FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

(Mark one)

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

For the quarterly period ended June 30, 1998

                                       OR

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

For the transition period from _________to_________

Commission file number 001-14093


                              Young & Rubicam Inc.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                 Delaware                                   13-1493710
                 --------                                   ----------
       (State or other jurisdiction of                   (I.R.S. Employer
       incorporation or organization)                   Identification No.)


285 Madison Avenue, New York, New York                                   10017
--------------------------------------                                   -----
(Address of principal executive offices)                              (Zip Code)


                                 (212) 210-3000
              ----------------------------------------------------
              (Registrant's telephone number, including area code)

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

The number of shares  outstanding of the  Registrant's  Common Stock,  $0.01 par
value, as of July 31, 1998 was 66,706,897.


<PAGE>




                  YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES

                                    FORM 10-Q

                                TABLE OF CONTENTS

                                                                        PAGE NO.

PART I: FINANCIAL INFORMATION

     Item 1. Financial Statements
                Consolidated Balance Sheets as of
                June 30, 1998 and December 31, 1997                            2

                Consolidated Statements of Operations for the
                Three Months and Six Months Ended June 30, 1998 and 1997       3

                Consolidated Statements of Cash Flows for the
                Six Months Ended June 30, 1998 and 1997                        4

                Consolidated Statements of Changes in Equity/(Deficit)
                for the Six Months Ended June 30, 1998 and for the
                Year Ended December 31, 1997                                   5

                Notes to Consolidated Financial
                Statements                                                 6 - 7

     Item 2. Management's Discussion and Analysis of Financial
             Condition and Results of Operations                          8 - 10

PART II: OTHER INFORMATION

   Item 2.   Changes in Securities and Use of Proceeds                        11
   Item 4.   Submission of Matters to a Vote of Security Holders              12
   Item 5.   Other Information                                                12
   Item 6.   Exhibits and Reports on Form 8-K                                 12


SIGNATURES                                                                    13

EXHIBIT INDEX                                                                 14


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This  document,  information  included in future filings by Young & Rubicam Inc.
(the "Company") with the United States  Securities and Exchange  Commission (the
"SEC"), and information contained in written materials,  press releases and oral
statements  issued by or on  behalf  of the  Company  contain,  or may  contain,
statements that constitute  "forward-looking  statements"  within the meaning of
Section 27A of the  Securities  Act of 1933, as amended,  and Section 21E of the
Securities Exchange Act of 1934, as amended. These statements include statements
regarding  the  intent,  belief or current  expectations  of the  Company or its
officers  (including  statements  preceded  by,  followed  by  or  that  include
forward-looking   terminology  such  as  "may,"  "will,"  "should,"  "believes,"
"expects,"  "anticipates,"  "estimates,"  "continues" or similar  expressions or
comparable terminology,  including the negative thereof) with respect to various
matters.   These   forward-looking   statements   include   statements   in  the
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" section of this document relating to the Company's  performance.  It
is important to note that the Company's  actual results could differ  materially
from those anticipated in these  forward-looking  statements depending on, among
other important factors, (i) revenues received from clients,  including revenues
pursuant to incentive compensation arrangements entered into by the Company with
certain  clients,  (ii)  gains or losses of  clients  and  client  business  and
projects,  as well as changes in the  marketing  and  communications  budgets of
clients,  (iii) the level of economic activity in the principal markets in which
the Company conducts business and other trends affecting the Company's financial
condition  or  results of  operations,  (iv) the  impact of  competition  in the
marketing  and  communications  industry  and (v) the  Company's  liquidity  and
financing  plans. All  forward-looking  statements in this document are based on
information  available  to the  Company on the date  hereof.  In  addition,  the
matters set forth under the caption "Risk  Factors" in the Company's  Prospectus
dated May 11, 1998 filed with the SEC pursuant to Rule 424(b) of the  Securities
Act of 1933, as amended,  constitute cautionary statements identifying important
factors with respect to such forward-looking statements, including certain risks
and  uncertainties  that could cause actual  results to differ  materially  from
those in such forward-looking statements.

<PAGE>


PART I: FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

                  YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                                  JUNE 30, 1998    DECEMBER 31, 1997
                                                                                  -------------    -----------------
<S>                                                                               <C>                  <C>          
CURRENT ASSETS
   Cash and cash equivalents                                                      $      76,760        $     160,263
   Accounts receivable, net of allowance for doubtful accounts of $14,839
    and $14,125 at June 30, 1998 and December 31, 1997, respectively                    803,313              790,342
   Costs billable to clients, net                                                        64,619               50,479
   Other receivables                                                                     32,355               35,218
   Deferred income taxes                                                                 29,034               32,832
   Prepaid expenses and other assets                                                     21,937               17,989
                                                                                  -------------        -------------
          Total Current Assets                                                        1,028,018            1,087,123
                                                                                  -------------        -------------
NONCURRENT ASSETS
   Property and equipment, net                                                          119,934              125,014
   Deferred income taxes                                                                192,319              124,192
   Goodwill, less accumulated amortization of $78,804 and $80,166 at
    June 30, 1998 and December 31, 1997, respectively                                   108,095              116,637
   Equity in net assets of and advances to unconsolidated companies                      28,031               26,393
   Other assets                                                                          39,241               48,660
                                                                                  -------------        -------------
          Total Noncurrent Assets                                                       487,620              440,896
                                                                                  -------------        -------------
          Total Assets                                                            $   1,515,638        $   1,528,019
                                                                                  =============        =============

