Financial Statements

                            Wellspring Resources LLC

                          Year ended June 30, 1997 and
                        Three Months ended June 30, 1996
                       with Report of Independent Auditors



<PAGE>


                            Wellspring Resources LLC

                              Financial Statements

                          Year ended June 30, 1997 and
                        Three Months ended June 30, 1996





                                    Contents

Report of Independent Auditors..............................................1

Audited Financial Statements

Balance Sheets..............................................................2
Statements of Operations....................................................3
Statements of Changes in Partners' Equity...................................4
Statements of Cash Flows....................................................5
Notes to Financial Statements...............................................6



<PAGE>












                         Report of Independent Auditors

Board of Directors
Wellspring Resources LLC

We have audited the accompanying balance sheets of Wellspring Resources LLC (the
Company) as of June 30, 1997 and 1996, and the related statements of operations,
and cash  flows for the  twelve  and  three  month  periods  then  ended.  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 audit.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial  position of the Company at June 30, 1997
and 1996,  and the results of its  operations  and its cash flows for the twelve
and three month  periods  then ended,  in  conformity  with  generally  accepted
accounting principles.


/S/ Ernst & Young LLP
---------------------
Ernst & Young LLP
Jacksonville, Florida
July 18, 1997


                                      -1-
<PAGE>



                            Wellspring Resources LLC

                                 Balance Sheets

<TABLE>
<CAPTION>


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

Current assets:
   Cash and cash equivalents                                                   $  3,159,664      $  6,326,590
   Receivables from clients                                                       3,077,787                 -
   Receivable from affiliates, net                                               11,009,153        11,248,157
   Deferred client implementation costs - current portion, net of
     accumulated amortization                                                     3,133,109                 -
   Other current assets                                                             135,595           143,048
                                                                              -------------     -------------
Total current assets                                                             20,515,308        17,717,795

Fixed assets, net of accumulated depreciation                                     9,883,020         6,001,699
Deferred software development costs, net of accumulated amortization
                                                                                 37,157,057        16,309,000
Deferred client implementation costs - non-current, net of accumulated
  amortization                                                                   10,595,776         3,794,883
Other intangible assets, net of accumulated amortization                            500,000           916,667
                                                                              =============     =============
Total assets                                                                    $78,651,161       $44,740,044
                                                                              =============     =============

LIABILITIES AND PARTNERS' EQUITY

Current liabilities:
   Accounts payable and accrued liabilities                                     $11,220,020      $  7,858,200
   Deferred revenue - current portion                                             1,699,124                 -
                                                                              -------------     -------------
Total current liabilities                                                        12,919,144         7,858,200

Non-current liabilities:
   Deferred revenue - non-current portion                                         6,961,094           235,000
   Accrued retirement benefits                                                      306,168                 -
                                                                              -------------     -------------
Total non-current liabilities                                                     7,267,262           235,000

   Commitments and contingent liabilities

                                                                              -------------     -------------
Total liabilities                                                                20,186,406         8,093,200

Partners' equity
   Partners' contributions                                                       73,500,000        39,462,000
   Retained (deficit)                                                           (15,035,245)       (2,815,156)
                                                                              -------------     -------------
Total partners' equity                                                           58,464,755        36,646,844
                                                                              -------------     -------------
Total liabilities and partners' equity                                          $78,651,161       $44,740,044
                                                                              =============     =============

</TABLE>

SEE ACCOMPANYING NOTES.

