplemental disclosure of non-cash
investing and financing activities:

  Capital leases                        $    481        $    40         $   802

  Fair value of assets acquired         $ 12,903         
  Cash consideration paid               $(11,270)
  Cash and stock consideration to 
   be paid                                  (480)
                                        --------
  Liabilities assumed                   $  1,153
                                        ========

</TABLE>

























    The accompanying notes are an integral part of these financial statements




                                      F-6
<PAGE>   26
             PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





1.         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

           THE COMPANY. Pharmaceutical Marketing Services Inc. ("PMSI" or the
           "Company"), provides a range of information services to
           pharmaceutical and healthcare companies in the United States, Europe
           and Japan to enable them to optimize their sales and marketing
           performance in a value driven environment. The services are comprised
           of targeting information services, prescription database services
           with Source and added value services. Most of the Company's
           information services are generated from its own proprietary databases
           containing unique prescription, managed care, healthcare market and
           medical prescriber data.

           BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION. The
           consolidated financial statements comprise the accounts of
           Pharmaceutical Marketing Services Inc. and its subsidiaries. The
           consolidated financial statements have been restated where applicable
           for discontinued operations (Note 18). The accompanying notes present
           amounts related to continuing operations only. All intercompany
           balances and transactions have been eliminated.

           CASH EQUIVALENTS. Cash equivalents consist primarily of highly liquid
           investments with maturities of three months or less at the date of
           acquisition.

           MARKETABLE SECURITIES. The Company adopted Statement of Financial
           Accounting Standards No. 115, "Accounting for Certain Investments in
           Debt and Equity Securities" (FAS 115), in fiscal 1995. In accordance
           with FAS 115, prior years' financial statements have not been
           restated to reflect the change in accounting method. Upon adoption of
           FAS 115, the June 30, 1995 opening balance of stockholders' equity
           decreased by $48,000, net of an income tax benefit of $31,000, to
           reflect the unrealized loss on investments available-for-sale that
           were previously carried at amortized cost.

           Management determines the appropriate classification of its
           investments in debt and equity securities at the time of purchase and
           re-evaluates such determination at each balance sheet date. Debt
           securities for which the Company does not have the intent or ability
           to hold to maturity are classified as available for sale, along with
           any investment in equity securities. Securities available for sale
           are carried at fair value, as determined by the quoted market value
           at the balance sheet date, with the unrealized gains and losses, net
           of tax, reported in a separate component of stockholders' equity. At
           June 30, 1997, the Company had no investments that qualified as
           trading or held to maturity.

           WORK IN PROCESS. Work in process consists of unbilled costs incurred
           on behalf of clients, principally outside vendor costs attributable
           to the Company's products and services.




                                      F-7
<PAGE>   27
             PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


           PROPERTY AND EQUIPMENT. Property and equipment are recorded at cost.
           All maintenance and repairs are expensed as incurred.

           Depreciation is provided using the straight line method. Furniture,
           office equipment and computer equipment are depreciated over five
           years and automobiles over four years. Leasehold improvements are
           amortized over the shorter of their useful lives or the terms of the
           respective leases. Buildings are depreciated over their estimated
           useful lives ranging from twenty to thirty years.

           On disposal, costs and accumulated depreciation are removed from the
           accounts and gains (losses) are recognized in the statement of
           operations.

           GOODWILL. Under the purchase method of accounting, the excess of the
           purchase price of businesses acquired over the fair value of tangible
           and intangible assets at the dates of acquisition has been assigned
           to goodwill. The net assets and results of operations of the
           acquisitions have been included in the consolidated financial
           statements of PMSI from their respective dates of purchase. Goodwill
           is amortized on a straight-line basis over periods between five and
           forty years.

           The Company assesses the recovery of its goodwill, on a subsidiary by
           subsidiary basis, by determining whether amortization of goodwill can
           be recovered through undiscounted future cash flows based on
           projected net income, excluding goodwill amortization, of the
           respective subsidiary. Impairment is measured by discounted future
           cash flows based on projected net income, excluding goodwill
           amortization, using a discount rate reflecting the Company's cost of
           funds.

           DATABASES. Acquired databases have been valued at their estimated
           fair values at the dates of acquisition. Databases are amortized
           using straight-line and accelerated methods over periods of up to
           five years. Costs associated with maintenance and updating of
           databases are expensed as incurred.

           SOFTWARE ACQUIRED. Computer software of businesses acquired is
           recorded at its fair value at the date of acquisition. This software
           is amortized on a straight-line basis over its useful life, which is
           estimated to be two to five years.

           FOREIGN CURRENCY. The balance sheet and results of operations of
           PMSI's subsidiaries that operate outside the United States are
           measured using local currency as the functional currency.

           Assets and liabilities have been translated into United States
           dollars at the rates of exchange at the balance sheet date.
           Translation gains and losses arising from the use of differing
           exchange rates from year to year are included in the cumulative
           translation 




                                      F-8
<PAGE>   28
             PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


           adjustment on the balance sheet. Revenues and costs are translated
           into United States dollars at the average rate during the period.

           Transaction gains and losses are recognized in the statement of
           operations as incurred. For the periods presented these amounts were
           not material.

           REVENUE RECOGNITION. Revenue is recognized on delivery of a product
           or as the service is rendered. Subscription-type revenue is
           recognized over the life of the subscription. Prebillings for
           products that have not been delivered or for services not yet
           rendered are classified as unearned income until the earnings process
           is complete.

           CONCENTRATION OF CREDIT RISK. Financial instruments that potentially
           subject PMSI to concentrations of credit risk consist principally of
           cash and cash equivalents, marketable securities and trade
           receivables. PMSI invests its excess cash with major banks and cash
           equivalents and marketable securities in a professionally managed
           fund. PMSI's customer base principally comprises companies within the
           pharmaceutical industry. Although the Company's receivables are
           concentrated in the pharmaceutical industry, the concentration of
           credit risk is limited due to the credit worthiness of the customers.
           PMSI does not require collateral from its customers.

           INCOME TAXES. Federal, foreign and state income taxes in the
           consolidated financial statements have been computed on a stand-alone
           return basis according to the fiscal and legal structure under which
           the various tax paying entities operate. Deferred income taxes are
           recorded to reflect the tax consequences on future years of
           differences between the tax basis of assets and liabilities and
           financial reporting amounts at each year end.

           EARNINGS/LOSS PER SHARE. Earnings/loss per share for the years ended
           June 30, 1995 and 1997 is computed based upon the weighted average
           number of shares outstanding and common stock equivalents (stock
           options) using the treasury stock method. For 1996 common stock
           equivalents have not been included as they are anti-dilutive.

           ALLOCATION OF INTEREST TO DISCONTINUED OPERATIONS. Enterprise
           interest is allocated to discontinued operations in proportion to net
           assets.

           USE OF ESTIMATES IN THE PREPARATION OF THE FINANCIAL STATEMENTS. The
           preparation of financial statements in conformity with generally
           accepted accounting principles requires management to make estimates
           and assumptions that affect the reported amounts of assets and
           liabilities, the 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. 


                                      F-9
<PAGE>   29
             PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



           FAIR VALUE OF FINANCIAL INSTRUMENTS. The carrying value of certain of
           the Company's financial instruments including cash and cash
           equivalents, accounts payable and other accrued liabilities
           approximates fair value due to their short maturities. The fair value
           of the Company's debentures is based on quoted market prices.