CURRENT LIABILITIES
   Loans payable                                                                  $      28,486        $      10,765
   Accounts payable                                                                     878,871              811,162
   Installment notes payable                                                              4,104                3,231
   Accrued expenses and other liabilities                                               217,752              273,011
   Accrued payroll and bonuses                                                           48,840               65,458
   Income taxes payable                                                                  22,839               29,665
                                                                                  -------------        -------------
          Total Current Liabilities                                                   1,200,892            1,193,292
                                                                                  -------------        -------------
NONCURRENT LIABILITIES
   Loans payable                                                                         75,059              330,552
   Installment notes payable                                                                400                6,503
   Deferred compensation                                                                 31,894               31,077
   Other liabilities                                                                    112,748              112,851
                                                                                  -------------        -------------
          Total Noncurrent Liabilities                                                  220,101              480,983
                                                                                  -------------        -------------
Commitments and Contingencies
Minority Interest                                                                         5,144                6,987
                                                                                  -------------        -------------
MANDATORILY REDEEMABLE EQUITY SECURITIES
   Common  stock,  par value $.01 per share;  authorized - 250,000,000
   shares; issued and outstanding - 0 shares and 50,658,180 shares at
   June 30, 1998 and December 31, 1997, respectively                                          -              508,471
                                                                                  -------------        -------------
STOCKHOLDERS' EQUITY/(DEFICIT)
   Preferred stock:
     Money Market Preferred Stock - Cumulative  variable  dividend;  liquidating
      value of $115.00 per share; one-tenth of one vote per share; authorized
      50,000 shares; 87 shares issued and outstanding                                         -                    -
     Cumulative Participating Junior Preferred Stock -  $ dividend; liquidating
      value of $1.00 per share; 100 votes per share; authorized 2,500,000
      shares; no shares issued and outstanding                                                -                    -
   Common stock, par value $.01 per share; authorized - 250,000,000
    shares; issued and outstanding - 66,670,462 and 11,086,950 shares at
    June 30, 1998 and December 31, 1997, respectively                                       704                  111
   Capital surplus                                                                      936,606               23,613
   Accumulated deficit                                                                 (809,858)            (522,866)
   Cumulative translation adjustment                                                    (18,686)             (16,577)
   Pension liability adjustment                                                            (706)                (706)
   Common stock in treasury, at cost; 3,681,048 and 1,115,160 shares at
    June 30, 1998 and December 31, 1997, respectively                                   (18,559)              (8,550)
   Unearned compensation - restricted stock                                                   -             (136,739)
                                                                                  -------------        -------------
          Total Stockholders' Equity/(Deficit)                                           89,501             (661,714)
                                                                                  -------------        -------------
          Total Liabilities, Mandatorily Redeemable Equity Securities
           and Stockholders' Equity/(Deficit)                                     $   1,515,638        $   1,528,019
                                                                                  =============        =============
</TABLE>


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


                                       2

<PAGE>


                  YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED                    SIX MONTHS ENDED
                                                                    JUNE 30,                             JUNE 30,
                                                         ------------------------------      ------------------------------
                                                             1998              1997              1998              1997
                                                             ----              ----              ----              ----
<S>                                                      <C>               <C>               <C>               <C>         
Revenues                                                 $    372,128      $    345,474      $    720,301      $    643,680

Compensation expense, including employee benefits             218,667           205,491           432,265           394,091
General and administrative expenses                           109,484           104,827           218,726           200,340
Other operating charges                                       234,449                 -           234,449                 -
                                                         ------------      ------------      ------------      ------------
Operating expenses                                            562,600           310,318           885,440           594,431
                                                         ------------      ------------      ------------      ------------

(Loss)/income from operations                                (190,472)           35,156          (165,139)           49,249
Interest expense, net                                          (4,597)           (9,327)          (10,172)          (17,630)
Other income                                                    1,373                 -             2,200                 -
                                                         ------------      ------------      ------------      ------------
(Loss)/income before income taxes                            (193,696)           25,829          (173,111)           31,619
Income tax (benefit)/expense                                  (47,057)           12,808           (38,205)           15,651
                                                         ------------      ------------      ------------      ------------
                                                             (146,639)           13,021          (134,906)           15,968
Equity in net income of unconsolidated companies                1,512             1,430             1,627             2,470
Minority interest in net (income)/loss of
 consolidated subsidiaries                                       (264)             (935)               78              (833)
                                                         ------------      ------------      ------------      ------------

(Loss)/income before extraordinary charge                    (145,391)           13,516          (133,201)           17,605
Extraordinary charge for early retirement of debt,
  net of tax benefit of $2,834                                 (4,433)                -            (4,433)                -
                                                         ------------      ------------      ------------      ------------

Net (loss)/income                                        ($   149,824)     $     13,516      ($   137,634)     $     17,605
                                                         ============      ============      ============      ============

(Loss)/earnings per share:
  Basic:
    (Loss)/income before extraordinary charge            ($      2.45)     $       0.29      ($      2.42)     $       0.37
                                                         ============      ============      ============      ============
    Extraordinary charge                                 ($      0.08)     $          -      ($      0.08)     $          -
                                                         ============      ============      ============      ============
    Net (loss)/income                                    ($      2.53)     $       0.29      ($      2.50)     $       0.37
                                                         ============      ============      ============      ============

