--------------------------------------------------------------------------------
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                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                            ---------------------
                                    FORM 10-K

                            ---------------------
             ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                        SECURITIES EXCHANGE ACT OF 1934


FOR THE FISCAL YEAR ENDED: DECEMBER 31, 1999   COMMISSION FILE NUMBER: 001-14093



                             YOUNG & RUBICAM INC.
            (Exact name of registrant as specified in its charter)



<TABLE>
<S>                                               <C>
                    DELAWARE                                   13-1493710
-----------------------------------------------                ----------
           (State or other jurisdiction of        (I.R.S. Employer Identification No.)
            incorporation or organization)
              285 MADISON AVENUE,
                  NEW YORK, NY                                    10017
-----------------------------------------------                 ----------
     (Address of principal executive offices)                   (Zip Code)

</TABLE>

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

Securities Registered Pursuant to Section 12(b) of the Act:



<TABLE>
<S>                                                          <C>
                                                           NAME OF EACH EXCHANGE
         TITLE OF EACH CLASS                                ON WHICH REGISTERED
-------------------------------------                    ------------------------
       Common Stock, $.01 Par Value                       New York Stock Exchange

</TABLE>

Securities Registered Pursuant to Section 12(g) of the Act:      NONE

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

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

     At  March  24,  2000,   there  were  72,284,001   shares  of  Common  Stock
outstanding;  the  aggregate  market value of the voting and  non-voting  common
equity held by nonaffiliates at March 24, 2000 was approximately  $2,996,917,906
(based  upon the  closing  price of the  Common  Stock as quoted on the New York
Stock Exchange on such date).

     Indicate  the  number of  shares  outstanding  of each of the  registrant's
classes of common stock, as of the latest practicable date.



<TABLE>
<S>                                     <C>
                CLASS                   OUTSTANDING AS OF MARCH 24, 2000
-------------------------------------   ---------------------------------
       Common Stock, $.01 Par Value                72,284,001
</TABLE>

                       DOCUMENTS INCORPORATED BY REFERENCE

     Certain portions of the Registrant's definitive proxy statement relating to
its annual  meeting of  stockholders  scheduled  to be held on May 12,  2000 are
incorporated  by reference in this Form 10-K in response to Part III,  Items 10,
11, 12 and 13.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>

                             YOUNG & RUBICAM INC.
                          ---------------------------
                      INDEX TO ANNUAL REPORT ON FORM 10-K
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999





<TABLE>
<CAPTION>
                                                                                       PAGE
                                                                                      -----
<S>        <C>                                                                        <C>
PART I
Item 1.    Business .................................................................   4
Item 2.    Properties ...............................................................  10
Item 3.    Legal Proceedings ........................................................  10
Item 4.    Submission of Matters to a Vote of Security Holders ......................  10
PART II
Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters ....  11
Item 6.    Selected Financial Data ..................................................  12
Item 7.    Management's Discussion and Analysis of Financial Condition and Results of
           Operations ...............................................................  13
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk ...............  19
Item 8.    Financial Statements and Supplementary Data ..............................  19
Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial
           Disclosure ...............................................................  19
PART III
Item 10.   Directors and Executive Officers of the Registrant .......................  20
Item 11.   Executive Compensation ...................................................  20
Item 12.   Security Ownership of Certain Beneficial Owners and Management ...........  20
Item 13.   Certain Relationships and Related Transactions ...........................  20
</TABLE>

     The  information  called  for by Items 10,  11,  12 and 13 is  incorporated
herein by  reference  to the  information  to be  included  under  the  captions
"Election  of  Directors,"   "Executive  Officers,"  "Executive   Compensation,"
"Compensation of Directors" and "Security  Ownership of Principal  Stockholders,
Directors and Executive  Officers" in the Company's  definitive  proxy statement
relating  to its 2000  Annual  Meeting of  Stockholders  which is expected to be
filed by April 14, 1999.



<TABLE>
<CAPTION>
<S>        <C>                                                                       <C>
PART IV
Item 14.   Exhibits, Financial Statement Schedules, and Reports on Form 8-K ......................... 21
</TABLE>

<PAGE>

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     This  document  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  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 performance of Young & Rubicam Inc. It
is important to note that our 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 us 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)
our ability to successfully  integrate companies and businesses that we acquire,
(iv) the overall level of economic activity in the principal markets in which we
conduct business and other trends  affecting our financial  condition or results
of operations, (v) the impact of competition in the marketing and communications
industry  and  (vi) our  liquidity  and  financing  plans.  All  forward-looking
statements in this document are based on information available to us on the date
hereof.

                                        3
<PAGE>

ITEM 1. BUSINESS

     Since  our  founding  75 years  ago,  Young &  Rubicam  Inc.  ("Y&R" or the
"Company")  has evolved from a single New York-based  advertising  agency to the
sixth largest  consolidated  marketing and  communications  organization  in the
world based upon 1998 revenues.  We currently operate through  recognized market
leaders, including:

     o Young & Rubicam Advertising (full-service advertising);

     o Dentsu,  Young  &  Rubicam  (full-service advertising in the Asia/Pacific
region);

     o Y&R  2.1  (full-service  on-line  and  off-line advertising and marketing
services);

     o The   Bravo   Group   and   Kang  &  Lee  (multi-cultural  marketing  and
communications);

     o impiric  (customer  relationship  management,  direct marketing and sales
promotion);

     o KnowledgeBase Marketing (customer relationship marketing);

     o Brand Dialogue (digital interactive branding and digital commerce);

     o The Media Edge (media planning, buying and placement services);

     o The   Digital   Edge  (internet  media  planning,  buying  and  placement
services);

     o Burson-Marsteller (perception management and public relations);

     o Cohn & Wolfe (full-service public relations);

     o Robinson Lerer & Montgomery (strategic corporate public relations);

     o Landor Associates (branding consultation and design services); and

     o Sudler & Hennessey (healthcare communications).

     In late 1992,  we created the Key  Corporate  Account,  or KCA,  program to
enhance  the  coordination  of  services  sought by  clients  from both a global
coverage as well as an integrated solutions  perspective.  KCAs are large global
client accounts that, as a group,  contribute the greatest share of our revenues
and  profits,  and are  served  on a  multinational  basis by two or more of our
businesses.  Revenues  from the ten  largest  KCAs,  as a group,  accounted  for
approximately  37% of our  consolidated  revenues in 1999. As part of our client
focus, members of our senior management team retain ongoing responsibilities for
individual KCAs in addition to their managerial roles.


INDUSTRY OVERVIEW

     The  marketing  and  communications  industry  encompasses  a wide range of
services  used to  develop  and  deliver  messages  to both  broad and  targeted
audiences  through  multiple  communication   channels.  The  industry  includes
traditional  advertising  services as well as other marketing and communications
services  such as  direct  marketing  and  sales  promotion,  public  relations,
branding  consultation  and  design  services,  new  media  marketing  and other
specialized services.

     Traditional  advertising  services  include the development and planning of
marketing  and  branding  campaigns;  the  creative  design  and  production  of
advertisements;  the  planning  and buying of time and/or  space in a variety of
media,  including  broadcast and cable television,  radio,  newspapers,  general
interest/specialty magazines,  billboards and the Internet; and the provision of
consumer, product and other market research to clients on an ongoing basis.

     Customer  relationship  management,  direct  marketing and sales  promotion
incorporate  a broad range of services,  including  consulting,  direct mail and
direct response  television  advertising (using toll-free 800 numbers),  inbound
and outbound  telemarketing,  database  marketing  and online  marketing.  Sales
promotion includes the planning,  design and implementation of merchandising and
sales promotions as well as design and  implementation  of targeted  interactive
campaigns.


                                        4
<PAGE>

     Perception  management  and  public  relations  address  clients'  external
corporate or brand  positioning,  public image and  relations  with key external
constituencies.  Functions  provided by public relations firms include corporate
communications,  public affairs, lobbying, crisis management,  issue advertising
and internal, consumer grassroots communications.


     Branding  consultation and design services encompass a range of services to
create, build and revitalize clients' brands. Among these services are corporate
identity,  package  design,  retail  design  and  branded  environments,  verbal
branding  and  nomenclature   systems,   corporate  literature  and  interactive
branding.


     New media marketing services include  interactive  marketing  campaigns and
strategic consulting services, the design of Internet websites, banners and home
pages, the development of corporate intranets and digital commerce applications.


OPERATIONS


     The following  section  contains a brief  description of the Company's main
service offerings.


     Young &  Rubicam  Advertising.  Young & Rubicam  Advertising  is one of the
world's leading full-service consumer advertising  agencies,  offering expertise
in strategic and creative  development,  consumer  research and  marketing,  and
media buying and planning.  Young & Rubicam  Advertising ranks as one of the ten
largest advertising agencies based in the United States.


     Young & Rubicam  Advertising  operates in the Americas,  Europe and Africa.
Young & Rubicam Advertising services clients through the Dentsu, Young & Rubicam
Partnerships across the Asia/Pacific region.


     Dentsu,  Young  &  Rubicam  Partnerships.   The  Dentsu,  Young  &  Rubicam
Partnerships  ("DY&R") are a network of full-service  advertising  agencies that
provide  Young & Rubicam  Advertising  with access to major  markets  across the
Asia/Pacific region. DY&R was created as a joint venture between Y&R and Dentsu,
Inc.  ("Dentsu") in 1991. In 1998,  Dentsu ranked as the fifth largest marketing
and  communications  organization  in the world and the  largest  marketing  and
communications  organization based in the Asia/Pacific  region. DY&R is a series
of local  ventures in which Y&R typically  has a majority  interest in principal
markets, except in Japan in which Dentsu has a majority interest, and is jointly
managed  and  operated by Y&R and Dentsu.  To  maximize  local brand  equity and
minimize conflicts,  DY&R operates under different brand names and management in
each of its three regions -- Asia, Australia/New Zealand and the United States.


     Y&R 2.1. Y&R 2.1 integrates on-line and off-line  advertising and marketing
services in support of client brands around the world.


     The Bravo Group and Kang & Lee.  The Bravo Group  ("Bravo")  and Kang & Lee
create  multi-cultural  marketing and  communications  programs  targeted to the
fast-growing  U.S.   Hispanic  and  Asian   communities,   respectively.   Their
multi-disciplinary services include advertising,  promotion and event marketing,
public relations, research and direct marketing.


     impiric.  impiric,  formerly known as Wunderman Cato Johnson,  is a leading
behavior-driven marketing and communications company.  Behavior-driven marketing
and communications  are designed to assist clients in producing  immediate sales
and building brand and customer equity. impiric addresses its clients' marketing
objectives  through  customer  relationship   management,   consulting,   direct
marketing,   sales   promotion,   television   commercials   and   infomercials,
telemarketing,  customer  loyalty  programs,  relationship  marketing  programs,
database  development and management,  merchandising,  entertainment  and sports
marketing, lead generation and new product launches.


     Headquartered  in New  York,  impiric  operates  in  North  America,  Latin
America,  the Asia/Pacific region,  Europe, the Middle East and Africa.  impiric
also has significant database facilities in Europe and Latin America.


                                        5
<PAGE>

     KnowledgeBase Marketing. KnowledgeBase Marketing ("KBM") is a single source
provider of integrated  information-based  marketing  solutions to businesses in
targeted high-growth industries.  KBM delivers its integrated business solutions
services by creating consolidated  databases,  and then designing,  implementing
and  evaluating  database  marketing  programs for clients.  KBM's  capabilities
include data warehousing,  data mining,  information services and data analysis.
Y&R acquired KBM in May 1999.


     Brand Dialogue.  Brand Dialogue specializes in digital interactive branding
and  digital  commerce.  Brand  Dialogue's  primary  offerings  consist  of  web
advertising, including the design, creation and production of websites, banners,
home  pages  and   comprehensive   interactive   campaigns;   digital   commerce
applications;  the development of corporate intranets to improve  communications
and  productivity  within  and among a defined  set of  users;  and  interactive
marketing consulting services.


     The Media Edge. The Media Edge provides  integrated media planning,  buying
and  placement  services for both Young & Rubicam  Advertising  and impiric.  In
addition,  The Media Edge provides  planning and buying of both  traditional and
direct response media, and offers a range of  media-related  services to clients
other  than  those of Young & Rubicam  Advertising  and  impiric,  as well as to
smaller independent advertising and communications agencies.


     The Digital Edge. The Digital Edge provides internet media planning, buying
and  placement  services  on behalf  of  clients  of The Media  Edge and its own
clients. It provides services for clients' digital  convergence,  e-commerce and
technology activities.  In addition to internet opportunities,  The Digital Edge
provides  clients  with  resources  in areas  such as  addressable  advertising,
information-enhanced television programming and video-on-demand.


     Burson-Marsteller.  Burson-Marsteller  is a leading perception  management,
public relations and public affairs company.  It provides a comprehensive  range
of perception management capabilities to its clients, including issues analysis,
crisis  management,  consumer and business  marketing  and  research,  corporate
communications,  investor relations and public affairs advocacy.  The perception
management  process begins with a statement of the desired  business results and
then  identifies  current  and  targeted  perceptions,   as  well  as  different
approaches to create the desired mindset with key audiences.


     Burson-Marsteller  is  headquartered in New York and operates in the United
States, Latin America, the Asia/Pacific region and Europe.


     Cohn & Wolfe.  Cohn & Wolfe is a  full-service  public  relations firm that
provides creative,  results-driven  services to its clients.  Cohn & Wolfe helps
its clients establish and communicate  corporate and brand identity,  launch new
products and expand sales. Areas of expertise include consumer marketing, sports
publicity and issues management,  as well as healthcare,  information technology
and business-to-business communications.


     Cohn  &  Wolfe was founded in 1970 and was acquired by Burson-Marsteller in
1984. Cohn & Wolfe operates in North America, Europe and Australia.


     Robinson  Lerer  &  Montgomery.   Robinson   Lerer  &  Montgomery   ("RLM")
specializes  in working with the senior  management  of companies to develop and
implement  strategies  for  corporate  image-building,  financial  transactions,
crisis management,  litigation support and media and investor programs.  RLM was
founded in 1986 and was acquired by Y&R in March 2000.


     Landor  Associates.  Landor  Associates  ("Landor")  is a leading  branding
consultancy and strategic  design firm.  Landor creates,  builds and revitalizes
clients' brands and helps position these brands for continued success.  Landor's
branding and identity  consultants,  designers and researchers work with clients
on a full range of branding and identity projects, including corporate identity,
packaging and brand identity  systems,  retail design and branded  environments,
interactive  branding  and design,  verbal  branding and  nomenclature  systems,
corporate literature, brand extensions and new brand development.


                                        6
<PAGE>

     Landor  was  founded  in 1941 and was  acquired  by Y&R in 1989.  Landor is
headquartered  in San Francisco and operates in the Americas,  Asia/Pacific  and
Australia,  Europe and the Middle East, including  multidisciplinary  consulting
and design studios in New York, Seattle,  Mexico City, Hamburg,  London,  Paris,
Hong Kong and Tokyo.

     Sudler &  Hennessey.  Sudler &  Hennessey  ("S&H") is a leading  healthcare
communications firm that develops strategic promotional and educational programs
for a wide  spectrum  of  healthcare  brands.  S&H creates  advertising,  direct
marketing   and   sales   promotion   programs   for   prescription   drugs  and
over-the-counter  medications.  In addition,  S&H provides strategic consultancy
and  communications  support in the areas of managed care,  medical  devices and
equipment, nutrition, veterinary medicine and general healthcare. Communications
programs produced by S&H on behalf of its largely pharmaceutical industry client
base  are  directed  to a wide  range  of  healthcare  professionals  as well as
patients and their support networks.

     S&H  was  founded  in  1941  and  was  acquired  by  Y&R  in  1973.  S&H is
headquartered  in New  York  and  operates  in  North  America,  Europe  and the
Asia/Pacific region.


CLIENTS

     We represent clients in various industries,  including automotive, consumer
packaged goods,  financial services,  food and beverages,  government  services,
telecommunications  and the  internet.  Among  our  approximately  5,500  client
accounts  are a number of large  multinational  organizations,  including  AT&T,
Citibank, Colgate-Palmolive, Ford Motor Company, Philip Morris and Sony. Our ten
largest clients  accounted for  approximately  37% of  consolidated  revenues in
1999; our three largest clients  accounted for approximately 22% of consolidated
revenues in 1999 and our  largest  client,  Ford Motor  Company,  accounted  for
approximately 13% of consolidated revenues in 1999.


OTHER INFORMATION

     For information  concerning revenues and assets on a geographical basis for
each of the  last  three  years,  reference  is  made  to Note 10 --  "Worldwide
Operations" of the Notes to the Consolidated  Financial  Statements beginning on
page F-1.


DEVELOPMENTS IN 1999

     The Company completed secondary public offerings of Common Stock on May 28,
1999  pursuant  to which  certain  selling  stockholders  sold an  aggregate  of
17,250,000  shares of Common  Stock to the  public,  and on  November  23,  1999
pursuant to which certain  selling  stockholders  sold an aggregate of 5,515,443
shares of Common Stock to the public.

     The Company did not receive any proceeds  from the sale of shares of Common
Stock by the selling stockholders in either of such offerings.


COMPETITION

     The marketing and  communications  industry is highly  competitive,  and we
expect it to remain so. Our principal  competitors  in the  advertising,  direct
marketing and perception  management and public  relations  businesses are large
multinational  marketing  and  communications  companies,  as well  as  numerous
smaller  agencies  that  operate  only in the  United  States  or in one or more
countries  or local  markets.  We must compete  with these other  companies  and
agencies to maintain existing client relationships and to obtain new clients and
assignments.  Some clients, such as U.S. governmental agencies, require agencies
to compete for business at mandatory periodic intervals.  We compete principally
on the basis of the following factors:

     o creative reputation;

     o knowledge of media;

     o quality and breadth of services;

                                        7
<PAGE>

     o geographical coverage and diversity;

     o relationships with clients; and

     o financial controls.

     Recently,  traditional  advertising  agencies also have been competing with
major  consulting   firms  that  have  developed   practices  in  marketing  and
communications.  New competitors also include smaller  companies such as systems
integrators, database marketing and modeling companies and telemarketers,  which
offer  technological  solutions to marketing and communications  issues faced by
clients.  In  addition,  the trend  towards  consolidation  of  global  accounts
requires companies seeking to compete effectively in the international marketing
and communications industry to make significant  investments.  These investments
include  additional  offices and personnel around the world and new and improved
technology for linking these offices and people.

     United States clients  typically may cancel contracts with agencies upon 90
days' notice,  and non-U.S.  clients  typically  also may cancel  contracts with
agencies on 90 to 180 days' notice.  In addition,  clients generally remain able
to move from one agency to another with relative ease.  However, we believe that
clients may find it  increasingly  difficult  to  terminate  relationships  with
agencies that represent their brands on a global basis because of the complexity
of coordinating  creative,  media and non-media  services.  As is typical in the
marketing and communications  industry, we have lost or resigned client accounts
and  assignments,  including The Clorox  Company and  Blockbuster  Video,  for a
variety of reasons,  including  conflicts with newly acquired clients.  Although
typically we have replaced these losses with new clients and assignments, we may
not be  successful  in  replacing  clients  that may leave  Y&R or in  replacing
revenues when a client significantly  reduces the amount of work given to Y&R. A
significant  reduction in the marketing and  communications  spending by, or the
loss of,  one or more of our  largest  clients,  if not  replaced  by new client
accounts or an increase in business from existing clients, would have a material
adverse effect on our prospects,  business,  financial  condition and results of
operations.