2.         TRANSACTIONS WITH SOURCE

                        Effective as of December 31, 1991, Walsh International
           Inc. ("Walsh") transferred to PMSI all the assets and liabilities of
           the PMSI business in exchange for shares of PMSI common stock. In
           connection with the transfer, the Company and Walsh entered into two
           long-term license agreements permitting the use by PMSI of certain
           Walsh proprietary databases. In addition, PMSI and Walsh entered into
           further agreements, covering data processing, administrative and
           management services and subleasing of certain facilities for various
           periods of time, all subject to renewal terms. During fiscal year
           1996, Walsh separated into two independent companies; Walsh
           International Inc. and Source Informatics Inc. ("Source") and the
           agreements were assigned from Walsh to Source. The principal
           agreements and terms are as follows:

           ALPHA (PRESCRIPTION) DATABASE LICENSE AGREEMENT. Source has granted
           the Company an exclusive license to use the databases for a period of
           five years through December 2001, with an option to renew for two
           additional 5-year periods. Thereafter, the agreement will be
           automatically renewed for 5-year periods unless the Company or Source
           terminates the agreement. The license fee amounts paid to Source in
           the years ended June 30, 1995, 1996 and 1997 in respect of this
           agreement were $2,663,000, $3,094,000 and $3,126,000, respectively.

                       Due to the movement of clients towards comprehensive
            database contracts in the United States, both parties agreed during
            fiscal 1995 to accelerate the transition, as provided for in the
            license agreement, to allocate payments based on the Alpha Database
            costs for data updating and maintenance according to the relative
            historical revenues generated by Source and PMSI in using the
            database. Revenues from the comprehensive database contracts are
            also allocated to both parties based upon historical percentages of
            revenue derived from the Alpha Database. These modifications did not
            have a material financial impact on the results of operations of
            PMSI during fiscal 1995. These amounts are included in production
            costs.

           DATA PROCESSING AGREEMENT. The Company has contracted for Source to
           provide specific data processing services and in the years ended June
           30, 1995, 1996 and 1997 costs totaling $1,883,000, $3,353,000 and
           $5,395,000, respectively, were charged by Source. These amounts are
           included in production costs.




                                      F-10
<PAGE>   30
             PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


           FACILITIES AGREEMENT. PMSI sublets space from Source. The net cost to
           the Company in the years ended June 30, 1995, 1996 and 1997
           classified as selling, general and administrative expenses, was
           $259,000, $545,000 and $29,000, respectively.

           MANAGEMENT AND EXECUTIVE SERVICES AGREEMENT. Source provided
           administrative, management and executive services to PMSI which
           resulted in a net cost to the Company of $1,300,000, $2,319,000 and
           $977,000 in the years ended June 30, 1995, 1996 and 1997,
           respectively. These are included in selling, general and
           administrative expenses.

                          At June 30, 1997, the Company had a net current
           receivable from Source of $1,646,000, which is included in other
           current assets. At June 30, 1996, the Company had a net current
           receivable from Source of $1,790,000. Source held 831,144 shares or
           6.3% of PMSI's Common Stock as of June 30, 1997. These represent the
           remaining shares that were transferred to Source in the "spin-off" of
           the Source businesses from Walsh.

3.         ACQUISITIONS AND DIVESTITURES

           ACQUISITIONS. The consolidated financial statements comprise various
           business operations and entities that have been acquired by PMSI.
           These acquisitions have been accounted for as purchases. Accordingly,
           the acquired assets and assumed liabilities have been recorded at
           their estimated fair value at the dates of acquisition. The results
           of operations are included in the consolidated financial statements
           from the respective dates of acquisition.

                        On July 1, 1994, PMSI acquired 80% of the common stock
           of Mediphase Limited, a specialist software and information company
           in the United Kingdom. Subsequent to June 30,1997, the Company
           purchased the remaining 20% of the common stock of Mediphase Limited
           for $1.7 million.

                        During fiscal 1995, PMSI acquired CMA Medical Data Ltd.
           ("CMA"), a U.K. health service database publisher. The consideration
           paid for this business was approximately $205,000. At acquisition,
           the excess of the purchase price over the fair value of the net
           assets of CMA of approximately $488,000 was allocated to goodwill and
           is being amortized over twenty years. This transaction has contingent
           payments based on operating profit generated by the business in
           future years, in relation to which $79,000 was paid during fiscal
           1997.




                                      F-11
<PAGE>   31
             PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------

                        Presented below are summarized unaudited pro forma
           revenue, net income and net income per share as if CMA had been
           combined with PMSI at the beginning of fiscal 1995, after giving
           effect to certain pro forma adjustments, principally amortization of
           intangible assets and other incremental expenses that would have been
           incurred had the business been acquired at the beginning of fiscal
           1995 (in thousands except per share data).

<TABLE>
<CAPTION>
                                                        Unaudited
                                                       Year Ended
                                                     June 30, 1995
                                                     -------------

               <S>                                 <C>    
                Revenue                             $89,991
                Net income                            5,307
                Net income per share                   0.41
</TABLE>


                        The pro forma data are not necessarily indicative of
           results that would have occurred if the Company had acquired the
           business at the beginning of fiscal 1995 or the future results of the
           Company.

                       On April 28, 1993, the Company purchased an 80% holding
           in IMR Finance, a French Corporation. During the period October 1,
           1996 to December 31, 2002 the Company had the option to acquire the
           remaining 20% of the outstanding capital stock of IMR Finance. For
           the same period, the owners of the minority interest had the option
           to require the Company to purchase their holding based on a multiple
           of projected pre-tax earnings.

                       During May 1997, the minority shareholders exercised
           their option, and the Company purchased the remaining 20% of the
           outstanding share capital of IMR Finance. The purchase price of $2.6
           million has been accounted for in net assets held for sale.

            DIVESTITURES. During the third quarter of fiscal 1997, Marketing
            Resources International Limited in the United Kingdom and Patient
            Programs in the US were divested by the Company for $0.4 million.
            The total revenue and operating loss from these businesses included
            in the consolidated statement of operations for the year ended June
            30, 1997 were $1.1 million and $1.0 million, respectively.





                                      F-12
<PAGE>   32
             PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------

4.             MARKETABLE SECURITIES

                        Marketable securities consisted of the following as of
June 30, 1996 and 1997 (in thousands):

<TABLE>
<CAPTION>
                                          Amortized      Fair Value
                                           Cost of       at Balance      Unrealized
Name of Issuer and Title of               Each Issue     Sheet Date      Losses, net
Each Issue                                at June 30,    at June 30,     at June 30,
---------------------------             --------------- --------------- ------------
                                        1996    1997    1996    1997    1996    1997
                                        ----    ----    ----    ----    ----    ----
<S>                                     <C>     <C>     <C>     <C>     <C>     <C>
Corporate debt securities               $19,387 $41,486 $19,375 $41,482 $(12)   $(4)

Debt securities issued by the U.S.
  Treasury and other U.S.
  government corporations and 
  agencies.                               9,738   4,121   9,737   4,121   (1)    --

Debt securities issued by foreign
  governments                             7,807   4,228   7,741   4,226  (66)    (2)
                                        ------- ------- ------- ------- ----    ---
                                        $36,932 $49,835 $36,853 $49,829 $(79)   $(6)
                                        ======= ======= ======= ======= ====    ===

Maturities
----------
Cash and cash equivalents(1)            $ 2,165 $17,708 $ 2,164 $17,707 $ (1)   $(1)

Short-term investments(2)                16,219  24,742  16,174  24,738  (45)    (4)

Due after one year through three years   18,548   7,385  18,515   7,384  (33)    (1)
                                        ------- ------- ------- ------- ----    ---
                                        $36,932 $49,835 $36,853 $49,829 $(79)   $(6)
                                        ======= ======= ======= ======= ====    ===
</TABLE>
(1) Maturities of three months or less at acquisition

(2) Due after three months







                                      F-13
<PAGE>   33
             PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------



5.         PROPERTY AND EQUIPMENT

                       Property and equipment at June 30, 1996 and 1997
comprised the following (in thousands):

<TABLE>
<CAPTION>
                                        1996            1997
                                        ----            ----
<S>                                     <C>             <C>
Land and buildings including leasehold  
  improvements                          $ 5,917          $ 5,546
Furniture and office equipment            1,670            2,528
Computer equipment                        3,967            7,756
Automobiles                                 103              321
                                        -------          -------
                                         11,657           16,151
Less accumulated depreciation
 and amortization                        (2,653)          (4,390)
                                        -------          -------
                                        $ 9,004          $11,761
                                        =======          =======
</TABLE>

                       Depreciation and amortization charged to operations for
           the years ended June 30, 1995, 1996 and 1997 were $1,098,000,
           $1,342,000 and $1,981,000, respectively.