  Diluted:
    (Loss)/income before extraordinary charge            ($      2.45)     $       0.22      ($      2.42)     $       0.29
                                                         ============      ============      ============      ============
    Extraordinary charge                                 ($      0.08)     $          -      ($      0.08)     $          -
                                                         ============      ============      ============      ============
    Net (loss)/income                                    ($      2.53)     $       0.22      ($      2.50)     $       0.29
                                                         ============      ============      ============      ============

Weighted average shares used to compute:
  Basic                                                    59,272,814        47,382,330        55,040,989        47,382,330
                                                         ============      ============      ============      ============
  Diluted                                                  59,272,814        60,619,742        55,040,989        60,433,102
                                                         ============      ============      ============      ============
</TABLE>


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


                                        3

<PAGE>


                  YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                            SIX MONTHS ENDED
                                                                                                JUNE 30,
                                                                                          --------------------
                                                                                          1998            1997
                                                                                          ----            ----
<S>                                                                                   <C>              <C>      
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss)/income                                                                     ($137,634)       $  17,605
Adjustments to reconcile net (loss)/income to net cash used by operating activities:
   Depreciation and amortization                                                         28,353           27,096
   Other operating charges                                                              234,449                -
   Extraordinary charge, net                                                              4,433                -
   Deferred income tax (benefit)/ expense                                               (64,329)           7,188
   Equity in net income of unconsolidated companies                                      (1,627)          (2,470)
   Dividends from unconsolidated companies                                                  908            1,980
   Minority interest in net (loss)/income of consolidated subsidiaries                      (78)             833
Change in assets and liabilities, excluding effects from acquisitions,
 dispositions, recapitalization and foreign exchange:
   Accounts receivable, net                                                             (20,259)          52,411
   Costs billable to clients, net                                                       (14,949)         (16,001)
   Other receivables                                                                      2,241           (9,797)
   Prepaid expenses and other assets                                                     (4,102)          (5,244)
   Accounts payable                                                                      49,586          (50,030)
   Accrued expenses and other liabilities                                               (66,020)         (40,541)
   Accrued payroll and bonuses                                                          (17,607)         (20,619)
   Income taxes payable                                                                  (4,176)          (5,852)
   Deferred compensation                                                                  1,957            1,380
   Other                                                                                  5,101            5,547
                                                                                      ---------        ---------
Net cash used in operating activities                                                    (3,753)         (36,514)
                                                                                      ---------        ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Additions to property and equipment                                                  (20,044)         (28,277)
   Acquisitions, net of cash acquired                                                      (499)          (2,846)
   Investment in net assets of and advances to unconsolidated companies                  (2,428)          (5,379)
   Proceeds from notes receivable                                                           339              647
                                                                                      ---------        ---------
Net cash used in investing activities                                                   (22,632)         (35,855)
                                                                                      ---------        ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from loans payable, long-term                                               215,000          230,619
   Repayment of loans payable, long-term                                               (470,125)          (2,714)
   Proceeds from loans payable, short-term, net                                          58,097           31,647
   Proceeds from issuance of common stock in initial public offering, net               158,637                -
   Deferred financing costs                                                                (667)               -
   Recapitalization payments                                                                  -         (247,272)
   Payments of non-recapitalization deferred compensation                                (3,302)             (11)
   Common stock repurchased                                                             (10,009)               -
   Common stock issued and other                                                          3,081                -
   Payment of installment notes, net                                                     (5,229)               -
   Dividends paid to minority shareholders                                               (1,206)            (612)
                                                                                      ---------        ---------
Net cash (used in)/provided by financing activities                                     (55,723)          11,657
                                                                                      ---------        ---------
Effect of exchange rate changes on cash and cash equivalents                             (1,395)          (5,103)
                                                                                      ---------        ---------
Net decrease in cash and cash equivalents                                               (83,503)         (65,815)
Cash and cash equivalents, beginning of period                                          160,263          110,180
                                                                                      ---------        ---------
Cash and cash equivalents, end of period                                              $  76,760        $  44,365
                                                                                      =========        =========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
   Interest paid                                                                      $  12,279        $  16,709
                                                                                      =========        =========
   Income taxes paid                                                                  $  16,020        $  11,461
                                                                                      =========        =========
</TABLE>


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


                                       4

<PAGE>


                  YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
             CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY/(DEFICIT)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                              VOTING                                          COMMON
                                              COMMON          CAPITAL       ACCUMULATED      STOCK IN      RESTRICTED
                                               STOCK          SURPLUS         DEFICIT        TREASURY         STOCK
                                              -------          -------       -----------      --------      ----------
<S>                                         <C>             <C>             <C>             <C>             <C>       
BALANCE AT JANUARY 1, 1997                  $     111       $ 106,825       ($498,928)      $       -       ($ 85,000)
Net loss                                            -               -         (23,938)              -               -
Common stock issued                                 -           1,501               -               -               -
Common stock repurchased                            -               -               -          (8,550)              -
Unearned compensation -
 restricted stock                                   -          51,739               -               -         (51,739)
Common stock options
 exercised/repurchased                             44           8,711               -               -               -
Accretion of mandatorily redeemable
 equity securities                                (44)       (145,163)              -               -               -
                                             --------       ---------       ---------       ---------       ---------

