SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
Registration statement pursuant to Section 12(b) or 12 (g) of the Securities
Exchange Act of 1934
or
[X] Annual report pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934
For the Fiscal year ended December 31, 2000
-----------------
or
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Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from _______________ to ___________________
Securities registered or to be registered pursuant to Section 12 (b) of the Act:
Name of Each Exchange
Title of Each Class On Which Registered
------------------- ---------------------
Ordinary Shares London Stock Exchange
American Depositary Shares, each Nasdaq
representing five
Ordinary Shares ("ADS")
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Securities registered or to be registered pursuant to Section 12 (g) of the Act:
Securities for which there is a reporting obligation pursuant to Section 15 (d)
of the Act:
Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report.
Ordinary Shares 1,111,853,705
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 with financial statement item the registrant has elected to follow.
Item 17 [_] Item 18 [X]
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
Overview
WPP Group plc ("WPP") and its subsidiaries is a leading communications services organisation offering national, multinational and global clients a comprehensive range of advertising and marketing services. These services include advertising and media investment management, information and consultancy, public relations and public affairs, and branding and identity, healthcare and specialist communications. The Group's revenues in 2000 were approximately $4.5 billion. Based on 2000 revenues, the Company is the largest marketing communications services company in the world. At year-end, WPP (including affiliated companies) employed 65,000 full-time people in 1,300 offices in 102 countries throughout the world.
Unless the context otherwise requires, the terms "Company", "Group" and "Registrant" as used herein shall mean WPP and its subsidiaries.
Selected financial data
The selected financial data set forth below is derived from the Consolidated Financial Statements of the Company which appear elsewhere in this Form 20-F and should be read in conjunction with, and are qualified in their entirety by reference to, such Consolidated Financial Statements including the notes thereto. Such Consolidated Financial Statements have been audited by Arthur Andersen, Independent Chartered Accountants.
The Consolidated Financial Statements of the Company are prepared in accordance with UK GAAP, which differ in certain significant respects from US GAAP. A reconciliation to US GAAP is set forth on pages F-22 to F-23 of the Consolidated Financial Statements.
Year ended December 31
Selected Consolidated Profit and Loss Account Data
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2000 1999 1998 1997 1996 2000 1999 1998 1997 1996
(pound)m (pound)m (pound)m (pound)m (pound)m $m $m $m $m $m
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Amounts in accordance with UK GAAP:
Turnover (or gross billings) 13,949.4 9,345.9 8,000.1 7,287.3 7,084.0 21,150.1 15,119.8 13,259.4 11,937.3 11,062.4
Revenue 2,980.7 2,172.6 1,918.4 1,746.7 1,691.3 4,519.3 3,514.8 3,179.6 2,861.2 2,641.1
EBITDA (i) 494.9 333.0 278.9 234.6 210.8 750.4 538.7 462.2 384.3 329.2
Operating Profit 378.0 263.5 229.1 194.9 170.1 573.1 426.3 379.7 319.2 265.6
Income before taxes and minority
interests 365.7 255.4 212.8 177.4 153.3 554.5 413.2 352.7 290.6 239.4
Net income before dividends 244.7 172.8 140.3 116.0 100.0 371.1 279.6 232.6 190.0 156.2
Basic earnings per share 29.3 22.9p 19.1p 15.8p 13.6p 44.4c 37.0c 31.7c 25.9c 21.2c
Diluted earnings per share 28.4 22.5p 18.8p 15.7p 13.5p 43.1c 36.4c 31.2c 25.7c 21.1c
Dividends per share 3.75p 3.1p 2.56p 2.13p 1.7p 5.7c 5.0c 4.2c 3.5c 2.7c
Amounts in accordance with US GAAP:
Net income 122.9 81.9 100.4 80.2 67.1 186.3 132.5 166.4 131.4 104.8
Basic earnings per share 14.7p 10.9p 13.6p 10.9p 9.1p 22.3c 17.6c 22.5c 17.9c 14.2c
Diluted earnings per share 14.1p 10.6p 13.4p 10.8p 9.0p 21.4c 17.1c 22.2c 17.7c 14.1c
Dividends per share 3.3p 2.72p 2.27p 1.844p 1.421p 5.0c 4.4c 3.8c 3.0c 2.2c
As of December 31
Selected Consolidated Balance Sheet Data:
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2000 1999 1998 1997 1996 2000 1999 1998 1997 1996
(pound)m (pound)m (pound)m (pound)m (pound)m $m $m $m $m $m
----------------------------------------------------------------------------------------------
Amounts in accordance with UK GAAP:
Total assets 9,112.0 3,234.4 2,480.5 1,979.3 1,894.8 13,610.6 5,233.9 4,127.0 3,256.7 3,242.6
Net assets 3,434.1 354.7 223.8 9.7 54.9 5,129.6 574.0 372.3 16.0 94.0
Capital Stock 111.2 77.5 76.6 73.6 74.1 166.1 125.4 127.4 121.1 126.8
Number of shares 1,111.9 774.5 766.5 736.3 741.4 1,111.9 774.5 766.5 736.3 741.4
Amounts in accordance with US GAAP:
Net assets 4,173.3 1,028.1 933.8 726.0 772.4 6,233.7 1,663.7 1,553.7 1,194.6 1,321.8
Total assets 9,532.7 3,723.0 3,083.6 2,675.7 2,629.2 14,239.0 6,024.6 5,130.5 4,402.6 4,499.3
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(i) EBITDA is defined as net income before interest, tax, depreciation,
amortization and impairment charge.
(ii) The selected financial data prior to 2000 has been restated as a result of
the implementation of FRS 19 (Deferred Tax) in the Group's 2000 financial
statements.
Dividends
Dividends on the Company's ordinary shares, when paid, are paid to share owners as of a record date which is fixed after consultation between the Company and The London Stock Exchange Limited ("The Stock Exchange").
The table below sets forth the amounts of interim, final and total dividends paid on the Company's ordinary shares in respect of each fiscal year indicated. The dividends are also shown translated into US cents per ADS using the Closing Buying Rate (as reported in the London Financial Times) for pounds sterling on each of the respective payment dates for such dividends.
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Pence per ordinary share Translated into US cents per ADS
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Year ended: Interim Final Total Interim Final Total
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1996 0.556 1.144 1.70 4.3* 8.9* 13.2*
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1997 0.70 1.43 2.13 5.7* 11.7* 17.4*
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1998 0.84 1.72 2.56 7.0* 14.3* 21.3*
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1999 1.0 2.1 3.1 8.1 17.0 25.1
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2000 1.2 2.55 3.75 9.4 19.3 28.7
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* These amounts have been restated to reflect the current value of one ADS to 5 ordinary shares (prior to November 16, 1999 one ADS represented 10 ordinary shares).
The 2000 interim dividend was paid on November 20, 2000 to share owners on the register at September 15, 2000. The 2000 final dividend is expected to be paid on July 9, 2001 to share owners on the register at June 8, 2001. The 2000 proposed final dividend has been translated into US cents using the 2000 average exchange rate of $1.5162.
Exchange rates
Fluctuations in the exchange rate between the pound sterling and the United States dollar will affect the dollar equivalent of the pound sterling prices of the Company's ordinary shares on The Stock Exchange, and as a result, are likely to affect the market price of the ADS in the United States. Such fluctuations will also affect the dollar amounts received by holders of ADSs on conversion by the Depositary of cash dividends paid in pounds sterling by the ordinary shares represented by the ADSs. The average Closing Buying Rates (as reported in the London Financial Times, or the average Bloomberg Closing Mid Point rate) for pounds sterling expressed in for each of the five years ended December 31, 2000, were:
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Year ended December 31 Average
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1996 1.5616
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1997 1.6381
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1998 1.6574
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1999 1.6178
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2000 1.5162
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The following table sets forth for each of the most recent six months, the high and low Bloomberg Closing Mid Point rates. As of June 4, 2001, the Bloomberg Closing Mid Point rate was 1.4126.
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Month ended High Low
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January 31, 2001 1.5044 1.4585
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February 28, 2001 1.4789 1.4408
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March 31, 2001 1.4696 1.4189
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April 30, 2001 1.4490 1.4183
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May 31, 2001 1.4395 1.4118
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June 30, 2001 (through June 4) 1.4173 1.4126
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RISK FACTORS
The Company competes for clients in a highly competitive industry.
The marketing communications services industry is highly competitive and fragmented. At the parent company level, the Company's principal competitors are other large multinational marketing and communications companies, including Omnicom Group and The Interpublic Group of Companies. The actual competition for clients, however, takes place at the operating company level, within the different sectors of advertising, media investment management, information and consultancy, public relations and public affairs, branding and identity, healthcare and specialist communications. The Company's principal competitors in the advertising industry are large multinational agencies, including BBDO, DDB Needham, McCann Erickson, TBWA, Burnett, and Dentsu, as well as numerous smaller agencies that operate in local markets. The Company's agencies must compete with other agencies to maintain existing client relationships and to obtain new clients. Principal competitive factors include the agency's creative reputation, knowledge of media alternatives and purchasing power, geographic coverage and diversity, quality of service and understanding of clients' needs. Improved global communications and free trade, and more stable, less inflationary worldwide economic growth have contributed to increased competition in the communications services industry. At the same time, however, the other larger communications services groups are consolidating, diversifying and growing their market share through acquisitions.
Clients are not generally bound to an individual agency and may move their accounts to another agency, usually with 90 days notice. Clients may also reduce advertising and marketing budgets at any time and for any reason with no compensation to the agency. Larger clients tend to use more than one agency for their advertising requirements. In many cases, the Company represents a client for only a portion of its advertising or marketing services needs or only in particular geographic areas thus enabling the client to continually compare the effectiveness of its different agencies' work. Industry practices in the other communications services businesses reflect similar concerns with respect to client relationships. Despite these circumstances, there is continued evidence that clients are moving towards the consolidation of their marketing activities.
An agency's ability to compete for new advertising, and marketing services clients and assignments, is limited somewhat by the policy followed by many clients of not permitting agencies working for them to represent competitive accounts or product lines in the same market. A lesser number of companies will not permit their advertising and/or marketing services firms to work on competitive accounts in any market, although, increasingly, converging strategies seem to be reducing the incidence of this. There are also some signs of a weakening of client conflict policies, as clients wrestle with the difficulties that increasing globalisation, acquisitions, mass product launches and joint ventures bring.
The Company receives a significant portion of its revenues from a limited number of large clients.
A relatively small number of clients contributes a significant percentage of the Company's consolidated revenues. The Company's ten largest clients accounted for 28% of revenues. The Company's clients generally are able to reduce advertising and marketing spending or cancel projects at any time for any reason. There can be no assurance that any of the Company's clients will continue to utilize the Company's services to the same extent, or at all, in the future. A significant reduction in advertising and marketing spending by, or the loss of one or more of, the Company's largest clients, if not replaced by new clients accounts or an increase in business from existing clients, would adversely affect the Company's prospects, business, financial condition and results of operations.
The Company may be subject to certain regulations that could restrict the company's activities.
From time to time, governments, government agencies and industry self-regulatory bodies in the United States and other countries in which the Company operates have adopted statutes, regulations, and rulings which directly or indirectly affect the form, content, and scheduling of advertising, and public relations and public affairs, or otherwise affect the activities of the Company and its clients. Some of the foregoing relate to general considerations such as truthfulness, substantiation and interpretation of claims made, comparative advertising, relative responsibilities of clients and advertising, public relations and public affairs firms, and registration of public relations and public affairs firms' representation of foreign governments.
In addition, there is an increasing tendency towards consideration and adoption of specific rules, prohibitions, and media restrictions, and labelling, disclosure and warning requirements, with respect to advertising for certain products, such as over-the-counter drugs and pharmaceuticals, cigarettes, food and certain alcoholic beverages, and to certain groups, such as children.
Proposals have been made for the adoption of additional laws and regulations which could further restrict the activities of advertising and public relations and public affairs firms and their clients. Though the Company does not expect any existing, proposed or future regulations to materially adversely impact the Company's business, the Company is unable to estimate the effect on its future operations of the application of existing statutes or regulations or the extent or nature of future regulatory action.
The Company is dependent on its employees.
The assets of advertising and marketing services businesses are primarily its people, and the Company is highly dependent on the talent, creative abilities and technical skills of its personnel and the relationships its personnel have with clients. The Company believes that its operating companies have established reputations in the industry which attract talented personnel. However, the Company, like all marketing and communications services businesses, is vulnerable to adverse consequences from the loss of key employees due to the competition among these businesses for talented personnel.
The Company is exposed to international business risk.
The Company operates in 102 countries throughout the world. Its operations outside the United States are exposed to the normal business risks and limitations caused by currency fluctuations, exchange control restrictions, restrictions on repatriation of earnings and investment of capital and political instability.
ITEM 4. INFORMATION ON THE COMPANY
The Company operates through a number of established national and global advertising and marketing services companies. Among these are the well known advertising networks J. Walter Thompson Company, Ogilvy & Mather Worldwide and Y&R Advertising; MindShare and The Media Edge in media investment management; The Kantar Group (including Research International, Millward Brown and Kantar Media Research) in information and consultancy; the worldwide public relations and public affairs companies Burson-Marsteller, Hill and Knowlton, Ogilvy Public Relations Worldwide and Cohn & Wolfe; and a wide range of branding and identity, healthcare and specialist communications companies including the Enterprise Identity Group and Landor Associates, specialising in branding and corporate identity, CommonHealth and Sudler & Hennessey, specialising in healthcare communications, and Oglivy One and Wunderman, in direct and interactive. The Company's ten largest clients in 2000 were American Express, Ford, IBM, Johnson & Johnson, Kimberly-Clark, Nestle, Pfizer, Philip Morris, Sears and Unilever.
The Company's ordinary shares are admitted to the Official List of the UK Listing Authority and trade on The Stock Exchange and American Depositary Shares (evidenced by American Depositary Receipts) representing deposited ordinary shares are quoted on the Nasdaq National Market ("Nasdaq"). At June 4, 2001, the Company had a market capitalisation of (Pounds) 8.7 billion ($12.3 billion).
The Company's executive office is located at 27 Farm Street, London W1J 5RJ, England, Tel: (44) 20 - 7408 - 2204 and its registered office is located at Pennypot Industrial Estate, Hythe, Kent CT21 6PE, England.
History and Development of the Company
The Company was incorporated under the laws of England and Wales in 1971, and until 1985 operated as a manufacturer and distributor of wire and plastic products. In 1985, new investors acquired a significant interest in the Company and changed the strategic direction of the Company from being a wire and plastics manufacturer and distributor to being a multinational communications services organisation. Since then, the Company has grown both internally and by the acquisition of companies, most significantly the acquisitions of JWT Group, Inc. in 1987, The Ogilvy Group, Inc. in 1989 and Young & Rubicam Inc. in 2000s.