     When we represent a client, we do not always handle all advertising, public
relations or other marketing and communications  services for that client.  Many
large  multinational  companies  are served by a number of  agencies  within the
marketing  and  communications  industry.  In many cases,  clients'  policies on
conflicts of interest or desires to be served by multiple agencies result in one
or more global agency  networks  representing a client only for a portion of its
marketing and  communications  needs or only in particular  geographic areas. In
addition,   the  ability  of  agencies  within   marketing  and   communications
organizations  to acquire new clients or  additional  assignments  from existing
clients may be limited by the conflicts  policy  followed by many clients.  This
conflicts policy typically  prohibits  agencies from performing similar services
for competing products or companies. Our principal international competitors are
holding  companies for more than one global  advertising  agency  network.  As a
result,  in some  situations,  separate  agency  networks  within these  holding
companies may be able to perform services for competing products or for products
of  competing  companies.   We  have  one  global  advertising  agency  network.
Accordingly,  our ability to compete for new advertising  assignments  and, to a
lesser extent, other marketing and communications assignments, may be limited by
these conflicts policies.

     Industry  practices  in other  areas of the  marketing  and  communications
business reflect similar concerns with respect to client relationships.


REGULATION

     The  regulation of advertising  takes several forms.  The primary source of
governmental  regulation in the United  States is the Federal  Trade  Commission
("FTC") which is charged with  administering  the Federal Trade  Commission  Act
(the "FTC Act").  The FTC Act covers a wide range of practices  involving false,
misleading and unfair advertising. In the event of violations of federal laws or
regulations,  the FTC may seek cease and  desist  orders,  may  impose  monetary
penalties   and  may  require  other   remedies.   The  Federal  Food  and  Drug
Administration, the Federal Communications


                                        8
<PAGE>

Commission  and other agencies also have  regulatory  authority that affects the
advertising business. In addition, many state and local governments have adopted
laws  and  regulations  similar  in  scope  to the FTC  Act and the  regulations
thereunder.

     Self-regulatory  activities  have  become  significant  in the  advertising
business.  The Council of Better  Business  Bureaus  has  created  the  National
Advertising Division and the National Advertising Review Board, which review and
process possible violations of proper business conduct through advertising.  The
national  television  networks and various other media have also adopted  strict
and extensive  regulations  governing the advertising  that they will accept for
broadcast or  publication.  Trade  associations  in certain  industries  publish
advertising  guidelines  for their  members and, in addition,  various  consumer
groups have been and continue to be powerful  advocates of increased  regulation
of advertising.

     Advertising  is also  subject to  regulation  in  countries  other than the
United  States in which we and our  affiliates  do business.  We have  developed
internal review procedures to help ensure that our work product, as well as that
of our affiliates,  is in compliance with standards of accuracy, fair disclosure
and ethical proprieties, including those established by federal, state and local
laws and regulations and the pre-clearance procedures of the broadcast media.

     In addition, as an international organization we are subject to the Foreign
Corrupt  Practices  Act, which imposes civil and criminal fines and penalties on
companies and individuals that violate its anti-bribery and other provisions.


EMPLOYEES

     We are highly  dependent upon the skills of our creative,  research,  media
and account personnel and practice group  specialists,  and their  relationships
with our clients.  Employees  generally are not subject to employment  contracts
and are,  therefore,  typically  able to move within the industry  with relative
ease.  Competition among the Company and its competitors for qualified personnel
is substantial,  and the Company, like its principal competitors,  is vulnerable
to the potentially  adverse  consequences that would arise from the inability to
attract or retain qualified  personnel.  We have approximately  15,000 employees
(including  part-time  employees)  worldwide,   including   approximately  6,000
employed in the United States.  Our U.S. employees are not covered by collective
bargaining  agreements.  We  believe  that  our  relations  with  employees  are
satisfactory.


                                        9
<PAGE>

ITEM 2. PROPERTIES

     We own our  headquarters  office building at 285 Madison Avenue,  New York,
New York. We lease other  offices and space for our  facilities in New York City
and  elsewhere  throughout  the world.  The  following  table sets forth certain
information relating to our principal properties:





<TABLE>
<CAPTION>
                                                                                        APPROXIMATE
                                                                                          SQUARE       LEASE
          LOCATION                                      USE                               FOOTAGE    EXPIRATION
---------------------------- --------------------------------------------------------- ------------ -----------
<S>                          <C>                                                       <C>          <C>
285 Madison Avenue (owned)   Young & Rubicam Advertising, impiric, Brand Dialogue        370,000        N/A
 New York, New York          and corporate headquarters
230 Park Avenue South        Burson-Marsteller, Bravo, Landor and impiric                340,500      1/22/06
 New York, New York
Gallus Park                  Young & Rubicam Advertising, impiric, Burson-Marsteller     154,000      4/26/04
 Frankfurt, Germany          and Sudler & Hennessey
825 Seventh Avenue           The Media Edge                                              111,832      1/31/10
 New York, New York
550 Town Center Drive        Young & Rubicam Advertising, Burson-Marsteller and           60,678      1/31/10
 Dearborn, Michigan          impiric
675 Avenue of the Americas   Impiric                                                      92,500      6/30/03
 New York, New York
Greater London House         Young & Rubicam Advertising, impiric and Sudler &            80,000      5/31/13
 London, U.K.                Hennessey
295 Madison Avenue           Young & Rubicam Advertising                                  65,821      1/22/06
 New York, New York
49-59 Avenue Andre Morizet   Young & Rubicam Advertising and impiric                      65,000      3/30/08
 Paris, France
100 First Plaza              Young & Rubicam Advertising, impiric, Burson-Marsteller      73,000      4/30/03
 San Francisco, California   and Bravo
Two Illinois Center          Young & Rubicam Advertising, impiric, Burson-Marsteller     122,000     11/30/11
 233 North Michigan          and Cohn & Wolfe
 Avenue
 Chicago, Illinois
1801 K Street NW             Burson-Marsteller and Cohn & Wolfe                           60,000     10/31/06
 Washington, D.C.
701 North Plano Road         KnowledgeBase Marketing                                      58,596      2/28/01
 Richardson, Texas
1001 Front Street            Landor                                                       70,000      5/31/08
 San Francisco, California
60 Bloor Street West         Young & Rubicam Advertising, impiric and Sudler &            65,000      8/31/07
 Toronto, Canada             Hennessey
7535 Irvine Center Drive     Young & Rubicam Advertising and impiric                      53,794     12/14/09
 Irvine, California
</TABLE>

ITEM 3. LEGAL PROCEEDINGS

     We are  involved  from time to time in  various  claims  and legal  actions
incident to our operations,  both as plaintiff and defendant.  In the opinion of
management,  these existing claims, in the aggregate, are not expected to have a
material adverse effect on the Company.


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

     No matters  were  submitted to a vote of security  holders  during the last
quarter of 1999.

                                       10
<PAGE>

                                     PART II


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

     The Company's  Common Stock is listed on the New York Stock  Exchange under
the symbol  "YNR." The table below shows the range of reported  last sale prices
on the New York Stock Exchange Composite Tape for the Company's Common Stock for
the periods indicated and dividends paid during such periods;  the reported last
sale  price on March 24,  1999 was  $49.25.  As of March 24,  1999,  there  were
approximately 1,038 holders of record of Common Stock.





<TABLE>
<CAPTION>
                                                      DIVIDENDS PAID PER SHARE
                                 HIGH        LOW          OF COMMON STOCK
                             ----------- ----------- -------------------------
<S>                          <C>         <C>         <C>
  1998
  Second Quarter (commencing
  May 12, 1998) ............ $ 33.06     $ 26.50                   --
  Third Quarter ............  35.88       28.38                    --
  Fourth Quarter ...........  33.63       19.75                    --
  1999
  First Quarter ............ $ 43.31     $ 31.25                   --
  Second Quarter ...........  44.38       37.25               $  .025
  Third Quarter ............  48.25       39.69                  .025
  Fourth Quarter ...........  73.25       43.00                  .025
</TABLE>

     On March 15, 2000,  Y&R paid a quarterly cash dividend of $0.025 per common
share to all stockholders of record as of March 1, 2000. The decision whether to
apply legally available funds to the payment of dividends on the Common Stock in
the future will be made at the  discretion  of the Board of  Directors  and will
depend  upon,  among  other  factors,  our  results  of  operations,   financial
condition,  capital  requirements and contractual  restrictions under our credit
facilities.  Our credit facilities contain financial and operating  restrictions
and covenant requirements and permit the payment of cash dividends except in the
event of a  continuing  default  under the  credit  agreements  governing  those
facilities.

                                       11
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

     The following selected financial data set forth below has been derived from
and should be read in conjunction  with Young & Rubicam  Inc.'s ("Y&R")  audited
consolidated financial statements and notes thereto (the "consolidated financial
statements") and Management's Discussion and Analysis of Financial Condition and
Results of Operations presented herein.


SELECTED STATEMENT OF OPERATIONS IS AS FOLLOWS:





<TABLE>
<CAPTION>
                                                                         YEAR ENDED DECEMBER 31
                                              ----------------------------------------------------------------------------
                                                    1999            1998           1997           1996           1995
                                              ---------------- -------------- -------------- -------------- --------------
<S>                                           <C>              <C>            <C>            <C>            <C>
(in thousands)
Revenues ....................................   $  1,717,186    $ 1,522,464    $ 1,382,740    $ 1,222,139    $ 1,085,494
Compensation expense, including
 employee benefits (1) ......................        994,119        903,948        836,150        730,261        672,026
General and administrative expenses (1) .....        514,981        455,578        463,936        391,617        356,523
Other operating charges (1) .................             --        234,449         11,925         17,166         31,465
Recapitalization-related charges (2) ........             --             --             --        315,397             --
                                                ------------    -----------    -----------    -----------    -----------
Operating expenses ..........................      1,509,100      1,593,975      1,312,011      1,454,441      1,060,014
                                                ------------    -----------    -----------    -----------    -----------
Operating profit (loss) .....................        208,086        (71,511)        70,729       (232,302)        25,480
Income (loss) before extraordinary charge.           167,099        (81,635)       (23,938)      (238,311)           820
Net income (loss) (3) .......................        167,099        (86,068)       (23,938)      (238,311)           820
Earnings (loss) per share (3):
 Basic:
   Income (loss) before extraordinary
    charge ..................................   $       2.43    $     (1.34)   $     (0.51)
   Extraordinary charge .....................             --          (0.08)            --
                                                ------------    -----------    -----------
   Net income (loss) ........................   $       2.43    $     (1.42)   $     (0.51)
                                                ------------    -----------    -----------
 Diluted:
   Income (loss) before extraordinary
    charge ..................................   $       2.02    $     (1.34)   $     (0.51)
   Extraordinary charge .....................             --          (0.08)            --
                                                ------------    -----------    -----------
   Net income (loss) ........................   $       2.02    $     (1.42)   $     (0.51)
                                                ============    ===========    ===========
Weighted average shares outstanding used to compute:
 Basic ......................................     68,688,848     60,673,994     46,949,355
                                                ============    ===========    ===========
 Diluted ....................................     82,871,725     60,673,994     46,949,355
                                                ============    ===========    ===========

</TABLE>

------------------
(1) For a discussion  of charges  included in  compensation  expense,  including
    employee benefits,  general and administrative expenses, and other operating
    charges,  see "Management's  Discussion and Analysis of Financial  Condition
    and Results of Operations" under the heading "Results of Operations."

(2) Represents   charges,   primarily  related  to  compensation,   recorded  in
    connection with Y&R's recapitalization in 1996 (the "Recapitalization").

(3) Net income in 1999 includes the aggregate  after-tax effect of approximately
    $51 million ($0.62 per share) in connection  with the net gain recognized on
    the sale of certain  assets of Brand  Dialogue in exchange  for an ownership
    interest in Luminant  Worldwide  Corporation  and  additional  consideration
    received  as a result of  achieving  certain  revenue and  operating  profit
    performance  targets of the Brand Dialogue  contributed  assets. Net loss in
    1998  includes  an  extraordinary  loss  on the  retirement  of debt of $4.4
    million  ($0.08 per share).  Earnings  per share for 1996 and 1995 cannot be
    computed  because  Y&R's  capital  structure  prior to its  Recapitalization
    consisted of both common stock and limited  partnership units in predecessor
    entities.


                                       12
<PAGE>

SELECTED BALANCE SHEET DATA





<TABLE>
<CAPTION>
                                                                              DECEMBER 31
                                                ------------------------------------------------------------------------
                                                    1999           1998           1997           1996           1995
                                                ------------   ------------   ------------   ------------   ------------
<S>                                             <C>            <C>            <C>            <C>            <C>
(in thousands)
Cash and cash equivalents ...................    $  144,517     $  122,138     $  160,263     $  110,180     $   21,646
Total assets ................................     2,414,281      1,635,119      1,537,807      1,598,812      1,226,581
Total debt ..................................       159,278         63,925        351,051        267,238        230,831
Mandatorily redeemable equity securities.....            --             --        508,471        363,264             --
Total stockholders' equity (deficit) ........       424,180        115,497       (661,714)      (480,033)        55,485
</TABLE>

ITEM  7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

     The  following   discussion   should  be  read  in  conjunction   with  the
Consolidated Financial Statements beginning on page F-1.


RESULTS OF OPERATIONS

     The  following  table sets forth,  for the years  indicated,  certain items
derived from our  consolidated  statements of operations and the  percentages of
revenue  represented  by such  items.  References  to years  are to years  ended
December 31. Totals may not add due to rounding.





<TABLE>
<CAPTION>
                                                           % OF                       % OF                        % OF
(IN MILLIONS)                                 1999       REVENUES       1998        REVENUES        1997        REVENUES
                                         -------------- ---------- -------------- ------------ -------------- -----------
<S>                                      <C>            <C>        <C>            <C>          <C>            <C>
Revenues ............................... $  1,717.2     100.0%     $  1,522.5      100.0%      $  1,382.7      100.0%
Compensation expense, including
 employee benefits .....................      994.1      57.9%          903.9       59.4%           836.2        60.5%
General and administrative expenses.....      515.0      30.0%          455.6       29.9%           463.9        33.6%
Other operating charges ................         --        --           234.4       15.4%            11.9         0.9%
                                         ----------     ------     ----------      ------      ----------      -------
Operating profit (loss) ................      208.1      12.1%          (71.5)      (4.7%)           70.7         5.1%
Net income (loss) ...................... $    167.1       9.7%     $    (86.1)      (5.7%)     $    (23.9)       (1.7%)
                                         ==========     ======     ==========      ======      ==========      =======
</TABLE>

1999 COMPARED TO 1998

     Revenues  for 1999  increased  by $194.7  million,  or 12.8%,  to  $1,717.2
million compared to 1998. Organic worldwide revenue growth, excluding the effect
of acquisitions and foreign currency  fluctuations,  was 10.4% due to the growth
of existing businesses, including net new business gains and net higher spending
from existing clients. Acquisitions contributed 5.0% of revenue growth, or $82.2
million.  Domestic revenues increased by 16.0%, or 11.7% excluding acquisitions,
to $899.8 million for 1999 compared to 1998. International revenues increased by
9.5% to $817.4 million.  Excluding the effect of foreign  currency  fluctuations
and  acquisitions,  international  revenues  increased 9.1% for 1999 compared to
1998.

     Compensation  expense increased by $90.2 million to $994.1 million for 1999
compared to 1998.  This  increase in  compensation  expense was primarily due to
additional  salary expense to support an increased revenue base and compensation
expense  attributable to acquired  entities,  partially  offset by the favorable
impact of a decrease  in employee  benefit  expenses  as a  percentage  of total
compensation. Compensation expense in 1999 decreased as a percentage of revenues
to 57.9% from 59.4% in 1998,  principally  reflecting  the  savings in  employee
benefit   expenses  as  a  percentage  of  total   compensation,   and  improved
productivity.

     General and  administrative  expenses  increased by $59.4 million to $515.0
million for 1999 compared to 1998. This increase was primarily due to additional
operating expenses to support revenue growth, amortization of goodwill and other
intangible assets  attributable to acquired entities and incremental  facilities
costs  associated  with the  expansion and  relocation  of certain  domestic and
international offices, partially offset by ongoing cost containment initiatives.
General and  administrative  expenses for 1999 as a percentage  of revenues were
30.0% as compared to 29.9% for 1998.


                                       13
<PAGE>

     Operating  profit was $208.1  million  for 1999.  As a result of the $234.4
million of other operating  charges  associated with our initial public offering
in 1998,  operating  loss was  $71.5  million  for  1998.  Excluding  the  other
operating charges in 1998,  operating profit increased $45.1 million,  or 27.7%,
in 1999  compared to 1998.  This  increase was primarily due to net new business
gains in 1999 combined with improved  operating  margins.  The operating  profit
margin for 1999 was 12.1%, a 140 basis point  improvement  over 1998,  excluding
the effect of the other operating charges.


     Net interest  expense  decreased by $2.8 million to $14.8  million for 1999
compared to 1998.  The decline was  principally  due to lower average  borrowing
rates during 1999 compared to 1998.


     Other income of $85.0 million in 1999  represented  the net pre-tax gain on
the sale of certain assets of our Brand  Dialogue  operations in exchange for an
ownership interest in Luminant Worldwide Corporation ("Luminant") and additional
consideration  received in the fourth  quarter of 1999 as a result of  achieving
revenue  and  operating  profit  performance   targets  of  the  Brand  Dialogue
contributed assets.


     Income tax  expense was $111.3  million for 1999  compared to an income tax
benefit  of $2.6  million  for 1998.  In 1998,  an income  tax  benefit of $64.6
million  was  attributable  to the other  operating  charges  of $234.4  million
incurred in  connection  with our initial  public  offering  and  reflected  the
anticipated  federal,  state  and  foreign  tax  effect of these  charges  after
consideration of valuation allowances for certain non-U.S. deductions, partially
offset by income tax expense of $62.0  million.  The effective tax rate for 1999
was 40.0% compared to 42.0% in 1998,  after  excluding the benefit  derived from
the other  operating  charges.  The decrease in the  effective tax rate resulted
from  various  tax  planning  initiatives  and a  shift  in  foreign  income  to
jurisdictions taxed at rates lower than the U.S. statutory rate.


     Equity in net income of unconsolidated affiliates was $4.5 million for 1999
compared to $4.7 million in 1998, reflecting improved operating results of these
companies  offset by the effect of the step up to majority  ownership in Dentsu,
Young &  Rubicam  companies  throughout  principal  markets  in  Asia,  with the
exception of Japan, resulting in the consolidation of these entities from August
2, 1999.


     Minority interest in net income of consolidated  companies was $4.3 million
for 1999 compared to $2.0 million in 1998,  primarily  reflecting  the effect of
the acquisition on August 2, 1999 of incremental  ownership interests in Dentsu,
Young &  Rubicam  companies  throughout  principal  markets  in  Asia,  with the
exception of Japan.


     In 1998, we incurred an extraordinary  charge of $4.4 million, net of a tax
benefit of $2.8 million,  due to the write-off of unamortized deferred financing
costs related to a previous credit facility.


     Net income for 1999 was $167.1 million.  As a result of the other operating
charges  incurred in connection  with our initial  public  offering in 1998, net
loss was $86.1 million for 1998.  Excluding the other operating  charges in 1998
of  $234.4  million  and other  income  of $85.0  million  in 1999,  net  income
increased  $32.3 million,  or 38.5%, in 1999 compared to 1998. This increase was
principally  due to revenue growth,  acquisition  activity,  improved  operating
margins, lower net borrowing costs and a reduced effective tax rate.