                                      -2-

<PAGE>


                            Wellspring Resources LLC

                            Statements of Operations


<TABLE>
<CAPTION>

                                                                          Three
                                                                          Months
                                                     Year ended           ended
                                                      June 30,           June 30,
                                                        1997               1996
                                                   -------------       -------------
<S>                                                          <C>                 <C>

Client Fees                                          $45,088,170         $10,829,487

Operating costs:
   Salaries and benefits                              23,038,910           4,853,592
   Subcontracted services                             20,014,717           6,025,063
   Occupancy and communications                        5,908,028             879,377
   Office expense                                      3,862,196             914,145
   Depreciation                                        1,792,082             966,490
   Amortization                                        2,312,767              83,333
                                                   -------------       -------------
Total operating costs                                 56,928,700          13,722,000
                                                   -------------       -------------

Loss from operations                                 (11,840,530)         (2,892,513)

Non-operating  income (expense):
   Interest income                                       206,257              77,357
   Interest expense                                     (585,816)                  -
                                                   =============       =============
Net loss                                            $(12,220,089)        $(2,815,156)
                                                   =============       =============


</TABLE>

SEE ACCOMPANYING NOTES.

                                      -3-

<PAGE>



                            Wellspring Resources LLC

                    Statements of Changes in Partners' Equity

<TABLE>
<CAPTION>

                                                                               Total
                                       Retained            Partners'          Partners'
                                       (Deficit)         Contributions         Equity
                                    -------------        -------------     -------------
<S>                                           <C>                  <C>               <C>

Balance at April 1, 1996            $           -         $          -      $          -


Net loss                               (2,815,156)                   -        (2,815,156)

Partners' contributions                         -           39,462,000        39,462,000
                                    -------------        -------------      ------------

Balance at June 30, 1996               (2,815,156)          39,462,000        36,646,844

Net loss                              (12,220,089)                   -       (12,220,089)

Partners' contributions                         -           34,038,000        34,038,000
                                    -------------        -------------      ------------

Balance at June 30, 1997             $(15,035,245)         $73,500,000       $58,464,755
                                    =============        =============      ============

</TABLE>


SEE ACCOMPANYING NOTES.

                                      -4-

<PAGE>


                            Wellspring Resources LLC

                            Statements of Cash Flows

<TABLE>
<CAPTION>

                                                                                                     Three
                                                                                                     Months
                                                                                Year ended           Ended
                                                                                  June 30,          June 30,
                                                                                    1997              1996
                                                                               -------------     --------------
<S>                                                                                      <C>                <C>

Cash flows from operating activities
Net loss                                                                        $(12,220,089)      $(2,815,156)
Adjustments to reconcile net loss to net cash used in operating activities:
     Depreciation                                                                  1,792,082           966,490
     Amortization of software development costs, implementation costs and
       intangible assets                                                           2,312,767            83,333
     Change in working capital                                                       836,659        (3,533,005)
                                                                               -------------     -------------
Net cash used in operating activities                                             (7,278,581)       (5,298,338)

Cash flows from investing activities
Purchases of fixed assets                                                         (5,673,404)       (6,968,189)
Investment in software development                                               (21,949,159)      (17,309,000)
Investment in client implementations                                              (2,303,782)       (3,559,883)
                                                                               -------------     -------------
Net cash used in investing activities                                            (29,926,345)      (27,837,072)

Cash flows from financing activities
Capital contributions from affiliates                                             34,038,000        39,462,000
                                                                               -------------     --------------
Net cash provided by financing activities                                         34,038,000        39,462,000
                                                                               -------------     --------------

Net (decrease) increase in cash and cash equivalents                              (3,166,926)        6,326,590
Cash and cash equivalents at beginning of period                                   6,326,590                 -
                                                                               =============     =============
Cash and cash equivalents at end of period                                      $  3,159,664      $  6,326,590
                                                                               =============     =============

</TABLE>

                                      -5-

SEE ACCOMPANYING NOTES.


<PAGE>


                            Wellspring Resources LLC

                          Notes to Financial Statements

                                  June 30, 1997


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

Wellspring  Resources  LLC (the  Company) was formed on April 1, 1996 as a joint
venture of Watson  Wyatt  Worldwide  (Wyatt) and State  Street  Global  Advisors
(State  Street)  with equal  ownership.  The  Company  previously  operated as a
separate  division of Wyatt under the name of Wyatt Preferred  Choice (WPC). The
Company  operates  principally  as an employee  benefits  outsourcing  firm with
ranges of services including  administration and processing of corporate savings
plans, defined benefit and contribution plans, and health and welfare plans.