1985 Through 1993
Throughout this period, the purchase price for acquisitions was primarily paid for in cash financed by bank debt, with some portion of the purchase price paid on a contingent performance basis over time. The Company carried a significant amount of debt into 1991 when a recession developed in its most important markets, the United States and the United Kingdom. Client advertising budgets were trimmed causing revenues (primarily commissions from media placements) to fall. The Company was not able to reduce expenses sufficiently at the time and the Company's profits fell.
In 1992 the Company began actions to reduce its acquisition related debt burden and stability returned to the Company's major markets. Financing initiatives, including the refinancing of existing bank debt with a new $800 million 5 year credit facility, the successful completion of a four-for-five ordinary share rights issue in 1993 and further initiatives including the sale of some of the Company's non-core operations, enhanced the Company's capital structure and liquidity.
1994 Through 2000
During the period from 1994 through 2000, the Company's financial and operating performance showed consistently strong improvement. Since 1995, the primary source of funds for the Group has been cash generated from operations and the primary uses of cash funds have been to service and repay bank debt, for capital expenditures and, since 1997, to fund acquisitions and ordinary share repurchases. The Company spent (Pounds)206.5 million, (Pounds)242.2 million and (Pounds)111.8 million for acquisitions in 2000, 1999 and 1998, respectively. For the same periods, cash spent on purchases of tangible fixed assets were (Pounds)111.9 million, (Pounds)64.6 million and (Pounds)51.6 million, respectively, and cash spent on share repurchases was (Pounds)94.1 million, (Pounds)17.9 million and (Pounds)33.3 million, respectively. The majority of the unsecured debt of the Group during this period was funded under various syndicated loan facilities. In conjunction with the improved profitability and credit standing of the Group, each new loan facility has brought reduced pricing and less restrictive covenants. The Company's revolving credit facilities consist of a $500 million syndicated Revolving Credit Facility and a $700 million facility dated August 2000. The $500 million facility dated July 1998, as amended, is due to expire in July 2002 and the $700 million facility is due to expire in August 2001 although the Group has the ability to extend drawings under this facility until August 2003. The Company also has a securitized working capital facility, currently in the amount of $350 million, which was entered into in 1993 and which has been amended several times, and most recently renewed in December 1998. As of December 31, 2000, the Company also had in issue US$ 200 million of 6.625% Notes due 2005 and US$ 100 million of 6.875% Notes due 2008.
The Company's revenues, operating margins and net profit continued to improve beyond the Company's publicly announced objectives during this period. Management stock ownership was promoted through the establishment of employee stock option plans and long term equity based incentive compensation plans at the operating company levels. Centralised human resources, property management, procurement, information technology and practice development initiatives were implemented during this period. In addition, the Company completed a number of strategic acquisitions and commenced a program of ordinary share repurchases in 1997.
On October 4, 2000, the Company finalised its acquisition of Young & Rubicam Inc. ("Young & Rubicam" or the "Y&R Group"). The value of the consideration which was satisfied entirely by the issue of new WPP ordinary shares or WPP American Depositary Shares, calculated by reference to the opening WPP share price on October 4, 2000, (Pounds)7.99, was (Pounds)3.0 billion. Further details regarding the acquisition of Young & Rubicam are given in Note 25 of Notes to the Consolidated Financial Statements.
The merger with Young & Rubicam brought together two organisations sharing a common approach on the integration of advertising and marketing services for clients. The management of WPP believe that the companies complement one another in providing alternative operating brands in common business areas while adding the market research expertise of WPP to the Young & Rubicam businesses. Both WPP and Young & Rubicam share a large number of major clients including The Ford Motor Company, Philip
Morris, Sears and Mattel. Within the enlarged Group client conflicts can be managed more effectively through separate operating brands so that clients will be assured of confidentiality. In addition, the merger has strengthened the Group geographically, particularly in North America and Continental Europe.
In 2000 turnover increased to almost (Pounds)14 billion ($21 billion), reflecting in part the growth of media investment management, and revenues grew over 37% to almost (Pounds)3 billion ($4.5 billion). Operating profit (excluding income from associates) rose by over 43% to (Pounds)378 million ($573 million) and operating margins (including income from associates) rose by 0.6 margin points to 14% in line with objectives. Pre-tax profits rose by over 43% to almost (Pounds)366 million ($555 million) and diluted earnings per share by over 26% to 28.4p (43.1c). On a like-for-like basis (including Young & Rubicam for the fourth quarter of 2000), revenues rose by almost 15% and gross profit rose almost 16% over 1999.
Year Average Net Debt(pounds)m Interest Coverage ---- ------------------------- ----------------- 1996 145.0 6.3 1997 115.0 7.3 1998 143.0 7.6 1999 206.0 8.2 2000 423.0 8.3 Margins ------- Year EBIT(pounds)m Operating Margin ---- ------------- ---------------- 1996 182.0 10.8% 1997 206.0 11.8% 1998 245.0 12.8% 1999 291.0 13.4% 2000 416.0 14.0% Earnings -------- Year Earnings(pounds)m ---- ----------------- 1996 100.0 1997 116.0 1998 140.3 1999 172.8 2000 244.7 |
Year Net Debt (pounds)m Market Cap(pounds)m ---- ------------------ ------------------- 1996 145 1,883 1997 115 1,984 1998 143 2,804 1999 206 7,598 2000 423 9,631 |
Subsequent Event
In June 2001, the Company issued EURO 1 billion of bonds, consisting of EURO 650 million at 6% due June 2008 and EURO 350 million at 5.125% due June 2004. Proceeds will be used to repay existing bank borrowings taken on at the time of the Young & Rubicam acquisition and for general corporate purposes.
Business Overview
The Company's business comprises the provision of communications services both on a national, multinational and global basis. The Company organises its businesses in four main areas: advertising and media investment management, information and consultancy, public relations and public affairs, and branding and identity, healthcare and specialist communications. Set forth below is a listing of the Group companies operating within these four business segments as at May 4, 2001.
-------------------------------------------------------------------------------- Advertising Media investment management Ogilvy & Mather Worldwide MindShare J. Walter Thompson Company The Media Edge/1/ Y&R Advertising/1/ Media Insight Red Cell Maximize Asatsu-DK/2/ Portland Outdoor Batey/2/ The Media Partnership/2/ Chime Communications PLC/2/ Tempus Group PLC/3/ Dentsu, Young & Rubicam/1,4/ Equus/2/ SCPF/2/ The Lord Group/1/ -------------------------------------------------------------------------------- Public relations & public affairs Information & consultancy Buchanan Communications The Kantar Group: Burson-Marsteller/1/ Research International Carl Byoir & Associates Millward Brown Cohn & Wolfe/1/ Kantar Media Research Hill and Knowlton - AGB Italia/2/ Ogilvy Public Relations Worldwide - BMRB International Robinson Lerer & Montgomery/1/ - IBOPE Media Information/2/ Timmons and Company Goldfarb Consultants The Wexler Group IMRB International/2/ Chime Communications PLC/2/ Center Partners |
Branding & identity Direct, promotion & relationship marketing Sector marketing
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The Brand Union: A. Eicoff & Co. . Corporate/B2B
Addison Corporate Marketing* Brierley & Partners/2/ Brouillard
BDG McColl* Einson Freeman Ogilvy Primary Contact
BPRI* EWA . Demographic marketing
Coley Porter Bell* The Grass Roots Group/2/ The Bravo Group/1/
Dovetail* High Co/2/ The Geppetto Group
Enterprise IG* KnowledgeBase Marketing/1/ Kang & Lee/1/
Enterprise XP* Mando Marketing The Market Segment Group/2/
-Banner McBride* OgilvyOne Worldwide Mendoza Dillon & Asociados
-Clever Media* RMG International Uniworld/2/
-Eurosem* RTC . Foodservice
-The Clinic* Savatar The Food Group
Lambie-Nairn* ThompsonConnect Worldwide . Investor Relations
Oakley Young* Wunderman International Presentations/2/
Walker Group/CNI* . PR & sports marketing
Warwicks* Premiere Group
CB'a PRISM Group
icon brand navigation . Real Estate
Landor Associates/1/ Specialist communications Pace
The Partners/1/ . Technology
Strategic marketing consulting Banner Corporation/1/
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Glendinning
The Henley Centre* Media and technology services
Management Ventures -----------------------------
Healthcare pFour Consultancy Clockwork Capital/2/
CommonHealth Quadra Advisory/2/ DigiReels
Ogilvy Healthcare The Farm/2/
Shire Hall Group Metro Group
Sudler & Hennessey/1/ Spafax
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Approximately 47% of the Company's revenues in 2000 were from advertising and media investment management, with the remaining 53% of its revenues being derived from the faster growing business segments of information and consultancy, public relations and public affairs, and branding and identity, healthcare and specialist communications. Over the past several years, the pattern of revenue growth varied by communications services sector and brand. The following table shows reported revenue attributable to each business segment in which the Company operates for the last three fiscal years.
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2000 2000 % of 1999 1999 % of 1998 1998 % of
(pound)m ($m) Total in (pound)m ($m) Total in (pound)m ($m) Total in
Revenues (i) 2000 (ii) 1999 (iii) 1998
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Advertising and media 1,399.0 2,121.2 46.9 1,013.1 1,639.0 46.6 951.3 1,576.7 49.7
investment management
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Information and consultancy 512.1 776.4 17.2 419.7 679.0 19.3 367.2 608.6 19.1
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Public relations
and public affairs 330.1 500.5 11.1 178.9 289.4 8.3 134.8 223.4 7.0
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Branding and identity,
healthcare and specialist 739.5 1,121.2 24.8 560.9 907.4 25.8 465.1 770.9 24.2
communications
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TOTAL 2,980.7 4,519.3 100.0 2,172.6 3,514.8 100.0 1,918.4 3,179.6 100.0
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The pattern of revenue growth also differed regionally. The following table shows, for the last three fiscal years of the Company, reported revenue attributable to each geographic area in which the Company operates and demonstrates the Company's regional diversity.
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Revenues 2000 2000 % of 1999 1999 % of 1998 1998 % of
(pound)m ($m) Total in (pound)m ($m) Total in (pound)m ($m) Total in
(i) 2000 (ii) 1999 (iii) 1998
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United
States 1,273.6 1,931.0 42.7 915.2 1,480.6 42.1 764.4 1,266.9 39.8
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United 532.4 807.2 17.9 434.7 703.3 20.0 393.5 652.2 20.5
Kingdom
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Continental Europe 586.3 889.0 19.7 426.2 689.4 19.6 396.0 656.3 20.6
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Canada,
Asia Pacific, Latin America, 588.4 892.1 19.7 396.5 641.5 18.3 364.5 604.2 19.1
Africa and Middle East
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TOTAL 2,980.7 4,519.3 100.0 2,172.6 3,514.8 100.0 1,918.4 3,179.6 100.0
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(i) These figures were converted from pounds sterling into dollars at the
average rate (Bloomberg Closing Mid Point rate) for pounds sterling for
the year ended December 31, 2000 which was (pound)1 = $1.5162.
(ii) These figures were converted from pounds sterling into dollars at the
average rate (as reported in the London Financial Times) for pounds
sterling for the year ended December 31, 1999 which was (pound)1 =
$1.6178
(iii) These figures were converted from pounds sterling into dollars at the
average rate (as reported in the London Financial Times) for pounds
sterling for the year ended December 31, 1998 which was (pound)1 =
$1.6574.
With the marketing services functions accounting for 53% of its activities, the Company is well positioned for future growth. Geographically, revenues from the fast-growing markets Asia Pacific, Latin America, Africa, the Middle East and Central and Eastern Europe now account for almost 20% of the Group's revenue, reflecting the geographic growth opportunity.
The Company's principal activities within each of its business segments are described below.
Advertising and media investment management
Advertising
The principal functions of an advertising agency are to plan and create marketing and branding campaigns and the design and production of advertisements for all types of media such as television, cable, the internet, radio, magazines, newspapers and outdoor locations such as billboards.
Revenue is typically derived from commissions on media placements and fees for advertising services. Compensation for advertising services may consist of varied arrangements involving commissions, fees, incentive-based compensation or a combination of the three, as agreed upon with each client.
The Company's advertising agencies include J. Walter Thompson Company, Ogilvy & Mather Worldwide, Y&R Advertising and Red Cell. The Company also owns interests in Dentsu, Young & Rubicam (ownership interests ranging from 27% to 67%); Asatsu-DK, Inc. (20%) and Chime Communications plc (approximately 25%).
Media investment management
The Group's worldwide media investment management companies plan and buy clients' brand messages in the most effective media using their buying power to negotiate competitive rates for space and time using sophisticated consumer and media research tools. They offer an integrated service covering conventional media like television, print and posters as well as digital and interactive media, sponsorship, event management and TV programming. They help clients to optimise their media spending through advice on the strategic benefit of each medium (e.g., TV, print, internet, radio, etc.), and passing economies of scale in the purchasing of media time and space through to clients. The business is conducted through WPP's subsidiaries MindShare Worldwide, The Media Edge, and Portland Outdoor (65% ownership interest). The Group also has investments in Tempus Group plc (approximately 22%) and TMP (Europe).
MindShare offers media planning, buying and research services for its clients which include existing J. Walter Thompson and Ogilvy & Mather clients and new MindShare clients. In 2000, MindShare achieved annual billings of $20 billion. No single client accounted for more than 8% of MindShare's 2000 revenues. Media consolidation continues to drive much of MindShare's regional and global growth. New global assignments from clients in 2000 included Boots, easyEverything, KPMG and Lufthansa. Regional assignments included Unilever and Sears in the US, Nike and Volvo in Europe, Terra in Mexico and Hang Seng Bank in Hong Kong. 2000 local client wins included Allianz in Germany, Bass in the UK, National Lotteries in Sweden and Belgium, and Kraft in Italy, Greece and the Czech Republic.
WPP also owns a minority interest in another of the leading European-based media, planning and buying companies, Tempus Group plc.
Public relations and public affairs
Public relations and public affairs companies advise clients who are seeking to communicate with consumers, governments and/or the business and financial communities. Public relations and public affairs activities include national and international corporate, financial and marketing communications, crisis management, public affairs and government lobbying. The Company's main subsidiaries in this area are Hill and Knowlton, Inc., Burson-Marsteller and Ogilvy Public Relations Worldwide.
Information and consultancy
Information and consultancy activities include consumer, media, corporate communication and policy research, advertising research, pre-testing and tracking and evaluation of advertising and promotions, design and management of international market studies and new product development and testing.
To help optimise its worldwide research offering to clients, the Company's separate global research businesses, which are described below, have been managed on a centralised basis under the umbrella of the Kantar Group. The principal companies comprising the Kantar Group are:
Research International is the world's largest custom research company, specialising in a wide range of business sectors and areas of marketplace information including strategic market studies, brand positioning and equity research, customer satisfaction surveys, product development, international research and advanced modelling.
Millward Brown is one of the world's leading companies in advertising research, including pre-testing, tracking and sales modelling, offering a full range of services to help clients market their brands more effectively.