 6.        GOODWILL

                       Goodwill at June 30, 1996 and 1997 comprised the
following (in thousands):


<TABLE>
<CAPTION>
                                        1996            1997
                                        ----            ----
<S>                                     <C>             <C>
Goodwill on acquisition                 $33,822         $34,752
Accumulated amortization                 (7,927)         (9,449)
                                        -------         -------
                                        $25,895         $25,303
                                        =======         =======
</TABLE>











         The increase in goodwill on acquisition includes contingent payments
and purchase accounting adjustments during the year relating to the UK
businesses.

         Amortization charged to operations for the years ended June 30, 1995,
1996 and 1997 was $1,595,000, $1,639,000, and $1,522,000, respectively.

         In the year ended June 30, 1996, pre-acquisition net operating losses
related to Scott-Levin and PMSI Belgium S.A. were utilized to reduce taxes
currently payable and decrease goodwill by $1,181,000.




                                      F-14
<PAGE>   34
             PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------



7.         OTHER ASSETS

                       Other assets at June 30, 1996 and 1997 consisted of the
following (in thousands):

<TABLE>
<CAPTION>
                                          1996            1997
                                          ----            ----
<S>                                     <C>             <C>
Software                                $ 4,831         $ 5,206
Acquired databases                       21,539          21,539
                                        -------         -------
                                         26,370          26,745
Less accumulated amortization           (26,201)        (26,324)
                                        -------         -------
                                            169             421

Debenture financing costs                 1,531(1)        1,302(1)
Deposits                                  1,115             766
Deferred taxes                            2,555             723
Investments                               1,736(2)        1,670(2)
Deferred charges                            429             422
Note receivable from Walsh                1,078(3)        1,120(3)
                                        -------         -------
                                        $ 8,613         $ 6,424
                                        =======         =======

</TABLE>


(1) Debenture financing costs are being amortized over the life of the
    debentures.

(2) Investments include restricted stock in a joint venture partner,
    carried at cost.

(3) Represents an interest free note receivable of $1,200,000 due from
    Walsh in June 1999 relating to the Scriptrac acquisition. The note
    receivable was recorded initially at its present value and as a result
    of accretion, the balance at June 30, 1997 is $1,120,000.


         Amortization of acquired databases and software charged to operations
for the years ended June 30, 1995, 1996 and 1997 was $294,000, $373,000, and
$211,000, respectively.





                                      F-15
<PAGE>   35
             PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------

8.         LONG-TERM DEBT

                       Long-term debt at June 30, 1996 and 1997 consisted of the
following (in thousands):

<TABLE>
<CAPTION>
                                          1996            1997
                                          ----            ----
<S>                                     <C>             <C>
Debentures(1)                           $69,000         $69,000
Other long-term debt(2)                     350             959
                                        -------         -------
                                         69,350          69,959
Less current portion                       (219)           (407)
                                        -------         -------
                                        $69,131         $69,552
                                        =======         =======

</TABLE>

 (1)       On February 3, 1993 the Company completed an offering of an aggregate
           $69 million Convertible Subordinated Debentures due in 2003. The
           debentures, issued at par, bear annual interest at 6-1/4% and are
           convertible into Common Stock of the Company at a conversion price of
           $20 per share, subject to adjustments in certain events. The current
           value of the debentures at June 30, 1997, based on quoted market
           prices, was $56,580,000.


(2)        Capital lease obligations.

         Annual maturities of long-term debt outstanding at June 30, 1997 are
(in thousands):

<TABLE>
<S>                                     <C>
June 1998                               $   407
June 1999                                   289
June 2000                                   263
June 2001                                   --
After 2001                               69,000
                                        -------
                                        $69,959
                                        =======
</TABLE>








                                      F-16
<PAGE>   36
             PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




9.         STOCK OPTIONS AND RESTRICTED STOCK PURCHASE PLAN

                        A Stock Option and Restricted Stock Purchase Plan (the
           "Plan") was established on August 17, 1991 for employees, officers
           and directors of the Company or any of its subsidiaries. The number
           of stock options authorized by the Plan is 2,250,000. The Plan
           provides for the granting of "non-qualified stock options" and
           "incentive stock options" to acquire Common Stock of PMSI and/or the
           granting of rights to purchase Common Stock. The terms and conditions
           of individual option agreements may vary, subject to the following
           guidelines: (i) the option price of incentive stock options may not
           be less than market value on the date of grant; the option price of
           non-qualified options may be less than market value on the date of
           grant, (ii) the term of all incentive stock options may not exceed
           ten years from the date of grant; the term of non-qualified stock
           options may exceed ten years, (iii) no options may be granted after
           August 17, 2001 and (iv) in general, options vest evenly over a
           period of five years from the date of issue.

                        A Non-Employee Directors' Stock Option Plan (the
           "Directors Plan") was adopted on May 27, 1993. The Directors' Plan
           provides for the granting of non-qualified stock options to purchase
           shares of the Company's Common Stock. The terms and conditions of
           individual option agreements may vary, subject to the following
           guidelines: (i) the option exercise price will be equal to 100% of
           the fair market value of the Common Stock on the date of grant, (ii)
           the term of the stock options may not exceed ten years from the date
           of grant, (iii) in general, options vest evenly over a period of
           three years from the date of issue (iv) the total number of shares of
           Common Stock that may be subject to options pursuant to the
           Directors' Plan is 120,000, subject to automatic adjustments
           following certain events, and (v) no options may be granted after May
           27, 2003.

           Additional information relating to the plan is as follows:

<TABLE>
<CAPTION>

                                                        YEAR ENDED JUNE 30,
                                               1995               1996            1997
                                            ----------          ----------      ----------
<S>                                         <C>                 <C>             <C>
Options outstanding at July 1, 1995,
  1996 and 1997                             1,564,100           1,786,400       1,848,200
Options granted                               372,750             234,250         392,200
Options exercised                             (17,600)            (84,050)        (30,200)
Options lapsed                               (132,850)            (88,400)       (306,450)
                                            ----------          ----------      ----------
Options outstanding at June 30              1,786,400           1,848,200       1,903,750
Options exercisable at June 30                769,225             980,700       1,150,610
                                            ----------          ----------      ----------
Options prices per share:
  Granted                                      $9-$10              $8-$14          $9-$10
  Exercised                                        $8              $8-$10        $8-$9.50
  Outstanding                                  $8-$22              $8-$22          $8-$22  
</TABLE>



                                      F-17
<PAGE>   37
             PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



10.        ACCOUNTING FOR STOCK-BASED COMPENSATION

                       The Company has elected to continue to use the intrinsic
           value based method to account for all of its employee stock-based
           compensation plans. Under APB Opinion No. 25, "Accounting for Stock
           Issued to Employees", the Company has recorded no compensation costs
           related to its stock option plans for the years ended June 30, 1995,
           1996 and 1997.