1998 COMPARED TO 1997


     Revenues  for 1998  increased  by $139.8  million,  or 10.1%,  to  $1,522.5
million compared to 1997. Organic worldwide revenue growth, excluding the effect
of acquisitions  and foreign currency  fluctuations,  was 12.2% due to growth of
existing  businesses,  including net new business gains and net higher  spending
from existing clients.  Domestic  revenues  increased by 17.3% to $775.7 million
for 1998 compared to 1997.  International  revenues  increased by 3.5% to $746.8
million.  Excluding the effect of foreign currency  fluctuations,  international
revenues increased 7.9% for 1998 compared to 1997.


                                       14
<PAGE>

     Compensation  expense increased by $67.7 million to $903.9 million for 1998
compared to 1997. The growth in compensation expense was primarily  attributable
to  additional  staffing  to  support  business  growth  and  salary  increases.
Compensation  expense in 1997 also included a $12.3 million charge primarily for
deferred compensation awards granted to senior executives.  Excluding the effect
of the 1997 deferred compensation awards, compensation expense in 1998 decreased
as a percentage of revenues to 59.4% from 59.6% in 1997.


     General and  administrative  expenses  decreased  by $8.3 million to $455.6
million for 1998  compared to 1997.  This  decrease was primarily due to a $25.5
million write-off in 1997 of accounts receivable,  costs billable to clients and
other capitalized costs with respect to the operations of  Burson-Marsteller  in
Europe and Asia,  which was  partially  offset in 1998 by  additional  operating
expenses   to   support   business   growth.   Excluding   the   effect  of  the
Burson-Marsteller   write-off,  general  and  administrative  expenses  in  1998
decreased as a percentage of revenues to 29.9% from 31.7% in 1997.


     Effective upon the  completion of our initial  public  offering in 1998, we
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.  In 1997, we
recognized  $11.9  million  of  other  operating   charges  for  non-cash  asset
impairment  write-downs  principally related to operations in the United States,
Africa, Latin America and Europe.


     As a result of the $234.4  million in other  operating  charges in 1998, we
reported  an  operating  loss of $71.5  million  for 1998.  Excluding  the other
operating   charges   described   above  for  both   1998  and  1997,   and  the
Burson-Marsteller  write-off and deferred compensation charge in 1997, operating
profit in 1998 increased by $42.4 million, or 35.2%, compared to 1997.


     Net interest  expense  decreased by $16.7 million to $17.7 million for 1998
compared  to 1997.  The decline was due to lower  average  borrowing  levels and
lower average borrowing rates during 1998 compared to 1997.


     We  recognized  an income tax benefit of $2.6 million for 1998  compared to
income tax expense of $58.3 million for 1997.  Included in 1998 is an income tax
benefit of $64.6 million  attributable to the other operating  charges of $234.4
million  described  above,  which reflects the  anticipated  federal,  state and
foreign tax effect of these charges after consideration of valuation  allowances
for certain non-U.S.  deductions. The effective income tax rate was a benefit of
3.0% for 1998.  Excluding the benefit derived from the other operating  charges,
the effective  tax rate was 42% for 1998, a decrease  from the 160.6%  effective
tax rate for  1997.  The  effective  tax rate in 1997  includes  the  effect  of
incremental  foreign taxes arising from losses outside the United States,  which
provided little or no tax benefit.


     Equity in net income of unconsolidated affiliates was $4.7 million for 1998
compared  to $0.3  million  in 1997,  reflecting  improved  worldwide  operating
results by advertising agency affiliates.


     Minority interest in net income of consolidated  companies was $2.0 million
for 1998 compared to $2.3 million in 1997,  primarily due to lower earnings from
a Latin American operation.


     We incurred an  extraordinary  charge of $4.4 million in 1998, which is net
of a tax benefit of $2.8 million,  due to the write-off of unamortized  deferred
financing  costs related to a credit  facility which was replaced in May 1998 in
connection with our initial public offering.


     Net loss for 1998 was $86.1 million compared to a net loss of $23.9 million
for  1997.  Excluding  the  after-tax  effect  of the  other  operating  charges
associated  with our initial  public  offering and the  extraordinary  charge in
1998, and the other operating charges, the  Burson-Marsteller  write-off and the
deferred  compensation  charge in 1997, net income increased by $86.3 million in
1998 compared to 1997. This increase was primarily the result of revenue growth,
improved  operating  margins,  lower net borrowing costs and a reduced effective
tax rate.


                                       15
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

     We   generally   finance  our  working   capital,   capital   expenditures,
acquisitions  and equity  repurchases  from cash generated  from  operations and
third-party borrowings.

     Cash and cash  equivalents  were  $144.5  million  and  $122.1  million  at
December 31, 1999 and 1998, respectively.  Cash provided by operating activities
in 1999 was  $326.9  million  compared  to $195.6  million  in 1998,  reflecting
revenue and net income  growth,  improved  operating  margins and a  significant
improvement  in  working  investment.  Operating  cash  flows are  significantly
impacted by 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 these  expenditures.
Our  practice,  where  possible,  is to bill and  collect  from our  clients  in
sufficient time to pay the amounts due the media.

     Free cash flow,  which is defined as cash provided by operating  activities
less capital expenditures,  totaled $240.8 million in 1999, a 100% increase from
1998.

     Cash used in investing  activities in 1999 was $301.3  million and included
$86.2 million in capital  expenditures  and $216.1 million for  investments  and
acquisitions,  net of cash acquired.  In 1998, cash used in investing activities
was  $99.7  million,   principally   consisting  of  $76.4  million  in  capital
expenditures.  The majority of capital  expenditures  in 1999 were for leasehold
improvements  and information  technology-related  purchases.  Acquisitions  and
investments in 1999 included the purchase of KnowledgeBase Marketing,  Inc., the
contribution of cash and certain net assets of our Brand Dialogue  operations in
exchange for an ownership  interest in Luminant,  the purchase of an incremental
ownership interest in the Dentsu, Young & Rubicam companies throughout principal
markets  in  Asia,   with  the   exception  of  Japan,   and  an  investment  in
DigitalConvergence.com Inc.

     Cash provided by financing activities in 1999 was $8.6 million and included
net borrowings of $127.1  million.  In 1998,  our Board of Directors  approved a
plan to repurchase an aggregate of up to 8.0 million  shares of our common stock
in the open market or in private  transactions.  In 1999, our Board of Directors
approved an increase of 4.0 million  shares to our authorized  share  repurchase
program,  bringing the total shares we can repurchase  through August 2001 under
the repurchase program to 12.0 million.  During 1999, we repurchased 3.5 million
shares of our common  stock on the open market and in other  transactions  at an
average price of $41.70 per share for an aggregate cost of $146.0 million.  From
January  1,  2000  through  March  15,  2000,  we   repurchased   an  additional
approximately  1.7 million  shares of common stock at an average price of $51.15
per share on the open market and in other transactions. This brings the total to
7.1 million shares repurchased under our authorized repurchase program. In 1998,
cash used in financing  activities was $136.2 million,  reflecting the repayment
of our previous credit  facility,  offset in part by the proceeds  received from
the consummation of our initial public offering and borrowings under our current
credit facility.

     During  1999,  we  increased  our  borrowing  capacity by entering  into an
additional  $200  million  credit  facility.   At  December  31,  1999,  we  had
approximately  $123.5  million in outstanding  indebtedness  under our aggregate
$600 million  credit  facilities.  We expect to fund  payments of principal  and
interest under these credit  facilities  with cash from  operations.  During the
first quarter of 1999, all interest rate protection  agreements to which we were
party either matured or were retired.  Accordingly, at December 31, 1999, we had
no such agreements outstanding.

     Our credit  facilities  contain  financial and operating  restrictions  and
covenant  requirements,  including  maximum  leverage ratio and minimum interest
coverage  requirements,  and permit the payment of cash dividends  except in the
event of a continuing  default  under the credit  agreements.  On June 15, 1999,
September 15, 1999 and December 15, 1999,  we paid a quarterly  cash dividend of
$0.025  per share of common  stock to all  shareholders  of record as of June 1,
1999,  September  1, 1999 and  December  1, 1999,  respectively.  The payment of
additional  dividends  in the future will be at the  discretion  of our Board of
Directors and will depend upon, among other factors,  our results of operations,
financial condition,  capital  requirements and contractual  restrictions in our
credit facilities.

     On January 20, 2000,  we completed  the  placement of $287.5  million of 3%
convertible  subordinated  notes due  January  15,  2005.  At the  option of the
holder, the notes are convertible into


                                       16
<PAGE>

shares of our common stock at a conversion price of $73.36 per share, subject to
adjustment.  We used the net proceeds of the offering to repay  outstanding debt
under our existing bank credit facilities and to fund operations.

     We may,  from time to time,  pursue  acquisition  opportunities  that would
strengthen or enhance  existing  capabilities or expand the geographic  scope of
our operations.

     At December  31,  1999,  our net  deferred  tax assets  were $85.2  million
consisting   primarily  of  federal,   state  and  foreign  net  operating  loss
carryforwards  and deferred tax assets resulting from prior period  compensation
payments made in  connection  with our initial  public  offering in 1998 and our
recapitalization  in 1996,  partially offset by deferred tax liabilities related
to the Luminant net gain and unrealized appreciation in equity securities.

     We believe that cash provided by operations and funds  available  under our
credit  facilities will be sufficient to meet our anticipated cash  requirements
as presently contemplated.


MARKET RISK MANAGEMENT

     Our market  risks  primarily  consist of the impact of changes in  currency
exchange rates on assets and liabilities of non-U.S.  operations,  the impact of
changes in interest  rates on debt and the impact of changes in market prices on
publicly traded equity securities held by us. At December 31, 1999 and 1998, the
carrying  value of our  financial  instruments  approximated  fair  value in all
material respects.


INTEREST RATE RISK

     At December 31, 1999, we had $159.3 million in outstanding  indebtedness as
compared to $63.9 million at December 31, 1998, consisting primarily of floating
rate debt. For floating rate debt, interest rate changes generally do not affect
the fair market value but do impact  future  earnings  and cash flows,  assuming
other  factors  are held  constant.  Based  on  outstanding  indebtedness  as of
December  31,  1999,  the annual  after-tax  earnings  impact  resulting  from a
one-percentage   point   increase  or  decrease  in  interest   rates  would  be
approximately $1.0 million, holding other variables constant.

     At December  31, 1998,  we had interest  rate  protection  agreements  with
respect to $31.5 million of our  indebtedness.  The fair value  approximated the
notional  amount at December 31,  1998.  During the first  quarter of 1999,  all
interest rate  protection  agreements  to which we were party either  matured or
were  retired.  Accordingly,  at December  31, 1999,  we had no such  agreements
outstanding.


MARKET RISK

     On September  21,  1999,  we received  equity  securities  in Luminant,  an
internet  and  e-commerce  services  firm,  in exchange for cash and certain net
assets of our Brand  Dialogue  operations.  During 1999, Y&R also made strategic
investments  in  marketable  equity  securities  of certain  other  entities and
received certain marketable equity securities in exchange for services rendered.
We account for our investments in equity  securities  with readily  determinable
fair values under Statement of Financial  Accounting Standards ("SFAS") No. 115,
which requires that certain equity securities be adjusted to market value at the
end of each  accounting  period.  The  values  of these  securities  have  since
appreciated significantly. However, the value of equity securities may fluctuate
based on the  volatility  of the  respective  company's  stock  price  and other
general market  conditions.  All of these equity securities have been classified
as  available-for-sale  securities  and,  as such,  are  carried net of tax as a
separate  component of stockholder's  equity in the  consolidated  balance sheet
caption "Unrealized appreciation in equity securities."


FOREIGN EXCHANGE RATE RISK

     Our  consolidated  financial statements are denominated in U.S. dollars. In
1999,  we  derived  approximately 48% of our revenues from operations outside of
the  United  States.  Significant strengthening of the U.S. dollar against other
major foreign currencies could have a material adverse


                                       17
<PAGE>

effect on our  results of  operations.  Substantially  all of our  revenues  are
billed in the same  currency  as the costs  incurred  to support  the  revenues,
thereby reducing  exposure to transaction  gains and losses. We typically do not
hedge foreign currency profits into U.S.  dollars,  believing that over time the
costs of a hedging program would outweigh any benefit of greater  predictability
in our U.S.  dollar-denominated  profits.  However,  we  selectively  hedge some
positions where management believes it is economically  beneficial to do so, and
base our  foreign  subsidiary  capitalization,  debt and  dividend  policies  on
minimizing  currency  risk. We also seek,  through  pricing and other means,  to
anticipate and avoid economic currency losses.

     We enter into forward  foreign  exchange  contracts to hedge certain assets
and liabilities,  which are recorded in a currency  different from that in which
they will be settled.  These  contracts are  generally  entered into in order to
hedge intercompany  transactions.  Gains and losses on these contracts generally
offset losses and gains on the related foreign currency denominated intercompany
transactions.  The gains and losses on these positions are deferred and included
in the basis of the transaction  upon  settlement.  The terms of these contracts
are generally a one-month maturity.  At December 31, 1999, Y&R had contracts for
the  sale of  $26.1  million  and the  purchase  of  $11.9  million  of  foreign
currencies  at fixed rates,  compared to contracts for the sale of $19.4 million
and the  purchase  of $6.1  million  of  foreign  currencies  at fixed  rates at
December 31, 1998.

     Management  believes that any losses  resulting  from market risk would not
have a material adverse impact on Y&R's consolidated financial position, results
of operations or cash flows.


CONVERSION TO EURO

     On January  1,  1999,  11 of the member  countries  of the  European  Union
established  fixed  conversion  rates between their existing  currencies and the
European  Union's  common  currency,  the euro.  The  transition  period for the
introduction  of the euro began on January 1, 1999.  Beginning  January 1, 2002,
the participating  countries will issue new euro-denominated bills and coins for
use in cash  transactions.  No  later  than  July  1,  2002,  the  participating
countries  will  withdraw  all  bills  and  coins   denominated  in  the  legacy
currencies, so that the legacy currencies no longer will be legal tender for any
transactions,  making the conversion to the euro complete. We are addressing the
issues  involved  with  the  introduction  of  the  euro,  including  converting
information  technology systems,  reassessing  currency risk and negotiating and
amending  agreements.  Based on progress to date, we believe that the use of the
euro will not have a  significant  impact on the manner in which we conduct  our
business. Accordingly, conversion to the euro is not expected to have a material
effect on our consolidated  financial  condition,  results of operations or cash
flows.


YEAR 2000 COMPLIANCE

     We continue to monitor the potential impact of the year 2000 on the ability
of our computer systems to accurately process  information with dates later than
December 31, 1999, or to process date-sensitive information accurately after the
turn of the  century.  We have  modified or  replaced  all  significant  systems
necessary  for us to operate our business  that we have  identified as requiring
year 2000  remediation.  We are also dependent in part on  third-party  computer
systems and  applications,  particularly  with respect to such critical tasks as
accounting, billing and buying, planning and paying for media, as well as on our
own computer systems.

     Since  January 1,  2000,  we have  experienced  no  material  impact on our
computer  systems or  operations  as a result of the year 2000  issue.  While we
believe our efforts have been  successful to date,  because of the complexity of
the year 2000 issue and the  interdependence  of  organizations  using  computer
systems, it is possible that our efforts, or those of third parties with whom we
interact,  may not be  sufficient to prevent all year 2000 issues that may arise
in the future.  Our failure to  satisfactorily  and completely  address the year
2000 issue  could have a material  adverse  effect on our  prospects,  business,
financial condition and results of operations.

     The out-of-pocket  costs incurred in 1999 in respect of the year 2000 issue
were not material.  We have funded all remedial  projects in connection with our
program.


                                       18
<PAGE>

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

     In  June  1998,  the  Financial  Accounting Standards Board ("FASB") issued
Statement   No.   133,   "Accounting  for  Derivative  Instruments  and  Hedging
Activities"  ("SFAS  No.  133"),  which  provides a comprehensive and consistent
standard  for  the  recognition  and  measurement  of  derivatives  and  hedging
activities.  In  June  1999,  the FASB issued Statement No. 137, "Accounting for
Derivative  Instruments and Hedging Activities -- Deferral of the Effective Date
of  FASB  Statement  No. 133", which delays implementation of SFAS No. 133 until
fiscal  years  beginning  after  June  15,  2000.  We do not anticipate that the
adoption  of  SFAS  No.  133  will  have  a  significant effect on our financial
condition.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     For information  required in response to this Item 7A, reference is made to
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations  under the heading "Market Risk  Management" and to Notes 1 and 13 of
Notes to the Consolidated Financial Statements.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The financial  statements  and  supplementary  data required in response to
this Item 8 appear beginning on page F-1.


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

     None.

                                       19
<PAGE>

                                    PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Information  with respect to the  executive  officers and  directors of the
Company and compliance with Section 16(a) of the Securities Exchange Act of 1934
and  the  rules  thereunder  is  incorporated  by  reference  to  the  Company's
definitive  proxy  statement for its 2000 Annual  Meeting of  Stockholders  (the
"Proxy Statement") expected to be filed by April 14, 2000.


ITEM 11. EXECUTIVE COMPENSATION

     Incorporated  by reference to the Proxy  Statement  expected to be filed by
April  14,  2000.  Such  incorporation   shall  not  be  deemed  to  incorporate
specifically  by  reference  the  information  referred to in Item  402(a)(8) of
Regulation S-K.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Incorporated  by reference to the Proxy  Statement  expected to be filed by
April 14, 2000.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Incorporated  by reference to the Proxy  Statement  expected to be filed by
April  14,  2000.  Such  incorporation   shall  not  be  deemed  to  incorporate
specifically  by  reference  the  information  referred to in Item  402(a)(8) of
Regulation S-K.

                                       20
<PAGE>

                                     PART IV


ITEM 14. EXHIBITS; FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K


(a)1. Financial Statements:





<TABLE>
<CAPTION>
                                                                                              PAGE
                                                                                             -----
<S>                                                                                          <C>
     Report of Management ................................................................    F-2
     Report of Independent Accountants ...................................................    F-3
     Consolidated Statements of Operations for the three years ended December 31, 1999....    F-4
     Consolidated Balance Sheets as of December 31, 1999 and 1998 ........................    F-5
     Consolidated Statements of Cash Flows for the three years ended December 31, 1999....    F-6
     Consolidated Statements of Changes in Equity (Deficit) for the three years ended
       December 31, 1999 .................................................................    F-7
     Quarterly Financial Information .....................................................    F-8
     Notes to Consolidated Financial Statements ..........................................    F-9
</TABLE>

2. Financial Statement Schedules:



<TABLE>
<S>                                                                         <C>
      Schedule II - Valuation and Qualifying Accounts for the three years
        ended December 31, 1999 .........................................   S-1
</TABLE>

     All other schedules are omitted because they are not applicable.