Kantar Media Research (KMR) focuses on media planning databases and new product development projects. KMR owns a minority interest (31%) in one of Latin America's leading media research businesses, IBOPE Media Information, which services national and multinational clients throughout the region in measurement and analysis of television ratings and advertising expenditures. KMR also has a minority interest (30%) in AGB Italia, a leading provider of television audience measurement systems worldwide.
IMRB International is the largest market research business in India.
Goldfarb Consultants is a leading international market research and consulting business based in Canada and the US.
Branding and identity
The Company delivers a large range of branding and identity services through its new Brand Union, a co-operative group of certain of WPP's specialist consulting brands, as well as a number of other operating subsidiaries, including Landor Associates and The Partners. These companies provide complementary services, including space planning, retail and work interiors, point of sale displays, marketing literature, annual reports and corporate literature, packaging and brand and corporate identity.
corporate literature, brand extensions and new brand development. Landor was founded in 1941 and was acquired by WPP as part of the Young & Rubicam acquisition in 2000. 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.
Direct, promotion and relationship marketing
The Company has a number of operating businesses in this category.
- OgilvyOne Worldwide, including its interactive unit, Ogilvy Interactive, is a
worldwide direct marketing group, providing direct mail, database marketing
and direct response advertising techniques.
- Wunderman (formerly known as impiric and, prior to that, Wunderman Cato
Johnson) is an integrated marketing solutions company acquired by WPP as part
of the Young & Rubicam acquisition in 2000. Wunderman delivers customer
relationship management services to clients through more than 80 offices in
over 40 countries. With 4,000 employees worldwide, Wunderman combines
strategic consulting data-driven and creative marketing services, the
Internet, and the latest information technologies to propel and measure
business results for its clients.
- KnowledgeBase Marketing (KBM), acquired by WPP as part of the Young & Rubicam
acquisition in 2000, 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.
- A. Eicoff & Co. specialises in targeted cable and broadcast television
advertising.
- EWA specialises in customer service and loyalty support programs, with units
specialising in government, education, the automobile industry, retail and
agriculture.
- Savatar specializes in marketing and technology, and acts as a single source
for business technology, interactive strategy, and database and call center
marketing.
Healthcare
The Company has extensive expertise in healthcare marketing and communications
services. Since 1992 several WPP companies have formed a strategic alliance
known as The CommonHealth to offer the largest and most comprehensive specialist
healthcare communications network in the world. CommonHealth clients can call
on any or all of the co-ordinated services of Group companies. Group companies
and/or divisions operating in the healthcare sector include - Ferguson
Communications Group, the largest US advertising agency specialising in
healthcare communications; Health Learning Systems, specialising in providing
healthcare professionals with the latest medical information through educational
programs, video and printed materials; Ogilvy & Mather Worldwide; Hill &
Knowlton; Ogilvy Public Relations Worldwide; Research International; and Zoe
Medical, a leading French healthcare agency. Sudler & Hennessey (S&H),
acquired by WPP as part of the Young & Rubicam acquisition in 2000, 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.
Specialist communications
Strategic marketing consulting
The Company's strategic marketing services assist clients in identifying and anticipating changes in the business and marketing environment, as well as devising appropriate marketing strategies. The resources of the strategic marketing services businesses are also utilised by the Company's other operating subsidiaries. The Company's main subsidiary engaged in providing strategic marketing services, the Henley Centre, acts as a consultant and advisor to businesses and governmental agencies in the international field of planning and market and product development, using analytical methods and econometric techniques to aid strategic decision-making.
Sector Marketing
- Banner Corporation is a European marketing communications firm specialising
in the technology sector.
- Mendoza Dillon & Asociados specializes in advertising for the Hispanic
community and provides clients with integrated marketing services in this
fast-growing specialist market.
- Pace is one of the largest specialists in the real estate communications
market in the United States, offering comprehensive services in the marketing
of both commercial and residential property to developers, builders and real
estate agents.
- Ogilvy Primary Contact is a leading UK based provider of business-to-
business, financial and corporate advertising.
- The Geppetto Group assists clients in communicating their products and
services to the youth market (children and teens) and implementing creative
branding solutions.
- The Bravo Group and Kang & Lee, acquired by WPP as part of the Young &
Rubicam acquisition in 2000, create multi-cultural marketing and
communications programs targeted to the fast-growing US Hispanic and Asian
communities, respectively. Their multi-disciplinary services include
advertising, promotion and event marketing, public relations, research and
direct marketing.
Media and technology services
- Metro Group provides a diverse range of technical and creative services, including multimedia, film, video and asset archiving, equipment sales and post production systems to clients in the UK.
WPP.com/ Investments in New Media Companies
In 1999, a new media parent company, wpp.com was formed to co-ordinate WPP's new media activities across the group's operating brands, to add value in the areas of new media and technology for clients and to accelerate the development of WPP's interactive capabilities and revenues. To date, wpp.com has concentrated on strengthening its existing operations, acquiring new activities in areas which we think are critically important, investing in start-up companies with whom WPP wishes to partner, and spreading knowledge of technology developments throughout the Group.
WPP.com's interactive equity investments have been made directly and indirectly through venture funds. The aim of these indirect investments has been to keep abreast of developments and identify potential client relationships, thus enhancing the Company's core capabilities. Historically, the prime venture funds through which WPP.com has made indirect investments have been Allegis Capital LLC, previously known as Media Technology Ventures, and Wit Capital's Dawntreader II fund.
The merger with Young & Rubicam has brought with it strong interactive capabilities, notably at The Digital Edge, Burson-Marsteller, Landor and Wunderman. WPP has made only two direct investments in the past few months as the Company is concentrating on consolidating the investments which Young & Rubicam had made and on building closer relationships between the operating companies and the existing minority investments.
Manufacturing
The original business of the Company remains as the manufacturing division which operates through subsidiaries of Wire and Plastic Products Limited. The division produces a wide range of products for commercial, industrial and retail applications. The Company's revenues from manufacturing activities in 2000 were less than 1% of the Company total.
WPP Group plc
WPP, the parent company, develops the professional and financial strategy of the Group, promotes operating efficiencies, coordinates cross referrals of clients among the Group companies and monitors the financial performance of its operating subsidiaries. WPP's activities as parent company are increasingly focusing on non-financial areas such as human resources, property, procurement, information technology and practice development. Management believes that there is a significant opportunity to add value to the Group's clients and its people by developing relationships between Group companies and encouraging cross referrals of clients among the Group companies and that the parent company is best placed to coordinate this work. WPP also continues to perform the traditional roles of central treasury, finance and cash management, tax reporting, financial control, mergers and acquisitions and investor relations.
WPP Strategy
The Group's strategic objective is to be the world's leading provider of communications services to global, multinational and national companies. Management believes that the way to achieve this objective is to maintain financial discipline while developing new ways to add value to the services provided to the Company's clients.
The Group has established the following financial and strategic objectives:
- To continue to raise operating margins to the level of the best performing competition, from 14% in 2000 to 15% in 2001 and to 15.5% by 2002. In addition, the Group's longer term objective, beyond 2002, is to raise operating margins to 20%.
- To increase the flexibility of the cost structure to cope with recessions as they develop. The Group's investment in people and property accounts for approximately 60% of revenues. Variable staff costs, including incentive compensation, freelancers and consultants, account for 6.6% of revenues and the Group aims for 7-8%.
- The Group has achieved its objective of de-leveraging the Company and interest cover of over 7 times. Now the Group will continue to focus on how to improve shareowner value by maximising the return on alternative investments in capital expenditures, acquisitions and investments, dividends or share buy-backs.
- To advance further the role of the parent company from that of a financial holding or investment company to a parent company that adds value to its clients and employees. The key added value areas that the Company has identified are human resources, property management, procurement, information technology and practice development.
- To place greater emphasis on revenue growth by better positioning the Group's revenue portfolio in faster-growing functional areas and geographic markets.
- To improve still further the quality of our creative output by stepping up training and development programs; by recruiting the finest talent; by celebrating and rewarding outstanding creative success; by acquiring strong creative companies; and by encouraging, monitoring and promoting achievements in winning creative awards.
Clients
The Company's structure of independent, autonomous companies and associates allows it to provide a comprehensive and, when appropriate, integrated range of communications services to national, multinational and global clients and to serve their increasingly complex and diverse geographic needs. At year-end, the Company served over 330 clients in three or more service disciplines and the Company works with more than 60 of these clients in four disciplines. All together, the Company now serves over 300 of the Global Fortune 500 clients, over one-half of the Nasdaq 100, and over 30 of the Fortune e-50, and works with well over 100 clients in six or more countries. The Company's ten largest clients in 2000 were American Express, Ford, IBM, Johnson & Johnson, Kimberly- Clark, Nestle, Pfizer, Philip Morris, Sears and Unilever. Together, such clients accounted for approximately 28% of the Company's revenues in 2000. No client of the Company represents more than 8% of the Company's aggregate revenues. The Company has maintained long-standing relationships with many of its clients, with the average length of relationship for the top 10 clients exceeding 50 years.
There is continued evidence that clients are moving towards the consolidation of their marketing activities. IBM, American Express, De Beers, Eastman Kodak, Ford, Kimberly-Clark, Kraft Foods, Mattel, Diageo, Colgate-Palmolive, Motorola, CitiGroup, Glaxo SmithKline and Boots have also consolidated their activities with Group companies. Some examples of other major advertisers who have chosen to consolidate their business with one or just a few large multinational agencies not part of the Group include Bayer, and Reckitt Benchiser, SC Johnson, Coca-Cola and Verizon. WPP is among a select number of advertising and marketing services companies that offers worldwide capabilities to these types of large multinational clients.
While the operating companies owned by the Company operate separately and independently of each other, and service different clients and/or business segments, they nevertheless have the opportunity to share certain corporate resources. The potential for cross-referral of clients among the Company's subsidiaries is significant, and increasing, as contacts and introductions between the various subsidiaries of the Company often produce new ideas for services and new client opportunities, nationally, internationally and by service functions. This was evidenced during 2000, when over 25% of new assignments are estimated to have come from the joint development of opportunities by two or more Group companies. To enhance this process, the Company has implemented incentive plans whereby a portion of the incentive compensation for senior executives in the Group is based upon their cooperation with, and cross referrals to, other Group companies. See "Business Overview -- Compensation".
Acquisitions
On October 4, 2000, the Company finalised its acquisition of Young & Rubicam. The value of the consideration which was satisfied entirely by the issue of new WPP ordinary shares or WPP American Depositary Shares, calculated by reference to the opening WPP share price on October 4, 2000, (Pounds)7.99, was (Pounds)3.0 billion. Further details regarding the acquisition of Young & Rubicam are given in Note 25 of the Notes to the Consolidated Financial Statements. Total cash spent on acquisitions and investment in 2000 was (Pounds)247 million. In addition to completing the Young & Rubicam acquisition, the Company or its operating companies acquired or made an investment in a number of companies in 2000, including:
Branding and identity,
healthcare and specialist
Advertising and media investment management Region communications Region
--------------------------------------------- ----------- ----------------------------- ---------
Asiatic Pakistan Pakistan Absolut Portugal
Indo Ad Indonesia Coolfire.interactive USA
KSM Netherlands Dialogue UK
Marti, Flores, Prieto & Watchel Puerto Rico Enterprise IG Copenhagen Denmark
Go Direct Marketing Canada
MediaNet Taiwan Horniak & Canny Australia
SCPF Spain Imaginet USA
Spafax UK Imagio Technology Advertising USA
Tamir Cohen Israel Interact Ireland
TMI Middle East Interfaz401 Mexico
The Lacek Group USA
Premiere Group UK
RADA UK
Springham Anderson Singapore
Tonic 360 USA
Uniworld USA
Warwicks UK
------------------------------------------------------------------------------------------------------------
Information and consultancy Region
--------------------------- ------
Ergo Advanced Research Spain
Research Partners Australia
Sifo Research & Consulting Sweden
Public relations and public affairs Region
----------------------------------- ------
Capitol PR Turkey
Rockey Group USA
Socket PR USA
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The Company has continued to make acquisitions and investments in companies in the first part of 2001, including SicolaMartin in the US and AD Venture Worldwide in Korea in advertising and media investment management; Ziment Associates in the US in information and consultancy; Finsbury and Communique PR in the UK and The ProMarc Agency, Deen+Black and Springbok Technologies in the US in public relations and public affairs; Glendinning Management Consultants and Black Cat Holdings in the UK, Icon Brand Navigation Group AG in Germany, CB Associes S.A. in France and Maxx Marketing in Hong Kong in branding and, identity, healthcare and specialist communications.
Compensation
In order to attract and retain high quality talent in all areas of its operations, WPP has established certain incentive plans to provide a more flexible cost structure for the Company and to permit a stronger link between longer term sustained performance and the level of staff remuneration. Base salaries are established within 15% of the median base salary for similar positions in directly comparable businesses depending on individual and business unit performance, experience and responsibility. WPP believes that the Company provides competitive total compensation packages to its executives, placing great emphasis on the flexible portion of compensation.
Key employees of each of the principal operating companies within the Group participate in annual incentive compensation plans under which a significant portion of their total compensation is directly related to the financial performance of their own company, division, client or functional responsibility. Individual bonuses are determined on the basis of achievements against individual performance objectives encompassing key strategic and financial performance criteria, including the level of co-operation between operating companies. In addition, a number of the most senior executives in the Company participate in long-term incentive plans under which awards are payable in a combination of cash and an interest in WPP ordinary shares, depending on the achievement of three-year financial performance targets, including conversion of revenue to profit targets, operating margin targets and staff costs to revenue ratio targets. Certain executives in the Group are also members of the WPP Group "Leaders", "Partners" or "High Potential Group" and receive grants of fair market value WPP share options exercisable three years from the grant date assuming that specific performance conditions are met including certain financial performance targets and targets for cooperation across WPP's operating companies.
In connection with WPP's emphasis on promoting cooperation and cross referrals among the Group companies, in 1997 WPP implemented a worldwide share ownership program for all Company employees with over two years' of service in 100% owned companies, and a partnership program rewarding outstanding examples of collaboration across various operating companies within the Group, with the objective of adding value to the Company's clients' businesses. Both these initiatives have continued in 2000. Since its adoption, grants have been made annually under the worldwide share ownership program and as at May 4, 2001 options under this plan had been granted to more than 18,000 employees for in excess of 9.1 million ordinary shares of the Company. In 2001 the program has been extended to all eligible Young & Rubicam employees.
Including outstanding options, interests in WPP restricted stock, stock already owned and holdings of the Employee Stock Ownership Plan, people working in the Group currently own, or have interests in, in excess of 71 million ordinary WPP shares representing over 6% of the Company, or approximately $750 million.
The Leadership Equity Acquisition Plan (LEAP) was approved by shareowners on September 2, 1999. Twenty-two executives of the Group have been invited to participate in the plan. These participants will acquire or have acquired 3.5 million WPP ordinary shares, currently worth over $40 million, and have made a commitment to retain them until September 2004. Under the terms of LEAP, the participants may earn matching shares over a five-year performance period, based on the Group's relative total share owner return as compared with 14 other major listed companies in our industry.