BALANCE AT DECEMBER 31, 1997                $     111       $  23,613       ($522,866)      ($  8,550)      ($136,739)
Net loss                                            -               -        (137,634)              -               -
Issuance of restricted stock                        -          94,039               -               -         136,739
Common stock issued and other                      17           3,064               -               -               -
Common stock repurchased                            -               -               -         (10,009)              -
Issuance of common stock in
 initial public offering, net of expenses          69         158,568               -               -               -
Accretion of mandatorily redeemable
 equity securities                                 (3)       (137,942)       (149,358)              -               -
Conversion of mandatorily redeemable
 equity securities                                510         795,264               -               -               -
                                             --------       ---------       ---------       ---------       ---------


BALANCE AT JUNE 30, 1998                    $     704       $ 936,606       ($809,858)      ($ 18,559)      $       -
                                            =========       =========       =========       =========       =========
</TABLE>





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


                                        5

<PAGE>



                  YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   Basis of Presentation

The accompanying  unaudited consolidated financial statements of Young & Rubicam
Inc. (the "Company") have been prepared  pursuant to the rules of the Securities
and  Exchange   Commission  (the  "SEC").   Certain   information  and  footnote
disclosures  normally  included in financial  statements  prepared in accordance
with generally  accepted  accounting  principles  have been condensed or omitted
pursuant to such rules and regulations.  These consolidated financial statements
should be read in conjunction with the audited consolidated financial statements
and notes thereto included in the Company's Registration Statement filed on Form
S-1 (File No.  333-46929)  (the "Form S-1").  In the opinion of management,  the
accompanying financial statements reflect all adjustments, which are of a normal
recurring  nature,  necessary  for a fair  presentation  of the  results for the
periods presented.

The results of operations for the interim periods  presented are not necessarily
indicative of the results expected for the full year.

2.   Use of Estimates

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

3.   Earnings (loss) per Share

The Company  computes  earnings (loss) per share in accordance with Statement of
Financial  Accounting  Standards  ("SFAS") No. 128,  "Earnings Per Share." Basic
earnings  (loss) per share is  calculated  by dividing net income  (loss) by the
weighted average shares of common stock outstanding during each period.  Diluted
earnings per share reflects the dilutive effect of stock options and other stock
awards granted to employees under stock-based compensation plans. Shares used in
computing basic and diluted earnings (loss) per share were as follows:


<TABLE>
<CAPTION>
                                                          Three months ended                        Six months ended
                                                               June 30,                                 June 30,
                                                          ------------------                        ----------------
                                                          1998               1997                 1998              1997
                                                       ----------         ----------           ----------        ----------
<S>                                                    <C>                <C>                  <C>               <C>       
            Basic - weighted average shares            59,272,814         47,382,330           55,040,989        47,382,330

            Effect of dilutive securities                       -         13,237,412                    -        13,050,772
                                                       ----------         ----------           ----------        ----------


            Diluted - weighted average shares          59,272,814         60,619,742           55,040,989        60,433,102
                                                       ==========         ==========           ==========        ==========
</TABLE>

As of June 30, 1998, there were  approximately 31.4 million common stock options
outstanding that could potentially dilute basic earnings (loss) per share in the
future that were excluded from the computation of diluted loss per share because
the effect would be  antidilutive.


                                        6

<PAGE>



4.   Comprehensive (Loss) Income

The Company has adopted SFAS No. 130,  "Reporting  Comprehensive  Income," which
requires  presentation of information on comprehensive income and its components
in the  financial  statements.  For the  Company,  comprehensive  (loss)  income
includes net (loss) income, foreign currency translation adjustments and minimum
pension  liability  adjustments.  Total  comprehensive  (loss)  income  and  its
components for interim  periods ended June 30, 1998 and 1997 were as follows (in
thousands):

<TABLE>
<CAPTION>
                                                                   Three months ended           Six months ended
                                                                        June 30,                    June 30,
                                                                   ------------------           ----------------
                                                                    1998         1997           1998          1997
                                                                    ----         ----           ----          ----
<S>                                                               <C>             <C>          <C>            <C>    
                    Net (loss)/income                             $(149,824)      $13,516      $(137,634)     $17,605
                    Foreign currency translation adjustment,
                      net of tax                                        (55)        (655)         (2,109)     (8,653)
                    Pension liability adjustment, net of tax              -            -               -           -
                                                                  ---------       -------      ---------     --------

                    Total comprehensive (loss)/income             $(149,879)      $12,861      $(139,743)    $  8,952
                                                                  ==========      =======      ==========    ========
</TABLE>


5.   Common Stock Dividend

On April 6, 1998, the Board of Directors  declared a stock dividend of 14 shares
of common  stock  payable  for each  share of common  stock  outstanding,  which
dividend  became  effective and was paid on May 11, 1998,  the effective date of
the Form S-1 for the  Company's  initial  public  offering of common  stock (the
"Offering").  The Company's  historical financial statements have been presented
to give  retroactive  effect to such common stock  dividend.  In  addition,  the
number of  shares  of  common  stock  the  Company  is  authorized  to issue was
increased from 10,000,000 to 250,000,000 and the number of authorized  preferred
shares was increased  from 50,000 to  10,000,000.  Of the  authorized  preferred
shares,  50,000 shares have been designated as Money Market  Preferred Stock and
2,500,000  shares  have  been  designated  as  Cumulative  Participating  Junior
Preferred Stock.