                       Pursuant to SFAS 123, "Accounting for Stock-Based
            Compensation", the Company is required to disclose the pro-forma
            effects on net loss and net loss per share data as if the Company
            had elected to use the fair value approach to account for all its
            stock-based compensation plans. Had compensation cost for the
            Company's plans been determined consistent with the fair value
            approach enumerated in SFAS No.123 the Company's net loss and net
            loss per share for the years ended June 30, 1996 and 1997 would have
            changed as indicated below (in thousands, except per share data):


<TABLE>
<CAPTION>
                                                        Year Ended June 30,
                                                        1996            1997
                                                        ----            ----
<S>                                                   <C>             <C>
Net loss:
    As reported                                       ($9,624)        ($5,253)
    Pro-forma                                         ($9,726)        ($5,556)

Net loss per share:
    As reported                                        ($0.73)         ($0.40)
    Pro-forma                                          ($0.74)         ($0.42)
</TABLE>
                       The fair value of options granted was estimated on the
           date of grant using the Black-Scholes option-pricing model with the
           following weighted-average assumptions used for grants in fiscal
           years 1996 and 1997; risk-free interest rate of 6%; expected life of
           6 years; 39% expected volatility and no dividends.













                                      F-18
<PAGE>   38
             PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




         A summary of the status of the Company's fixed option plans as of 
June 30, 1996 and 1997 and changes during the years ended on those dates is 
as follows:

<TABLE>
<CAPTION>
                                             June 30, 1996                June 30, 1997
                                        -------------------------    -------------------------
                                          Number     Weighted-         Number      Weighted-
                                            of        average            of         average
Fixed options                             shares   exercise price      snares   exercise price
<S>                                     <C>             <C>          <C>            <C>
Outstanding at beginning of year        1,786,400       $11.62       1,848,200      $11.77
  Granted                                 234,250       $13.34         392,200       $9.38
  Exercised                               (84,050)       $8.97         (30,200)      $8.48
  Cancelled                               (88,400)      $14.59        (306,450)     $13.43
                                        ---------                    ---------
Outstanding at end of year              1,848,200       $11.77       1,903,750      $11.02
                                        =========                    =========
Options exercisable at end of year        980,700       $11.99       1,150,610      $11.35
                                        =========                    =========

Weighted-average fair value of options
granted during the period at exercise
price equal to market price at grant 
date                                                    $13.34                       $9.38
</TABLE>


         A summary of information regarding the outstanding options and those 
exercisable at June 30, 1997 is given in the following tables:

<TABLE>
<CAPTION>
                                        Weighted Average
                        Number of          remaining            Number of
Exercise Price           Options      Contractual life of        Options
    ($)                Outstanding    options outstanding      Exercisable
                                            (Yrs)
   <S>                <C>                   <C>                 <C>
    8.13                  2,500             7.92                    1,000
    8.40                586,350             4.17                  586,350
    8.75                124,000             7.67                   86,080
    9.00                 90,000             9.25                        0
    9.50                481,100             8.64                   82,080
   13.50                331,800             7.91                  130,500
   14.00                 36,000             4.58                   36,000
   15.00                 15,000             4.92                   15,000
   15.25                102,000             5.29                   81,600
   15.75                 15,000             5.95                   12,000
   18.50                 12,000             5.33                   12,000
   22.00                108,000             4.58                  108,000
                      ---------             ----                ---------
                      1,903,750             6.54                1,150,610
                      =========             ====                =========
</TABLE>

         The weighted average exercise price of options outstanding at June 30,
1997 was $11.02. The weighted average exercise price of options exercisable at
June 30,1997 was $11.35.






                                      F-19
<PAGE>   39
            PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


11.        TAXES

         The components of the income tax (provision) benefit for the years
ended June 30, 1995, 1996 and 1997 are comprised of the following (in
thousands):

<TABLE>
<CAPTION>
                                                            Year Ended
                                                              June 30,
                                                ----------------------------------------
                                                 1995            1996            1997
                                                -------         -------         --------
<S>                                             <C>             <C>             <C>
U.S. taxes currently (payable) receivable       $(2,701)        $(1,666)        $     9
Foreign taxes currently payable                    (968)           (279)         (1,711)
Deferred income taxes                               719             789            (953)
                                                -------         -------         -------
                                                $(2,950)        $(1,156)        $(2,655)
                                                =======         =======         =======
</TABLE> 


         The domestic and foreign components of income before income taxes were
as follows (in thousands):

<TABLE>
<CAPTION>
                                                            Year Ended
                                                              June 30,
                                                ----------------------------------------
                                                 1995            1996            1997
                                                -------         -------         --------
<S>                                             <C>             <C>             <C>
Domestic                                        $ 4,736         $ 1,153         $ 4,022
Foreign                                           3,529            (763)          3,311
                                                -------         -------         -------
                                                $ 8,265         $   390         $ 7,333
                                                =======         =======         =======
</TABLE>






                                      F-20
<PAGE>   40
             PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     The provision for income taxes differs from that computed using the 34%
statutory federal income tax rate as follows (in thousands):

<TABLE>
<CAPTION>
                                                   Year Ended June 30,
                                             -------------------------------
                                              1995        1996        1997 
                                             -------     -------     -------
<S>                                         <C>         <C>         <C>
Provision based on federal statutory rate    $(2,810)    $  (133)    $(2,493)
Goodwill and other non-deductible
  items                                         (313)       (304)       (301)
Foreign earnings and dividends
  taxed at different rates                     1,270        (538)      1,124
Release of prior period tax reserves             --           --         833
State tax, net of federal benefit               (253)       (135)       (149)
Purchase accounting adjustments                 (280)     (1,182)        --
Valuation of temporary differences               147         848      (2,386)
All other, net                                  (711)        288         717
                                             -------     -------     -------
Consolidated effective tax rate              $(2,950)    $(1,156)    $(2,655)
                                             =======     =======     =======
</TABLE>

     The tax effect of significant temporary differences representing deferred
tax assets and liabilities at June 30, 1996 and 1997 were as follows (in
thousands):

<TABLE>
<CAPTION>                                            
CURRENT ASSETS (LIABILITIES):                             1996        1997 
                                                         -------     -------
<S>                                                     <C>         <C>
Accrued liabilities                                      $   545     $ 1,655 
Foreign tax credits                                           53         --
Net operating losses                                          62         --
Prepaid assets                                                14         212
Bad debts                                                     39         130
                                                         -------     -------
                                                             713       1,997
Valuation allowance                                          --         (405)
                                                         -------     -------
Net current assets                                           713       1,592
                                                         -------     -------

NON-CURRENT ASSETS(LIABILITIES):

Fixed assets & intangibles                                  (316)       (200)
Net operating losses                                       3,983       4,113
Other liabilities                                            319         222
                                                         -------     -------
                                                           3,986       4,135
Valuation allowance                                       (1,431)     (3,412)
                                                         -------     -------
Net non-current assets                                     2,555         723
                                                         -------     -------
Deferred taxes, net                                      $3,268      $ 2,315
                                                         =======     =======
</TABLE>

     Deferred tax assets recognized by the Company result from the anticipated
carryback of future tax deductions to offset income taxes previously provided
and the utilization of future tax deductions to reduce taxes payable on future
taxable income.

                                      F-21

<PAGE>   41
             PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




           As of June 30, 1997, there is available for foreign income tax
           purposes net operating loss carryforwards of approximately $9,596,000
           which expire as follows: 1998: $0, 1999: $503,000, 2000: $0, 2001: $0
           and thereafter: $9,093,000.

                        The undistributed earnings of foreign subsidiary
           companies for which deferred U.S. income taxes have not been provided
           at June 30, 1996 and June 30, 1997 because of permanent reinvestment
           of earnings in the operations of those subsidiaries, amounted to
           $15,117,000 and $15,272,000, respectively. It is not practicable to
           estimate the amount of tax that might be payable on the eventual
           remittance of such earnings. On remittance, certain foreign countries
           impose withholding taxes. The amount of withholding taxes that would
           be payable on remittance of the entire amount of such undistributed
           earnings would approximate $3,813,000 and $3,727,000 at June 30, 1996
           and June 30, 1997, respectively.