Although still applicable to other key management employees, there is no current intention to make further option grants to executive directors, including the Group chief executive. See Item 6-Directors, Senior Management and Employees.
Training
Many of the companies within the Group offer formal training programs for new employees. In particular, J. Walter Thompson, Ogilvy & Mather, Research International, Millward Brown and Hill & Knowlton have been actively engaged for many years in the training and development of their personnel. The companies conduct various educational programs, such as seminars and workshops, in the United States and abroad, and have various other formal programs for interchanging ideas, materials and experiences among their offices. The parent company has initiated a number of multi-company seminars and workshops aimed at senior employees. These have covered areas such as integrated marketing, organisational development, management and leadership skills, retailing and creativity.
Description of property
The majority of the Company's properties are leased, although certain properties which are used mainly for office space are owned in the US (including the 370,000 net square foot Young & Rubicam headquarters office building located at 285 Madison Avenue in New York, NY), Argentina, Austria, Brazil, Mexico, Netherlands, Peru and Thailand, and certain office buildings and a manufacturing plant is owned in the UK. Principal leased properties include office space at the following locations:
Location Use Approximate square footage
-------- --- --------------------------
Worldwide Plaza, New York, NY Ogilvy & Mather, MindShare 675,700
466 Lexington Avenue, New York, NY J. Walter Thompson 456,100
230 Park Ave South, New York, NY BM, Bravo, Landor, S&H 323,400
900 North Michigan Avenue, Chicago, IL J. Walter Thompson, OPR 205,600
233 North Michigan Avenue, Chicago, IL Y&R Advertising, Wunderman, BM,
Cohn & Wolfe 122,100
500 Woodward Avenue, Detroit, MI J. Walter Thompson, MindShare 160,200
825 Seventh Avenue, New York, NY The Media Edge 109,800
10 Cabot Square, Canary Wharf, London, UK Ogilvy & Mather 104,200
675 Avenue of the Americas Wunderman 92,500
Greater London House, London, UK Y&R Advertising, Wunderman 89,700
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The Company actively manages its rental costs to revenue ratio and believes that it is still capable of achieving significant improvements in this area.
The Company considers its properties owned or leased to be in good condition and generally suitable and adequate for the purposes for which they are used. See also Item 5 -Operating and Financial Review and Prospects. As of December 31, 2000, the fixed asset value (cost less depreciation) representing properties, both owned and leased, as reflected in the Company's consolidated financial statements was approximately (Pounds)185.0 million (US$276.3 million).
See Note 2 of Notes to the Company's Consolidated Financial Statements for a schedule by years of future minimum rental payments to be made and future sublease rental payments to be received, as of December 31, 2000, under non- cancellable operating leases of the Company.
Outstanding legal proceedings
The Company has claims against others and there are claims against the Company in a variety of matters arising from the conduct of its business. In the opinion of the management of the Company, the ultimate liability, if any, that is likely to result from these matters would not have a material effect on the Company's financial position, or on the results of operations.
Significant claims settled during 2000
None.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Forward-Looking Statements
In connection with the provisions of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"), the Company may include forward-looking statements (as defined in the Reform Act) in oral or written public statements issued by or on behalf of the Company. These forward-looking statements may include, among other things, plans, objectives, projections, anticipated future economic performance as assumptions and the like that are subject to risks and uncertainties. As such, actual results or outcomes may differ materially from those discussed in the forward-looking statements. Important factors which may cause actual results to differ include but are not limited to: the unanticipated loss of a material client or key personnel, delays or reductions in client advertising budgets, shifts in industry rates of compensation, government compliance costs or litigation, unanticipated natural disasters, the Company's exposure to changes in the values of other major currencies (because a substantial portion of its revenues are derived and costs incurred outside of the United Kingdom) and the overall level of economic activity in the Company's major markets (which varies depending on, among other things, regional, national and international political and economic conditions and government regulations in the world's advertising markets). In light of these and other uncertainties, the forward-looking statements included in the document should not be regarded as a representation by the Company that the Company's plans and objectives will be achieved.
Impact of Exchange Rates
The Company's reporting currency has always been UK Sterling. However, the Group's significant overseas operations give rise to an exposure to changes in foreign exchange rates. The Group seeks to mitigate the effect of these structural currency exposures by borrowing in the same currencies as the operating (or `functional') currencies of its main operating units. The majority of the group's debt is therefore denominated in US dollars, as this is the predominant currency of revenues.
To neutralise foreign exchange impact and to better illustrate the underlying improvement in revenue and profit from one year to the next, the Company has adopted the practice of publishing results in both reportable currency (local currency results translated into UK Sterling at the prevailing foreign exchange rate) and constant currency (current and prior year local currency results translated into UK Sterling at a budget or "constant" foreign exchange rate).
Significant cross-border trading exposures are hedged by the use of forward foreign exchange contracts. There were no such material contracts in place at December 31, 2000. No speculative foreign exchange trading is undertaken.
Overview
The following discussion is based on the Company's audited Consolidated Financial Statements included elsewhere in the document. The Consolidated Financial Statements have been prepared in accordance with UK GAAP. See pages F-22 to F-23 of Notes to the Consolidated Financial Statements which contain a discussion of the principal differences between UK and US GAAP relevant to the Company.
Outlook
The Company's budgets for 2001 have been prepared on a conservative basis largely excluding new business particularly in advertising and media investment management. They predict like-for-like, year-on-year revenue increases of over 7% in comparison to 2000 pro forma numbers, with advertising and media investment management revenue growth of 3% and marketing services growth of over 10%.
Revenues for the first three months of 2001 were up 64% over last year in constant currency (73% on a reportable currency basis). Combined WPP and Young & Rubicam constant currency revenues were up over 9% and on a like-for-like basis, excluding acquisitions and currency fluctuations, revenues rose 6%. In the first three months of 2001, net debt averaged (Pounds)470 million (including Y&R's convertible debt of (Pounds)195 million) compared to (Pounds)239 million for the same period in constant currency. This includes the (Pounds)653 million spent on capital expenditure, acquisitions, share purchases and dividends in the previous twelve months. Free cash flow over the same period was (Pounds)417 million.
The Group continues to focus on its key objectives of improving operating profits and margins, increasing cost flexibility (particularly in the areas of staff and property costs), using free cash flow to enhance share owner value, continuing to develop the role of the parent company in adding value to its clients and employees, developing its portfolio in high revenue growth geographic and functional areas and improving its creative quality and capabilities. The Company does not believe that there is any functional, geographic, account concentration or structural reason that should prevent the Group from achieving operating margins of 15.5% by 2002. The two best- performing listed competitors in the industry generate margins of 16-18%.
Fiscal 2000 Compared with Fiscal 1999
Revenues and Operating Income - Revenues increased by 37.2% on a reportable currency basis in 2000 to (Pounds)2,980.7 million from (Pounds)2,172.6 million in 1999. However, on a constant currency basis the revenue increase was almost 33% with strong growth in all disciplines (advertising and media investment management 33.8%, information and consultancy 19.8%, public relations and public affairs 75.6% and branding and identity, healthcare and specialist communications 27.6%) and regions (North America 29.8%, Continental Europe 47.2%, Asia Pacific, Latin America, Africa and the Middle East 38.2% and the United Kingdom 22.5%). Non-advertising activities represented 53% of revenues in both years. On a like-for-like basis (including Y&R for the final quarter of 2000), revenues rose by almost 15%.
Reported operating income (including associate income) rose by 43.1% to (Pounds)416.0 million in 2000 from (Pounds)290.8 million in 1999. Reported currency operating margins increased from 13.4% to 14.0%. Reported operating costs including direct costs rose by over 36% and by 32% in constant currency. On a like-for-like basis, total operating and direct costs were up over 14% on the previous year. Operating margins before short and long-term incentive payments (totalling (Pounds)118 million, or over 22% of operating profit before bonus and taxes) rose to 17.9% from 16.7%. The staff cost to gross margin ratio excluding incentives fell to 54.8% from 55.0%. Variable staff costs as a proportion of total staff costs increased to 12.1% in 2000 from 11.5% in 1999 and, as a proportion of revenues, increased to 6.6% from 5.8%, increasing flexibility in the cost structure.
Interest expense - In reported currency, net interest expense increased from (Pounds)35.4 million to (Pounds)50.3 million, reflecting increased profitability more than offset by rising US dollar interest rates, debt acquired, the increased level of acquisition activity and share repurchases. Interest cover, however, has improved to 8.3x in comparison to 8.2x in the previous year.
The Company continues to be substantially protected against a significant rise in US interest rates by interest rate swaps at fixed rates of 6.25% or below (excluding margin), with maturities extending to January 2003, and with US dollar debt at fixed rates.
Taxes - The Company's tax rate on profits for the year ended December 31, 2000 was 30.0%, the same as in the previous year. Since 1992, the Group has reduced its tax rate on profits before non-operating exceptional items by over one-third from 47% in that year.
Net income - Net income available to ordinary shareowners was (Pounds)244.7 million in the year ended December 31, 2000 against (Pounds)172.8 million in 1999.
Fiscal 1999 Compared with Fiscal 1998
Revenues and Operating Income - Revenues increased by 13.3% on a reportable currency basis in 1999 to (Pounds)2,172.6 million from (Pounds)1,918.4 million in 1998. On a constant currency basis the revenue increase was 12% with strong growth in all disciplines (advertising and media investment management 5.2%, information and consulting 13.9%, public relations and public affairs 30.5%, branding and identity, healthcare and specialist communications 19.2%) and regions (North America 16.8%, United Kingdom 10.5%, Continental Europe 11.0% and Asia Pacific, Latin America, Africa and the Middle East 4.0%). The Company's non-advertising activities grew to represent over 53% of Group revenues.
Reported operating income (including associate income) rose by 18.6% to (Pounds)290.8 million in 1999 from (Pounds)245.2 million in 1998. Reported currency operating margins increased from 12.8% to 13.4%. Reported operating costs rose by 13.4% and by almost 12% in constant currency. Operating margins before short and long-term incentive payments (totalling (Pounds)71 million or almost 20% of operating profit before bonus and taxes) rose to 16.7% from 15.8%. Staff and property costs represent approximately 60% of the Company's cost base. The Company places great emphasis on the control of these costs. The incentive arrangements for the Company's most senior staff include specific financial objectives for the improvement in absolute operating profit, operating margins, as well as improvements in the staff cost to revenue ratios of each operating division. Variable staff costs as a proportion of total staff costs have increased over recent years to 11.5% and as a proportion of revenues to 5.8%. This has resulted in increased flexibility in the cost structure. Continued efforts to minimise property costs include consolidation of operations into shared space upon lease renewal.
Interest expense - In reported currency, net interest expense increased to (Pounds)23.4 million from (Pounds)19.2 million in 1998 reflecting the increased level of acquisition activity and share repurchases. Charges in respect of working capital facilities decreased to (Pounds)12.0 million from (Pounds)13.2 million. Interest cover improved to 8.2 times in comparison to 7.6 times in the prior year.
Taxes - The Company's tax rate on a reported currency basis was 30.0% on profits, compared with 31.5% in 1998. This reflects the impact of tax restructuring within the company.
Net income - Net income available to ordinary shareowners was (Pounds)172.8 million in the year ended December 31, 1999 against (Pounds)140.3 million in 1998.
Liquidity and Capital Resources
General. The primary source of funds for the Group since 1995 has been cash generated from operations. The primary uses of cash funds since 1995 have been to service and repay bank debt, for capital expenditures and, since 1997, to fund acquisitions and ordinary share repurchases. The Company evaluates its free cash flow requirements and other needs when deciding the amount to allocate to ordinary share repurchases. In 2000 the Company invested (Pounds)94.1 million in share repurchases. The Company continues to commit (Pounds)150-(Pounds)200 million for share buy-backs in the open market, when market conditions are appropriate. Such annual rolling share repurchases would represent approximately 1 - 2% of the Company's share capital. For a breakdown of the Company's sources and uses of cash see the "Consolidated Statements of Cash Flows" included as part of the Company's Consolidated Financial Statements in Item 18 of this Report.
Liquidity risk management. The Group manages liquidity risk by ensuring continuity and flexibility of funding even in difficult market conditions. Undrawn committed borrowing facilities are maintained in excess of average gross borrowing levels and debt maturities are closely monitored.
Liquidity. Since 1995 the majority of the unsecured debt of the Group has been funded under various syndicated loan facilities. In conjunction with the improved profitability and credit standing of the Group, each new loan facility has brought reduced pricing and less restrictive covenants.
USA bond. The Company has in issue US$ 200 million of 6.625% Notes due 2005 and US$ 100 million of 6.875% Notes due 2008.
Revolving credit facilities. The Company's debt is also funded by a $500 million syndicated Revolving Credit Facility dated July 1998, as amended, and a $700 million facility dated August 2000. The $500 million facility is due to expire in July 2002 and the $700 million facility is due to expire in August 2001 although the Group has the ability to extend drawings under this facility until August 2003. The Company's syndicated borrowings drawn down under these arrangements averaged $422 million during the year at an average rate of 6.2% inclusive of margin. Borrowings under the revolving credit facilities are governed by certain financial covenants based on the results and financial position of the Company. The Company also has a securitized working capital facility, currently in the amount of $350 million, which was entered into in 1993 and which has been amended several times, and most recently renewed in December 1998.
Interest on the majority of the Company's borrowings, other than the USA bond, is payable at a margin of between 0.20% and 0.55% over the relevant LIBOR and, for $350 million of borrowings as of December 31, 2000, is hedged to January 2003 at US dollar LIBOR rates of 6.25% or less (excluding margin costs).
Convertible debt. In October 2000, with the purchase of Young & Rubicam Inc., the Group acquired $287.5 million of 3% Convertible Notes due January 15, 2005. At the option of the holder, the notes are convertible into shares of WPP's common stock at a conversion price of $87.856 per ADR. The notes may be redeemed at WPP's option on or after January 20, 2003. Interest on the notes is payable on January 15 and July 15 of each year, beginning on July 15, 2000. The notes are unsecured obligations of Y&R and are guaranteed by WPP.
Eurobonds. In June 2001, the Company issued EURO 1 billion of bonds, consisting of EURO 650 million at 6% due June 2008 and EURO 350 million at 5.125% due June 2004. Proceeds will be used to repay existing bank borrowings taken on at the time of the Young & Rubicam acquisition and for general corporate purposes.
We believe that cash provided by operations and funds available under our credit facilities will be sufficient to meet the Group's anticipated cash requirements as presently contemplated.
See Note 8 of Notes to the Consolidated Financial Statements, which contains an analysis of net funds with debt analysed by year of repayment.
Cash Flows
Net debt averaged (Pounds)423 million in 2000, up (Pounds)217 million against (Pounds)206 million in 1999. The average debt figures for 2000 include the impact of the Young & Rubicam Inc. long-term convertible bond of (Pounds)195 million for the final quarter.