3. Exhibits:



<TABLE>
<S>        <C>
 3.1       Amended and Restated Certificate of Incorporation of Young & Rubicam Inc.
           (incorporated by reference from Exhibit 4.4 to the Registration Statement on Form S-8
           (File No. 333-57605) filed by the Company).
 3.2       Amended and Restated Bylaws of Young & Rubicam Inc. (incorporated by reference
           from Exhibit 4.5 to the Registration Statement on Form S-8 (File No. 333-57605) filed by
           the Company).
 4.1       Specimen Certificate of Common Stock of Young & Rubicam Inc. (incorporated by
           reference from Exhibit 4.1 to the Registration Statement on Form S-1 (File No.
           333-46929) filed by the Company).
 4.2       Rights Agreement, dated as of May 1, 1998 (incorporated by reference from Exhibit 4.9
           to the Registration Statement on Form S-8 (File No. 333-57605) filed by the Company).
 4.3       Certificate of Designation for Registrant's Cumulative Participating Junior Preferred
           Stock (incorporated by reference from Exhibit 4.3 to the Registration Statement on
           Form S-1 (File No. 333-66883) filed by the Company).
 9.1       Management  Voting  Trust  Agreement,  dated as of December  12, 1996
           (incorporated  by  reference  from  Exhibit  9.1 to the  Registration
           Statement on Form S-1 (File No. 333-46929) filed by the Company).
 9.2       Young & Rubicam Inc. Restricted Stock Trust Agreement, dated as of December 12,
           1996 (incorporated by reference from Exhibit 9.2 to the Registration Statement on Form
           S-1 (File No. 333-46929) filed by the Company).+
10.1       Contribution Agreement, dated October 30, 1996 (incorporated by reference from
           Exhibit 10.3 to the Registration Statement on Form S-1 (File No. 333-46929) filed by the
           Company).
10.2       Young & Rubicam Holdings Inc. Restricted Stock Plan (incorporated by reference from
           Exhibit 10.4 to the Registration Statement on Form S-1 (File No. 333-46929) filed by the
           Company).+
</TABLE>

                                       21
<PAGE>


<TABLE>
<S>         <C>
10.3        Young & Rubicam Holdings Inc. Management Stock Option Plan (incorporated by
            reference from Exhibit 10.5 to the Registration Statement on Form S-1 (File No.
            333-46929) filed by the Company).+
10.4        Young & Rubicam Inc. 1997 Incentive Compensation Plan (incorporated by reference
            from Exhibit 10.6 to the Registration Statement on Form S-1 (File No. 333-46929) filed
            by the Company).+
10.5        Young & Rubicam Inc. Select Executive Retirement Income Plan, dated as of December
            19, 1997, with Peter A. Georgescu (incorporated by reference from Exhibit 10.7 to the
            Registration Statement on Form S-1 (File No. 333-46929) filed by the Company).+
10.6        Young & Rubicam Inc. Select Executive Retirement Income Plan, dated as of January
            1, 1995, with Peter A. Georgescu (incorporated by reference from Exhibit 10.8 to the
            Registration Statement on Form S-1 (File No. 333-46929) filed by the Company).+
10.7        Young & Rubicam Inc. Select Executive Retirement Income Plan, dated as of January
            1, 1986, with Peter A. Georgescu (incorporated by reference from Exhibit 10.9 to the
            Registration Statement on Form S-1 (File No. 333-46929) filed by the Company).+
10.8        Young & Rubicam Inc. Select Executive Retirement Income Plan, dated as of December
            19, 1997, with Edward Vick (incorporated by reference from Exhibit 10.13 to the
            Registration Statement on Form S-1 (File No. 333-46929) filed by the Company).+
10.9        Young & Rubicam Inc. Select Executive Retirement Income Plan, dated as of January
            1, 1995, with Edward Vick (incorporated by reference from Exhibit 10.14 to the
            Registration Statement on Form S-1 (File No. 333-46929) filed by the Company).+
10.10       Registration  Rights  Agreement,  dated  as  of  December  12,  1996
            (incorporated  by reference  from Exhibit 10.18 to the  Registration
            Statement on Form S-1 (File No.
            333-46929) filed by the Company).+
10.11       Letter Agreement dated June 28, 1996 by and between Young & Rubicam Inc. and
            Michael J. Dolan (incorporated by reference from Exhibit 10.20 to the Registration
            Statement on Form S-1 (File No. 333-46929) filed by the Company).+
10.12       Lease Agreement for 230 Park Avenue South (incorporated by reference from Exhibit
            10.21 to the Registration Statement on Form S-1 (File No. 333-46929) filed by the
            Company).
10.13       H&F Option Agreement, dated as of December 12, 1996, among Young & Rubicam
            Holdings Inc., a New York corporation ("Holdings"), Young & Rubicam Inc., a New
            York corporation, Young & Rubicam Inc., a Delaware corporation and a wholly-owned
            subsidiary of Holdings, and Hellman & Friedman Capital Partners III, L.P.
            (incorporated by reference from Exhibit 10.22 to the Registration Statement on Form
            S-1 (File No. 333-46929) filed by the Company).
10.14       H&F Option Agreement, dated as of December 12, 1996, among Young & Rubicam
            Holdings Inc., a New York corporation ("Holdings"), Young & Rubicam Inc., a New
            York corporation, Young & Rubicam Inc., a Delaware corporation and a wholly-owned
            subsidiary of Holdings, and H&F Orchard Partners III, L.P. (incorporated by reference
            from Exhibit 10.23 to the Registration Statement on Form S-1 (File No. 333-46929) filed
            by the Company).
10.15       Form of Young & Rubicam Inc. Key Corporation Managers Bonus Plan (incorporated
            by reference from Exhibit 10.24 to the Registration Statement on Form S-1 (File No.
            333-46929) filed by the Company).+
</TABLE>

                                       22
<PAGE>


<TABLE>
<S>          <C>
10.16        Amendment No. 1 to Restricted Stock Trust Agreement dated as of March 13, 1998
             (incorporated by reference from Exhibit 10.25 to the Registration Statement on Form
             S-1 (File No. 333-46929) filed by the Company.+
10.17        Young & Rubicam Inc. Deferred Compensation Plan (incorporated by reference from
             Exhibit 10.26 to the Registration Statement on Form S-1 (File No. 333-46929) filed by
             the Company).+
10.18        Amendment No. 1 to Young & Rubicam Inc. Deferred Compensation Plan effective as
             of November 19, 1997 (incorporated by reference from Exhibit 10.26 to the Annual
             Report on Form 10-K for the year ended December 31, 1998 filed by the Company).+
10.19        Amendment No. 2 to Young & Rubicam Inc. Deferred Compensation Plan effective as
             of January 1, 1999 (incorporated by reference from Exhibit 10.27 to the Annual Report
             on Form 10-K for the year ended December 31, 1998 filed by the Company).+
10.20        Young & Rubicam Inc. Grantor Trust Agreement (incorporated by reference from
             Exhibit 10.27 to the Registration Statement on Form S-1 (File No. 333-46929) filed by
             the Company).+
10.21        Amendment to Young & Rubicam Inc. 1997 Incentive Compensation Plan
             (incorporated by reference from Exhibit 10.28 to the Registration Statement on Form
             S-1 (File No. 333-46929) filed by the Company).+
10.22        Young & Rubicam Inc. Change in Control Severance Plan.*+
10.23        Amendment No. 2 to Young & Rubicam Inc. 1997 Incentive Compensation Plan.*+
10.24        Young & Rubicam Inc. Director Deferred Fee Plan, as amended by Amendment No. 1*+
10.25        Young & Rubicam Inc. Director Stock Option Plan.*+
10.26        Credit Agreement for the Credit Facility (incorporated by reference from Exhibit 10.28 to
             the Registration Statement on Form S-1 (File No. 333-66883) filed by the Company).
10.27        Credit Agreement, dated as of June 30, 1999, among Young & Rubicam Inc. and the banks
             named therein  (incorporated  by reference from Exhibit 10.1 to the
             Quarterly  Report on Form 10-Q for the quarter ended  September 30,
             1999 filed by the Company.)
10.28        Indenture by Young & Rubicam Inc. to The Bank of New York, as Trustee, dated as of
             January 20, 2000, with respect to 3% Convertible Subordinated Notes due 2005.*
21.1         List of Subsidiaries (incorporated by reference from Exhibit 10.28 to the Registration
             Statement on Form S-1 (File No. 333-66883) filed by the Company).
23.1         Consent of PricewaterhouseCoopers LLP. *
24.1         Powers of Attorney to sign Form 10-K and resolution of Board of Directors re Power of
             Attorney. *
27.1         Financial Data Schedule (filed in electronic format only).*
</TABLE>

----------
* Filed herewith.

+ This exhibit is a management contract or a compensatory plan or arrangement.


(b) Reports on Form 8-K:

     No  reports on Form 8-K were  filed  during the fourth  quarter of the year
ended December 31, 1999.


                                       23
<PAGE>

                                   SIGNATURES

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





<TABLE>
<CAPTION>
           SIGNATURE                             TITLE                        DATE
------------------------------   ------------------------------------   ----------------
<S>                              <C>                                    <C>
       /s/ EDWARD H. VICK        Chairman of the Board and Chief         March 24, 2000
-----------------------
                                         Creative Officer
         Edward H. Vick
   /s/ THOMAS D. BELL, JR.       President, Chief Executive Officer      March 24, 2000
-----------------------
                                            and Director
      Thomas D. Bell, Jr.
     /s/ MICHAEL J. DOLAN          Vice Chairman, Chief Financial        March 24, 2000
-----------------------
                                        Officer and Director
        Michael J. Dolan
  /s/ STEPHANIE W. ABRAMSON       Executive Vice President, General      March 24, 2000
-----------------------
                                        Counsel and Secretary
     Stephanie W. Abramson
     /s/ JACQUES TORTOROLI         Senior Vice President, Finance        March 24, 2000
-----------------------
                                 (Principal Accounting Officer)
        Jacques Tortoroli
    /s/ RICHARD S. BODMAN                     Director                   March 24, 2000
-----------------------
       Richard S. Bodman
    /s/ F. WARREN HELLMAN                     Director                   March 24, 2000
-----------------------
       F. Warren Hellman
     /s/ MICHAEL H. JORDAN                    Director                  March 24_, 2000
-----------------------
        Michael H. Jordan
/s/ SIR CHRISTOPHER LEWINTON                  Director                   March 24, 2000
-----------------------
   Sir Christopher Lewinton
   /s/ JOHN F. MCGILLICUDDY                   Director                   March 24, 2000
-----------------------
      John F. McGillicuddy
        /s/ JUDITH RODIN                      Director                   March 24, 2000
-----------------------
           Judith Rodin
     /s/ ALAN D. SCHWARTZ                     Director                   March 24, 2000
-----------------------
        Alan D. Schwartz

</TABLE>



                                       24
<PAGE>

                  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



<TABLE>
<CAPTION>
                                                                                              PAGE
                                                                                             -----
<S>                                                                                          <C>
Report of Management .....................................................................    F-2
Report of Independent Accountants ........................................................    F-3
Consolidated Statements of Operations for the three years ended December 31, 1999 ........    F-4
Consolidated Balance Sheets as of December 31, 1999 and 1998 .............................    F-5
Consolidated Statements of Cash Flows for the three years ended December 31, 1999 ........    F-6
Consolidated Statements of Changes in Equity (Deficit) for the three years ended December
31,
 1999 ....................................................................................    F-7
Quarterly Financial Information ..........................................................    F-8
Notes to Consolidated Financial Statements ...............................................    F-9
Financial Statement Schedule II -- Valuation and Qualifying Accounts
 for the three years ended December 31, 1999..............................................    S-1
</TABLE>



                                       F-1
<PAGE>

                              REPORT OF MANAGEMENT

     The  management  of Young & Rubicam Inc.  ("Y&R") and its  subsidiaries  is
responsible for the integrity of the financial data reported by Y&R.  Management
uses its best judgment to ensure that the financial  statements  present fairly,
in all material  respects,  the consolidated  financial  position and results of
operations of Y&R. These  financial  statements have been prepared in accordance
with generally accepted accounting principles.

     The system of internal  controls  of Y&R is designed to provide  reasonable
assurance  that  assets are  safeguarded,  that  transactions  are  executed  in
accordance with management's  authorization and are properly recorded,  and that
accounting  records  may  be  relied  upon  for  the  preparation  of  financial
statements  and  other  financial   information.   Underlying  this  concept  of
reasonable  assurance is the premise that the cost of control  should not exceed
the benefits derived and that the evaluation of those factors requires estimates
and judgments by  management.  Further,  because of inherent  limitations in any
system of internal  accounting  control,  errors or irregularities may occur and
not be detected. Nevertheless, management believes that a high level of internal
control is  maintained  by Y&R through the  selection  and training of qualified
personnel,  the  establishment  and  communication  of  accounting  and business
policies, and its internal audit program.

     The  financial  statements  have been audited by  independent  accountants.
Their report  expresses an independent  informed  judgment as to the fairness of
management's reported operating results and financial position. This judgment is
based on the procedures described in their report.

     The Audit Committee of the Board of Directors, which is comprised solely of
directors  who are not  officers  or  employees  of Y&R,  meets  regularly  with
corporate  management,  Y&R's  internal  auditors  and  legal  counsel,  and the
independent  accountants  to review the activities of each and to satisfy itself
that each is properly  discharging its  responsibility.  In addition,  the Audit
Committee meets on a scheduled basis with the independent  accountants,  without
management's  presence, to discuss the audit of the financial statements as well
as other auditing and financial reporting matters.



<TABLE>
<S>                              <C>
      Thomas D. Bell, Jr.            Michael J. Dolan
       President and                 Vice Chairman and
     Chief Executive Officer      Chief Financial Officer

</TABLE>



                                       F-2
<PAGE>


                        REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors and Shareholders of Young & Rubicam Inc.


       In our opinion, the consolidated financial statements listed in the index
appearing  under  Item  14(a)(1)  on page 21  present  fairly,  in all  material
respects,  the financial  position of Young & Rubicam Inc. and its  subsidiaries
(the  "Company")  at  December  31,  1999 and  1998,  and the  results  of their
operations  and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with accounting principles generally accepted in
the United States. In addition, in our opinion, the financial statement schedule
listed in the index appearing under Item 14(a)(2) on page 21 presents fairly, in
all  material  respects,   the  information  set  forth  therein  when  read  in
conjunction with the related consolidated financial statements.  These financial
statements  and  financial  statement  schedule  are the  responsibility  of the
Company's  management;  our  responsibility  is to  express  an opinion on these
financial  statements and financial  statement  schedule based on our audits. We
conducted our audits of these  statements in accordance with auditing  standards
generally accepted in the United States,  which 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,
assessing the  accounting  principles  used and  significant  estimates  made by
management,  and evaluating the overall  financial  statement  presentation.  We
believe  that our audits  provide a reasonable  basis for the opinion  expressed
above.







PricewaterhouseCoopers LLP
New York, New York
February 11, 2000



                                       F-3
<PAGE>

                 YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS





<TABLE>
<CAPTION>
                                                                               YEAR ENDED DECEMBER 31,
                                                                      ------------------------------------------
                                                                           1999          1998          1997
                                                                      ------------- ------------- --------------
                                                                      (IN THOUSANDS, EXCEPT SHARE AND PER SHARE
                                                                                       AMOUNTS)
<S>                                                                   <C>           <C>           <C>
Revenues ............................................................  $ 1,717,186   $ 1,522,464   $ 1,382,740
Compensation expense, including employee benefits ...................      994,119       903,948       836,150
General and administrative expenses .................................      514,981       455,578       463,936
Other operating charges .............................................           --       234,449        11,925
                                                                       -----------   -----------   -----------
Operating expenses ..................................................    1,509,100     1,593,975     1,312,011
                                                                       -----------   -----------   -----------
Operating profit (loss) .............................................      208,086       (71,511)       70,729
Interest income .....................................................        9,221         8,315         8,454
Interest expense ....................................................      (24,069)      (26,001)      (42,879)
                                                                       -----------   -----------   -----------
Net interest expense ................................................      (14,848)      (17,686)      (34,425)
Other income ........................................................       84,982         2,200            --
                                                                       -----------   -----------   -----------
Income (loss) before income taxes ...................................      278,220       (86,997)       36,304
Income tax provision (benefit) ......................................      111,288        (2,644)       58,290
                                                                       -----------   -----------   -----------
                                                                           166,932       (84,353)      (21,986)
Equity in net income of unconsolidated affiliates ...................        4,509         4,707           342
Minority interest in net income of consolidated companies ...........       (4,342)       (1,989)       (2,294)
                                                                       -----------   -----------   -----------
Income (loss) before extraordinary charge ...........................      167,099       (81,635)      (23,938)
                                                                       -----------   -----------   -----------
Extraordinary charge for early retirement of debt, net of tax .......           --        (4,433)           --
                                                                       -----------   -----------   -----------
Net income (loss) ...................................................  $   167,099   $   (86,068)  $   (23,938)
                                                                       ===========   ===========   ===========
Earnings (loss) per share:
Basic:
 Income (loss) before extraordinary charge ..........................  $      2.43   $     (1.34)  $     (0.51)
 Extraordinary charge ...............................................           --       (  0.08)           --
                                                                       -----------   -----------   -----------
 Net income (loss) ..................................................  $      2.43   $     (1.42)  $     (0.51)
                                                                       ===========   ===========   ===========
Diluted:
 Income (loss) before extraordinary charge ..........................  $      2.02   $     (1.34)  $     (0.51)
 Extraordinary charge ...............................................           --       (  0.08)           --
                                                                       -----------   -----------   -----------
 Net income (loss) ..................................................  $      2.02   $     (1.42)  $     (0.51)
                                                                       -===========   ===========   ===========
Weighted average shares outstanding
 Basic ..............................................................   68,688,848    60,673,994    46,949,355
                                                                       ===========   ===========   ===========
 Diluted ............................................................   82,871,725    60,673,994    46,949,355
                                                                       ===========   ===========   ===========

</TABLE>

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

                                       F-4
<PAGE>

                 YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
                           CONSOLIDATED BALANCE SHEETS



<TABLE>
<CAPTION>
                                                                                                   DECEMBER 31,
                                                                                           -----------------------------
                                                                                                1999           1998
                                                                                           -------------- --------------
                                                                                               (IN THOUSANDS, EXCEPT
                                                                                           SHARE AND PER SHARE AMOUNTS)
<S>                                                                                        <C>            <C>
CURRENT ASSETS
 Cash and cash equivalents ...............................................................  $   144,517    $   122,138
 Accounts receivable, net of allowance for doubtful accounts of $25,012 and $17,938 at
  December 31, 1999 and December 31, 1998, respectively ..................................    1,031,445        835,284
 Costs billable to clients ...............................................................       76,982         55,187
 Other receivables .......................................................................       43,138         37,177
 Deferred tax benefits ...................................................................       50,302         46,803
 Prepaid expenses and other current assets ...............................................       27,803         25,979
                                                                                            -----------    -----------
  Total Current Assets ...................................................................    1,374,187      1,122,568
                                                                                            -----------    -----------
NONCURRENT ASSETS
 Property,  leasehold  improvements  and equipment at cost,  net of  accumulated
  depreciation  and  amortization  of $248,112 and $231,655 at December 31, 1999
  and December 31,
  1998, respectively .....................................................................      194,569        150,413
 Deferred income taxes ...................................................................       34,875        158,510
 Intangibles, net of accumulated amortization of $91,285 and $87,283 at December 31, 1999
  and December 31, 1998, respectively ....................................................      353,860        121,005
 Equity in net assets of and advances to unconsolidated affiliates .......................       36,001         38,397
 Investments in equity securities ........................................................      366,590             --
 Other noncurrent assets .................................................................       54,199         44,226
                                                                                            -----------    -----------
  Total Assets ...........................................................................  $ 2,414,281    $ 1,635,119
                                                                                            ===========    ===========
 CURRENT LIABILITIES
 Accounts payable ........................................................................  $ 1,206,385    $   886,632
 Accrued expenses and other current liabilities ..........................................      226,006        202,433
 Accrued payroll and bonuses .............................................................       78,531         77,078
 Advance billings ........................................................................      132,130        121,992
 Accrued taxes on income .................................................................       24,844         19,290
 Short-term debt .........................................................................       31,710         32,031
                                                                                            -----------    -----------
  Total Current Liabilities ..............................................................    1,699,606      1,339,456
                                                                                            -----------    -----------
NONCURRENT LIABILITIES
 Long-term debt ..........................................................................      127,568         31,894
 Deferred compensation ...................................................................       31,328         30,635
 Other noncurrent liabilities ............................................................      117,405        113,064
                                                                                            -----------    -----------
Minority Interests .......................................................................       14,194          4,573
                                                                                            -----------    -----------
Commitments and Contingencies
STOCKHOLDERS' EQUITY
 Money Market Preferred Stock -- cumulative variable dividend; liquidating value
  of $115 per  share;  one-tenth  of one vote per  share;  authorized  -- 50,000
  shares; issued and
  outstanding -- 87 shares ...............................................................           --             --
 Cumulative Participating Junior Preferred Stock -- minimum $1.00 dividend; liquidating
  value of $1.00 per share; 100 votes per share; authorized -- 2,500,000 shares; issued
and
  outstanding -- 0 shares ................................................................           --             --
 Common stock -- par value $.01 per share; authorized -- 250,000,000 shares; issued and
  outstanding -- 72,950,004 shares and 66,374,569 shares at December 31, 1999 and
  December 31, 1998, respectively (excluding 2,471 shares and 3,976,941 shares in                   730            704
  treasury)
 Capital surplus .........................................................................      908,969        934,676
 Accumulated deficit .....................................................................     (596,470)      (758,292)
 Unrealized appreciation in equity securities ............................................      144,977             --
 Cumulative translation adjustment .......................................................      (33,092)       (10,810)
 Pension liability adjustment ............................................................         (817)        (1,210)
                                                                                            -----------    -----------
                                                                                                424,297        165,068
 Common stock in treasury, at cost .......................................................         (117)       (49,571)
  Total Stockholders' Equity .............................................................      424,180        115,497
                                                                                            -----------    -----------
  Total Liabilities and Stockholders' Equity .............................................  $ 2,414,281    $ 1,635,119
                                                                                            ===========    ===========