6.   Public Offering

On May 15, 1998,  the Company  closed the  Offering.  An aggregate of 19,090,000
shares (including  2,490,000 shares subject to the  underwriters'  overallotment
option)  of the  Company's  common  stock was  offered to the  public,  of which
6,912,730  shares were sold by the Company  and  12,177,270  shares were sold by
certain selling  stockholders.  Net proceeds to the Company were $158.6 million,
after deducting  underwriting discounts and commissions and expenses paid by the
Company in connection with the Offering.  The Company did not receive any of the
net  proceeds  from the sale of common  stock by the selling  stockholders.  The
Company used the net proceeds  from the Offering  together  with $155 million of
borrowings  under  a new  credit  facility  (see  Note  7) to  repay  all of the
outstanding  borrowings  under its then  existing  $700 million  senior  secured
credit facility.

Upon  the  consummation  of the  Offering,  9,231,105  shares  of  common  stock
("Restricted  Stock")  held in a  restricted  stock trust vested and resulted in
non-recurring,  non-cash,  pre-tax  compensation charges of $234.4 million which
have been reflected as "other operating  charges" in the Company's  consolidated
statements  of  operations  for the  periods  ended June 30,  1998.  The Company
redeemed  the  remaining  1,855,845  shares  of  Restricted  Stock  held  in the
restricted stock trust upon the consummation of the Offering.

7.   New Debt Facility

On May 15, 1998, the Company  entered into a $400 million,  five-year  unsecured
multicurrency  revolving credit facility (the "New Facility") which replaced its
then existing $700 million  senior  secured  credit  facility.  The New Facility
contains certain financial and operating restrictions and covenant requirements,
including a maximum leverage ratio and a minimum interest coverage  requirement.
The Company is required to pay a facility fee tied to the leverage ratio ranging
from  0.125% to 0.2% per annum.  Under the terms of the New  Facility,  interest
charged on loans ranges from base rate to Eurodollar and Eurocurrency  rate plus
applicable  margins tied to the leverage  ratio  ranging from 0.275% to 0.3%. On
May 15, 1998, the Company used the net proceeds from the Offering  together with
$155  million of  borrowings  under the New  Facility  to repay all  outstanding
borrowings  under its then existing $700 million senior secured credit facility.
Approximately  $7.3 million of unamortized  deferred  financing costs related to
the replaced  credit facility were charged to expense and have been reflected as
an extraordinary  charge, net of an applicable tax benefit of approximately $2.8
million, in the Company's consolidated  statements of operations for the periods
ended June 30, 1998.


                                        7
<PAGE>

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RESULTS OF OPERATIONS

The discussion  which follows  should be read in conjunction  with the Company's
consolidated  financial  statements and notes thereto, and the information under
the caption  "Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations," contained in the Company's Prospectus dated May 11, 1998
filed in connection with the Offering.

SECOND QUARTER 1998 COMPARED TO SECOND QUARTER 1997

Revenues for the second quarter of 1998 increased by $26.7 million,  or 7.7%, to
$372.1  million  compared  to the  second  quarter  of 1997.  The  increase  was
primarily  due to new business  (including  business from new clients and higher
revenue  from  existing  clients).  U.S.  revenues  increased by 16.1% to $187.8
million for the second  quarter of 1998 compared to the second  quarter of 1997.
International  revenues  increased  by 0.4% to  $184.3  million  for the  second
quarter of 1998 compared to the second quarter of 1997.  Excluding the effect of
the  strengthening  (on average) of the U.S. dollar against foreign  currencies,
total   revenues  for  the  second  quarter  of  1998  increased  by  10.8%  and
international revenues increased by 6.1% compared to the second quarter of 1997.

Compensation  expense increased by $13.2 million, or 6.4%, to $218.7 million for
the second quarter of 1998 compared to the second quarter of 1997. This increase
was primarily attributable to additional staffing to support business growth and
salary  increases.  Excluding  the  effect  of  foreign  currency  fluctuations,
compensation expense increased by 8.9% compared to the second quarter of 1997.

General and  administrative  expenses  increased by $4.7  million,  or 4.4%,  to
$109.5  million for the second quarter of 1998 compared to the second quarter of
1997.  This  increase was  primarily  due to  additional  operating  expenses to
support  new  business   growth.   Excluding  the  effect  of  foreign  currency
fluctuations,  general and administrative expenses increased by 7.3% compared to
the second quarter of 1997.

Effective upon the  consummation of the Offering,  the Company  recognized other
operating charges of $234.4 million.  These other operating charges consisted of
non-recurring,  non-cash  compensation  charges  resulting  from the  vesting of
shares of Restricted Stock allocated to employees. As a result of these charges,
the Company expects to incur a net loss for the year ending December 31, 1998.

Loss from  operations was $190.5 million for the second quarter of 1998 compared
to income from  operations  of $35.2  million for the second  quarter of 1997, a
decrease  of  $225.7  million,  primarily  due to the  other  operating  charges
described above. Excluding the other operating  charges,  income from operations
increased by $8.8 million,  or 25.1%, to $44.0 million for the second quarter of
1998 compared to the second quarter of 1997.

Net  interest  expense  decreased by $4.7 million to $4.6 million for the second
quarter of 1998 compared to the second  quarter of 1997.  The decline was due to
lower  average  borrowing  levels and lower average  borrowing  rates during the
second quarter of 1998 compared to the second quarter of 1997.