Cash flow continued to improve as a result of improved profitability and management of working capital. In 2000, operating profit was (Pounds)378 million, capital expenditure (Pounds)112 million, depreciation and amortisation of (Pounds)79 million, tax paid (Pounds)81 million, interest and similar charges paid (Pounds)57 million and other net cash inflows of (Pounds)84 million. Free cash flow available for debt repayment, acquisitions, share buybacks and dividends was therefore (Pounds)291 million. This free cash flow was more than absorbed by acquisition payments and investments of (Pounds)247 million, share repurchases and cancellations of (Pounds)94 million and dividends of (Pounds)26 million.
Net debt averaged (Pounds)206 million in the year ended December 31, 1999, an increase of (Pounds)63 million from (Pounds)143 million in 1998 (up (Pounds)51 million against (Pounds)155 million in 1998 at 1999 exchange rates). In 1999, operating profit was (Pounds)264 million, capital expenditure (Pounds)65 million, depreciation (Pounds)42 million, tax paid (Pounds)58 million, interest and similar charges paid (Pounds)33 million and other net cash inflows of (Pounds)21 million. Free cash flow available for debt repayment, acquisitions, share buy-backs and dividends was therefore (Pounds)171 million. This
free cash flow was more than absorbed by acquisition payments and investments of (Pounds)262 million (offset by (Pounds)52 million of cash acquired) shares repurchases and cancellations of (Pounds)18 million and dividends of (Pounds)21 million.
Capital Structure
At December 31, 2000, the Company's capital base was comprised of 1,111,853,705 ordinary shares of 10 pence each.
Asset Disposals
There were no significant asset disposals during 1998, 1999 or 2000.
Excess Space
The task of eliminating surplus property costs has been achieved over the last eight years. Excess space generally represents discrete unutilised areas of the Company's properties which are available for sublet. Over 650,000 square feet of excess space with a cash cost of approximately (Pounds)14 million ($22 million) per annum has been either sublet or absorbed since 1992. The excess space arose from a reduction in headcount together with property decisions made by certain companies prior to their acquisition by the Company. WPP's rental costs to revenue ratio are competitive with the best performing competition, although capable of improvement.
Inflation
As in 1999 and 1998, in management's opinion the effect of inflation has not had a material impact on the Company's results for the year or financial position as at December 31, 2000.
Interest rate risk management
The Group's interest rate management policy recognises that fixing rates on all its debt eliminates the possibility of benefiting from rate reductions and similarly, having all its debt at floating rates unduly exposes the Group to increases in rates. The Group therefore aims to limit the impact from increases in rates while seeking to ensure that it benefits from rate reductions by regularly reviewing its exposure profile and deciding upon the periods for fixing rates in the light of financial market expectations. Its principal borrowing currencies are US dollars and pounds sterling. Borrowings in these two currencies, including amounts drawn under the working capital facility, represented 93% of the Group's gross indebtedness at December 31, 2000 (at US$1,154 million and (Pounds)178 million respectively) and 94% of the Group's average gross debt during the course of 2000 (at US$948 million and (Pounds)194 million). 81% of the year-end US$ debt is at fixed rates averaging 5.37% for an average period of 42 months. The sterling debt is all at floating rates. Other than fixed rate debt, the Group's other fixed rates are achieved through interest rate swaps with the Group's bankers. The Group also uses forward rate agreements and interest rate caps to manage exposure to interest rate changes. At December 31, 2000 the Group had one forward rate agreement in place capping short-term US$ interest rates at an average rate of 5.65% on $25 million of borrowings. These interest rate derivatives are used only to hedge exposures to interest rate movements arising from the Group's borrowing and surplus cash balances arising from its commercial activities and are not traded independently. Payments made under these instruments are accounted for on an accruals basis. See Note 8 of the Notes to the Consolidated Financial Statements which contains an analysis of the debt and fixed rate maturities.
Economic and monetary union in Europe - (`EMU')
The Group's European companies, including those in the UK, continue to prepare for the introduction of the euro, which will be the sole functional currency of participating countries in 2002. The Group does not expect a material effect on trading performance from the introduction of the euro, but continues to analyse the potential impact. The Group's information systems are being updated, with costs being expensed as incurred. Costs are not expected to be significant and conversions are benefiting from the successful
introduction of the euro as the functional currency in the Group's operating companies in Belgium on January 1, 1999. The Group does not anticipate changing its reporting currency to the euro until the UK decides to join EMU.
US GAAP
The Company's Consolidated Financial Statements included elsewhere herein have been prepared in accordance with UK GAAP, which differ in certain significant respects from US GAAP.
For the year ended December 31, 2000 net income under US GAAP was (Pounds)122.9 million compared with net income of (Pounds)81.9 million for the same period in 1999. The corresponding figures under UK GAAP were net income of (Pounds)244.7 million and (Pounds)172.8 million, respectively. Share owners' funds, (i.e. shareholders' equity), under US GAAP at December 31, 2000 were (Pounds)4,149.1 million, as compared with share owners' funds of (Pounds)3,409.9 million under UK GAAP. See pages F-22 to F-24 of Notes to the Consolidated Financial Statements for a discussion of the principal differences between US GAAP and UK GAAP that affect the Group's financial statements.
Accounting for Derivative Instruments and Hedging Activities In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities. The Statement establishes accounting and reporting standards in the United States requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. The Statement requires that changes in the derivative's fair value be recognised currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. Statement 133, as amended by Statement 137, is effective for fiscal years beginning after June 15, 2000. A company may also implement the Statement as of the beginning of any fiscal quarter after issuance (that is, fiscal quarters beginning June 16, 1998 and thereafter). Statement 133 cannot be applied retroactively. Statement 133 must be applied to (a) derivative instruments and (b) certain derivative instruments embedded in hybrid contracts that were issued, acquired, or substantively modified after December 31, 1997. The Group has not yet quantified the impact of adopting Statement 133 on the amounts presented under US generally accepted accounting standards. However, the Statement could increase volatility in earnings and other comprehensive income.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
The directors and executive officers of the Company as of May 4, 2001 are as follows:
Philip Lader, age 54: Chairman (non-executive). Philip Lader was appointed chairman in February 2001. He has had a distinguished international career in business, education and government. He served as US Ambassador to the Court of St. James's from 1997 to 2001, and previously held other executive posts in the US government. Before entering government service, he was executive vice president of the company managing the late Sir James Goldsmith's US holdings and president of universities in the US and Australia. He serves as a senior advisor at Morgan Stanley International and is a director of AES Corporation and RAND Corporation. He is also a Trustee of the British Museum.
Sir Martin Sorrell, Age 56: Group chief executive. Martin Sorrell joined WPP in 1986 as a director, becoming Group chief executive in the same year. He is a non-executive director of Colefax & Fowler Group plc. and a member of the Nasdaq board.
Paul Richardson, age 43: Group finance director. Paul Richardson became Group finance director of WPP in December 1996 after four years with the Company as director of treasury. He is responsible for the Group's worldwide finance function, including external reporting, taxation, procurement, property and treasury. Previously he spent six years with the central team of Hanson plc financing major acquisitions and disposals. He is a chartered accountant and member of the Association of Corporate Treasurers. He is a non-executive director of Chime Communications PLC and Singleton Group in Australia.
Brian Brooks, age 45: Chief human resources officer. Brain Brooks joined WPP in September 1992. He is responsible for the recruitment and development of senior talent thoughout the group, as well as career and succession planning for key people. He manages WPP stock ownership plans, as well as incentive and total remuneration programs, in partnership with each WPP Company. Previously he was a partner in Towers Perrin in New York and London. He is a lawyer and is admitted to practise law.
Eric Salama, age 40: Group director of strategy and chief executive of wpp.com. Eric Salama joined the parent company in 1994 and the board in July 1996. He is responsible for the Group's interactive development and for developing and implementing the Group's strategy. He is an adviser to the UK Government in the fields of creative and media industries and education and a Trustee of the British Museum. Previously he was joint managing director of The Henley Centre, a WPP company.
Michael Dolan, age 54: Chairman and chief executive officer of Young & Rubicam Inc. Michael J. Dolan was appointed a director in September 2000. He is chief executive of Young & Rubicam Inc. and has been a vice chairman, president, chief operating officer and chief financial officer and a director of Young & Rubicam Inc. since July 1996. Before joining Young & Rubicam Inc. in 1996 as vice chairman and chief financial officer, he was president and chief executive officer of Snack Ventures Europe, the joint venture between PepsiCo Foods International and General Mills. Prior to PepsiCo, he was with Peter Kiewet Sons Inc., the construction and mining conglomerate, from 1987 through 1991. Prior to this he was a partner in the Strategy Practice with Booz Allen & Hamilton, having begun his career with JP Morgan. He is a director of Luminant Wordwide Corporation, Thomas Weisel Partners and Gamut Interactive.
Jeremy Bullmore, age 71: Non-executive director. Jeremy Bullmore was appointed a director in 1988 after 33 years at J. Walter Thompson, London, the last 11 as chairman. He was chairman of the Advertising Association from 1981 to 1987 and continues to write and lecture extensively on marketing and advertising. He is also a non-executive director of the Guardian Media Group plc and president of NABS.
Esther Dyson, age 49: Non-executive director. Esther Dyson was appointed a director in June 1999. She is chairman of EDventure Holdings, the pioneering US-based information technology and new media company. She is an acknowledged luminary in the technology industry, highly influential in her field for the past 16 years, with a state-of-the-art knowledge of the emerging information technology industry worldwide and the emerging computer markets of Central and Eastern Europe. An investor as well as an observer, she sits on the boards of Audumbla, Manugistics, IBS Group, Scala Business Solutions and GreaterTalent.com among others.
Warren Hellman, age 66: Non-executive director. Warren Hellman was appointed a director in September 2000 and has been a director of Young & Rubicam Inc. since December 1996. He is chairman of Hellman and Friedman LLC, a private investment company he founded in 1984. Previously, Mr. Hellman was a general partner of Hellman, Ferri Investment Associates, Matrix Management Company, Matrix II Management Company, and Lehman Brothers. At Lehman Brothers he served as president, as well as head of the Investment Banking Division, and chairman of Lehman Corporation. He is currently a director of Levi Strauss & Co., II Fornaio America Corp., Sugar Bowl Corporation, and D. N. & E. Walter & Co. He is chairman of the San Francisco Foundation, Trustee Emeritus of the Brookings Institution, and member of the University of California, Berkeley Walter A. Haas School of Business Advisory Board.
Masao Inagaki, age 78: Non-executive director. Masao Inagaki was appointed a director in September 1998 following WPP's equity investment in Asatsu-DK, Japan's third largest advertising and communications company. He founded Asatsu in 1956 and has been chairman and chief executive officer since 1992. He is also vice president of the Japan Advertising Agencies Association. In January 1999, Asatsu Inc. became Asatsu-DK as a result of Asatsu's merger with DIK.
John Jackson, age 71: Non-executive director. John Jackson was appointed a director in 1993. He is chairman of Hilton Group plc, Celltech Group plc and a number of other public companies. He is also the non-solicitor chairman of Mishcon de Reya. He has extensive experience of a broad range of businesses, including television broadcasting, high technology industries, retailing, publishing, printing, biotechnology, electronics and pharmaceuticals.
Michael Jordan, age 65: Non-executive director. Michael Jordan was appointed a director in September 2000 and has been a director of Young & Rubicam Inc. since December 1999. He is executive chairman of Clariti Telecommunications International Ltd., chairman of Luminant Worldwide Corporation, and chairman of eOriginal Inc. He is a member and former chairman of the US-Japan Business Council, chairman of The College Fund/UNCF, and chairman of the Policy Board of the Americans for the Arts. He also serves on the
Boards of Aetna Inc. and Dell Computer Corporation. He retired as chairman and chief executive officer of the CBS Corporation in 1998 after having led one of the most comprehensive transformations of a major US corporation.
Sir Christopher Lewinton, age 69: Non-executive director. Sir Christopher Lewinton was appointed a director in September 2000 and has been a director of Young & Rubicam Inc. since May 1999. He was for 14 years chairman of TI Group plc, and remains a consultant to TI Group Automotive Systems. From 1970 to 1985 he was chief executive of the Wilkinson Sword Group and, in 1978, when Wilkinson Sword was acquired by Allegheny International, he joined the main board of the company and chaired Allegheny's international operations. He is a non-executive director of Videonet, a private company providing video-on-demand. He served as a non-executive director of Reed Elsevier from 1993 to 1999 and was a director of the Supervisory Board of Mannesman AG from 1995 to 1999.
Christopher Mackenzie, age 46: Non-executive director. Christopher Mackenzie was appointed a director in March 2000. He is president, chief executive and deputy chairman of TrizecHahn Corporation (TZH), one of North America's largest diversified property companies. He was previously a company officer of GE, leading GE Capital's international business development. He is a non-executive director of Global Switch, the London-based Technology Centre company, in which TZH is a controlling shareholder, as well as Fairchild Dornier GmbH, the aircraft manufacturer, and Champagne Jacquesson S.A.
Stanley Morten, age 57: Non-executive director. Stanley Morten was appointed a director in 1991. He is a private investor with a focus on companies in the genomics sector of the biotechnology industry, and is currently working with Pegasus Capital Advisors of Cos Cob, Connecticut, to raise a new venture capital fund called Auxyn Biosciences Ventures. Previously he was the chief operating officer of Punk, Ziegel & Co, a New York investment banking firm with a focus on the healthcare and technology industries. Before that he was the managing director of the equity division of Wertheim Schroder & Co, Inc in New York.
John Quelch, age 49: Non-executive director. John Quelch was appointed a director in 1987. He is Professor and Dean of the London Business School and was formerly the Sebastian S. Kresge Professor of Marketing at Harvard Business School. A prolific writer on marketing and public policy issues, he is the author of 12 books on marketing management. He is a non-executive director of Blue Circle Industries plc, easyJet plc and the Graduate Management Admission Council. He was a founding non-executive director of Reebok International Ltd.
Terms of Directors and Executive Officers
The Company's Articles of Association provide that a director appointed since the last Annual General Meeting, or who has held office for more than 30 months since his election or re-election by the Company in general meeting (whether annual or extraordinary) shall retire from office but shall be eligible for re- election.
Messrs Dolan, Hellman, Jordan and Sir Christopher Lewinton were appointed at the Extraordinary General Meeting held in September 2000 and are not required to seek re-election this year. Philip Lader having been appointed a director since the last General Meeting, is required to retire from office at the forthcoming Annual General Meeting, but being eligible offers himself for re-election.
The Board has also decided that those directors who are aged 70 or over on the date of the Notice of Annual General Meeting, namely Messrs Bullmore, Jackson and Inagaki, will retire from office at the forthcoming Annual General Meeting, but being eligible, are all offering themselves for re-election. Further, in accordance with the Articles of Association, Mr. Quelch also retires but being eligible offers himself for re-election.
The directors may from time to time appoint any other person to be a director. Any director so appointed shall hold office only until the next Annual General Meeting following his appointment when he shall retire but shall be eligible for re-election at that meeting.