</TABLE>

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

                                       F-5
<PAGE>

                 YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS





<TABLE>
<CAPTION>
                                                                                        YEAR ENDED
                                                                                       DECEMBER 31,
                                                                                      --------------
                                                                                           1999
                                                                                      --------------
                                                                                      (IN THOUSANDS)
<S>                                                                                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ...................................................................  $   167,099
Adjustments to reconcile net income (loss) to net cash provided by operating
 activities:
 Depreciation and amortization ......................................................       71,217
 Other non-cash operating charges ...................................................           --
 Other non-cash income ..............................................................      (84,982)
 Extraordinary charge for early retirement of debt, net of tax ......................           --
 Deferred income tax expense (benefit) ..............................................       73,341
 Equity in net income of unconsolidated affiliates ..................................       (4,509)
 Dividends from unconsolidated affiliates ...........................................        3,714
 Minority interest in net income of consolidated companies ..........................        4,342
Change in assets and liabilities, excluding effects from acquisitions, dispositions
 and foreign exchange:
 Accounts receivable ................................................................     (138,036)
 Costs billable to clients ..........................................................      (12,900)
 Other receivables ..................................................................       (2,885)
 Prepaid expenses and other assets ..................................................       13,083
 Accounts payable ...................................................................      232,277
 Accrued expenses and other current liabilities .....................................       (9,590)
 Accrued payroll and bonuses ........................................................       (1,900)
 Advance billings ...................................................................       10,139
 Accrued taxes on income ............................................................        4,246
 Deferred compensation ..............................................................          926
 Other ..............................................................................        1,346
                                                                                       -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES ...........................................  $   326,928
                                                                                       -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Additions to property, leasehold improvements and equipment ........................  $   (86,174)
 Acquisitions, net of cash acquired .................................................     (154,715)
 Investments in equity securities ...................................................      (61,364)
 Proceeds from investing activities .................................................          978
                                                                                       -----------
NET CASH USED IN INVESTING ACTIVITIES ...............................................  $  (301,275)
                                                                                       -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds from long-term debt .......................................................  $   107,590
 Repayments of long-term debt .......................................................      (10,421)
 Net proceeds from short-term debt ..................................................       30,318
 Net proceeds from issuance of common stock in initial public offering ..............           --
 Common stock issued ................................................................       35,940
 Purchase of treasury shares ........................................................     (146,028)
 Dividends paid .....................................................................       (5,277)
 Payment of deferred compensation ...................................................       (1,356)
 Recapitalization payments ..........................................................           --
 Net payment of installment notes ...................................................         (399)
 Other financing activities .........................................................       (1,802)
                                                                                       -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES .................................  $     8,565
                                                                                       -----------
Effect of exchange rate changes on cash and cash equivalents ........................      (11,839)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ................................       22,379
Cash and cash equivalents, beginning of period ......................................      122,138
                                                                                       -----------
Cash and cash equivalents, end of period ............................................  $   144,517
                                                                                       ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 Interest paid ......................................................................  $    24,108
                                                                                       ===========
 Income taxes paid ..................................................................  $    29,655
                                                                                       ===========
NONCASH INVESTING ACTIVITY:
 Common stock issued in acquisitions ................................................  $    85,584
                                                                                       ===========




<CAPTION>
                                                                                         YEAR ENDED DECEMBER 31,
                                                                                      -----------------------------
                                                                                           1998           1997
                                                                                      -------------- --------------
                                                                                             (IN THOUSANDS)
<S>                                                                                   <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ...................................................................  $   (86,068)    $  (23,938)
Adjustments to reconcile net income (loss) to net cash provided by operating
 activities:
 Depreciation and amortization ......................................................       60,610         56,721
 Other non-cash operating charges ...................................................      234,449         11,925
 Other non-cash income ..............................................................       (2,200)            --
 Extraordinary charge for early retirement of debt, net of tax ......................        4,433             --
 Deferred income tax expense (benefit) ..............................................      (38,664)          (384)
 Equity in net income of unconsolidated affiliates ..................................       (4,707)          (342)
 Dividends from unconsolidated affiliates ...........................................        3,467          2,728
 Minority interest in net income of consolidated companies ..........................        1,989          2,294
Change  in  assets  and  liabilities,   excluding  effects  from   acquisitions,
 dispositions and foreign exchange:
 Accounts receivable ................................................................      (29,398)        42,144
 Costs billable to clients ..........................................................        5,418         15,834
 Other receivables ..................................................................       (2,346)        13,930
 Prepaid expenses and other assets ..................................................       (6,702)           269
 Accounts payable ...................................................................       72,216        109,205
 Accrued expenses and other current liabilities .....................................      (29,374)       (15,368)
 Accrued payroll and bonuses ........................................................        8,869          2,179
 Advance billings ...................................................................       15,074        (39,881)
 Accrued taxes on income ............................................................      (10,652)        19,352
 Deferred compensation ..............................................................        3,234         13,052
 Other ..............................................................................       (4,033)        14,791
                                                                                       -----------     ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES ...........................................  $   195,615     $  224,511
                                                                                       -----------     ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Additions to property, leasehold improvements and equipment ........................  $   (76,378)    $  (51,899)
 Acquisitions, net of cash acquired .................................................      (17,423)       (11,281)
 Investments in equity securities ...................................................       (7,072)        (5,640)
 Proceeds from investing activities .................................................        1,190          1,678
                                                                                       -----------     ----------
NET CASH USED IN INVESTING ACTIVITIES ...............................................  $   (99,683)    $  (67,142)
                                                                                       -----------     ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds from long-term debt .......................................................  $   225,834     $  226,770
 Repayments of long-term debt .......................................................     (524,883)      (105,870)
 Net proceeds from short-term debt ..................................................       71,997         20,103
 Net proceeds from issuance of common stock in initial public offering ..............      158,637             --
 Common stock issued ................................................................        7,995         10,390
 Purchase of treasury shares ........................................................      (60,956)        (1,500)
 Dividends paid .....................................................................           --             --
 Payment of deferred compensation deferred compensation .............................       (3,535)        (1,118)
 Recapitalization payments ..........................................................           --       (247,789)
 Net payment of installment notes ...................................................       (8,883)            --
 Other financing activities .........................................................       (2,448)           347
                                                                                       -----------     ----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES .................................  $  (136,242)    $  (98,667)
                                                                                       -----------     ----------
Effect of exchange rate changes on cash and cash equivalents ........................        2,185         (8,619)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ................................      (38,125)        50,083
Cash and cash equivalents, beginning of period ......................................      160,263        110,180
                                                                                       -----------     ----------
Cash and cash equivalents, end of period ............................................  $   122,138     $  160,263
                                                                                       ===========     ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 Interest paid ......................................................................  $    29,439     $   39,986
                                                                                       ===========     ==========
 Income taxes paid ..................................................................  $    36,288     $   25,020
                                                                                       ===========     ==========
NONCASH INVESTING ACTIVITY:
 Common stock issued in acquisitions ................................................  $        --     $    1,126
                                                                                       ===========     ==========

</TABLE>

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

                                       F-6
<PAGE>

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





<TABLE>
<CAPTION>
                                                 COMMON      CAPITAL      ACCUMULATED
                                                 STOCK       SURPLUS        DEFICIT
                                              ----------- ------------- ---------------
                                                           (IN THOUSANDS)
<S>                                           <C>         <C>           <C>
BALANCE AT DECEMBER 31, 1996 ................    $ 111     $  106,825     $  (498,928)
                                                 =====     ==========     ===========
Net loss ....................................      --              --         (23,938)
Foreign currency translation adjustments.....      --              --              --
Minimum pension liability adjustments .......      --              --              --
                                                 -----     ----------     -----------
Comprehensive income (loss) .................                                 (23,938)
Common stock issued .........................      --           1,501              --
Purchase of treasury shares .................      --              --              --
Unearned compensation -- restricted
 stock ......................................      --          51,739              --
Common stock options exercised ..............      44           8,711              --
Accretion of mandatorily redeemable
 equity securities ..........................     (44)       (145,163)             --
                                                 -----     ----------     -----------
BALANCE AT DECEMBER 31, 1997 ................    $ 111     $   23,613     $  (522,866)
                                                 =====     ==========     ===========
Net loss ....................................      --              --         (86,068)
Foreign currency translation adjustments.....      --              --              --
Minimum pension liability adjustments .......      --              --              --
                                                 -----     ----------     -----------
Comprehensive income (loss) .................      --              --         (86,068)
Issuance of restricted stock ................      --          94,039              --
Common stock options exercised and
 other ......................................      17           1,134              --
Purchase of treasury shares .................      --              --              --
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 DECEMBER 31, 1998 ................    $ 704     $  934,676     $  (758,292)
                                                 ======    ==========     ===========
Net income ..................................      --              --         167,099
Foreign currency translation adjustments.....      --              --              --
Unrealized appreciation in equity
 securities, net of $92,690 of deferred
 income taxes ...............................      --              --              --
Minimum pension liability adjustments .......      --              --              --
                                                 ------    ----------     -----------
Comprehensive income (loss) .................      --              --         167,099
Common stock options exercised ..............      26         (69,771)             --
Purchase of treasury shares .................      --              --              --
Common stock issued in acquisitions .........      --          44,064              --
Dividends paid ..............................      --              --          (5,277)
                                                 ------    ----------     -----------
BALANCE AT DECEMBER 31, 1999 ................    $ 730     $  908,969     $  (596,470)
                                                 ======    ==========     ===========



<CAPTION>
                                                                             ACCUMULATED
                                                  COMMON                        OTHER
                                                 STOCK IN     RESTRICTED    COMPREHENSIVE
                                                 TREASURY        STOCK         INCOME          TOTAL
                                              ------------- -------------- -------------- ---------------
                                                                    (IN THOUSANDS)
<S>                                           <C>           <C>            <C>            <C>
BALANCE AT DECEMBER 31, 1996 ................  $       --    $   (85,000)    $   (3,041)    $  (480,033)
                                               ==========    ===========     ==========     ===========
Net loss ....................................          --             --             --         (23,938)
Foreign currency translation adjustments.....          --             --        (14,255)        (14,255)
Minimum pension liability adjustments .......          --             --             13              13
                                               ----------    -----------     ----------     -----------
Comprehensive income (loss) .................                                   (14,242)        (38,180)
Common stock issued .........................          --             --             --           1,501
Purchase of treasury shares .................      (8,550)            --             --          (8,550)
Unearned compensation -- restricted
 stock ......................................          --        (51,739)            --              --
Common stock options exercised ..............          --             --             --           8,755
Accretion of mandatorily redeemable
 equity securities ..........................          --             --             --        (145,207)
                                               ----------    -----------     ----------     -----------
BALANCE AT DECEMBER 31, 1997 ................  $   (8,550)   $  (136,739)    $  (17,283)    $  (661,714)
                                               ==========    ===========     ==========     ===========
Net loss ....................................          --             --             --         (86,068)
Foreign currency translation adjustments.....          --             --          5,767           5,767
Minimum pension liability adjustments .......          --             --           (504)           (504)
                                               ----------    -----------     ----------     -----------
Comprehensive income (loss) .................          --             --          5,263         (80,805)
Issuance of restricted stock ................          --        136,739             --         230,778
Common stock options exercised and
 other ......................................      19,935             --             --          21,086
Purchase of treasury shares .................     (60,956)            --             --         (60,956)
Issuance of common stock in initial
 public offering, net of expenses ...........          --             --             --         158,637
Accretion of mandatorily redeemable
 equity securities ..........................          --             --             --        (287,303)
Conversion of mandatorily redeemable
 equity securities ..........................          --             --             --         795,774
                                               ----------    -----------     ----------     -----------
BALANCE AT DECEMBER 31, 1998 ................  $  (49,571)   $        --     $  (12,020)    $   115,497
                                               ==========    ===========     ==========     ===========
Net income ..................................          --             --             --         167,099
Foreign currency translation adjustments.....          --             --        (22,282)        (22,282)
Unrealized appreciation in equity
 securities, net of $92,690 of deferred
 income taxes ...............................          --             --        144,977         144,977
Minimum pension liability adjustments .......          --             --            393             393
                                               ----------    -----------     ----------     -----------
Comprehensive income (loss) .................          --             --        123,088         290,187
Common stock options exercised ..............     153,962             --             --          84,217
Purchase of treasury shares .................    (146,028)            --             --        (146,028)
Common stock issued in acquisitions .........      41,520             --             --          85,584
Dividends paid ..............................          --             --             --          (5,277)
                                               ----------    -----------     ----------     -----------
BALANCE AT DECEMBER 31, 1999 ................  $     (117)   $        --     $  111,068     $   424,180
                                               ==========    ===========     ==========     ===========
</TABLE>

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

                                       F-7
<PAGE>

                 YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
                  QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
                   (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)





<TABLE>
<CAPTION>
                                                                   EARNINGS (LOSS) PER
                                                  INCOME (LOSS)        SHARE BEFORE
                                     OPERATING        BEFORE       EXTRAORDINARY CHARGE
                                       PROFIT     EXTRAORDINARY  -----------------------
       QUARTER          REVENUES       (LOSS)         CHARGE        BASIC      DILUTED
--------------------- ------------ ------------- --------------- ----------- -----------
<S>                   <C>          <C>           <C>             <C>         <C>
1999
1st .................  $  383,873   $    34,558    $    19,701    $   0.30    $   0.24
2nd .................     414,361        52,834         30,585        0.45        0.37
3rd (1) .............     428,452        55,305         73,942        1.06        0.88
4th .................     490,500        65,389         42,871        0.60        0.51
                       ----------   -----------    -----------
Year ................   1,717,186       208,086        167,099        2.43        2.02
                       ----------   -----------    -----------
1998
1st .................  $  348,173   $    25,333    $    12,190    $   0.24    $   0.19
2nd (2) (3) .........     372,128      (190,472)      (145,391)     ( 2.45)     ( 2.45)
3rd .................     375,419        42,178         24,306        0.36        0.29
4th .................     426,744        51,450         27,260        0.41        0.34
                       ----------   -----------    -----------
Year ................   1,522,464       (71,511)       (81,635)     ( 1.34)     ( 1.34)
                       ----------   -----------    -----------
1997
1st .................  $  298,206   $    14,093    $     4,089    $   0.09    $   0.07
2nd .................     345,474        35,156         13,516        0.29        0.22
3rd .................     333,387        (4,302)        (5,700)     ( 0.12)     ( 0.12)
4th .................     405,673        25,782        (35,843)     ( 0.77)     ( 0.77)
                       ----------   -----------    -----------
Year ................   1,382,740        70,729        (23,938)     ( 0.51)     ( 0.51)
                       ----------   -----------    -----------



<CAPTION>
                           NET            COMMON STOCK       DIVIDENDS PAID
                          INCOME    -----------------------   PER SHARE OF
       QUARTER            (LOSS)        HIGH        LOW       COMMON STOCK
--------------------- ------------- ----------- ----------- ---------------
<S>                   <C>           <C>         <C>         <C>
1999
1st .................  $    19,701   $  43.31    $  31.25           --
2nd .................       30,585      44.38       37.25       $ .025
3rd (1) .............       73,942      48.25       39.69       $ .025
4th .................       42,871      73.25       43.00       $ .025
                       -----------                              ------
Year ................      167,099      73.25       31.25       $ .075
                       -----------                              ------
1998
1st .................  $    12,190   $     --    $     --
2nd (2) (3) .........     (149,824)     33.06       26.50
3rd .................       24,306      35.88       28.38
4th .................       27,260      33.63       19.75
                       -----------
Year ................      (86,068)     35.88       19.75
                       -----------
1997
1st .................  $     4,089
2nd .................       13,516
3rd .................       (5,700)
4th .................      (35,843)
                       -----------
Year ................      (23,938)
                       -----------
</TABLE>

----------
(1) Operating profit (loss) for the third quarter of 1999 includes $70.8 million
    of net  pre-tax  gain on the sale of  certain  assets of our Brand  Dialogue
    operations  in exchange  for an  ownership  interest  in Luminant  Worldwide
    Corporation.

(2) Operating  profit  (loss) for the second  quarter  of 1998  includes  $234.4
    million of non-recurring,  non-cash, pre-tax compensation charges recognized
    upon the  consummation  of our initial  public  offering  resulting from the
    vesting of shares of restricted stock allocated to employees. Net income for
    the second  quarter of 1998 also  includes an  extraordinary  charge of $4.4
    million, which is net of a tax benefit of $2.8 million, due to the write-off
    of unamortized  deferred  financing  costs related to Y&R's replaced  credit
    facility.

(3) The high and low  prices of common  stock  reflect  amounts  from the period
    commencing  upon the  consummation of our initial public offering on May 12,
    1998, the first day of public trading, through June 30, 1998.


                                       F-8
<PAGE>

                 YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


NOTE  1  --  DESCRIPTION  OF  THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

     BUSINESS:   Young  &  Rubicam  Inc.  ("Y&R")  is  a  global  marketing  and
communications  company which offers clients integrated services in the creation
and  production of  advertising,  strategic  media  planning and buying,  direct
marketing and customer relationship management, perception management and public
relations,   branding   consultancy   and  design   services,   and   healthcare
communications.  Y&R operates through wholly owned subsidiaries,  joint ventures
and non-equity  affiliations  worldwide.  Operations  cover the major geographic
regions of North America,  Europe, Latin America, the Far East,  Australia,  New
Zealand, the Middle East and Africa.