12.        EMPLOYEE BENEFIT PLANS

                        Subsidiaries of PMSI in the United Kingdom, Holland,
           Japan and the United States have defined contribution pension or
           profit sharing plans covering substantially all their employees. The
           total costs associated with these plans for the years ended June 30,
           1995, 1996 and 1997 were $618,000, $729,000 and $1,245,000
           respectively.

13.        LEASE OBLIGATIONS

                        Various PMSI subsidiaries lease certain property and
           equipment. Obligations under long-term non-cancellable lease
           agreements expiring at various dates have the following aggregate
           approximate annual minimum rentals (in thousands):


<TABLE>
<CAPTION>

                                        Capital                 Operating
                                        -------                 ---------
<S>                                     <C>                     <C>
1998                                    $  449                   $1,291
1999                                       312                    1,057
2000                                       269                      843
2001                                        --                      437
After 2001                                  --                      291
                                        ------                  -------
                                         1,030                   $3,919
                                                                =======
Less amount representing interest          (71)
                                        ------
Present value of minimum lease
payments                                   959

Less current portion                      (407)
                                        ------
                                        $  552
                                        ======
    
</TABLE>

                        Operating lease rental expense for the years ended June
           30, 1995, 1996 and 1997 was $2,237,000, $1,471,000 and $1,559,000,
           respectively. Included in furniture, fixtures and equipment are
           assets subject to capitalized leases with an original cost of
           $1,332,000 (1996: $924,000) and accumulated amortization of $351,000
           (1996: $505,000).






                                      F-22
<PAGE>   42
             PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




14.        GEOGRAPHIC DATA

                        The following table presents certain financial
information by geographic area (in thousands):

<TABLE>
<CAPTION>
                                        As of and For the Year Ended
                                                June 30, 1997                                            
                            --------------------------------------------------
                                               Operating          Identifiable
                            Revenues         Income (Loss)           Assets
                            --------         -------------        ------------
<S>                        <C>              <C>                  <C>
United States               $ 47,555           $  9,552             $  32,142
Europe and Pacific            50,930              2,887                74,694
General corporate                -               (4,915)               60,366
                            --------           --------             ---------
Total                       $ 98,485           $  7,524             $ 167,202
                            ========           ========             =========
</TABLE>
                   
<TABLE>
<CAPTION>
                                        As of and For the Year Ended
                                                June 30, 1996                                            
                            --------------------------------------------------
                                               Operating          Identifiable
                            Revenues         Income (Loss)           Assets
                            --------         -------------        ------------
<S>                        <C>              <C>                  <C>
United States               $ 41,421           $  5,566             $  28,023
Europe and Pacific            51,256              1,508                56,614
General corporate                350             (6,554)               45,900
                            --------           --------             ---------
Total                       $ 93,027           $    520             $ 130,537
                            ========           ========             =========
</TABLE>

<TABLE>
<CAPTION>
                                        As of and For the Year Ended
                                                June 30, 1995                                            
                            --------------------------------------------------
                                               Operating          Identifiable
                            Revenues         Income (Loss)           Assets
                            --------         -------------        ------------
<S>                        <C>              <C>                  <C>
United States               $ 42,308           $ 6,566              $  28,463
Europe and Pacific            47,585             5,168                 54,002
General corporate                -              (3,494)                55,184
                            --------           -------              ---------
Total                       $ 89,893           $ 8,240              $ 137,649
                            ========           =======              =========
</TABLE>


                                      F-23
<PAGE>   43
            PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15.        SUPPLEMENTAL OPERATIONS STATEMENT DATA

                        Advertising costs are charged to costs and expensed as
           incurred and for the years ended June 30, 1995, 1996 and 1997
           amounted to $928,000, $1,308,000 and $1,391,000, respectively.

16.        RESTRUCTURING COSTS

                        During the third quarter of fiscal 1996, the Company
           recorded a $2.3 million ($1.3 million after tax) restructuring charge
           for elimination of non-core product lines. These products were
           unprofitable and there was no assurance of future profitability. The
           charge related primarily to write-off of database costs and severance
           payments. The $2.3 million charge included estimated cash payments of
           $1.5 million and non-cash asset write-offs of $0.8 million. The
           remaining balance of the restructuring liability as of June 30, 1996
           was $0.9 million. This was fully utilized in fiscal year 1997.

17.        IMPAIRMENT

           During the third quarter of fiscal 1996, the Company adopted the
           provisions of Statement of Financial Accounting Standard number 121
           "Accounting for the Impairment of Long-Lived Assets and for
           Long-Lived Assets to be Disposed of" ("FAS 121"). The initial
           application of this statement resulted in a pre-tax charge of $2.4
           million ($1.6 million after tax) related principally to the write-off
           of goodwill and capitalized database costs for a database business
           being exited.





                                      F-24
<PAGE>   44
             PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



18.            QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

                         The following tables show the unaudited quarterly
               financial information for the year ended June 30, 1997
               (in thousands except for per share data):


<TABLE>
<CAPTION>
                                                                     QUARTER ENDED
                                                      ------------------------------------------------------
                                                     SEPTEMBER 30     DECEMBER 31     MARCH 31      JUNE 30    
                                                      ------------     ------------    --------      -------

YEAR ENDED JUNE 30, 1997
<S>                                                  <C>              <C>            <C>            <C>
Total revenues                                          $21,992          $26,552       $ 22,794       $27,217
Gross profit                                              9,234           12,444         10,341        12,009
Net income from continuing operations                       227            1,456          1,046         1,932
Net loss from discontinued operations, net                   --           (9,914)            --            --
                                                      ------------     ------------     --------      -------
Net income (loss)                                       $   227          $(8,458)       $ 1,046       $ 1,932
                                                      ============     ============     ========      =======

Income per share from continuing operations             $  0.02          $  0.11        $  0.08       $  0.14

Loss per share from discontinued operations                  --            (0.74)            --            --
                                                      ------------     ------------    ---------      -------
Net income (loss) per share                             $  0.02          $ (0.63)       $  0.08       $  0.14
                                                      ============     ============    =========      =======

  YEAR ENDED JUNE 30, 1996
Total revenues                                          $20,709          $24,290       $ 23,126       $24,902
Gross profit                                              8,953           11,692          9,475        11,302
Net (loss) income from continuing operations                118            2,379         (4,660)        1,454
Net loss from discontinued operations, net                 (673)          (1,080)        (7,162)           --
                                                      ------------     ------------     --------      -------
Net income (loss)                                       $  (555)         $ 1,299       $(11,822)      $ 1,454
                                                      ============     ============    =========      =======
                                                                     
Income (loss) per share from continuing operations      $  0.01          $  0.18       $  (0.35)      $  0.11

Loss per share from discontinued operations               (0.05)           (0.08)         (0.54)           --
                                                      ------------     ------------    ---------      -------
Net income (loss) per share                             $ (0.04)         $  0.10       $  (0.89)      $  0.11
                                                      ============     ============    =========      =======
</TABLE>


19.            ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS

                         During the third quarter of fiscal 1996, the Company
               announced its decision to develop its business as a focused
               information services provider to the pharmaceutical and
               healthcare industries and that its European marketing and
               communication businesses would be divested. These businesses,
               comprising the non-database segment of PMSI's operations, were
               accounted for as discontinued operations and, accordingly, their
               operations have been segregated in the accompanying statements of
               operations.

                         During the second quarter of fiscal 1997, the Company
               recorded a further net charge for the loss on disposal of the
               discontinued operations of $9.9 million. The charge was based
               upon the Company's quarterly review of the assumptions used in
               determining the estimated loss relating to the discontinued
               operations. This further charge was principally the result of
               revisions to the original estimates of expected net 





                                      F-25
<PAGE>   45
            PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------


               proceeds and income expected to be generated during the disposal
               period from the remaining businesses to be sold.