The Group chief executive: Sir Martin Sorrell
Sir Martin Sorrell's services to the Group outside the USA are provided by JMS Financial Services Limited ("JMS"). He is directly employed by WPP Group USA, Inc. for his activities in the USA. Taken together, the agreement with JMS ("the UK Agreement") and the agreement with the Group chief executive directly (the "US Agreement") provide for the following remuneration all of which is further disclosed elsewhere in Item 6.
. annual salary and fees of (Pounds)840,000;
. annual pension contributions of (Pounds)336,000;
. short-term incentive (annual bonus) of 100% of annual salary and fees at
target and up to 200% maximum;
. the Leadership Equity Acquisition Plan; and
. the Performance Share Plan.
In addition JMS is entitled to phantom options linked to the WPP share price, granted in 1993 and 1994 as disclosed in the table entitled "Share Options" elsewhere in Item 6. No further phantom options have been or will be granted to JMS or Sir Martin Sorrell.
JMS has stated its intention not to exercise the phantom options in respect of 1993 until March 2003 and has agreed to defer its interest in the phantom options in respect of 1994 until March 2004.
Following the enactment of the personal service company legislation in the Finance Act 2000, the Company has agreed to reimburse JMS with the additional employer National Insurance contribution liability which JMS incurs because of the personal service company legislation on the basis that 63% of the annual fee, bonus and pension contribution is drawn by Sir Martin Sorrell from JMS.
Pursuant to the authority conferred on the directors at the company's annual general meeting in 2000, the company and JMS have entered into a contract to satisfy JMS' entitlements under LEAP and the phantom options, by the allotment of new shares in the Company.
Both the UK Agreement and the US Agreement may be terminated within a period of 90 days from a change of control. In these agreements "change of control" is as defined respectively in section 416 of the Income and Corporation Taxes Act 1988 and the Securities Exchange Act 1934.
On a termination by the Group chief executive and JMS, WPP is obliged to pay an amount equal to twice the annual salary and fee; bonus and pension payments payable under the UK and US Agreements; and also to continue certain benefits such as health insurance under the US agreement.
Sir Martin Sorrell has also entered into covenants, which apply for the period of 12 months following termination of the UK Agreement and the US Agreement ("Termination"), under which he has agreed not to compete with any business carried on by the Company or any member of the WPP Group in any country in which the business of the Company or any member of the WPP Group is carried on at the date of Termination, nor to solicit certain business or custom or services from major clients or clients with which Sir Martin Sorrell was involved in the 12 months before Termination. The covenants also include an obligation not to induce suppliers with whom he was actively involved during the 12 months ending on Termination, nor to induce employees with whom he had material dealings in connection with the provision of services during the 12 months ending on Termination to cease relationship or employment with the Company or any member of the WPP Group.
The Capital Investment Plan (CIP) and Notional Share Award Plan (NSAP)
The CIP provides the Group chief executive with a capital incentive initially over a five-year period with effect from September 4, 1994 and which matured in September 1999.
The Group chief executive has agreed to defer entitlement to the 4,691,392 Performance Shares which he would otherwise have been able to acquire in September 1999, subject to good leaver, change of control and other specified provisions, so as to correspond with
the investment period under LEAP. Accordingly, subject to the provisions of the CIP, the rights to acquire the Performance Shares may be exercised in the period September 30, 2004 to December 31, 2004. These Performance Shares were acquired by an ESOP in 1994 at a total cost of approximately (Pounds)5.5 million.
JMS has agreed, subject to good leaver, change of control and other specified provisions, to defer its interest under the NSAP on a similar basis to that on which the Group chief executive has agreed to defer his interest under the CIP. Accordingly, subject to the provisions of the NSAP, JMS's right to receive a sum under the NSAP may be exercised in the period September 30, 2004 to December 31, 2004 and will be calculated by reference to the average price of a WPP share for the five dealing days before JMS's right under the NSAP is exercised. The NSAP relates to 1,754,520 notional WPP shares.
Awards made to the Group chief executive or JMS under the CIP, the Notional Share Award Plan and the phantom options, become immediately exercisable on a change of control. Under these plans, "change of control" is defined as the acquisition by a person or persons of more than 20% of the issued share capital of WPP where this is followed within 12 months by the appointment of a director with neither the Group chief executive's nor JMS's approval.
The rights of the Group chief executive and JMS respectively under the CIP and the NSAP are dependent on Sir Martin Sorrell remaining interested until September 2004 in 747,252 shares in which he invested in September 1994. Pursuant to the authority conferred on the directors at the Company's annual general meeting in 2000, the Company and JMS have entered into a contract to satisfy JMS's entitlement under the NSAP by the allotment of new shares in the Company.
Director's service contracts and notice periods
Except for Sir Martin Sorrell and Michael Dolan, each of the parent company executive directors is employed under a contract under which the director must give the Company 12 months' notice and the Company must give the executive 12 months' notice. Mr B J Brooks is employed under a service contract dated June 1, 1993, Mr P W G Richardson is employed under a service contract dated January 8, 1997 and Mr E R Salama is employed under a service contract dated April 1, 1997.
There are no change of control provisions in the contracts for executive directors, other than in respect of the Group chief executive.
The Board unanimously consider that, given the special position of the Group chief executive and the personal investment commitment made by him in the Company, there are special circumstances for the notice period applicable to him, which is for a fixed term of three years from September 1, 2000 renewable on or before September 1, each year. The Company anticipates that the current term will be renewed in September 2001 on this basis.
The Board also unanimously consider, that in order to retain the services of Michael Dolan and in the special circumstances which applied to him at the time of the merger with Young & Rubicam Inc., it was necessary to depart from its normal policy on directors' contracts and enter into a service contract with him for an initial term of four years with a provision for a one year extension.
Non-executive directors
Remuneration for non-executive directors consists of fees for their services in connection with the Board and Board committee meetings and where appropriate, for devoting additional time and expertise for the benefit of the Group. Non- executive directors are not eligible for membership in any Company pension plans, and do not participate in any of the Group's short- or long-term incentive programs. Non-executive directors may receive a part of their fees in ordinary shares of the Company, including in the form of options exercisable, at par value of the shares on completion of the non-executive directors' services.
Philip Lader's letter of appointment is for a term of three years subject to review after two years. All other non-executive directors have letters of appointment, which are renewable for a two-year period.
For the fiscal year ended December 31, 2000 the aggregate compensation paid by WPP and its subsidiaries to all directors and officers of WPP as a group for services in all capacities was (Pounds)7,986,599. Such compensation was primarily paid by WPP and its subsidiaries in the form of salaries and performance-related bonuses.
The sum of (Pounds)437,000 was set aside and paid in the last fiscal year to provide pension benefits for directors and officers of WPP.
Directors' remuneration
Remuneration of the directors was as follows/(7)/:
-----------------------------------------------------------------------------------------------------------------------------
Short-term
incentive
Location Salary Other plans (annual 2000 1999
and fees Benefits bonus)/(1)/ Total Total
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
Chairmen
H Maxwell/(5)/ USA 101 - - 101 102
P Lader/(5)/ USA - - - - -
Executive directors
M S Sorrell/(7)/ UK 854 24 1,302 2,180/(2)/ 1,324/(2)/
B J Brooks USA 214 4 134 352 267
P W G Richardson UK 250 22 156 428 349
E R Salama UK 165 22 103 290 265
G C Sampson/(5)/ UK 34 7 - 41 82
M J Dolan/(5) and (6)/ USA 132 3 528 663 -
Non-executive directors/(6)/
J J D Bullmore/(4)/ UK 72 12 - 84 82
E Dyson USA 35 - - 35 13
F W Hellman/(5)/ USA 7 - - 7 -
M Inagaki Japan - - - - -
J B H Jackson UK 30 - - 30 25
M H Jordan/(5)/ USA 7 - - 7 -
C Mackenzie UK 20 - - 20 -
C Lewinton/(5)/ USA 6 - - 6 -
S W Morten USA 33 - - 33 29
J A Quelch UK 28 40 - 68 55
J Smilow/(5)/ USA 20 - - 20 25
Total remuneration 2,008 134 2,223 4,365 2,618
-----------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
Long-term Pension
incentive plans Contributions
2000/(3)/ 1999/(3)/ 2000 1999
Total Total Total Total
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
Chairmen
H Maxwell/(5)/ - - - -
P Lader/(5)/ - - - -
Executive directors
M S Sorrell/(7)/ - - 340 324
B J Brooks 476 904 23 26
P W G Richardson 461 2,844 25 21
E R Salama 414 1,094 17 16
G C Sampson/(5)/ - 17 - -
M J Dolan/(5) and (6)/ 1,676 - 1 -
Non-executive directors/(6)/
J J D Bullmore/(4)/ - - - -
E Dyson - - - -
F W Hellman/(5)/ - - - -
M Inagaki - - - -
J B H Jackson - - - -
M H Jordan/(5)/ - - - -
C Mackenzie - - - -
C Lewinton/(5)/ - - - -
S W Morten - - - -
J A Quelch - - - -
J Smilow/(5)/ - - - -
Total remuneration 3,027 4,859 406 387
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Notes
1. Amounts included in short-term incentive plans represent bonuses in respect
of 2000 performance, paid in 2001.
2. The amount of salary and fees comprises the fees payable under the UK
Agreement with JMS Financial Services Limited ("JMS") and the salary
payable under the US Agreement referred to elsewhere in Item 6. Until 2000,
as in previous years, JMS discharged all relevant UK National Insurance
costs attributable to the provision of the services of Sir Martin Sorrell
under the UK Agreement. With effect from July 2000 the Company has agreed
to reimburse to JMS any additional employer national insurance costs
arising as a result of schedule 12 to the Finance Act 2000 attributable to
the difference between the amount payable to JMS under the UK agreement and
the salary payable by JMS to Sir Martin Sorrell.
3. These amounts represent gains realised on the exercise of share options
and, where relevant, payments under the Performance Share Plan.
4. JJD Bullmore has a consulting arrangement with the Company in addition to
his fee as a non-executive director.
5. H Maxwell retired and P Lader was appointed in February 2001. C Mackenzie
was appointed in March 2000, GC Sampson retired in May 2000 and MJ Dolan,
FW Hellman, MH Jordan and Sir Christropher Lewinton were all appointed in
September 2000. J. Smilow retired in September 2000.
6. Particulars of Mr Dolan's arrangements are set out elsewhere in Item 6
7. All amounts payable in US dollars have been converted into (Pounds)
sterling at $1.5162 to (Pounds)1. The amounts paid to Sir Martin Sorrell
were paid in art in US dollars and part in (Pounds) sterling.
The Company has also disclosed to its share owners details of its remuneration policies for senior employees. These are summarized as follows:
. Scope of the Compensation committee - during the year the Compensation committee was comprised exclusively of independent non-executive directors, namely:
- S W Morten (Chairman of the Committee);
- H Maxwell (retired February 2001);
- J A Quelch; and
- C Mackenzie (appointed February 2001).
No member of the committee has any personal financial interest, other than
as share owners, in the matters to be decided by the committee, no
potential conflicts of interest arising from cross-directorships and no
day-to-day involvement in running the Group's businesses. The Compensation
committee, which seeks the advice of independent remuneration consultants,
is responsible for establishing and overseeing the implementation of
remuneration policy for the Group with specific reference to the following:
assessment of competitive practices and determination of competitive
positioning; base salary levels; annual and long-term incentive awards;
policy and grants relating to WPP share ownership; and pensions and
executive benefits. The Compensation committee determines awards under
annual and long-term incentive plans and awards of WPP stock under a number
of plans for Group employees who are paid a base salary of $150,000 or
more.
. The Compensation committee determines the remuneration of the Group chief executive on the basis of a comparison with the chief executives of other global, multi-agency communications companies, including the Omnicom Group (Omnicom) and The Interpublic Group (IPG). The remuneration, stock incentive arrangements and benefits of the other executive directors (other than Michael Dolan for the year under review), are based on comparable positions in multinational companies of a similar size and complexity.
. Elements of executive remuneration - The following comprised the principal elements of executive remuneration for the period under review:
- Base Salaries
- Annual incentives
- Long-term incentives, including stock ownership and LEAP; and
- Pension, life insurance, health and disability benefits.
Base salary levels are established by reference to the market median for similar positions in directly comparable businesses and by comprehensive market survey information. In the case of the parent company, this includes other global services companies such as IPG and Omnicom and, for J. Walter Thompson Company, Ogilvy and Mather Worldwide and Young & Rubicam Inc., the competitive market includes other major multinational advertising agencies. For each of the other operating companies in the Group, a comparable definition of business competitors is used to establish competitive median salaries. Individual salary levels are set within a range of 15 % above or below the competitive median, taking a number of relevant factors into account, including individual and business unit performance, level of experience, scope of responsibility and the competitiveness of total remuneration.
Salary levels for executives are reviewed every 18, 24 or 36 months, depending on the level of base salary. Executive salary adjustments are made on the recommendation of the Group chief executive for operating company chief executives and parent company executive directors and by the chief executive officer of each operating company for all other executives.
Annual incentives are paid under plans established for each operating company and for executives of the parent company. In the case of the Group chief executive and other parent company directors (other than Michael Dolan) and executives, the total amount of annual incentive payable is based on the achievement of Group operating profit or operating cash flow targets as well as the achievement of Group operating profit margin targets. The Group chief executive is subject to additional targets. These are established by the Group chief executive and approved by the Compensation committee. In the case of each operating company, operating profit and operating profit margin targets are agreed each year.
Within the limits of available annual incentive funds, individual awards are paid on the basis of achievements against individual performance objectives, encompassing key strategic and financial performance criteria, including:
- Operating profit;
- Profit margin;
- Staff costs to revenue or gross margin;
- Revenue or gross margin growth and conversion;
- Level of co-operation among operating companies; and
- Other key strategic goals, established annually.
In each case, the annual incentive objectives relate to the participant's own operating company, division, client or functional responsibility.
Each executive's annual incentive opportunity is defined at a "target" level for the full achievement of objectives. Higher awards may be paid for outstanding performance in excess of target. With effect from January 1, 2000 the target level for the Group chief executive is 100% of base fees/salary and the maximum level is 200%. In respect of Mr. Dolan for the year under review his bonus will be not less than $800,000 and for future years will be not less than $600,000 with a maximum of 200% of base salary. A one-time stay bonus of $800,000 is also payable to Mr. Dolan in October 2001 so long as he is then an employee of Young & Rubicam Inc. For other Group executive directors the target commencing January 1, 2000 is 50% of base salary and the maximum is 75%.
Long-term incentives, including option grants, comprise a significant element of total remuneration for senior executives in the parent company and each operating company. During 2000, Group-wide, approximately 1,100 of those executives participated in a long-term incentive plan.
The committee regularly reviews the operation of the Group's long-term incentive programs to ensure that the performance measures and levels of reward are appropriate and competitive.