     PRINCIPLES  OF  CONSOLIDATION:   The  accompanying  consolidated  financial
statements include the accounts of Y&R and its majority owned subsidiaries.  The
equity in net income  attributable to minority  shareholder  interests are shown
separately in the  consolidated  balance sheets and  consolidated  statements of
operations.  Investments  in entities  owned 20% or more, but less than majority
owned and not  otherwise  controlled  by Y&R are  accounted for under the equity
method. All significant intercompany transactions are eliminated.

     CASH  EQUIVALENTS:  Y&R  considers all highly  liquid  instruments  with an
initial  maturity of three months or less to be cash  equivalents at the time of
purchase.  Y&R records book  overdrafts in accounts  payable.  Accounts  payable
included  $88.6 million and $51.8 million of book  overdrafts as of December 31,
1999 and 1998, respectively.

     REVENUE   RECOGNITION:   Substantially   all   revenues  are  derived  from
commissions for placement of  advertisements  in various media and from fees for
manpower  and  for  production  of   advertisements   and  other  marketing  and
communications  services.  Commission revenue is recognized when media is placed
and when labor and production  costs are billed.  Fee revenue is recognized when
services are rendered.

     COSTS BILLABLE TO CLIENTS: Costs billable to clients consist principally of
costs incurred in providing  communication services to clients. Such amounts are
generally  billed to clients when manpower is used,  when costs are incurred for
production and when print production is completed.

     DEPRECIATION AND AMORTIZATION:  Depreciation charges are computed using the
straight-line  method over the estimated  useful life of the respective asset up
to 25 years.  Leasehold improvements are amortized on a straight-line basis over
the lesser of the term of the  related  lease or the  estimated  useful  life of
these assets.

     INTANGIBLES:  Intangibles,  including  goodwill,  are  carried at cost less
accumulated  amortization  which is being provided on a straight line basis over
the  economic  lives of the  respective  assets with a maximum life of 40 years.
Each year,  the  intangibles  are  written  down if, and to the extent  they are
determined  to be impaired.  Intangibles  are  determined  to be impaired if the
future  anticipated  undiscounted  cash  flows  arising  from  the  use  of  the
intangibles is less than the net unamortized cost of the intangibles.

     INCOME  TAXES:  In  accordance  with  Statement  of  Financial   Accounting
Standards  ("SFAS") No. 109,  "Accounting for Income Taxes," deferred tax assets
and  liabilities  are  determined  based on  differences  between the  financial
reporting  and the tax basis of  assets  and  liabilities  and are  measured  by
applying  enacted tax rates and laws to taxable years in which such  differences
are expected to reverse.  Y&R's practice is to provide  currently for taxes that
will be  payable  upon  remittance  of  foreign  earnings  of  subsidiaries  and
affiliates to the extent that such earnings are not  considered to be reinvested
indefinitely.

     STOCK-BASED   COMPENSATION: SFAS   No.  123,  "Accounting  for  Stock-Based
Compensation,"  encourages  entities  to  account  for employee stock options or
similar  equity instruments using a fair value approach. However, it also allows
an entity to continue to measure compensation costs using


                                       F-9
<PAGE>

                 YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
          YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 - (CONTINUED )

the  method prescribed by Accounting Principles Bulletin ("APB") Opinion No. 25,
"Accounting  for  Stock  Issued  to  Employees."  Y&R has elected to continue to
account  for  such  plans  under  the  provisions  of APB Opinion No. 25 and has
included,  in  Note  15,  the required SFAS No. 123 pro forma disclosures of net
income  (loss)  and  earnings (loss) per share as if the fair value-based method
of accounting had been applied.

     TREASURY  STOCK:  Y&R accounts for treasury  share  purchases at cost.  The
reissuance of treasury  shares is accounted  for at the average  cost.  Gains or
losses on the  reissuance  of  treasury  shares  are  accounted  for as  capital
surplus.

     FOREIGN  CURRENCY  TRANSLATION: Y&R's financial statements were prepared in
accordance   with   the   requirements   of   SFAS  No.  52,  "Foreign  Currency
Translation."  Under this method, net foreign currency transaction gains of $0.5
million  and  net  losses  of  $1.3  million  were  recorded  in  1999 and 1997,
respectively. Net losses in 1998 were immaterial.

     DERIVATIVE FINANCIAL INSTRUMENTS: Derivative financial instruments are used
by Y&R  principally in the management of its interest rate and foreign  currency
exposures.  Y&R  does not hold or issue  derivative  financial  instruments  for
trading purposes.  Gains and losses on hedges of existing assets and liabilities
are included in the carrying  amounts of those  assets and  liabilities  and are
ultimately  recognized in income as part of those  carrying  amounts.  Gains and
losses related to hedges of firm  commitments  are also deferred and included in
the basis of the transaction when it is completed.

     INVESTMENTS  IN EQUITY  SECURITIES:  Y&R  accounts for its  investments  in
publicly traded equity  securities  under SFAS No. 115,  "Accounting for Certain
Investments  in Debt and Equity  Securities."  In accordance  with SFAS No. 115,
unrealized   gains  on  securities   owned  by  Y&R,  which  are  classified  as
available-for-sale securities, are carried net of tax as a separate component of
stockholders'  equity under the consolidated  balance sheet caption  "Unrealized
appreciation in equity securities." Unrealized appreciation in equity securities
included in stockholders'  equity at December 31, 1999, was $145.0 million,  net
of $92.7  million of related  income taxes.  Investments  which are not publicly
traded are accounted for at cost.

     CONCENTRATIONS  OF CREDIT  RISK:  Y&R's  clients  are  engaged  in  various
businesses  located  primarily in North America,  Europe,  Latin America and the
Asia/Pacific  region.  Y&R performs  ongoing credit  evaluations of its clients.
Allowances  for credit losses are  maintained at levels  considered  adequate by
management.  Y&R invests  its excess  cash in  deposits  with major banks and in
money market  securities.  These securities  typically mature within 90 days and
are highly rated  instruments.  Y&R's top 10 clients accounted for approximately
37%, 36% and 31% of consolidated revenues in 1999, 1998 and 1997,  respectively.
Y&R's  largest  client  accounted  for   approximately   13%,  10%  and  10%  of
consolidated  revenues for the years ended  December  31,  1999,  1998 and 1997,
respectively.

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

     RECENT  ACCOUNTING  PRONOUNCEMENTS: In  June 1998, the Financial Accounting
Standards  Board  ("FASB")  issued Statement No. 133, "Accounting for Derivative
Instruments   and  Hedging  Activities"  ("SFAS  No.  133"),  which  provides  a
comprehensive  and  consistent  standard  for the recognition and measurement of
derivatives  and hedging activities. In June 1999, the FASB issued Statement No.
137,  "Accounting  for Derivative Instruments and Hedging Activities -- Deferral
of  the  Effective  Date of FASB Statement No. 133", which delays implementation
of  SFAS  No.  133  until  fiscal years beginning after June 15, 2000. We do not
anticipate  that  the adoption of SFAS No. 133 will have a significant effect on
our financial condition.


                                      F-10
<PAGE>

                 YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
          YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 - (CONTINUED )

     RECLASSIFICATIONS: Certain  reclassifications  have  been made to the prior
years' financial statements to conform to the 1999 presentation.


NOTE 2 -- EARNINGS PER SHARE


     Basic  earnings  (loss) per share are  calculated  by  dividing  net income
(loss) by the weighted  average  shares of common stock  outstanding  during the
years ended December 31, 1999, 1998 and 1997. Diluted earnings per share reflect
the  dilutive  effect of stock  options,  primarily  stock  options  granted  to
employees under stock-based compensation plans, and other dilutive securities.


     Shares  used in  computing  basic and  diluted  earnings  per share were as
follows:





<TABLE>
<CAPTION>
                                                    1999           1998            1997
                                                ------------   ------------   -------------
<S>                                             <C>            <C>            <C>
Basic -- weighted average shares ............   68,688,848     60,673,994      46,949,355
Effect of dilutive securities ...............   14,182,877             --              --
                                                ----------     ----------      ----------
Diluted -- weighted average shares ..........   82,871,725     60,673,994      46,949,355
                                                ==========     ==========      ==========
</TABLE>

     In the years ended December 31, 1998 and 1997,  basic and diluted  weighted
average shares used in the calculation  were the same since the inclusion of the
effect of stock options on loss per share would have been antidilutive.


     In  computing  basic loss per share for the year ended  December  31, 1997,
Y&R's 11.1 million  shares of  restricted  stock were excluded from the weighted
average  number  of common  shares  outstanding.  Such  shares  vested  upon the
consummation of Y&R's initial public offering on May 15, 1998, a condition which
was not satisfied at December 31, 1997 (see Note 3).


NOTE 3 -- INITIAL PUBLIC OFFERING


     On May 15, 1998, Y&R closed an initial public  offering of its common stock
(the  "Offering").  An aggregate of 19,090,000  shares of Y&R's common stock was
offered to the public, of which 6,912,730 shares were sold by Y&R and 12,177,270
shares were sold by certain selling  shareholders.  Y&R used the net proceeds of
$158.6  million,  together  with $155 million of  borrowings  under a new credit
facility to repay all of the outstanding borrowings under its then existing $700
million senior secured credit facility.


     The  completion  of the  Offering  gave  rise to  non-recurring,  non-cash,
pre-tax  compensation  charges of $234.4  million,  or $169.8 million net of the
related tax benefit,  from the vesting of an  aggregate  of 9,231,105  shares of
restricted  stock allocated to employees as of the date of the completion of the
Offering.  These charges have been reflected as other operating charges in Y&R's
consolidated  statement of operations  for the year ended December 31, 1998. Y&R
redeemed  the  remaining  1,855,845  shares  of  restricted  stock  held  in the
restricted stock trust upon the consummation of the Offering.


NOTE 4 -- 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
became  effective  and was  paid on May 11,  1998.  Y&R's  historical  financial
statements  have  been  presented  to give  retroactive  effect  to  this  stock
dividend.


                                      F-11
<PAGE>

                 YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
          YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 - (CONTINUED )

NOTE 5 -- EQUITY IN NET ASSETS OF UNCONSOLIDATED AFFILIATES





<TABLE>
<CAPTION>
                                                           1999                   1998                   1997
                                                  ---------------------- ---------------------- ----------------------
                                                     EQUITY     EQUITY      EQUITY     EQUITY      EQUITY     EQUITY
                                      OWNERSHIP      IN NET     IN NET      IN NET     IN NET      IN NET     IN NET
             AFFILIATE                 INTEREST      ASSETS     INCOME      ASSETS     INCOME      ASSETS     INCOME
----------------------------------- ------------- ----------- ---------- ----------- ---------- ----------- ----------
                                                                      (IN THOUSANDS)
<S>                                 <C>           <C>         <C>        <C>         <C>        <C>         <C>
Dentsu, Y&R Partnerships ..........   15%-50%      $ 20,816    $ 2,354    $ 27,790    $ 2,389    $ 17,510    $  2,587
Eco S.A. ..........................     40%           2,249        231       2,085        (75)      2,206          96
Cresswell, Munsell, Fultz &
 Zirbel ...........................     33%           2,210        151       2,183        500       1,922         508
Team Holdings .....................     25%           4,078         --          --         --          --          --
National Public Relations .........     22%             749        167         527        (19)        647          98
Other ............................. 50% or less       5,899      1,606       5,812      1,912       4,108      (2,947)
                                                   --------    -------    --------    -------    --------    --------
                                                   $ 36,001    $ 4,509    $ 38,397    $ 4,707    $ 26,393    $    342
                                                   ========    =======    ========    =======    ========    ========
</TABLE>

     Effective August 2, 1999, the ownership and management structure of Dentsu,
Young & Rubicam  ("DY&R") was amended.  The agreement  resulted in Y&R acquiring
majority ownership in and operational  control of all DY&R companies  throughout
principal  markets in Asia,  with the exception of Japan.  In Japan,  Dentsu has
acquired a majority share. Effective August 2, 1999, Y&R commenced consolidating
the  results  of DY&R for  those  markets  where it holds a  majority  ownership
interest.  For  periods  prior to  August 2,  1999,  the  financial  information
reflects the DY&R  partnerships  in which Y&R held a minority  equity  ownership
interest.

     The  summarized   unaudited  financial   information  below  represents  an
aggregation of Y&R's unconsolidated affiliates.



<TABLE>
<CAPTION>
FINANCIAL INFORMATION
                                        1999           1998           1997
                                    ------------   ------------   ------------
                                                  (IN THOUSANDS)
<S>                                 <C>            <C>            <C>
EARNINGS DATA
 Revenues .......................    $ 241,183      $ 218,973      $ 207,668
 Operating profit ...............       27,557         22,320         13,768
 Net income .....................       15,189         15,424          4,347
BALANCE SHEET DATA
 Current assets .................    $ 276,183      $ 317,916      $ 321,372
 Noncurrent assets ..............       52,658         60,624         40,147
 Current liabilities ............      234,441        266,090        287,101
 Noncurrent liabilities .........       22,308         17,023         13,215
 Equity .........................       72,092         95,427         61,203

</TABLE>


                                      F-12
<PAGE>

                 YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
          YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 - (CONTINUED )

NOTE 6 -- INVESTMENTS IN EQUITY SECURITIES

     On September 21, 1999, Y&R  contributed  $15 million and certain net assets
of its Brand Dialogue  operations (the "Brand Dialogue  Contributed  Assets") in
exchange  for  an   ownership   interest  in  Luminant   Worldwide   Corporation
("Luminant"),  an internet and e-commerce  services firm that provides strategic
consulting,  content  development  and systems  integration  capabilities to its
clients. Y&R recognized a net after-tax gain of approximately $42 million on the
sale of the Brand Dialogue  Contributed Assets in the third quarter of 1999. Y&R
accounts for its  investment in Luminant  equity  securities at fair value under
SFAS No. 115. Since  September  1999,  the value of these equity  securities has
appreciated  significantly.  However,  the value of the  equity  securities  may
fluctuate  based on the  volatility of Luminant's  stock price and other general
market   conditions.   We   have   classified   the   Luminant   securities   as
available-for-sale  securities.  At December 31,  1999,  the cost basis of these
securities was $91.5 million.  The securities are carried at their fair value of
$306.5 million and are included in other  investments on the balance sheet.  The
difference between cost and fair value of $215.0 million is carried net of $83.9
million of related income taxes as a separate component of stockholders'  equity
under the consolidated balance sheet caption "Unrealized  appreciation in equity
securities." Under the terms of the contribution  agreement between Luminant and
Y&R, Y&R recorded a net after-tax gain of approximately $9 million in the fourth
quarter of 1999  reflecting  the  realization of contingent  consideration  as a
result of achieving certain revenue and operating profit performance  targets of
the Brand  Dialogue  Contributed  Assets,  and is eligible to receive,  in 2000,
future  contingent  consideration  from  Luminant,  in the  form of cash  and/or
non-voting shares of Luminant common stock, at Luminant's  discretion,  based on
the consolidated performance of Luminant for the first six months of 2000.

     During 1999,  Y&R also made  strategic  investments  in  marketable  equity
securities of certain other entities for an aggregate cost of approximately  $45
million and also received certain  marketable  equity securities in exchange for
services  rendered.  Y&R accounts for its investments in equity  securities with
readily  determinable  fair values under SFAS No. 115. At December 31, 1999, all
equity securities covered by SFAS No. 115 were designated as available-for-sale.
Accordingly,  these securities are stated at fair value, with unrealized holding
gains, net of taxes,  reported in a separate component of shareholders'  equity.
Such  equity  securities  at  December  31,  1999,  excluding  Luminant,  had an
aggregate  cost basis of $14.7  million.  These  securities are carried at their
fair value of $37.3 million and are included in investments in equity securities
on the balance sheet.  Differences  between cost and fair value of $22.6 million
are carried net of $8.8 million of related income tax as a separate component of
stockholders'  equity under the consolidated  balance sheet caption  "Unrealized
appreciation in equity securities."

     When  readily  determinable  fair  values  are  not  available,  marketable
securities are carried on the balance sheet at cost, except in cases where it is
determined that a decline in the estimated fair value of the investment is other
than  temporary.  At  December  31,  1999,  the  carrying  value  of  such  cost
investments   was   $22.8   million,    which   includes   our   investment   in
DigitalConvergence.com Inc. of approximately $20 million.

NOTE 7 -- ACQUISITIONS

     Effective  August 2, 1999, the ownership and  management  structure of DY&R
was amended.  The agreement  resulted in Y&R acquiring majority ownership in and
operational control of all DY&R companies  throughout principal markets in Asia,
with the  exception of Japan.  In Japan,  Dentsu has acquired a majority  share.
Effective  August 2, 1999, Y&R commenced  consolidating  the results of DY&R for
those  markets  where  it  holds  a  majority  ownership   interest.   Y&R  paid
approximately $6 million for the incremental  ownership interest and will pay $4
million in the first quarter of 2001.  This  transaction  has been accounted for
under the purchase method of accounting for business combinations. A preliminary
allocation of the cost to acquire the additional  interest in DY&R has been made
based upon the fair value of DY&R's net assets.


                                      F-13
<PAGE>

                 YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
          YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 - (CONTINUED )

     On May 21, 1999, Y&R acquired  KnowledgeBase  Marketing,  Inc.  ("KBM"),  a
provider of database and analytical  services,  in a stock and cash  transaction
valued at  approximately  $175 million.  This transaction has been accounted for
under the purchase method of accounting for business combinations. A preliminary
allocation of the cost to acquire KBM has been made based upon the fair value of
KBM's net assets.

     Also  during  1999,  Y&R  acquired  The Direct  Impact  Company,  a company
specializing in grassroots issues management; Rainey, Kelly, Campbell, Roalfe, a
London-based  advertising  agency; a majority  ownership  interest in The Banner
Corporation,  a European marketing and  communications  firm specializing in the
technology  sector,  and made several other  acquisitions and equity investments
for which the aggregate  purchase price was  approximately  $80 million.  All of
these  acquisitions  were accounted for under the purchase  method of accounting
and a preliminary  allocation  of the costs to acquire  these  entities has been
made based on the fair value of the net assets.

     During 1998 and 1997,  Y&R  acquired  full or partial  interests in certain
domestic and international entities and obtained additional interests in certain
partially  owned  entities for an aggregate  purchase price of $17.6 million and
$14.7 million,  respectively. In 1998, acquisitions included Y&R's purchase of a
multi-cultural advertising agency and certain other assets located in the United
States.  In 1997, Y&R acquired an additional  37.5% equity  interest in the DY&R
companies in Australia and New Zealand.  In  consideration  for this  additional
equity  interest,  Y&R contributed to Dentsu 12.5% of its equity interest in its
advertising and direct marketing  agencies in Australia and New Zealand.  All of
these  acquisitions  were accounted for under the purchase method of accounting.
During 1997,  Y&R also  recorded  $11.9 million in other  operating  charges for
certain asset impairment writedowns.

     Certain acquisitions  completed in 1999 and prior years require payments in
future  years if  certain  results  are  achieved  by the  companies  that  were
acquired.  Formulas for these contingent future payments differ from acquisition
to  acquisition.  Contingent  future payments are not expected to be material to
Y&R's results of operations or financial position.