The Company  was created  with the Wyatt  contribution  of software  development
costs related to WPC,  along with an equal  contribution  consisting of cash and
certain fixed assets from State Street.  The Company,  from its  inception,  has
focused on building  and  maintaining  its own client base as well as  servicing
certain contractual  relationships owned by Wyatt. The Company has leveraged the
use of the contributed  software technology to service its own client base which
it continues to build.

The Company,  operating as a limited  liability  partnership,  is a pass-through
entity which  incurs no federal  income  taxes;  however,  it is  obligated  for
payments of various state income taxes and ad valorem taxes which ultimately are
passed to the joint venture partners.

ACCOUNTING PERIODS

The Company's two accounting periods referred to hereafter are the twelve months
ended June 30, 1997 and the three months ended June 30, 1996.

USE OF ESTIMATES

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, disclosures 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.  Estimates  are used when  accounting  for
revenue, deferred software and development costs, depreciation and amortization,
asset write-downs and employee benefit plans.


                                      -6-
<PAGE>




                            Wellspring Resources LLC

                    Notes to Financial Statements (continued)






1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

REVENUE RECOGNITION

Fees  related  to  long-term  contracts  for  administrative  and  recordkeeping
services are recognized as income when earned based on terms of the contract.

CASH AND CASH EQUIVALENTS

The Company  considers  short-term,  highly  liquid  investments  with  original
maturities of 90 days or less to be cash equivalents.

RECEIVABLES FROM CLIENTS

Billed  receivables  from clients are  presented at their billed  amount less an
allowance for doubtful  accounts,  if any.  Unbilled  receivables  are stated at
their  estimated net realizable  value.  The Company has determined that none of
its  receivables  were  uncollectible  as of June 30,  1997 and 1996.  The total
amount of  unbilled  receivables  at June 30, 1997 was  $792,262;  there were no
unbilled receivables at June 30, 1996.

DEFERRED SOFTWARE DEVELOPMENT COSTS

Deferred software development costs includes costs associated with products that
are under  development  by the Company for use in providing  services to current
and future clients. Deferred software development costs includes certain systems
development and enhancement costs, which are specifically identifiable and which
will be associated with long-term  contracts for  outsourcing and  recordkeeping
services.  Deferred software development costs will be amortized over the useful
lives of the products.

The  Company had  invested  $38,256,057  and  $16,309,000  in deferred  software
development at June 30, 1997 and 1996, respectively. Accumulated amortization of
deferred software development costs was $1,099,000 at June 30, 1997.
There was no accumulated amortization at June 30, 1996.

                                      -7-

<PAGE>


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The Company  assesses the  potential  for  impairment  of its deferred  software
development  assets based upon whether it is probable that  undiscounted  future
cash flows will be less than the net book value of the deferred  costs.  At June
30, 1997 and 1996, management does not believe that any such impairment exists.

DEFERRED CLIENT IMPLEMENTATION COSTS AND REVENUES

The Company incurs costs  associated  with converting  and/or creating  employee
databases  which are  required  for  providing  services  to its  clients.  Such
pre-operational  costs are deferred  until the  initiation of  operations  (on a
client/service  specific basis).  Upon  commencement of a service for a specific
client all  deferred  implementation  costs  associated  with such  service  are
ratably amortized over the remaining life of the contract governing the specific
client service.

The  Company  had  invested   $14,523,883  and  $3,794,883  in  deferred  client
implementation  costs  at June  30,  1997 and  1996,  respectively.  Accumulated
amortization  of deferred client  implementation  costs was $797,100 at June 30,
1997. There was no accumulated amortization at June 30, 1996.