Parent company - Annual grants of WPP performance shares are made to all executive directors. For awards currently outstanding, the value of each performance share is equivalent to one WPP share and the number of shares vesting over each three-year performance period is dependent on the growth of WPP's total share owner return relative to the growth of total share owner return of major publicly traded marketing services companies. Where the Group's total share owner return is below the median level of the peer group, none of the performance shares vest. Currently, at median performance, 50% of the performance shares vest, with higher percentages vesting for superior performance up to 100% if WPP ranks at least equal to the second ranking peer company.
Over the 1998-2000 performance period, WPP's performance ranked second among the peer group companies. Contingent grants of performance shares for the 1999-2001, 2000-2002 and 2001-2003 periods range from 25% to 100% of base salary.
Operating companies - Senior executives of most Group operating companies participate in long-term incentive plans, which provide awards in cash and restricted WPP stock for the achievement of three-year financial performance targets. These plans operate on a rolling three-year basis with awards paid in March 2001 under the 1998-2000 long-term incentive plans. The value of payments earned by executives over each performance period is based on the achievement of targeted improvements in the following performance measures:
- average operating profit or operating cash flow; and
- average operating margin.
The stock portion of each payment is 50%. Restrictions on the sale of this stock are lifted after one year in respect of 50% of the stock and after two years for the balance, if the executive remains employed in the Group.
In addition, some executives also receive annual grants of WPP stock options through their membership of the WPP Group `Leaders' or `Partners' or `High Potential' Group. These programs recognize a participant's contribution to the achievement of WPP's strategic aims, including business co-operation across operating companies. All members of the WPP Leaders, Partners and High Potential Groups, including the chief executive officer of each operating company (including Michael Dolan for the current financial year), receive an annual grant of fair market value WPP stock options, which are exercisable three years from the grant date assuming that specific performance conditions are met. Each year the grant value (number of shares times fair market value at the grant date) of these awards ranges from approximately 15% to 150% of base salary.
Client Equity Investment Funds- To address increasing competition for talent from new sources, as well as the growth of client revenues from internet companies, the Company has established a fund for each major operating group through which investments can be made in the stock of pre-IPO clients. These investments are limited to a specified portion of the fee income derived from each client, and there is an overall limit on the level of client equity investments by each operating group. These client equity investments will generally be sold as soon as possible following a public offering. Positive returns realized on client equity investments will then be
used to acquire WPP shares, which will be allocated to employees in the operating companies. The WPP shares will vest in two equal installments over a two-year period. Since its introduction last year, only three investments have been made under this fund.
Leadership Equity Acquisition Plan (`LEAP') - In September 1999 share owners approved the introduction of LEAP to reward superior performance relative to WPP's peer companies, so as to create strong shared interests with share owners through significant personal investment and ownership in stock by executives and to ensure competitive total rewards in the appropriate marketplace.
Under LEAP, participants must commit WPP shares (`WPP shares'), valued at not less than their annual earnings, at the time of acquisition, of which no more than two-thirds may be satisfied by a participant's existing holding of WPP shares, in order to provide an opportunity to earn additional WPP shares (`matching shares'). These investment shares must be committed for a five-year period (`investment period'). The number of matching shares which a participant may receive at the end of the investment period will depend on the performance of the Company measured over five financial years commencing with the financial year in which the WPP shares are committed. The number of matching shares will depend on the total shareholder return (`TSR') achieved by the Company relative to major publicly traded marketing services companies. The maximum number of matching shares, other than in respect of the seven participants, including Mr. Dolan, who are executives of Young & Rubicam Inc., is five for every investment share, for which the Company must rank first or second over the performance period. If the Company's performance is below the median of the comparator group only half a matching share will vest for every WPP share held throughout the investment period. Following the merger with Young & Rubicam Inc., seven executives of Young & Rubicam Inc., including Mr. Dolan, have accepted invitations to participate in LEAP and their entitlement to matching shares in WPP has been pro-rated so that they are entitled only to four-fifths of the number of matching shares to which the executives of WPP became entitled as a result of their acceptance of invitations to participate made to them in September 1999. Consequently the maximum number of matching shares to which the seven executives of Young & Rubicam Inc. may become entitled to is four as opposed to five.
On a change of control matching shares may be received based on the Company's performance to that date. The Compensation committee will also consider, in the light of exceptional financial circumstances during the performance period, whether the recorded TSR is consistent with the achievement of commensurate underlying performance.
Executive directors of the Company and senior executives from several Group operating companies participate in LEAP. To date, awards have been made to 22 directors and executives. Sir Martin Sorrell, the Group chief executive has, together with JMS, committed to LEAP shares worth $10 million calculated at a price of (Pounds)5.685 per share of which shares worth $3 million were purchased in the market after August 16, 1999.
It is expected that the matching shares to which participants (other than JMS) become entitled for the awards made by reference to 1999 and 2000 will be provided from one of the Company's employee share ownership plans (`ESOPs'). The ESOPs have acquired the maximum potential number of matching shares in respect of awards made in or by reference to 1999 at an average cost not exceeding (Pounds)3.70 per share. Authority has been obtained from share owners to satisfy the entitlement of JMS to matching shares by an allotment of new shares.
Executive Stock Ownership Policy - During 1996, the Company introduced stock ownership goals for the most senior executives in the Group. These range from 50% to 400% of salary. Beginning in 2000, stock option grants may vary depending on whether an individual achieves and maintains specified levels of WPP stock ownership.
Executive Stock Option Plan and Worldwide Ownership Plan - The 1996 Executive Stock Option Plan has been used annually since its adoption to make option grants to members of the WPP Leaders, Partners and High Potential Groups including key employees of the parent company, but excluding parent company executive directors and the Group chief executive. Under the terms of his service contract Mr. Dolan will be entitled to receive a grant under this plan in September 2001.
In 1997 the Company broadened stock option participation by introducing the Worldwide Ownership Plan for all employees of 100%-owned Group companies with at least two years' service, in order to develop a stronger ownership culture and greater knowledge of Group resources. Since its adoption grants have been made annually under this plan also and as at May 4, 2001 options under this Plan had been granted to more than 18,000 employees for in excess of 9.1 million ordinary shares of the Company. Grants made under this plan to approximately 5,200 employees in 1998 became exercisable in March 2001.
Retirement benefits - The form and level of Company-sponsored retirement programs varies depending on historical practices and local market considerations. The level of retirement benefits is regularly considered when reviewing executive remuneration levels.
In the two markets where the Group employs the largest number of people, the US and UK, pension provision generally takes the form of defined contribution benefits, although the Group still maintains three defined benefit plans in the US and three defined benefit plans in the UK. In each case, these pension plans are provided for the benefit of employees in specific operating companies and, in the case of the UK plans, are closed to new entrants. All pension coverage for the parent company's executive directors is on a defined contribution basis and only base salary is pensionable under any Company retirement plan. Details of pension contributions for the period under review in respect of parent company executive directors are set out elsewhere in Item 6.
Compensation of `Executive Officers'
The following tables sets out compensation details for the Group chief executive
and each of the other five most highly compensated executive officers in the
Group as at December 31, 2000 (the `Executive Officers'). As used in this
statement, the `Executive Officers' are deemed to include executive directors of
the Company, or an executive who served as the chief executive officer of one of
the Group's major operating companies. One of the Executive Officers was also an
executive director of WPP during 2000. This information represents additional
disclosure to that provided in "Directors' remuneration" elsewhere in Item 6 and
has been provided in a similar manner to the compensation disclosure of the
Company's main US-based competitors.
This information covers compensation for services rendered in all capacities and paid in each of the two calendar years ended December 31, 2000 and 1999. Incentive compensation paid in 2001 for performance in 2000 and previous years, is not included in these tables, consistent with US reporting requirements.
2000 Executive Remuneration
------------------------------------------------------------------------------------------------------------------------------------
Long Term Compensation/(5)/
------------------------------------
Share
Other annual Options
compensation SARs and Restricted
Salary Bonus/(1) /(2)/ phantom shares
Name Principal position Year $000 $000 $000 shares/(3)/ Number
Number
MS Sorrell Group chief executive 2000 1,295 819 36 - -
WPP Group 1999 1,231 979 37 - -
S Lazarus Chairman/ 2000 850 638 43 15,807 216,629
Chief executive officer 1999 850 638 31 18,288 215,554
Ogilvy & Mather Worldwide
C Jones Chief executive officer 2000 750 417 20 11,855 7,024
J Walter Thompson Company 1999 750 225 18 16,138 18,072
I Gotlieb Chairman/ 2000 750 600 21 - -
Chief executive officer 1999 219 - 7 96,826 -
MindShare
H Paster Chairman/ 2000 550 344 17 8,694 5,422
Chief executive officer 1999 550 344 17 11,834 6,300
Hill and Knowlton
R Seltzer Chairman/ 2000 450 338 25 7,113 34,165
Chief executive officer 1999 423 395 25 9,682 72,487
Ogilvy Public
Relations Worldwide
Long Term Compensation/(5)/
---------------------------
LTIP payments All other
$000 Compensation /(4)/
Name Principal position $000
MS Sorrell Group chief executive - 515
WPP Group - 524
S Lazarus Chairman/ 273 128
Chief executive officer 263 128
Ogilvy & Mather Worldwide
C Jones Chief executive officer 90 108
J Walter Thompson Company 153 112
I Gotlieb Chairman/ - 13
Chief executive officer - 25
MindShare
H Paster Chairman/ 123 23
Chief executive officer 159 31
Hill and Knowlton
R Seltzer Chairman/ 113 9
Chief executive officer - 8
Ogilvy Public
Relations Worldwide
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|
Notes
1. Represents short-term incentive awards paid during calendar years 2000
and 1999 in respect of the prior year's incentive plans.
2. Includes the value of company cars, club memberships, executive health and
other benefits and supplemental executive life insurance.
3. As used in this report, the term "phantom shares" (as used in the UK) and
the term `free-standing SARs' (as used in the US) are interchangeable.
Matching shares which could vest under LEAP are not included in this table,
but are referred to elsewhere in Item 6 within the table entitled "Long-
term incentive plan awards"
4. Includes accruals during each calendar year under consideration, under
defined contribution retirement and defined benefit retirement
arrangements.
5. Options granted in 2000 were over ADRs (based on the ratio in existence
at December 31, 1999.)
Long-term incentive plan grants in 2000/(1)/
-----------------------------------------------------------------------------------------------------------------------------------
Performance period Threshold Target Maximum
$ $ $
M S Sorrell/(2)/ 2000-2002 n/a n/a n/a
S Lazarus 2000-2002 - 650,000 975,000
C Jones 2000-2002 - 600,000 900,000
I Gotlieb 2000-2002 - 400,000 600,000
H Paster 2000-2002 - 275,000 412,500
R Seltzer 2000-2002 - 150,000 225,000
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|
Notes:
1. This table does not include the maximum number of Matching shares which are
capable of vesting under LEAP. If the performance requirement under LEAP is
satisfied to the fullest possible extent and subject to the WPP investment
shares being retained until the end of the investment period (September
2004), the maximum number of matching shares which may vest in relation to
the performance period ending December 31, 2003 is as follows: Sir Martin
Sorrell (including those attributable to JMS) 5,369,070; S Lazarus
1,610,700; C Jones 1,610,700; H Paster 439,750 and R Seltzer 362,400.
2. An award of 137,255 units under the Performance Share Plan was made to Sir
Martin Sorrell during 2000. Each unit is analogous to an ordinary share of
WPP Group plc.
Other long-term incentive plan awards/(1)/
Long-term Incentive Plan awards granted to directors are as follows:
------------------------------------------------------------------------------------------------------------------------------------
Granted/ Granted
Plan/(1)/ At Jan 1 (lapsed) Vested At Dec 31 (lapsed) Vested At May 4
2000 2000/(4)/ 2000 2000 2001/(4)/ 2001 2001
Number Number Number Number Number Number Number
B J Brooks PSP 36,967 122 (18,544) 18,545 83 (18,628) -
PSP 60,864 (883) (29,991) 29,990 110 (15,050) 15,050
PSP 46,728 - - 46,728 - (23,364) 23,364
PSP 50,623 - - 50,623 - - 50,623
PSP - 32,185 - 32,185 - - 32,185
LEAP 272,600 - - 272,600 - - 272,600
M J Dolan/(5)/ LTIP
Units - - - - 5,000 - 5,000
LEAP - 1,288,000 - 1,288,000 - - 1,288,000
P W G Richardson
PSP 21,086 68 (10,577) 10,577 49 (10,626) -
PSP 67,925 (985) (33,470) 33,470 122 (16,796) 16,796
PSP 55,513 - - 55,513 - (27,757) 27,756
PSP 65,944 - - 65,944 - - 65,944
PSP - 36,765 - 36,765 - - 36,765
LEAP 299,030 179,418 - 478,448 - - 478,448
E R Salama PSP 24,719 80 (12,399) 12,400 56 (12,456) -
PSP 56,604 (820) (27,892) 27,892 102 (13,997) 13,997
PSP 46,261 - - 46,261 - (23,131) 23,130
PSP 48,359 - - 48,359 - - 48,359
PSP - 26,961 - 26,961 - - 26,961
LEAP 272,645 - - 272,645 - - 272,645
M S Sorrell/(3)/ - 8,594,493 - - 8,594,493 - - 8,594,493
PSP 219,812 - - 219,812 - - 219,812
PSP 137,255 - - 137,255 - - 137,255
LEAP 5,369,070 - - 5,369,070 - - 5,369,070
-----------------------------------------------------------------------------------------------------------------------------
Price per
share of
vested units
on valuation
Performance Period date /(2)/
B J Brooks 1 Jan 1996-31 Dec 1998 365.8p
1 Jan 1997-31 Dec 1999 981.0p
1 Jan 1998-31 Dec 2000 872.0p
1 Jan 1999-31 Dec 2001 n/a
1 Jan 2000-31 Dec 2002 n/a
1 Jan 1999-31 Dec 2003 n/a
M J Dolan/(5)/
1 Jan 2001-31 Dec 2003 n/a
1 Jan 1999-31 Dec 2003 n/a
P W G Richardson
1 Jan 1996-31 Dec 1998 365.8p
1 Jan 1997-31 Dec 1999 981.0p
1 Jan 1998-31 Dec 2000 872.0p
1 Jan 1999-31 Dec 2001 n/a
1 Jan 2000-31 Dec 2002 n/a
1 Jan 1999-31 Dec 2003 n/a
E R Salama 1 Jan 1996-31 Dec 1998 365.8p
1 Jan 1997-31 Dec 1999 981.0p
1 Jan 1998-31 Dec 2000 872.0p
1 Jan 1999-31 Dec 2001 n/a
1 Jan 2000-31 Dec 2002 n/a
1 Jan 1999-31 Dec 2003 n/a
M S Sorrell/(3)/ n/a n/a
1 Jan 1999-31 Dec 2001 n/a
1 Jan 2000-31 Dec 2002 n/a
1 Jan 1999-31 Dec 2003 n/a
--------------------------------------------------------------------------------
|
Notes
1. The long-term incentive plans operated by the Company consist of the
Performance Share Plan (PSP) and the Leadership Equity Acquisition Plan
(LEAP). Details of the PSP and LEAP can be found elsewhere in Item 6. The
number of shares shown for LEAP represents the maximum number of Matching
Shares which is capable of vesting at the end of the performance period, if
the performance requirement is satisfied to the fullest extent and subject
to the retention of WPP investment shares until the end of the relevant
investment period in September 2004. The number of Sir Martin Sorrell's
Matching Shares includes those attributable to JMS. The 8,594,493 shares
referred to in note 3 are not awarded under either the PSP or LEAP. Mr.