NOTE 8 -- PROPERTY, LEASEHOLD IMPROVEMENTS AND EQUIPMENT

     Property, leasehold improvements and equipment are recorded at cost and are
comprised of the following:





<TABLE>
<CAPTION>
                                                                                          AS OF DECEMBER 31,
                                                                                       -------------------------
                                              USEFUL LIVES                                 1999          1998
                                              --------------------------------------   -----------   -----------
                                                                                            (IN THOUSANDS)
<S>                                           <C>                                      <C>           <C>
Land and buildings ........................   20-25 years                               $  31,038     $  29,706
Furniture, fixtures and equipment .........   3-10 years                                  303,853       252,673
Leasehold improvements ....................   Shorter of 10 years or life of lease        104,235        93,797
Automobiles ...............................   3-5 years                                     3,555         5,892
                                                                                        ---------     ---------
                                                                                          442,681       382,068
                                                                                        ---------     ---------
Less -- Accumulated depreciation and
 amortization .............................                                               248,112       231,655
                                                                                        ---------     ---------
                                                                                        $ 194,569     $ 150,413
                                                                                        =========     =========
</TABLE>

     During 1999, 1998 and 1997, depreciation expense amounted to $53.6 million,
$49.2 million and $47.6 million, respectively.

NOTE 9 -- INCOME TAXES

     Income (loss) before income taxes consisted of the amounts shown below:

                                      F-14
<PAGE>

                 YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
          YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 - (CONTINUED )


<TABLE>
<CAPTION>
                         1999           1998           1997
                     -----------   --------------   ----------
                                  (IN THOUSANDS)
<S>                  <C>           <C>              <C>
Domestic .........    $191,920       $ (127,325)     $12,304
Foreign ..........      86,300           40,328       24,000
                      --------       ----------      -------
Total ............    $278,220       $  (86,997)     $36,304
                      ========       ==========      =======
</TABLE>

     The following summarizes the provision (benefit) for income taxes:




<TABLE>
<CAPTION>
                                 1999           1998           1997
                             ------------   ------------   -----------
                                          (IN THOUSANDS)
<S>                          <C>            <C>            <C>
CURRENT:
 Federal .................    $   3,365      $   3,938      $  18,195
 State and local .........        1,110          3,512          4,220
 Foreign .................       33,472         28,570         36,259
                              ---------      ---------      ---------
                                 37,947         36,020         58,674
                              ---------      ---------      ---------
DEFERRED:
 Federal .................       67,707        (28,126)         7,547
 State and local .........        5,551         (6,415)         2,472
 Foreign .................           83         (4,123)       (10,403)
                              ---------      ---------      ---------
                                 73,341        (38,664)          (384)
                              ---------      ---------      ---------
 Total ...................    $ 111,288      $  (2,644)     $  58,290
                              =========      =========      =========

</TABLE>

     Y&R's  effective  income tax rate varied from the statutory  federal income
tax rate as a result of the following factors:





<TABLE>
<CAPTION>
                                                                        1999           1998          1997
                                                                     ----------   -------------   ----------
<S>                                                                  <C>          <C>             <C>
Statutory federal income tax rate ................................       35.0%         (35.0)%        35.0%
Effect of Y&R's initial public offering ..........................         --           32.1            --
State and local income taxes, net of federal tax effect ..........        2.4          ( 6.3)         17.1
Foreign subsidiaries' tax rate differential ......................        1.9            7.2         107.2
Nondeductible goodwill amortization ..............................        0.8            0.7           8.5
Other, net .......................................................       (0.1)         ( 1.7)        ( 7.2)
                                                                         ----          -----         -----
Consolidated effective tax rate ..................................       40.0%         ( 3.0)%       160.6%
                                                                         ====          =====         =====
</TABLE>

     Y&R's  share of the  undistributed  earnings  of foreign  subsidiaries  not
included in its consolidated  Federal income tax return that could be subject to
additional income taxes if remitted was  approximately  $102.9 million and $59.1
million at  December  31, 1999 and 1998,  respectively.  No  provision  has been
recorded  for the United  States in respect of foreign  taxes that could  result
from the  remittance  of such  undistributed  earnings  since the  earnings  are
permanently  reinvested  outside the United States and it is not  practicable to
estimate  the amount of such  taxes.  Withholding  taxes of  approximately  $5.1
million and $8.1 million  would be payable  upon  remittance  of all  previously
unremitted earnings at December 31, 1999 and 1998, respectively.


                                      F-15
<PAGE>

                 YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
          YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 - (CONTINUED )

   The components of Y&R's net deferred income tax assets are:



<TABLE>
<CAPTION>
                                                   AS OF DECEMBER 31,
                                               ---------------------------
                                                   1999           1998
                                               ------------   ------------
                                                     (IN THOUSANDS)
<S>                                            <C>            <C>
Allowance for doubtful accounts ............    $    4,633     $   4,274
Net operating loss carryforwards ...........        54,624        45,126
Deferred compensation ......................         2,424         2,424
                                                ----------     ---------
                                                    61,681        51,824
Valuation allowance ........................       (11,379)       (5,021)
                                                ----------     ---------
Current portion ............................        50,302        46,803
                                                ----------     ---------
Investments in equity securities ...........      (116,260)           --
Deferred compensation ......................        47,721        53,501
Depreciable and amortizable assets .........        23,461        30,417
Long-term leases ...........................         7,154         7,377
Other noncurrent items .....................        20,900        15,235
Net operating loss carryforwards ...........        57,526        65,300
Tax credit carryforwards ...................         3,658         3,658
                                                ----------     ---------
                                                    44,160       175,488
Valuation allowance ........................        (9,285)      (16,978)
                                                ----------     ---------
Noncurrent portion .........................        34,875       158,510
                                                ----------     ---------
Net deferred income tax assets .............    $   85,177     $ 205,313
                                                ==========     =========
</TABLE>

     Y&R's net deferred income tax assets arise from temporary differences which
represent  the   cumulative  deductible  or taxable   amounts  recorded  in  the
financial  statements in different years than recognized in the tax returns. The
majority of the temporary differences result from expenses accrued for financial
reporting purposes which are not deductible for tax purposes until actually paid
and net operating losses.

     The net operating loss ("NOL") carryforwards represent the benefit recorded
for federal,  state and local,  and foreign NOLs. At December 31, 1999 and 1998,
Y&R had approximately  $251.3 million and $258.3 million,  respectively,  of NOL
carryforwards  for  U.S.  tax  purposes  which  expire  in  the  year  2018  and
approximately   $111.9   million  and  $91.4  million,   respectively,   of  NOL
carryforwards  for foreign tax purposes with  carryforward  periods ranging from
one  year to an  indefinite  time.  At  December  31,  1999  and  1998,  Y&R had
approximately  $3.4  million  and $3.2  million,  respectively,  of  alternative
minimum tax  credits  which are not subject to  expiration  and $0.4  million of
foreign tax credits which expire in the year 2001.

     Furthermore, Y&R, under its stock option plans, has a significant number of
non-qualified  stock  options  issued to employees  that remain  outstanding  at
December 31, 1999.  These  options,  if exercised,  would create  additional tax
deductions  that would further reduce Y&R's domestic and  international  taxable
income.  The tax  deduction  has no  impact  on Y&R's  consolidated  results  of
operations,  in  accordance  with APB Opinion No. 25,  except for payroll  taxes
imposed by certain  taxing  jurisdictions  upon  exercise.  It is impractical to
quantify the future deduction as it is dependent upon, among other factors,  the
fair market value of Y&R stock at the time of exercise.

     Y&R is required to provide a valuation  allowance  against  deferred income
tax assets when it is more likely than not that some or all of the  deferred tax
assets will not be realized.  Valuation  allowances  of $20.7  million and $22.0
million were recorded at December 31, 1999 and 1998, respectively. The valuation
allowances  represent a  provision  for  uncertainty  as to the  realization  of
certain   deferred  tax  assets,   including   NOL   carryforwards   in  certain
jurisdictions.  Y&R has concluded that based upon expected future results, it is
more likely than not that the net deferred tax asset balance will be realized.


                                      F-16
<PAGE>

                 YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
          YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 - (CONTINUED )

NOTE 10 -- WORLDWIDE OPERATIONS


     Y&R's wholly owned and partially owned businesses and affiliates operate in
the global  marketing and  communications  operating  segment.  These businesses
provide marketing and communications services to clients on an integrated basis,
where appropriate, through several worldwide, regional and national networks and
brands. Y&R's financial  information by geographic area as of December 31, 1999,
1998 and 1997 and for the years then ended is presented below.





<TABLE>
<CAPTION>
                          UNITED STATES       EUROPE        OTHER          TOTAL
                         ---------------   -----------   -----------   -------------
                                               (IN THOUSANDS)
<S>                      <C>               <C>           <C>           <C>
1999
Revenues .............      $  899,750      $582,267      $235,169      $1,717,186
Total assets .........       1,393,600       638,649       382,032       2,414,281
1998
Revenues .............      $  775,700      $532,404      $214,360      $1,522,464
Total assets .........         844,070       589,128       201,921       1,635,119
1997
Revenues .............      $  661,367      $472,225      $249,148      $1,382,740
Total assets .........         697,250       582,424       258,133       1,537,807
</TABLE>

NOTE 11 -- EMPLOYEE BENEFITS


     Y&R  provides  retirement  benefits  for  their  U.S.  full-time  employees
primarily through a defined benefit pension plan ("the Plan").  Contributions to
the Plan are  based  upon  current  costs  and  prior  service  costs  which are
actuarially computed, with the latter being amortized over the average remaining
service period.


     During  1999,  there  were  no  contributions   made  to  the  Plan.  Total
contributions  to the Plan  made in 1998  were  $10.0  million.  Pursuant  to an
agreement with the Pension Benefit Guaranty Corporation,  Y&R has also agreed to
make contributions to the Plan in an amount required to cause the credit balance
at the  end of each  Plan  year to be at  least  equal  to  $12.5  million  plus
interest.  Y&R is not required to make any payment that would not be  deductible
under  Internal  Revenue  Code section 404.  Y&R's  credit  balance  maintenance
requirement  terminates when Y&R's indebtedness  obtains specified rating levels
(or, if there are no such ratings from certain major ratings agencies,  when Y&R
meets a fixed charge coverage ratio test), but in no event earlier than December
31, 2001. In addition, such credit balance maintenance requirements terminate if
the Plan's unfunded  benefit  liabilities are zero at the end of two consecutive
Plan years.


     Y&R also  contributes to government  mandated  plans and maintains  various
noncontributory retirement plans at certain foreign subsidiaries,  some of which
are considered to be defined  benefit plans for accounting  purposes.  Plans are
funded  in  accordance  with the laws of the  countries  where  the plans are in
effect and, in accordance  with such local statutory  requirements,  may have no
plan assets.


                                      F-17
<PAGE>

                 YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
          YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 - (CONTINUED )

     A summary of the  components  of net periodic  pension cost for the defined
benefit plans are as follows:





<TABLE>
<CAPTION>
                                                     1999                                 1998
                                     ------------------------------------ ------------------------------------
                                         U.S.      NON-U.S.      TOTAL        U.S.      NON-U.S.      TOTAL
                                     ------------ ---------- ------------ ------------ ---------- ------------
                                                                  (IN THOUSANDS)
<S>                                  <C>          <C>        <C>          <C>          <C>        <C>
Service costs for benefits earned
 during the period .................  $    4,265   $   229    $    4,494   $    3,801    $ 254     $    4,055
Interest costs on projected
 benefit obligation ................       9,151       677         9,828        9,151     598           9,749
Expected return on plan assets .....     (11,125)       --       (11,125)     (10,263)     --         (10,263)
Amortization of prior service
 costs .............................        (411)       --          (411)        (411)     --            (411)
Amortization of transitional
 (asset)/obligation ................         (61)      117            56          (61)    112              51
Recognized actuarial
 loss/(income) .....................       2,150        28         2,178        1,910        (8)        1,902
                                      ----------   -------    ----------   ----------    -------   ----------
Net periodic pension cost of the
 plans .............................  $    3,969   $ 1,051    $    5,020   $    4,127    $ 956     $    5,083
                                      ==========   =======    ==========   ==========    ======    ==========



<CAPTION>
                                                   1997
                                     --------------------------------
                                        U.S.     NON-U.S.     TOTAL
                                     ---------- ---------- ----------
                                              (IN THOUSANDS)
<S>                                  <C>        <C>        <C>
Service costs for benefits earned
 during the period .................  $  2,671   $   306    $  2,977
Interest costs on projected
 benefit obligation ................     8,804       639       9,443
Expected return on plan assets .....    (9,281)       --      (9,281)
Amortization of prior service
 costs .............................      (411)       --        (411)
Amortization of transitional
 (asset)/obligation ................       (61)      114          53
Recognized actuarial
 loss/(income) .....................     1,057         2       1,059
                                      --------   -------    --------
Net periodic pension cost of the
 plans .............................  $  2,779   $ 1,061    $  3,840
                                      ========   =======    ========
</TABLE>

     Changes in the benefit obligation and plan assets are as follows:




<TABLE>
<CAPTION>
                                                                            AS OF DECEMBER 31,
                                              -------------------------------------------------------------------------------
                                                               1999                                    1998
                                              -------------------------------------- ----------------------------------------
                                                  U.S.       NON-U.S.       TOTAL        U.S.        NON-U.S.        TOTAL
                                              ------------ ------------ ------------ ------------ -------------- ------------
                                                                              (IN THOUSANDS)
<S>                                           <C>          <C>          <C>          <C>          <C>            <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year .....  $ 138,416    $  11,526    $ 149,942    $ 130,036     $    9,080    $ 139,116
Service costs ...............................      4,265          229        4,494        3,801            254        4,055
Interest costs ..............................      9,151          677        9,828        9,151            598        9,749
Foreign currency exchange rate
 (gain)/loss ................................         --       (1,595)      (1,595)          --            796          796
Actuarial (gain)/loss .......................    (12,399)        (352)     (12,751)       6,958            984        7,942
Benefits paid ...............................    (11,709)        (211)     (11,920)     (11,530)          (186)     (11,716)
                                               ---------    ---------    ---------    ---------     ----------    ---------
Benefit obligation at end of year ...........    127,724       10,274      137,998      138,416         11,526      149,942
                                               ---------    ---------    ---------    ---------     ----------    ---------
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of
 year, primarily fixed income and
 equity securities ..........................    139,200           --      139,200      129,421             --      129,421
Actual return on plan assets ................     18,861           --       18,861       11,309             --       11,309
Company contributions .......................         --          211          211       10,000            186       10,186
Benefits paid ...............................    (11,709)        (211)     (11,920)     (11,530)          (186)     (11,716)
                                               ---------    ---------    ---------    ---------     ----------    ---------
Fair value of plan assets at end of year.....    146,352           --      146,352      139,200             --      139,200
                                               ---------    ---------    ---------    ---------     ----------    ---------
Funded status ...............................     18,628      (10,274)       8,354          784        (11,526)     (10,742)
Unrecognized net transition (asset)/
 obligation .................................        (42)         401          359         (103)           581          478
Unrecognized prior service benefit ..........     (1,720)          --       (1,720)      (2,131)            --       (2,131)
Unrecognized net (gain)/loss ................     (1,931)         741       (1,190)      20,354          1,242       21,596
Additional liability ........................         --         (817)        (817)          --         (1,210)      (1,210)
                                               ---------    ---------    ---------    ---------     ----------    ---------
Prepaid (accrued) pension costs for
 defined benefit plans ......................  $  14,935    $  (9,949)   $   4,986    $  18,904     $  (10,913)   $   7,991
                                               =========    =========    =========    =========     ==========    =========
</TABLE>

                                      F-18
<PAGE>

                 YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
          YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 - (CONTINUED )

Assumptions used were:




<TABLE>
<CAPTION>
                                                         1999                 1998                   1997
WEIGHTED-AVERAGE ASSUMPTIONS AS OF DECEMBER 31   -------------------- -------------------- -------------------------
                                                    U.S.    NON-U.S.     U.S.    NON-U.S.     U.S.       NON-U.S.
                                                 --------- ---------- --------- ---------- ---------- --------------
<S>                                              <C>       <C>        <C>       <C>        <C>        <C>
Discount and settlement rate ................... 8.3%      6.0%       7.0%      6.0%       7.25%       6.5%-7.0%
Rate of increase in compensation levels ........ 7.6%      2.5%       5.0%      2.5%        5.0%           3.0%
Expected long-term rate of return on assets .... 9.0%         N/A     9.0%         N/A      9.0%          N/A
</TABLE>

     Y&R recorded  liabilities  of $0.8 million and $1.2 million at December 31,
1999 and 1998, respectively, for the portion of its unfunded pension liabilities
that had not been  recognized  as  expense  with  corresponding  adjustments  to
equity.

     Contributions to foreign defined contribution plans were $9.9 million, $9.0
million and $8.4 million in 1999, 1998 and 1997, respectively.

     Y&R also has an employee  savings plan that qualifies as a deferred  salary
arrangement  under section 401(k) of the Internal  Revenue Code. Under the plan,
participating U.S. employees may defer a portion of their pre-tax earnings up to
the Internal Revenue Service annual  contribution  limit. Y&R currently  matches
100% of each  employee's  contribution  up to a maximum of 5% of the  employee's
earnings up to $160,000.  Amounts  expensed by Y&R for its  contributions to the
plan were $9.1  million,  $8.4 million and $7.8 million in 1999,  1998 and 1997,
respectively.

     At December 31, 1999 and 1998, other noncurrent  liabilities  include $10.2
million  and  $8.6  million,   respectively,   relating  to  postretirement  and
postemployment benefits other than pensions.

     Y&R maintains  certain  deferred cash incentive plans which are either tied
to operating  performance or contractual deferred compensation  agreements.  The
costs of these  compensation  plans were  expensed over the  applicable  service
period.  At  December  31, 1999 and 1998,  Y&R  recorded  deferred  compensation
liabilities of $31.3 million and $30.6 million, respectively.


                                      F-19
<PAGE>

                 YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
          YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 - (CONTINUED )

NOTE 12 -- DEBT

     Y&R's short-term debt consists  principally of advances under bank lines of
credit and generally bears interest at prevailing market rates. Y&R's short-term
debt of $31.7 million and $32.0 million include short-term portions of long-term
debt  of  $2.0  million  and  $0.5  million  at  December  31,  1999  and  1998,
respectively.

     Long-term debt is comprised of the following:



<TABLE>
<CAPTION>
                                                             AS OF DECEMBER 31,
                                                         --------------------------
                                                             1999           1998
                                                         ------------   -----------
                                                               (IN THOUSANDS)
<S>                                                      <C>            <C>
       Unsecured revolving credit facilities .........    $ 123,500      $ 31,460
       Capital lease obligations .....................        2,197            34
       Other borrowings ..............................        3,821           862
                                                          ---------      --------
                                                            129,518        32,356
       Less -- Current portion .......................        1,950           462
                                                          ---------      --------
                                                            127,568        31,894
                                                          =========      ========
</TABLE>

     On June 30, 1999,  Y&R increased its borrowing  capacity by entering into a
$200 million 364-day unsecured  revolving credit facility.  On May 15, 1998, Y&R
entered into a $400 million,  five-year unsecured multicurrency revolving credit
facility and used the net proceeds from the Offering  together with $155 million
of borrowings  under this credit  facility to repay all  outstanding  borrowings
outstanding 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 Y&R's  consolidated  statement  of  operations  for the year  ended
December  31,  1998.  Amounts due under the credit  facility  are required to be
repaid on May 15,  2003.  Y&R is required  to pay  varying  rates of interest on
outstanding  borrowings,  generally  based on LIBOR  plus an  applicable  margin
ranging from 0.275% to 0.70%,  depending on the leverage  ratio,  or the Federal
Funds Rate plus 0.5%.  Y&R is also  required to pay a facility  fee ranging from
0.10% to 0.20% and,  if the  outstanding  advances  exceed 50% of the  aggregate
facility,  a utilization fee will be charged  ranging from 0.075% to 0.125%.  In
1999 and 1998,  the total  facility fees under the credit  facilities  were $0.6
million and $0.4 million,  respectively. Our credit facilities contain financial
and operating restrictions and covenant requirements, including maximum leverage
ratio and minimum interest coverage requirements, and permit the payment of cash
dividends  except  in  the  event  of a  continuing  default  under  the  credit
agreements.