The Company  recognized  an income tax  benefit of $47.1  million for the second
quarter of 1998  compared to income tax expense of $12.8  million for the second
quarter of 1997. An income tax benefit of $64.6 million was  attributable to the
other  operating  charges of $234.4  million  described  above and  reflects the
anticipated  federal,  state and  foreign   tax effect of such  other  operating
charges after  consideration of valuation allowance amounts for certain non-U.S.
deductions.  The  effective  income  tax rates  were a  benefit  of 24.3% and an
expense  of  49.6%,  respectively,  for the  second  quarter  of 1998 and  1997.
Excluding the benefit  derived from the other operating  charges,  the effective
tax rate was 43.0% for the  second  quarter of 1998,  a decrease  from the 49.6%
effective tax rate for the second quarter of 1997.  Such decrease  resulted from
lower foreign taxes on the Company's  foreign  operations as well as a reduction
in the rate at which state and local taxes were assessed on domestic income.

The  Company  incurred an  extraordinary  charge of $4.4  million,  net of a tax
benefit of  approximately  $2.8  million,  due to the  write-off of  unamortized
deferred financing costs related to the replaced credit facility.

Net loss for the  second  quarter  of 1998 was $149.8  million  compared  to net
income of $13.5 million for the second quarter of 1997.



                                        8

<PAGE>




SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997

Revenues for the six months ended June 30, 1998 increased by $76.6  million,  or
11.9%,  to $720.3  million  compared to the six months ended June 30, 1997.  The
increase was primarily due to new business  (including business from new clients
and higher revenue from existing  clients).  U.S. revenues increased by 20.5% to
$372.3 million for the six months ended June 30, 1998 compared to the six months
ended June 30, 1997.  International revenues increased by 4.0% to $348.0 million
for the six months ended June 30, 1998 compared to the six months ended June 30,
1997.  Excluding the effect of the strengthening (on average) of the U.S. dollar
against  foreign  currencies,  total  revenues for the six months ended June 30,
1998 increased by 15.6% and international  revenues  increased by 11.1% compared
to the six months ended June 30, 1997.

Compensation  expense increased by $38.2 million, or 9.7%, to $432.3 million for
the six months  ended June 30, 1998  compared  to the six months  ended June 30,
1997. This increase was primarily attributable to additional staffing to support
business growth and salary  increases.  Excluding the effect of foreign currency
fluctuations, compensation expense increased by 13.4% compared to the six months
ended June 30, 1997.

General and  administrative  expenses  increased by $18.4  million,  or 9.2%, to
$218.7 million for the six months ended June 30, 1998 compared to the six months
ended June 30, 1997.  This increase was  primarily  due to additional  operating
expenses  to  support  new  business  growth.  Excluding  the  effect of foreign
currency  fluctuations,  general and administrative  expenses increased by 12.8%
compared to the six months ended June 30, 1997.

Effective upon the  consummation of the Offering,  the Company  recognized other
operating charges of $234.4 million.  These other operating charges consisted of
non-recurring,  non-cash  compensation  charges  resulting  from the  vesting of
shares of Restricted Stock allocated to employees. As a result of these charges,
the Company expects to incur a net loss for the year ending December 31, 1998.

Loss from  operations  was $165.1 million for the six months ended June 30, 1998
compared to income from  operations  of $49.2  million for the six months  ended
June 30,  1997,  a  decrease  of  $214.3  million,  primarily  due to the  other
operating charges described above. Excluding the other operating charges, income
from operations  increased by $20.1 million,  or 40.7%, to $69.3 million for the
six months ended June 30, 1998 compared to the six months ended June 30, 1997.

Net interest  expense  decreased  by $7.5  million to $10.2  million for the six
months ended June 30, 1998  compared to the six months ended June 30, 1997.  The
decline was due to lower average  borrowing  levels and lower average  borrowing
rates during the six months ended June 30, 1998 compared to the six months ended
June 30, 1997.

The Company recognized an income tax benefit of $38.2 million for the six months
ended June 30, 1998  compared to income tax expense of $15.7 million for the six
months  ended  June 30,  1997.  An  income  tax  benefit  of $64.6  million  was
attributable  to the other operating  charges of $234.4 million  described above
and reflects the anticipated federal, state and foreign tax effect of such other
operating charges after consideration of valuation allowance amounts for certain
non-U.S.  deductions. The effective income tax rates were a benefit of 22.1% and
an expense of 49.5%,  respectively,  for the six months  ended June 30, 1998 and
1997.  Excluding  the benefit  derived  from the other  operating  charges,  the
effective  tax rate was 43.0% for the six months ended June 30, 1998, a decrease
from the 49.5%  effective tax rate for the six months ended June 30, 1997.  Such
decrease resulted from lower foreign taxes on the Company's  foreign  operations
as well as a reduction in the rate at which state and local taxes were  assessed
on domestic income.

The  Company  incurred an  extraordinary  charge of $4.4  million,  net of a tax
benefit of  approximately  $2.8  million,  due to the  write-off of  unamortized
deferred financing costs related to the replaced credit facility.

Net loss for the six months ended June 30, 1998 was $137.6  million  compared to
net income of $17.6 million for the six months ended June 30, 1997.