                      Summary operating results of the discontinued operations
               for the years ended June 30, 1995, 1996 and 1997 were as follows:

<TABLE>
<CAPTION>                                                                     Year Ended
                                                                               June 30,
                                                                   ------------------------------------
                                                                      1995          1996        1997
                                                                   ------------------------------------
<S>                                                                 <C>          <C>          <C>

               Results of discontinued operations:
               Revenue                                               $39,865      $44,849      $    --
               Income (loss) from operations:
               Income (loss) before taxes                                299       (2,288)          --
               Income tax provision                                     (430)        (917)          --                     
                                                                     -------      -------      -------
               Loss from discontinued operations                        (131)      (3,205)          --
               Loss on disposal of discontinued operations, net           --       (5,710)      (9,914)
                                                                     -------      -------      -------       
               Loss from discontinued operations                     $  (131)     $(8,915)     $(9,914)
                                                                     =======      =======      =======

</TABLE>





                      The loss from discontinued operations for the nine months
               to March 31, 1997, when the measurement period ended, was $1.3
               million net of income taxes.

                      At the end of the measurement period, the French point of
               sale marketing business was the only operation in the
               discontinued segment that had not been sold. The business
               remained unsold at June 30, 1997. In accordance with EITF 90-6,
               the net assets of this remaining business, together with the
               remaining accrual for the loss expected to be generated on
               disposition, are now classified as net current assets held for
               sale and net assets held for sale in the balance sheet at June
               30, 1997 and its operating profit for the third and fourth
               quarters is recorded in operating income as a separate item
               "income from assets held for sale".

                      Although the Company's estimated net proceeds expected to
               be generated from the disposal of assets held for sale are
               supported by Management's calculations, as confirmed by an
               outside valuation, it is reasonably possible the Company may have
               to adjust the carrying value of the assets held for sale at the
               time of disposition.

                      The revenue and operating income attributable to assets
               held for sale in the fourth quarter of fiscal 1997 were $5.2
               million and $0.4 million, respectively.







                                      F-26
<PAGE>   46
             PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



20.            SUBSEQUENT EVENTS

                             On July 30, 1997 the Company announced that it had
               finalized the sale of its Dutch and US-based international
               publishing and communications operations to Excerpta Medica, the
               medical communications division of Elsevier Science for $9
               million, resulting in a net gain on sale of approximately $3
               million. The sale of these businesses formed part of the program
               of divestitures of non-core businesses announced by the Company
               in May 1996.

                             On August 20, 1997, the Company announced that it
               had signed definitive agreements to acquire the Source Europe
               business from Source Informatics Inc. (Source), and to divest its
               minority interest in the Source Informatics venture in the United
               States together with its OTC Physician Survey business. The
               Company will file a proxy statement with the SEC, prior to
               calling a special meeting of PMSI's common stockholders. Subject
               to receiving the approval of PMSI common stockholders, the
               Company expects the transactions to close before the end of
               calendar year 1997.




                                      F-27
<PAGE>   47
                        REPORT OF INDEPENDENT ACCOUNTANTS
                         ON FINANCIAL STATEMENT SCHEDULE



The Board of Directors and Stockholders of
Pharmaceutical Marketing Services Inc.




               Our report on the consolidated financial statements of
Pharmaceutical Marketing Services Inc. is included on Page F-1 of this Form
10-K. In connection with our audits of such financial statements, we have also
audited the related financial statement schedule listed in the index on Page 19
of this Form 10-K.

               In our opinion, the financial statement schedule referred to
above, when considered in relation to the basic financial statements taken as a
whole, presents fairly, in all material respects, the information required to be
included therein.



                                                        COOPERS & LYBRAND L.L.P.

Stamford, Connecticut
September 9, 1997




                                       S-1
<PAGE>   48
             PHARMACEUTICAL MARKETING SERVICES INC. AND SUBSIDIARIES
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                    YEARS ENDED JUNE 30, 1995, 1996 AND 1997


<TABLE>
<CAPTION>
      Col. A                    Col. B                 Col. C                    Col. D          Col. E
-----------------------      ------------            ----------                ----------      ----------
                                                      Additions
                                                     ----------
                              Balance at             Charged to                                Balance at
                             Beginning of            Costs and                                   End of
Descriptions                    Period                Expenses                 Deductions        Period
-----------------------      ------------            ----------                ----------      ----------
<S>                          <C>                    <C>                       <C>              <C>
Allowance for doubtful
accounts                        

June 30, 1995                 $  685,000                 19,000                 (289,000)       $  415,000
June 30, 1996                 $  415,000                207,000                 (222,000)       $  400,000
June 30, 1997                 $  400,000                246,000                 (258,000)       $  388,000

Valuation allowance
for deferred tax assets

June 30, 1995                 $1,978,000                598,000                      --         $2,576,000
June 30, 1996                 $2,576,000                     --               (1,145,000)       $1,431,000
June 30, 1997                 $1,431,000              2,386,000                      --         $3,817,000

</TABLE>



                                      S-2
<PAGE>   49

                                    PART III

               The information required by Part III of Form 10-K is incorporated
by reference from the Registrant's definitive Proxy Statement for its meeting of
stockholders in connection with its transition period, which is to be filed
pursuant to Regulation 14A not later than October 30, 1997.


               Pursuant to General Instruction G(3) to the Annual Report on Form
10-K, the information required by Part III of 10-K regarding executive officers
of the Company required by Item 401 of Regulation S-K is hereby incorporated by
reference from the Registrants' Definitive Proxy Statement for its annual
meeting of stockholders, which is to be filed pursuant to Registration 14A not
later than October 30, 1997.



                                     PART IV

ITEM 10.  EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K

               (a)(1-2) Financial Statements and Schedule

               See Index to Financial Statements and Schedule on page 19 of this
               Annual Report.


               EXHIBITS

               Exhibit Number

               2.1     Transfer and Exchange Agreement, dated as of October 11,
                       1991, between Walsh International Inc. and Pharmaceutical
                       Marketing Services Inc. (incorporated by reference to
                       Exhibit 2.1 to the Registrant's Registration Statement
                       Number 33-43226)

               2.2     Merger Agreement and Plan of Reorganization, dated
                       October 11, 1991, by and between Walsh International
                       Inc., Pharmaceutical Marketing Services Inc. and SLA
                       Acquisition Corp., on the one hand, and Scott-Levin
                       Associates, Inc., Joy Scott and Larry Levin, on the other
                       (incorporated by reference to Exhibit 2.2 to the
                       Registrant's Registration Statement Number 33-43226)

               2.3     English translation of Agreement for the Sale and
                       Purchase of the Shares of IMR S.A. (translation for
                       information purposes only) (incorporated by reference to
                       Exhibit 2.1 to the Registrant's Current Report on Form
                       8-K filed May 13, 1993)
<PAGE>   50
               2.4     Contrat pour l'Achat et la Vente des Actions de la
                       Societe IMR S.A. (incorporated by reference to Exhibit
                       2.2 to the Registrant's Current Report on Form 8-K filed
                       May 13, 1993)

               2.5     Sale and Purchase Agreement dated July 30, 1997 by and
                       among Bugamor Databases BV, PMSI Nederland BV and PMSI
                       Bugamor Inc. (as sellers), and Excerpta Medica Medical
                       Communications BV and Elsevier Science Inc. (as
                       purchasers) (incorporated by reference to Exhibit 2.2 to
                       the Registrant's Current Report on Form 8-K filed August
                       19, 1997)

               3.1     Certificate of Incorporation of Pharmaceutical Marketing
                       Services Inc. and Amendment thereto (incorporated by
                       reference to Exhibit 3.1 to the Registrant's Registration
                       Statement No. 33-43226)

               3.2     By-laws of Pharmaceutical Marketing Services Inc.
                       (incorporated by reference to Exhibit 3.2 to the
                       Registrant's Registration Statement No. 33-43226)

               4.1     Indenture, dated as of February 1, 1993, between
                       Pharmaceutical Marketing Services Inc., and Harris Trust
                       Company of New York, Trustee (incorporated by reference
                       to Exhibit 4.1 to the Registrant's Annual Report on Form
                       10-K filed March 30, 1993)

           10.1(a)(i)  Purchase and Sale Agreement, dated as of April 1,
                       1994, by and between Walsh Belgium N.V. and PMSI Belgium,
                       S.A.