     At December  31,  1999,  the current  portion of  long-term  debt  includes
installment notes payable to management  investors of $0.7 million.  At December
31, 1998,  short-term and long-term debt includes  installment  notes payable to
management investors of $0.7 million and $0.4 million, respectively.

     The  weighted-average  interest rate on outstanding  debt was 5.71% for the
year ended December 31, 1999. The weighted-average  interest rate on outstanding
debt,  including the effect of interest rate swap  contracts,  was 6.27% for the
year ended  December 31,  1998.  At December  31,  1998,  Y&R had interest  rate
protection agreements with respect to $31.5 million of its indebtedness.  During
the first quarter of 1999, all interest rate  protection  agreements to which we
were party either matured or were retired. Accordingly, at December 31, 1999, we
had no such agreements outstanding.

     At December  31,  1999 and 1998,  Y&R had $760  million  and $543  million,
respectively, in availability under its commercial lines of credit ($635 million
and $435 million,  respectively,  in the United States and $125 million and $108
million,  respectively,  outside the United States).  Unused commercial lines of
credit  at  December  31,  1999 and 1998  were $600  million  and $480  million,
respectively. Y&R has no obligation to pay commitment fees on our current credit
facilities.  During 1998, Y&R paid commitment fees of approximately $0.1 million
on the unused portion of the replaced credit facility.


                                      F-20
<PAGE>

                 YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
          YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 - (CONTINUED )

NOTE 13 -- FAIR VALUE OF FINANCIAL INSTRUMENTS AND HEDGING ACTIVITY

     At  December  31,  1999 and 1998,  the  carrying  value of Y&R's  financial
instruments approximated fair value in all material respects.

     At December 31, 1999, Y&R had $159.3 million in outstanding indebtedness as
compared to $63.9 million at December 31, 1998, consisting primarily of floating
rate debt. For floating rate debt, interest rate changes generally do not affect
the fair market value but do impact  future  earnings  and cash flows,  assuming
other  factors  are held  constant.  Based  on  outstanding  indebtedness  as of
December  31,  1999,  the annual  after-tax  earnings  impact  resulting  from a
one-percentage   point   increase  or  decrease  in  interest   rates  would  be
approximately $1.0 million, holding other variables constant.

     Y&R enters into forward foreign exchange  contracts to hedge certain assets
and  liabilities  which are recorded in a currency  different from that in which
they  settle.  The purpose of these  contracts  is almost  exclusively  to hedge
intercompany transactions.  Gains and losses on these contracts generally offset
losses  and  gains on the  related  foreign  currency  denominated  intercompany
transactions.  The gains and losses on these positions are deferred and included
in the basis of the transaction  upon  settlement.  The terms of these contracts
are generally a one-month maturity.  At December 31, 1999, Y&R had contracts for
the  sale of  $26.1  million  and the  purchase  of  $11.9  million  of  foreign
currencies  at fixed rates,  compared to contracts for the sale of $19.4 million
and the  purchase  of $6.1  million  of  foreign  currencies  at fixed  rates at
December 31, 1998.

     At  December  31,  1998,  Y&R had entered  into  interest  rate  protection
agreements  with respect to $31.5  million of its  indebtedness.  The fair value
approximated the notional amount at December 31, 1998.  During the first quarter
of 1999, all interest rate  protection  agreements to which we were party either
matured or were  retired.  Accordingly,  at December  31,  1999,  we had no such
agreements outstanding.

     Management  believes that any losses  resulting  from market risk would not
have a material adverse impact on the consolidated  financial position,  results
of operations or cash flows of Y&R.


NOTE 14 -- EQUITY

     The following schedule  summarizes the changes in the number of outstanding
shares of common stock and treasury stock:





<TABLE>
<CAPTION>
                                            COMMON         COMMON STOCK
                                            STOCK          IN TREASURY
                                       ---------------   ---------------
<S>                                    <C>               <C>
BALANCE JANUARY 1, 1997 ............      58,469,280                --
                                          ----------                --
Issued .............................       4,391,010                --
Repurchased ........................      (1,115,160)        1,115,160
                                          ----------         ---------
BALANCE DECEMBER 31, 1997 ..........      61,745,130         1,115,160
                                          ----------         ---------
Issued -- Offering .................       6,912,730                --
Issued -- Option Exercises .........       2,178,436        (1,599,946)
Restricted Stock Redeemed ..........      (1,855,845)        1,855,845
Repurchased ........................      (2,605,882)        2,605,882
                                          ----------        ----------
BALANCE DECEMBER 31, 1998 ..........      66,374,569         3,976,941
                                          ----------        ----------
Issued -- Option Exercises .........       7,927,665        (5,326,700)
Issued -- Acquisitions .............       2,149,951        (2,149,951)
Repurchased ........................      (3,502,181)        3,502,181
                                          ----------        ----------
BALANCE DECEMBER 31, 1999 ..........      72,950,004             2,471
                                          ==========        ==========
</TABLE>

                                      F-21
<PAGE>

                 YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
          YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 - (CONTINUED )

     In 1997,  payments of $247.8 million were made to U.S.-based equity holders
for  options  and other  equity  holdings  tendered  in  connection  with  Y&R's
recapitalization in 1996 (the "Recapitalization").

     In connection with the consummation of the Recapitalization,  Y&R created a
class of preferred stock  designated as Money Market Preferred Stock (the "Money
Market Preferred").  The Money Market Preferred carries a variable rate dividend
and is  redeemable at Y&R's  election for $115.00 per share  following the fifth
anniversary  of the  issuance  thereof.  At December  31, 1999 and 1998,  50,000
shares of Money Market  Preferred were  authorized and 87 shares were issued and
outstanding.


NOTE 15 -- OPTIONS

     The Young & Rubicam  Inc.  1997  Incentive  Compensation  Plan (the  "ICP")
provides  for  grants of stock  options,  stock  appreciation  rights  ("SARS"),
restricted stock, deferred stock, other stock-related awards, and performance or
annual  incentive  awards that may be settled in cash,  stock or other  property
("Awards").  Under the ICP,  the total  number  of  shares of Y&R  common  stock
reserved and available for delivery to participants in connection with Awards is
19,125,000,  plus the  number of shares of Y&R  common  stock  subject to awards
under pre-existing plans that become available (generally due to cancellation or
forfeiture)  after the effective date of the ICP;  provided,  however,  that the
total number of shares of Y&R common stock with respect to which incentive stock
options  may be  granted  shall not exceed  1,000,000.  Any shares of Y&R common
stock  delivered  under the ICP may consist of authorized and unissued shares or
treasury shares.

     The Board of  Directors is  authorized  to grant stock  options,  including
incentive  stock options,  non-qualified  stock options,  and SARS entitling the
participant  to receive the excess of the fair market value of a share of common
stock on the date of  exercise  over the grant  price of the SAR.  The  exercise
price per share  subject to an option and the grant price of a SAR is determined
by the Board of Directors,  but must not be less than the fair market value of a
share of common  stock on the date of grant.  The maximum term of each option or
SAR, the times at which each option or SAR will be  exercisable,  and provisions
requiring forfeiture of unexercised options or SARS at or following  termination
of employment generally is fixed by the Board of Directors,  except no option or
SAR may have a term exceeding ten years.

     Generally,  options granted prior to 1999 under the ICP become  exercisable
over a three-year  vesting period beginning on the third anniversary of the date
of grant and  expire ten years from the date of grant.  The  three-year  vesting
period for options granted in 1999 generally begins on the first  anniversary of
the date of grant.  However,  the Board of  Directors  may,  at its  discretion,
accelerate the exercisability, the lapsing of restrictions, or the expiration of
deferral or vesting periods of any award, and such  accelerated  exercisability,
lapse, expiration and vesting shall occur automatically in the case of a "change
in  control"  of Y&R  except  to the  extent  otherwise  provided  in the  award
agreement.  In addition, the Board of Directors may provide that the performance
goals relating to any  performance-based  awards will be deemed to have been met
upon the occurrence of any change in control.

     At the  closing of the  Recapitalization  in 1996,  the Board of  Directors
granted the Rollover  Options,  which were  immediately  vested and exercisable.
Each  Rollover  Option has an exercise  price of $1.92 per share,  with  certain
limited  exceptions  outside of the United States. Of the Rollover Options,  50%
have a term of five years and the remaining 50% have a term of seven years.

     At the closing of the Recapitalization, the Board of Directors also granted
to employees  options to purchase  5,200,590 shares of Y&R common stock at $7.67
per share and, in 1997,  additional  options to purchase 1,891,200 shares of Y&R
common stock at $7.67 per share (the "Additional  Options").  As a result of the
granting of the Additional Options in 1997, Y&R recognized a compensation charge
of $1.3 million  reflecting  the  difference  between the estimated  fair market
value of Y&R common stock on the


                                      F-22
<PAGE>

                 YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
          YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 - (CONTINUED )

date of grant and the  exercise  price of the  Additional  Options.  All options
granted to employees in connection  with the  Recapitalization  were pursuant to
and are governed by the stock option plan in  existence  prior to the  effective
date of the ICP.

     Additionally,  at the  closing  of the  Recapitalization,  Y&R  granted  to
Hellman & Friedman  Capital  Partners  III,  L.P.  ("HFCP")  and  certain  other
investors options to purchase  2,598,105 shares of Y&R common stock at $7.67 per
share which were exercisable  immediately and expire on the seventh  anniversary
of the closing. Substantially all of the HFCP options were exercised in 1999.

     Y&R has  adopted  SFAS  No.  123  (see  Note  1).  In  accordance  with the
provisions  of SFAS No.  123,  Y&R  applies  APB  Opinion  No. 25,  and  related
interpretations,  in accounting  for its plans.  If Y&R had elected to recognize
compensation  expense  based  upon the fair  value at the grant  date for awards
under its plans  consistent  with the  methodology  prescribed  by SFAS No. 123,
Y&R's net income in 1999 would be  decreased  by $8.3 million and the net income
per common share would be  decreased  by $0.12 and $0.10,  for basic and diluted
earnings  per share,  respectively.  Y&R's net loss would be  increased  by $7.8
million  and $6.3  million  for the  years  ended  December  31,  1998 and 1997,
respectively,  and the net basic and  diluted  loss per  common  share  would be
increased by $0.13 for each of the years ended December 31, 1998 and 1997.

     These SFAS No. 123 pro forma  amounts may not be  representative  of future
disclosures  since the  estimated  fair value of stock  options is  amortized to
expense over the vesting period, and additional options may be granted in future
years. The fair value for these options was estimated at the date of grant using
the Black-Scholes  option-pricing  model with the following  assumptions for the
period ended December 31, 1999, 1998 and 1997, respectively:





<TABLE>
<CAPTION>
                                              1999               1998               1997
                                        ----------------   ----------------   ----------------
<S>                                     <C>                <C>                <C>
       Expected term ................   4 years            6 years            10 years
       Risk-free rate ...............    5.22%-6.23%        4.26%-5.84%        5.59%-7.12%
       Dividend yield ...............         0.26%                 0%                 0%
       Expected volatility ..........        28.60%             24.90%                 0%

</TABLE>

     Since Y&R's common stock was publicly  traded for the first time in 1998 as
a result of the Offering, we did not have sufficient  historical  information to
make a reasonable  assumption as to the expected  volatility of our common stock
price in the future. As a result, the assumption in the table above reflects the
expected volatility of stock prices of entities similar to Y&R. In addition, the
decrease in the expected  term of options for 1998 as compared to 1997 is due to
the creation of an active,  liquid market for Y&R's common stock  resulting from
the Offering.

     The  weighted-average  fair value and  weighted-average  exercise  price of
options granted on and subsequent to the Recapitalization for which the exercise
price equals the fair value of Y&R common stock on the grant date was $12.30 and
$38.76 in 1999, respectively,  $7.80 and $22.59 in 1998, respectively, and $5.28
and $12.33 in 1997, respectively.

     In 1997, Y&R granted options to certain executives at exercise prices below
the fair value of Y&R common  stock on the date of grant.  The  weighted-average
fair value and  weighted-average  exercise  price of these options was $6.76 and
$7.67 in 1997, respectively.

     The  Black-Scholes   option  valuation  model  was  developed  for  use  in
estimating  the  weighted-average  fair value of traded  options,  which have no
vesting  restrictions and are fully  transferable.  Because Y&R's employee stock
options  have  characteristics  significantly  different  from  those of  traded
options,  and because changes in the subjective input assumptions can materially
affect the fair value estimate,  in management's opinion, the existing models do
not  necessarily  provide a  reliable  single  measure  of the fair value of its
employee stock options.


                                      F-23
<PAGE>

                 YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
          YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 - (CONTINUED )

   Transactions involving options are summarized as follows:





<TABLE>
<CAPTION>
                                         OPTIONS        WEIGHTED-AVERAGE
                                       OUTSTANDING       EXERCISE PRICE
                                     ---------------   -----------------
<S>                                  <C>               <C>
       JANUARY 1, 1997 ...........      24,622,260         $   3.76
                                        ----------         --------
       Granted ...................      11,469,150            11.56
       Exercised .................      (4,250,790)            2.19
       Cancelled .................        (827,415)            4.50
                                        ----------         --------
       DECEMBER 31, 1997 .........      31,013,205             6.84
                                        ----------         --------
       Granted ...................       2,472,933            22.59
       Exercised .................      (2,178,436)            3.10
       Cancelled .................      (1,230,060)           10.81
                                        ----------         --------
       DECEMBER 31, 1998 .........      30,077,642             8.23
                                        ----------         --------
       Granted ...................       4,414,179            38.76
       Exercised .................      (7,927,665)            4.54
       Cancelled .................      (2,228,060)           13.65
                                        ----------         --------
       DECEMBER 31, 1999 .........      24,336,096         $  14.47
                                        ==========         ========

</TABLE>

     At  December  31,  1999,  1998 and 1997,  Y&R had  exercisable  options  of
8,494,699, 14,963,354, and 17,242,995, respectively.


     The following information is as of December 31, 1999:





<TABLE>
<CAPTION>
                                                   OPTIONS OUTSTANDING                  OPTIONS EXERCISABLE
                                       -------------------------------------------   --------------------------
                                                         WEIGHTED-
                                                          AVERAGE       WEIGHTED-                     WEIGHTED-
                                                         REMAINING       AVERAGE                       AVERAGE
                                           NUMBER       CONTRACTUAL      EXERCISE        NUMBER       EXERCISE
RANGE OF EXERCISE PRICES                OUTSTANDING         LIFE          PRICE       EXERCISABLE       PRICE
------------------------------------   -------------   -------------   -----------   -------------   ----------
<S>                                    <C>             <C>             <C>           <C>             <C>
 $1.92..............................     6,083,314           3.11       $   1.92       6,083,314      $   1.92
 $7.67..............................     4,322,980           6.24           7.67       2,221,361          7.67
 $12.00-$15.00......................     8,312,700           8.10          12.40         103,650         12.59
 $25.00-$31.00......................     1,420,223           8.94          28.55          86,374         30.22
 $37.00-$49.00......................     4,196,879           9.47          38.98              --            --
                                         ---------           ----       --------       ---------      --------
TOTAL AT DECEMBER 31, 1999 .........    24,336,096           6.81       $  14.47       8,494,699      $   3.84
                                        ----------           ----       --------       ---------      --------
</TABLE>

NOTE 16 -- LITIGATION, COMMITMENTS AND CONTINGENT LIABILITIES


     Y&R is  involved in various  legal  proceedings  incident  to the  ordinary
course  of  business.  Y&R's  practice  is  to  attempt  to  minimize  potential
liabilities through insurance coverage and/or indemnification  provisions in its
agreements with clients and others. Y&R believes that the outcome of all pending
legal  proceedings  and  unasserted  claims  in the  aggregate  will  not have a
material  adverse  effect on its results of operations,  consolidated  financial
position or liquidity.


     At December 31, 1999, Y&R was committed under operating leases, principally
for office space.  Certain leases contain  renewal options calling for increased
rentals.  Others contain certain  escalation clauses relating to taxes and other
operating expenses.


                                      F-24
<PAGE>

                 YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
          YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 - (CONTINUED )

     Net rental expense was $85.1 million,  $75.5 million,  and $74.4 million in
1999,  1998 and 1997,  respectively.  Future  minimum  rental  commitments as of
December 31, 1999 are as follows:





<TABLE>
<CAPTION>
                                (IN THOUSANDS)
<S>                            <C>
  2000 .....................       $ 61,831
  2001 .....................         56,600
  2002 .....................         50,672
  2003 .....................         42,891
  2004 .....................         38,092
  Thereafter ...............         93,014

</TABLE>

     Y&R had outstanding guarantees of $4.5 million and $8.6 million at December
31,  1999 and 1998,  respectively,  primarily  in  support  of  credit  lines of
unconsolidated affiliates.


NOTE 17 -- SUBSEQUENT EVENTS (UNAUDITED)

     On January 20, 2000,  Y&R completed  the placement of $287.5  million of 3%
convertible  subordinated  notes due  January 15,  2005,  which  includes  $37.5
million of notes issued  pursuant to the exercise by the initial  purchasers  of
their  over-allotment  option.  At the  option  of the  holder,  the  notes  are
convertible  into shares of Y&R's common  stock at a conversion  price of $73.36
per share,  subject to adjustment.  Y&R used the net proceeds of the offering to
repay  outstanding debt under Y&R's existing bank credit  facilities and to fund
operations.

     In January 2000, Y&R  contributed  cash and certain assets and rights known
as Y&R  TeamSpace,  a  proprietary  software  tool, to eMotion Inc., a firm that
provides  digital  media  management  solutions  that  facilitate  the  creative
workflow,  sale, distribution and management of media rich broadband content. In
exchange for an ownership  interest in eMotion Inc. Y&R expects to record a gain
in the first quarter of 2000 in connection with this transaction.

     In the  first  quarter  of  2000,  Y&R  acquired  100%  of  Robinson  Lerer
Montgomery,  LLC and also made strategic  investments in certain other entities.
Cash  payments  made  in  connection   with  these   transactions   amounted  to
approximately $45 million.


                                      F-25
<PAGE>

YOUNG AND RUBICAM INC. AND SUBSIDIARY COMPANIES                  SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                       ADDITIONS
                                                       -----------------------------
                                           BALANCE AT   CHARGED TO                                  BALANCE
                                            BEGINNING    COSTS AND     CHARGED TO                  AT END OF
DESCRIPTION                                 OF PERIOD    EXPENSES    OTHER ACCOUNTS   DEDUCTIONS    PERIOD
----------------------------------------- ------------ ------------ ---------------- ------------ ----------
<S>                                       <C>          <C>          <C>              <C>          <C>
YEAR ENDED DECEMBER 31, 1999
Allowance for Doubtful Accounts .........   $ 17,938     $ 10,766         --            $ 3,692    $ 25,012
                                            ========     ========         ==            =======    ========
YEAR ENDED DECEMBER 31, 1998
Allowance for Doubtful Accounts .........   $ 14,125     $  9,404         --            $ 5,591    $ 17,938
                                            ========     ========         ==            =======    ========
YEAR ENDED DECEMBER 31, 1997
Allowance for Doubtful Accounts .........   $  9,849     $ 14,269         --            $ 9,993    $ 14,125
                                            ========     ========         ==            =======    ========
</TABLE>

                                       S-1