                                        9
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Historically,   the  Company's  operations  have  been  financed  by  internally
generated funds and third-party borrowings.  Quarterly and annual operating cash
flows are  significantly  impacted by the seasonal  media  spending  patterns of
advertisers,  including the timing of payments made to media and other suppliers
on behalf of clients as well as the timing of cash  collections  from clients to
fund such  expenditures.  The Company's practice is to bill and collect from its
clients in  sufficient  time to pay the  amounts  due the  media.  Cash and cash
equivalents  were $76.8 million at June 30, 1998  compared to $160.3  million at
December  31,  1997.  Cash was used  during the six months  ended June 30,  1998
primarily to repay  long-term  debt,  including the prepayment of  approximately
$15.3 million of certain  non-negotiable  subordinated  payment  obligations  to
former employee stockholders and for capital expenditures.

On May 15, 1998,  the Company  closed the Offering.  Net proceeds to the Company
were $158.6 million,  after deducting underwriting discounts and commissions and
expenses paid by the Company in connection  with the Offering.  The Company used
the net proceeds  from the  Offering  together  with $155 million of  borrowings
under the New Facility to repay all of the outstanding borrowings under its then
existing $700 million senior secured credit facility.

Capital  expenditures  were $20 million for the six months  ended June 30, 1998.
The  Company   estimates  that  its  capital   expenditures   in  1998  will  be
approximately  $75  million for  information  technology  and certain  leasehold
improvements which will be required as a result of lease renewals.

The  Company's  net  deferred  tax assets at June 30, 1998 were  $221.4  million
consisting   primarily  of  federal,   state  and  foreign  net  operating  loss
carryforwards.  Consequently,  the Company  expects a reduction in the amount of
cash taxes paid on a worldwide basis in current and future years.

The Company  believes that cash provided by operations and funds available under
the New Facility will be sufficient to meet its anticipated cash requirements.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting  for  Derivative  Instruments  and  Hedging  Activities,"  which  is
required  to be adopted in years  beginning  after June 15,  1999.  The  Company
anticipates that the adoption of SFAS No. 133 will not have a significant effect
on the financial condition of the Company.


                                       10

<PAGE>



PART II OTHER INFORMATION

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Pursuant to the Form S-1,  which was  declared  effective  by the SEC on May 11,
1998, and a registration statement on Form S-1 (File No. 333-52395) filed by the
Company  pursuant  to Rule  462(b) of the  Securities  Act of 1933,  as  amended
(together with the Form S-1, the "Form S-1 Registration Statement"), the Company
registered  for sale  pursuant to the  Securities  Act of 1933,  as amended,  an
aggregate of  16,600,000  shares of common stock (the "Firm  Shares"),  of which
6,912,730  shares were offered by the Company and 9,687,270  shares were offered
by certain selling stockholders (the "Selling Stockholders").

Of the  16,600,000  shares of common stock  registered  pursuant to the Form S-1
Registration  Statement,  13,280,000 shares were offered initially in the United
States by the U.S. Underwriters (as defined in the Underwriting  Agreement dated
May 11, 1998 among the Company, the Selling Stockholders,  the U.S. Underwriters
named therein and the  International  Managers named therein (the  "Underwriting
Agreement")),  for whom  Donaldson,  Lufkin & Jenrette  Securities  Corporation,
Bear, Stearns & Co. Inc., Furman Selz LLC, Goldman, Sachs & Co. and Smith Barney
Inc. acted as U.S.  Representatives,  and 3,320,000  shares of common stock were
offered initially  outside the United States by the  International  Managers (as
defined in the  Underwriting  Agreement) for whom  Donaldson,  Lufkin & Jenrette
International,  Bear, Stearns  International  Limited,  Furman Selz LLC, Goldman
Sachs   International   and   Smith   Barney   Inc.   acted   as   International
Representatives.

In  addition,  pursuant  to the Form S-1  Registration  Statement,  the  Company
registered  for sale an  aggregate  of  2,490,000  shares of common  stock  (the
"Option Shares") subject to an overallotment option (the "Overallotment Option")
granted by certain  non-management Selling Stockholders to the U.S. Underwriters
to purchase up to an additional 2,490,000 shares of common stock solely to cover
overallotments,   which   Overallotment   Option  was   exercised  by  the  U.S.
Underwriters for an aggregate of 2,490,000 shares of common stock.

The  offering of the Firm Shares and Option  Shares has  terminated.  The public
offering  price of the Firm  Shares and the Option  Shares was $25.00 per share.
The closing of the sale of the Firm Shares and the Option Shares occurred on May
15,  1998.  The  aggregate  gross  proceeds  to  the  Company  and  the  Selling
Stockholders  from  the  sale of the  Firm  Shares  and the  Option  Shares  was
$477,250,000.

The Form S-1  Registration  Statement  registered  for  sale by the  Company  an
aggregate  of  6,912,730  Firm Shares at a proposed  maximum  offering  price of
$24.00 per share,  for aggregate gross proceeds (before  deducting  underwriting
discounts and commissions  and Company  expenses) of  $165,905,520.  The Company
sold an  aggregate  of  6,912,730  Firm Shares at the public  offering  price of
$25.00 per share,  for aggregate gross proceeds (before  deducting  underwriting
discounts and commissions and Company  expenses) of  $172,818,250.  The Form S-1
Registration  Statement  registered  for  sale by the  Selling  Stockholders  an
aggregate of 12,177,270  shares of common stock  (consisting  of 9,687,270  Firm
Shares and up to 2,490,000  Option Shares) at a proposed  maximum offering price
of $24.00 per share, for aggregate gross proceeds (before deducting underwriting
discounts and commissions) of  $292,254,480.  The Selling  Stockholders  sold an
aggregate of 12,177,270  shares of common stock  (consisting  of 9,687,270  Firm
Shares and 2,490,000  Option Shares) at the public  offering price of $25.00 per
share, for aggregate gross proceeds (before deducting underwriting discounts and
commissions) of $304,431,750.