           10.1(a)(ii) Purchase and Sale Agreement, dated as of April 1,
                       1994, by and among Walsh Nederland B.V., Walsh Medical
                       Data and Research B.V. and PMSI Bugamor B.V.

           10.1(b)     Amended and Restated Alpha Database License Agreement,
                       dated as of July 1, 1994 by and between Walsh America
                       Limited and Pharmaceutical Data Services, Inc., on the 
                       one hand, and Pharmaceutical Marketing Services Inc., on
                       the other.

           10.1(c)     Physician Database License Agreement, dated as of 
                       December 2, 1991, by and between Walsh International Inc.
                       and Pharmaceutical Marketing Services Inc. (incorporated
                       by reference to Exhibit 10.1(c) to the Registrant's
                       Registration Statement No. 33-43226)

           10.1(d)     Management and Executive Services Agreement, dated as of
                       December 2, 1991, by and between Walsh International 
                       Inc., Pharminfo Advisors Limited and Informed Management
                       Limited, on the one hand, and Pharmaceutical Marketing
                       Services Inc., on the other (incorporated by reference to
                       Exhibit 10.1(d) to the Registrant's Registration 
                       Statement No. 33-43226)

           10.1(e)     Data Processing Agreement, dated as of December 2, 1991,
                       by and between Walsh International Inc. and 
                       Pharmaceutical Marketing Services Inc. (incorporated by 
                       reference to Exhibit 10.1(e) to the Registrant's 
                       Registration Statement No. 33-43226)
<PAGE>   51
            10.1(f)   Facilities Agreement, dated as of December 2, 1991, by and
                      between Walsh International Inc. and Pharmaceutical
                      Marketing Services Inc. (incorporated by reference to
                      Exhibit 10.1(f) to the Registrant's Registration Statement
                      No. 33-43226)

            10.1(g)   Collaborative Marketing Agreement, dated as of December 2,
                      1991, by and between Walsh America Limited and
                      Pharmaceutical Data Services, Inc., on the one hand, and
                      Pharmaceutical Marketing Services Inc. and American
                      Medical Census Corp., on the other (incorporated by
                      reference to Exhibit 10.1(g) to the Registrant's
                      Registration Statement No. 33-43226)

            10.1(h)   Health and Benefits Agreement, dated as of December 2,
                      1991, by and between Walsh International Inc. and
                      Pharmaceutical Marketing Services Inc. (incorporated by
                      reference to Exhibit 10.1(h) to the Registrant's
                      Registration Statement No. 33-43226)

            *10.1(i)  Mailing Services Agreement, dated as of December 2, 1991,
                      by and between Walsh International Inc. and Pharmaceutical
                      Marketing Services Inc. (incorporated by reference to
                      Exhibit 10.1(i) to the Registrant's Registration Statement
                      No. 33-43226)

            10.1(j)   English translation of Warranty Agreement (translation for
                      information purposes only) (incorporated by reference to
                      Exhibit 3.1 to the Registrant's Current Report on Form 8-K
                      filed May 13, 1993)

            10.1(k)   Contrat de Garantie (incorporated by reference to Exhibit
                      3.2 to the Registrant's Current Report on Form 8-K filed
                      May 13, 1993)

            10.1(l)   English translation of Agreement for the Supply of
                      Services (translation for information purposes only)
                      (incorporated by reference to Exhibit 4.1 to the
                      Registrant's Current Report on Form 8-K filed May 13,
                      1993)

            10.1(m)   Contrat de Prestations de Services (incorporated by
                      reference to Exhibit 4.2 to the Registrant's Current
                      Report on Form 8-K filed May 13, 1993)

            10.1(n)   English translation of Put Option (translation for
                      information purposes only) (incorporated by reference to
                      Exhibit 5.1 to the Registrant's Current Report on Form 8-K
                      filed May 13, 1993)

            10.1(o)   Promesse Unilaterale de Vente d'Actions (incorporated by
                      reference to Exhibit 5.2 to the Registrant's Current
                      Report on Form 8-K filed May 13, 1993)

            10.1(p)   English translation of Call Option (translation for
                      information purposes only) (incorporated by reference to
                      Exhibit 6.1 to the Registrant's Current Report on Form 8-K
                      filed May 13, 1993)
<PAGE>   52
            10.2(a)   Pharmaceutical Marketing Services Inc. and its
                      Subsidiaries Stock Option and Restricted Stock Purchase
                      Plan (incorporated by reference to Exhibit 10.2 to the
                      Registrant's Registration Statement No. 33-43226)

            10.2(b)   Pharmaceutical Marketing Services Inc. Non-Employee
                      Directors' Stock Option Plan (incorporated by reference to
                      Exhibit 4.3 to the Registrant's Registration Statement No.
                      33-66306)

            11        Statement re Computation of Earnings (Loss) per Share

            22.1      List of subsidiaries of Pharmaceutical Marketing Services
                      Inc. (incorporated by reference to Exhibit 22.1 to the
                      Registrant's Registration Statement No. 33-43226)

            23        Consent of Coopers & Lybrand L.L.P.

*           Certain portions of this Exhibit have been omitted pursuant to an
            order of the Securities and Exchange Commission granting
            confidential treatment.

            (b)       Reports on Form 8-K filed during the three months ended
                      June 30, 1997.
 
                      None.     
<PAGE>   53
                                   SIGNATURES

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

Date:  September 15, 1997


                                        PHARMACEUTICAL MARKETING SERVICES INC.


                                By/s/ Raymund M. Davies
                                      ------------------------------------------
                                      Raymund M. Davies
                                      Vice President and Chief Financial Officer


                                POWER OF ATTORNEY

         Each person whose individual signature appears below hereby authorizes
Dennis M.J. Turner, Frederick W. Kyle and Raymond Davies, and each of them, with
full power of substitution and full power to act without the other, his true and
lawful attorney-in-fact and agent in his name, place and stead, to execute in
the name and on behalf of such person, individually and in each capacity stated
below, and to file any and all amendments to this report.

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

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


<S>                                 <C>                                                <C> 
/s/   Handel E. Evans               Director, Chairman of The Board                    September 15, 1997
-----------------------------
      Handel E. Evans


/s/   Dennis M.J. Turner            Director, Chief Executive Officer                  September 15, 1997
-----------------------------
      Dennis M.J. Turner


/s/   Frederick W. Kyle             Director, Chief Operating Officer                  September 15, 1997
-----------------------------
      Frederick W. Kyle


/s/   Robert J. Frattaroli          Director, President                                September 15, 1997
-----------------------------
      Robert J. Frattaroli


/s/   Raymund M. Davies             Vice President, Chief Financial                    September 15, 1997
-----------------------------       Officer, and Treasurer
      Raymund M. Davies              


/s/   Patrick J. Welsh              Director                                           September 15, 1997
-----------------------------
      Patrick J. Welsh
</TABLE>
<PAGE>   54
<TABLE>
<S>                                  <C>                                <C> 
/s/   Stuart Gold                    Director                           September 15, 1997
-----------------------------
      Stuart Gold


/s/    Carolyne K. Davis             Director                           September 15, 1997
-----------------------------
      Carolyne K. Davis
</TABLE>
<PAGE>   55
                               INDEX TO EXHIBITS