The Company  receives fee revenues  from its clients for the  implementation  of
contracts.  The  recognition  of such fees is also  deferred  until the  related
contracts become operational. Deferred fee income was $8,660,218 and $235,000 at
June 30, 1997 and 1996, respectively.

The Company  assesses  the  potential  for  impairment  of its  deferred  client
implementation assets based upon whether it is probable that undiscounted future
cash flows will be less than the net book value of the deferred  costs.  At June
30, 1997 and 1996, management does not believe that any such impairment exists.

OTHER INTANGIBLES

The Company's other  intangibles  include  purchased  employee  benefit software
packages from Wyatt. Accordingly, the $1,000,000 original cost of these packages
had  accumulated  amortization  of $500,000  and $83,333 as of June 30, 1997 and
1996, respectively.

                                      -8-

<PAGE>


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of the Company's cash and cash equivalents, receivables from
clients and accounts  payable and accrued  liabilities  approximates  fair value
because of the short maturity and ready liquidity of those instruments.

CONCENTRATION OF CREDIT RISK

Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of certain cash and cash equivalents, short-term
investments and receivables from clients. The Company invests its excess cash in
high credit quality financial institutions.

The  Company  has  relatively  few  customers  that make up its  customer  base.
Concentrations of credit risk with respect to receivables from those clients are
reduced due to the credit worthiness of the customer base.

2. FIXED ASSETS

Furniture, fixtures, equipment, and leasehold improvements are recorded at cost,
and  presented  net of  accumulated  depreciation  or  amortization.  Furniture,
fixtures and equipment are depreciated using the straight-line method over lives
ranging from three to seven years.  Leasehold  improvements  are  amortized on a
straight-line  basis over the shorter of the assets' lives or  underlying  lease
terms.

The components of fixed assets are:

                                                              June 30
                                                        1997           1996
                                                   -------------  -------------

 Furniture, fixtures and equipment                    $8,942,315     $6,813,836
 Leasehold improvements                                3,699,278        154,353
                                                   -------------  -------------
                                                      12,641,593      6,968,189
  Less accumulated depreciation and amortization      (2,758,573)      (966,490)
                                                   =============  =============
                                                      $9,883,020     $6,001,699
                                                   =============  =============


                                      -9-

<PAGE>


3. EMPLOYEE BENEFIT PLANS

PENSION PLAN

The Company has a qualified  defined  benefit  pension plan that is available to
substantially  all of its  employees.  This  plan,  formed on  January  1, 1997,
succeeds a defined  benefit  plan from Wyatt which  covered  employees  that had
previously been employees of the Company and WPC.

Pension  benefits  are  based  on a  multi-variable  formula  which  takes  into
consideration  age,  years of  service,  and  average  compensation  levels with
compensation  increases  projected  at 5% and the benefit  liability  discounted
currently at 7.5%.  Employees are eligible for benefits  upon  retirement at age
65. As of June 30,  1997,  the  Company  had no  retirement  benefits  currently
payable to eligible participants and accordingly, had no plan assets nor funding
as of the end of this period.  However,  the accrued  liability for the plan was
$306,168  which was comprised of an accumulated  benefit  obligation of $259,919
and a vested benefit obligation of $46,249.

LONG TERM SAVINGS PLAN

Effective  January 1, 1997, the Company sponsored a deferred savings plan set up
as a  401(k).  Under  this  plan,  the  Company  matches  up to 50% of  employee
contributions made subject to a maximum of 3% of their compensation. The Company
incurred $325,976 in expenses for this plan during fiscal year 1997.

Contributions  are  limited to amounts  that are  currently  deductible  for tax
purposes.

OTHER NONQUALIFIED PLANS

At June 30, 1997, the Company had  established  nonqualified  plans  including a
salary  deferral plan and a defined  benefit plan.  Effective  upon  retirement,
benefits will be paid  according to these plans which are  otherwise  subject to
certain limitations imposed by the Internal Revenue Code.