The Company  incurred the  following  fees and expenses in  connection  with the
Offering  pursuant to the Form S-1  Registration  Statement:  (i)  $9,505,004 of
underwriters' discounts and commissions, (ii) $135,635 of SEC registration fees,
(iii) $30,500 of National  Association of Securities Dealers,  Inc. filing fees,
(iv) $335,023 of New York Stock  Exchange  listing fees, (v) $3,520,100 of legal
fees,  accounting  fees,  and other  professional  services and  expenses,  (vi)
$475,000 of printing and  engraving  expenses,  (vii)  $20,000 of registrar  and
transfer  agent's  fees  and  (viii)  approximately  $160,000  of  miscellaneous
expenses.

The  aggregate  net proceeds to the Company  from the Offering of the  6,912,730
Firm Shares, after deducting underwriting discounts and commissions and expenses
paid by the Company in connection with the Offering,  were $158.6  million.  The
Company used the net proceeds from the  Offering,  together with $155 million of
borrowings under the New Facility to repay outstanding borrowings under its then
existing credit facility.


                                       11
<PAGE>



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

The Annual Meeting of the  Stockholders  of the Company was held on May 8, 1998.
The Company did not solicit proxies.  The Stockholders voted on and approved the
election of the Board of  Directors in its entirety  with the  Directors  listed
below  elected  to serve as  indicated  below as Class I,  Class II or Class III
Directors,  with  terms  expiring  at  the  Annual  Meetings  of  the  Company's
Stockholders  to be held in 1999, 2000 and 2001,  respectively,  which elections
became effective upon completion of the Offering. The results of the vote of the
4,032,088  shares of common  stock voted out of the  4,102,610  shares of common
stock  and  Money  Market  Preferred Stock  that were  eligible  to vote were as
follows:

<TABLE>
<CAPTION>
                                                                    NUMBER OF SHARES
                          NAME OF DIRECTOR                       FOR              WITHHELD
                          ----------------                       ---              --------
<S>                                                            <C>                  <C>   
          F. Warren Hellman (Class I)                          4,032,088            70,522
          Alan D. Schwartz (Class I)                           4,032,088            70,522
          Edward H. Vick (Class I)                             4,032,088            70,522
          Michael J. Dolan (Class II)                          4,032,088            70,522
          Peter A. Georgescu (Class II)                        4,032,088            70,522
          Philip U. Hammarskjold (Class II)                    4,032,088            70,522
          Thomas D. Bell (Class III)                           4,032,088            70,522
          Richard S. Bodman (Class III)                        4,032,088            70,522
          John F. McGillicuddy (Class III)                     4,032,088            70,522
</TABLE>

Additionally,  the  Stockholders  voted on and  approved (i) the adoption of the
Amended and Restated  Certificate of  Incorporation  of the Company which was to
become effective immediately prior to the consummation of the Offering; (ii) the
adoption of the Amended and Restated By-Laws of the Company which were to become
effective  immediately  prior to the  consummation  of the  Offering;  (iii) the
execution,  delivery and performance by the Company of the Amended Stockholders'
Agreement  entered into among the HFCP Investors,  the Management  Investors and
the Management Voting Trust (as such terms are defined therein) and the Company,
which was to  become  effective  immediately  prior to the  consummation  of the
Offering;  (iv) the execution,  delivery and performance of the Rights Agreement
between the Company and The Bank of New York, as Rights Agent; (v) the Company's
1997 Incentive  Compensation  Plan, as amended;  and (vi) the appointment of the
firm of Price  Waterhouse  LLP as the  Company's  independent  auditors  for the
calendar  year 1998.  For all such matters voted on by the  Stockholders,  votes
representing 4,032,088 shares of common stock were cast in favor of such matters
and votes representing  70,522 shares of common stock and Money Market Preferred
Stock were withheld. All numbers of shares of common stock contained within this
item do not  reflect  the common  stock  dividend  of 14 shares of common  stock
payable  for each  share of common  stock  outstanding,  which  dividend  became
effective and was paid on May 11, 1998, subsequent to the Annual Meeting.

ITEM 5. OTHER INFORMATION

On August 4,  1998,  the  Company  announced  that its  Board of  Directors  had
approved a plan to  repurchase  up to 2,000,000  shares of common stock over the
next two years.  The shares will be repurchased by the Company from time to time
in  anticipation  of exercises of stock  options and will be reissued as options
are exercised.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

    (a) Exhibits: See Exhibit Index

    (b) Reports on Form 8-K: None.


                                       12

<PAGE>



                                   SIGNATURES

Pursuant  to the  requirements  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.


                              Young & Rubicam Inc.
                              --------------------
                                  (Registrant)

Date August 14, 1998                              /s/ Michael J. Dolan
     ---------------                              ------------------------------
                                                  Name: Michael J. Dolan
                                                  Title: Vice Chairman and
                                                         Chief Financial Officer





                                       13

<PAGE>



                                  EXHIBIT INDEX


          NUMBER                                  DESCRIPTION
          ------                                  -----------

          27.1                                    Financial Data Schedule








                                       14