<TABLE>
<CAPTION>
Exhibit                                        Description                                             Page Number
Number

<S>                        <C>                                                                  <C>  
2.1                        Transfer and Exchange Agreement, dated as of October
                           11, 1991, between Walsh International Inc. and
                           Pharmaceutical Marketing Services Inc. (incorporated
                           by reference to Exhibit 2.1 to the Registrant's
                           Registration Statement Number 33-43226)

2.2                        Merger Agreement and Plan of Reorganization, dated
                           October 11, 1991, by and between Walsh International
                           Inc., Pharmaceutical Marketing Services Inc. and SLA
                           Acquisition Corp., on the one hand, and Scott-Levin
                           Associates, Inc., Joy Scott and Larry Levin, on the
                           other (incorporated by reference to Exhibit 2.2 to
                           the Registrant's Registration Statement Number
                           33-43226)

2.3                        English translation of Agreement for the Sale and
                           Purchase of the Shares of IMR S.A. (translation for
                           information purposes only) (incorporated by reference
                           to Exhibit 2.1 to the Registrant's Current Report on
                           Form 8-K filed May 13, 1993)

2.4                        Contrat pour l'Achat et la Vente des Actions de la
                           Societe IMR S.A. (incorporated by reference to
                           Exhibit 2.2 to the Registrant's Current Report on
                           Form 8-K filed May 13, 1993)

2.5                        Sale and Purchase Agreement dated July 30, 1997 by
                           and among Bugamor Databases BV, PMSI Nederland BV and
                           PMSI Bugamor Inc. (as sellers), and Excerpta Medica
                           Medical Communications BV and Elsevier Science Inc.
                           (as purchasers) (incorporated by reference to Exhibit
                           2.2 to the Registrant's Current Report on Form 8-K
                           filed August 19, 1997)

3.1                        Certificate of Incorporation of Pharmaceutical
                           Marketing Services Inc. and Amendment thereto
                           (incorporated by reference to Exhibit 3.1 to the
                           Registrant's Registration Statement No. 33-43226)

3.2                        By-laws of Pharmaceutical Marketing Services Inc.
                           (incorporated by reference to Exhibit 3.2 to the
                           Registrant's Registration Statement No. 33-43226)
</TABLE>
<PAGE>   56
4.1                        Indenture, dated as of February 1, 1993, between
                           Pharmaceutical Marketing Services Inc., and Harris
                           Trust Company of New York, Trustee

10.1(a)(i)                 Purchase and Sale Agreement, dated as of April 1,
                           1994, by and between Walsh Belgium N.V. and PMSI
                           Belgium, S.A.

10.1(a)(ii)                Purchase and Sale Agreement, dated as of April 1,
                           1994, by and among Walsh Nederland B.V., Walsh
                           Medical Data and Research B.V. and PMSI Bugamor B.V.


10.1(b)                    Amended and Restated Alpha Database License
                           Agreement, dated as of July 1, 1994 by and between
                           Walsh America Limited and Pharmaceutical Data
                           Services, Inc., on the one hand, and Pharmaceutical
                           Marketing Services Inc., on the other.

 10.1(c)                   Physician Database License Agreement, dated as of
                           December 2, 1991, by and between Walsh International
                           Inc. and Pharmaceutical Marketing Services Inc.
                           (incorporated by reference to Exhibit 10.1(c) to the
                           Registrant's Registration Statement No. 33-43226)

 10.1(d)                   Management and Executive Services Agreement, dated as
                           of December 2, 1991, by and between Walsh
                           International Inc., Pharminfo Advisors Limited and
                           Informed Management Limited, on the one hand, and
                           Pharmaceutical Marketing Services Inc., on the other
                           (incorporated by reference to Exhibit 10.1(d) to the
                           Registrant's Registration Statement No. 33-43226)

 10.1(e)                   Data Processing Agreement, dated as of December 2,
                           1991, by and between Walsh International Inc. and
                           Pharmaceutical Marketing Services Inc. (incorporated
                           by reference to Exhibit 10.1(e) to the Registrant's
                           Registration Statement No. 33-43226)

 10.1(f)                   Facilities Agreement, dated as of December 2, 1991,
                           by and between Walsh International Inc. and
                           Pharmaceutical Marketing Services Inc. (incorporated
                           by reference to Exhibit 10.1(f) to the Registrant's
                           Registration Statement No. 33-43226)
<PAGE>   57
 10.1(g)                   Collaborative Marketing Agreement, dated as of
                           December 2, 1991, by and between Walsh America
                           Limited and Pharmaceutical Data Services, Inc., on
                           the one hand, and Pharmaceutical Marketing Services
                           Inc. and American Medical Census Corp., on the other
                           (incorporated by reference to Exhibit 10.1(g) to the
                           Registrant's Registration Statement No. 33-43226)

 10.1(h)                   Health and Benefits Agreement, dated as of December
                           2, 1991, by and between Walsh International Inc. and
                           Pharmaceutical Marketing Services Inc. (incorporated
                           by reference to Exhibit 10.1(h) to the Registrant's
                           Registration Statement No. 33-43226)

*10.1(i)                   Mailing Services Agreement, dated as of December 2,
                           1991, by and between Walsh International Inc. and
                           Pharmaceutical Marketing Services Inc. (incorporated
                           by reference to Exhibit 10.1(i) to the Registrant's
                           Registration Statement No. 33-43226)

10.1(j)                    English translation of Warranty Agreement
                           (translation for information purposes only)
                           (incorporated by reference to Exhibit 3.1 to the
                           Registrant's Current Report on Form 8-K filed May 13,
                           1993)

10.1(k)                    Contrat de Garantie (incorporated by reference to
                           Exhibit 3.2 to the Registrant's Current Report on
                           Form 8-K filed May 13, 1993)

10.1(l)                    English translation of Agreement for the Supply of
                           Services (translation for information purposes only)
                           (incorporated by reference to Exhibit 4.1 to the
                           Registrant's Current Report on Form 8-K filed May 13,
                           1993)

10.1(m)                    Contrat de Prestations de Services (incorporated by
                           reference to Exhibit 4.2 to the Registrant's Current
                           Report on Form 8-K filed May 13, 1993)

10.1(n)                    English translation of Put Option (translation for
                           information purposes only) (incorporated by reference
                           to Exhibit 5.1 to the Registrant's Current Report on
                           Form 8-K filed May 13, 1993)

10.1(o)                    Promesse Unilaterale de Vente d'Actions (incorporated
                           by reference to Exhibit 5.2 to the 
<PAGE>   58
                           Registrant's Current Report on Form 8-K filed May 13,
                           1993)

10.1(p)                    English translation of Call Option (translation for
                           information purposes only) (incorporated by reference
                           to Exhibit 6.1 to the Registrant's Current Report on
                           Form 8-K filed May 13, 1993)

10.2(a)                    Pharmaceutical Marketing Services Inc. and its
                           Subsidiaries Stock Option and Restricted Stock
                           Purchase Plan (incorporated by reference to Exhibit
                           10.2 to the Registrant's Registration Statement No.
                           33-43226)

10.2(b)                    Pharmaceutical Marketing Services Inc. Non-Employee
                           Directors' Stock Option Plan (incorporated by
                           reference to Exhibit 4.3 to the Registrant's
                           Registration Statement No. 33-66306)

11                         Statement re Computation of Earnings (Loss) per Share

22.1                       List of subsidiaries of Pharmaceutical Marketing
                           Services Inc. (incorporated by reference to Exhibit
                           22.1 to the Registrant's Registration Statement No.
                           33-43226)

23                         Consent of Coopers & Lybrand L.L.P.

* Certain portions of this Exhibit have been omitted pursuant to an order of the
Securities and Exchange Commission granting confidential treatment.