No contributions  were made during 1996,  however,  contributions of $61,996 for
the salary deferral plan was made for 1997.

                                      -10-

<PAGE>


4. SELF INSURANCE RESERVES

The Company  provides certain medical and dental benefits to its employees at no
cost.  These benefits had  previously  been provided by Wyatt up to December 31,
1996.  Expense  for the  medical  benefits  and dental  benefits  provided  were
$1,494,506  and  $377,603  for  the  periods  ended  June  30,  1997  and  1996,
respectively.  As the Company is self insured for these benefits up to a certain
amount,  reserve for claims development is estimated for reported and unreported
claims and is reflected as a liability in the accompanying financial statements.
The Company has specific case  indemnification for individual losses that exceed
$160,000 up to a $1,000,000  maximum.  As of June 30, 1997,  the  liability  for
reported and unreported claims was estimated at $595,540.

5. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities consist of:

                                                              June 30
                                                        1997           1996
                                                   -------------  -------------


  Accounts payable and accrued liabilities          $  7,433,988     $6,734,251
  Accrued salaries and bonuses                         2,363,636        413,016
  Accrued vacation                                       826,856        710,933
  Self insurance reserves                                595,540              -
                                                   =============   ============
  Total accounts payable and accrued liabilities    $ 11,220,020     $7,858,200
                                                   =============   ============

                                      -11-

<PAGE>


6. LEASES

The Company leases office space and various  computer  equipment under operating
lease  agreements  with terms ranging from one to ten years.  The rental expense
was $4,849,248 and $341,007 for fiscal years 1997 and 1996, respectively. Future
minimum lease payments for operating lease commitments are:

                                                 LEASE
          YEARS ENDING JUNE 30                COMMITMENTS
          --------------------              ----------------

                   1998                      $  7,659,054
                   1999                         8,845,669
                   2000                         9,296,342
                   2001                         9,071,949
                   2002                         6,823,480
                   Thereafter                  30,002,877
                                            =================
                                              $71,699,371
                                            =================

7. RELATED PARTIES

The Company's  Board of Managers is comprised of officers and management of both
Wyatt and State  Street as well as the  Company's  Chief  Executive  Officer who
serves as its Chairman.  Due to the spin-off of Wyatt's previous division,  WPC,
the Company was reliant on various Wyatt financial  reporting  processes through
the end of fiscal year 1997. The Company was charged  approximately  $78,000 for
these services during fiscal year 1997.

Capital  contributed  by Wyatt and State  Street at June 30,  1997 and 1996 were
$73,500,000  and  $39,462,000,  respectively.  Of  the  $39,462,000  of  capital
contributed at June 30, 1996, $12,060,117 was receivable from State Street which
is included in receivable  from  affiliates in the balance sheet. As of June 30,
1997, all of the capital contributed had been funded.

Under an agreement  between the Company and Wyatt, the Company provides services
to certain  clients whose  contracts were retained by Wyatt.  The client service
agreement  provides  (in part) that the  Company  may bill Wyatt for 100% of the
costs associated with providing services to the retained clients. As of June 30,
1997, Wyatt owed the Company  $11,009,153 for retained client  services.  Client
fees  and  cost  billed  to  Wyatt  amounted  to  $40,313,000  and  $10,829,000,
respectively, in 1997 and 1996.

                                      -12-

<PAGE>


8. COMMITMENTS AND CONTINGENT LIABILITIES

The Company is currently negotiating  settlement of a long standing dispute over
the pricing of certain services from one of its major service  providers.  As of
June 30, 1997, the Company has recognized its liability to the service  provider
to the extent of the Company's position in the negotiations.  Should the dispute
be settled in favor of the service provider,  the Company could be exposed to as
much as  $2,200,000  in  additional  liability to the service  provider.  Of the
$2,200,000,  approximately  $1,900,000 would be recoverable from Wyatt under the
client services agreement.


                                      -13-