Dolan participates in the Young & Rubicam long-term incentive plan,
referred to elsewhere in Item 6.
2. Valuation date is December 31 at the end of the relevant performance
period.
3. The 8,594,493 shares represent the number of shares, or cash equivalent of
shares which vest, under the Capital Investment Plan (CIP), the Notional
Share Award Plan (NSAP) and phantom options. Details of these plans are set
out elsewhere in Item 6. The performance conditions were satisfied under
the CIP and NSAP before these plans were due to mature in September 1999.
Each plan has been extended until September 2004, subject to good leaver,
change of control and other specified provisions, when the awards vest.
Consequently their value cannot be established until that time. Under
arrangements made with Sir Martin Sorrell relating to the payment on his
behalf of US withholding tax under the CIP and pension payments made under
the US Agreement, WPP Group USA Inc. has made payments of which the maximum
amount outstanding during the year was (Pounds)480,000 and which remained
outstanding at December 31, 2000.
4. Includes dividends received in respect of vested restricted stock which
have been reinvested in the acquisition of further ordinary shares.
5. Represents LTIP units, rather than shares, under the long-term incentive
plan, referred to elsewhere in Item 6.
The Company's approach to utilising share options within the overall remuneration policy is discussed elsewhere in Item 6.
Directors' Interests
Ordinary Shares
Directors' interests in the Company's share capital, all of which were
beneficial, were as follows:
------------------------------------------------------------------------------------------------------------------------------------
Other Other
Shares acquired interests at Shares acquired interests
through long-term Dec 31, through long-term acquired
At Jan 1, 2000 incentive plan 2000 inc. incentive plan awards (disposed
or date of awards in 2000/(1)/ shares in 2001 of) since
appointment ------------------------ purchased At Dec 31, --------------------- Dec 31, At May 4,
if later Vested (sold) in 2000/(2)/ 2000(1) Vested (sold)(1) 2000 2001
------------------------------------------------------------------------------------------------------------------------------------
B J Brooks 346,788 48,535 (33,540) - 361,783 57,042 (28,527) - 390,298
J J D Bullmore 20,065 - - - 20,065 - - - 20,065
M J Dolan/(2)(7)(11)/ 3,613,645 - - (71,100)(10) 3,542,545 - - 417,500(12) 3,960,045
E Dyson - - - - - - - 5,000 5,000
F W Hellman/(2)(7)/ 1,193,665(9) - - 8,380(10) 1,202,045 - - - 1,202,045
M Inagaki/(4)/ - - - - - - - - -
J B H Jackson 12,500 - - - 12,500 - - - 12,500
M H Jordan/(2)(7)/ 16,695(9) - - 3,490(10) 20,185 - - - 20,185
P Lader/(8)/ - - - - - - - - -
C Lewinton/(2)(7)/ 8,350(9) - - 13,395(10) 21,745 - - - 21,745
C Mackenzie - - - 10,000 10,000 - - - 10,000
H Maxwell 35,000 - - - 35,000 - - - 35,000
S W Morten 20,000 - - - 20,000 - - - 20,000
J A Quelch 10,000 - - 2,000 12,000 - - - 12,000
P W G Richardson 331,176 44,047 (44,047) 19,567 350,743 55,179 (22,073) - 383,849
E R Salama 409,177 40,291 (19,892) - 429,576 49,584 (35,706) - 443,454
G C Sampson/(8)/ 554,313 - - - - - - - -
J E Smilow/(8)/ 100,000 - - - - - - - -
M S Sorrell/(2)/ 13,293,414 - - 93,540 13,386,954 - - - 13,386,954
------------------- ------------- ---------- --------- ------------- ------------- ------- ---------- --------- ------------
|
Notes
1. Further details of long-term incentive plans are given elsewhere in Item 6
within the table entitled "Other long-term incentive plan awards".
2. Interests include unexercised options. In the case of Sir Martin Sorrell
interests include 1,571,190 and 577,391 unexercised phantom options granted
in 1993 and 1994 respectively as referred to elsewhere in Item 6, 4,691,392
shares in respect of the Capital Investment Plan and 1,754,520 shares in
respect of the Notional Share Award Plan.
3. Each of the executive directors has a technical interest as an employee and
potential beneficiary in one of the Company's ESOPs in shares in the
Company held under the relevant ESOP. At December 31, 2000, the Company's
ESOPs held in total 36,208,185 shares in the Company, (1999: 27,889,000
shares).
4. M Inagaki is a director and chairman of Asatsu-DK, which at May 4, 2001 was
interested in 31,295,646 shares representing 2.60% of the issued share
capital of the Company.
5. Save as disclosed above and elsewhere in Item 6, no director had any
interest in any contract of significance with the Group during the year.
6. The above Interests do not include the Interests of the executive directors
in the Performance Share Plan but include shares held by them and committed
to the Leadership Equity Acquisition Plan (LEAP) referred to elsewhere in
Item 6, although they do not include any matching shares which may vest
under LEAP.
7. Appointed in September 2000. Shares were acquired in ADS form following the
completion of the merger between the Company and Young & Rubicam Inc., in
accordance with the terms of the merger agreement and include the interests
of Messrs Dolan, Hellman, Jordan and Lewinton under Young & Rubicam
incentive plans.
8. G C Sampson retired in May 2000, J E Smilow in September 2000 and P Lader
was appointed in February 2001.
9. Includes shares made available as a result of the Young & Rubicam Inc.
Directors Stock Option Plan.
10. Includes shares made available as a result of the Young & Rubicam Inc.
Directors Deferred Fee Plan.
11. Includes shares made available as a result of the Young & Rubicam Inc.
Restricted Stock and Incentive Compensation Plans.
12. Represents shares made available as a result of the Young & Rubicam Inc.
Incentive Compensation Plan. A Further 417,500 options vest under this Plan
in April 2002.
Share Options
Other than as referred to in the notes above and also below, no director has been granted options over ordinary shares or ADSs in 2000 and as at May 4, 2001 no director had any options outstanding and unexercised.
2,196,190 phantom options were granted to JMS in relation to 1993 at a base price of 52.5p per share, exercisable between April 1996 and April 2003 and 577,391 in relation to 1994 at a base price of 115p per share, exercisable in March 2004. In 1997, JMS exercised 625,000 phantom options granted in relation to 1993. This leaves 1,571,190 unexercised phantom options granted in relation to 1993. JMS has indicated that it does not intend to exercise the 1993 phantom options until March 2003, subject to good leaver and change of control provisions.
Under the terms of Michael Dolan's service contract, Mr Dolan is entitled to receive in September 2001, a grant of options to acquire WPP ADSs under the terms of the WPP Executive Share Option Plan having an aggregate fair market value equal to his base salary at that time.
An analysis of share options is shown in Note 23 of the Consolidated Financial Statements in Item 19. This includes both the movement in the year and an analysis of unexercised options at December 31, 2000.
Options granted in 2000
------------------------------------------------------------------------------------------------------------------------------------
Stock options, % of total options Potential realisable value at assumed
granted granted by Company Exercise price annual rates of stock price appreciation
(number of ADRs) in 2000 ($ per share) Expiry date for option term
0% 5% 10%
$000 $000 $000
--------------------------------------------------
M S Sorrell - - - - - - -
S Lazarus 15,807 2.1% 63.26 2 Sept 2010 - 629 1,594
C Jones 11,855 1.6% 63.26 2 Sept 2010 - 472 1,195
I Gotlieb - - - 2 Sept 2010 - - -
H Paster 8,694 1.1% 63.26 2 Sept 2010 - 346 877
R Seltzer 7,113 0.9% 63.26 2 Sept 2010 - 283 717
------------------------------------------------------------------------------------------------------------------------------------
|
All options granted to executives in this table are exercisable three years from the grant date and expire ten years from the grant date.
Stock option, SAR and phantom stock exercises in last financial year and final year-end share option, SAR and phantom stock values
------------------------------------------------------------------------------------------------------------------------------------
Number of ordinary shares Value of unexercised
Ordinary Market value at underlying unexercised share options, in-the-money share options, SARs
shares acquired exercise date SARs and phantom stocks at year end and phantom stocks at year end ($)(1)
on exercise ($) ----------------------------------- --------------------------------------
Exercisable Unexerciseable Exercisable Unexerciseable
M S Sorrell - - 1,571,190 577,391 19,232,734 6,528,738
S Lazarus 592,428 8,292,649 434,531 454,735 4,144,241 2,773,366
C Jones 341,586 3,082,321 - 290,316 - 1,563,968
I Gotlieb - - - 484,130 - 1,581,895
H Paster - - 247,219 179,820 2,480,271 860,831
R Seltzer - - 86,752 164,162 762,587 851,679
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|
1. The value is calculated by subtracting the exercise price from the fair market value of the Company's ordinary shares on December 31, 2000, namely (Pounds)8.72 and using an exchange rate of $1.4937 to (Pounds)1.
Employees
The assets of marketing and communications services businesses are primarily its people, and the Company is highly dependent on the talent, creative abilities and technical skills of its personnel and the relationships its personnel have with clients. The Company believes that its operating companies have established reputations in the industry which attract talented personnel. However, the Company, like all marketing and communications services businesses, is vulnerable to adverse consequences from the loss of key employees due to the competition among these businesses for talented personnel. On December 31, 2000 the Group had 51,195 employees located in approximately 1,300 offices, in 102 countries compared with 29,168 employees on December 31, 1999 and 26,184 in 1998. Including all the Group's affiliated companies, total employees were approximately 65,000 on December 31, 2000. The average number of employees in 2000 was 36,157 compared with 27,711 in 1999 and 25,589 in 1998. Their geographical distribution was as follows:
2000 1999 1998
Number Number Number
------ ------ ------
United Kingdom 5,425 4,439 3,973
United States 11,058 8,033 7,082
Continental Europe 7,985 5,650 4,922
Canada, Asia Pacific, Latin America, Africa and Middle East 11,689 9,589 9,612
------ ------ ------
36,157 27,711 25,589
|
Total staff costs in 2000 were (Pounds)1,617.6 million compared with (Pounds)1,091.3 million in 1999. The Company's staff cost to gross margin ratio excluding incentives fell to 54.8% from 55.0%. Variable staff costs as a proportion of total staff costs increased to 12.1% and as a proportion of revenues, to 6.6%.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
Control of registrant
As of the dates shown below, the Company is aware of the following interests of 3% or more in the issued ordinary share capital of the Company:
----------------------------------------------------------------------------------------------------
Months Ending May 31
----------------------------------------------------------------------------------------------------
2001 2000 1999 1998
------------------------------------------------------------------------------------------------------------------------------------
Putnam Investment Management 5.60% 63,400,000 3.05% 23,723,701 * * - -
------------------------------------------------------------------------------------------------------------------------------------
Legg-Mason 3.51% 39,832,402 5.27% 41,010,741 5.85% 45,004,913 * *
------------------------------------------------------------------------------------------------------------------------------------
WPP-ESOP 3.45% 39,168,965 3.95% 30,768,244 3.25% 25,171,250 * *
------------------------------------------------------------------------------------------------------------------------------------
Chase Manhattan Bank 3.01% 34,118,838 * * * * * *
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Asatsu-DK * * 4.02% 31,295,646 4.07% 31,295,646 - -
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Morgan Stanley * * * * 6.75% 51,878,181 10.90% 80,538,131
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Scudder Stevens & Clark Inc. - - - - * * 6.32% 46,671,391
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Tiger Management Corporation - - - - - - 5.03% 37,178,000
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Barclays * * 3.25% 25,276,536 * * * *
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*Less than 3% interests in the issued ordinary share capital of the Company.
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None of these shareholders has voting rights that are different from those of the holders of the Company's ordinary shares generally.
As far as WPP is aware, it is neither directly nor indirectly owned or controlled by one or more corporations or by any government, or by any other natural or legal persons severally or jointly.
Related party transactions
None.
ITEM 8. FINANCIAL INFORMATION
See Consolidated Financial Statements of the Company as at December 31, 2000, 1999 and 1998 (page F-1).
ITEM 9. THE OFFER AND LISTING
Share price history
The Company's ordinary shares have been traded on The London Stock Exchange since 1971. The Company currently has authorisation to purchase up to 10% of the outstanding ordinary shares of the Company pursuant to its share buy back program. Management is authorised to use its discretion in planning purchases of ordinary shares under the share buy back program.
The following table sets forth, for the quarters indicated, the reported high and low middle-market quotations for the Company's ordinary shares on The London Stock Exchange, based on its Daily Official List. Such quotations have been translated in each case into United States dollars at the closing daily mid-trade rate reported by Bloomberg on each of the respective dates of such quotations.
Translated into
Pounds per United States
Ordinary Share Dollars
--------------------------------------------------------------------------------------------------------------
High Low High Low
---- --- ---- ---
1996 2.54 1.57 4.36 2.42
1997 2.92 2.36 4.96 3.96
1998 4.67 2.02 7.68 3.41
1999
----
First Quarter 5.49 3.59 8.88 5.95
Second Quarter 5.75 4.98 9.29 8.03
Third Quarter 6.27 5.39 10.15 8.72
Fourth Quarter 9.96 5.70 16.09 9.44
2000
----
First Quarter 13.24 8.68 20.83 14.28
Second Quarter 10.98 7.69 17.13 11.46
Third Quarter 10.16 8.10 14.84 11.97
Fourth Quarter 9.41 6.93 13.71 10.12
2001
----
January 8.89 7.87 13.05 11.84
February 8.84 7.95 13.07 11.52
March 8.73 7.04 12.81 10.00
First Quarter 8.89 7.04 13.05 10.00
April 8.47 6.78 12.18 9.71
May 8.66 7.67 12.34 10.88
June* 7.64 7.60 10.79 10.77
Second Quarter* 8.66 6.78 12.34 9.71
*to June 5, 2001
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The ordinary shares have traded in the United States since December 29, 1987 in the form of ADSs which are evidenced by ADRs. From November 16, 1999 onwards, each ADS represents 5 ordinary shares (previously 10 ordinary shares since November 15, 1995 and 2 ordinary shares prior to that date). The depositary for the ADSs is Citibank, N.A. in New York. The following table sets forth, for the quarters indicated, the reported high and low sales prices of the ADSs as reported on by Nasdaq. High and low sales prices of the ADSs prior to November 16, 1999 have been restated for comparative purposes to represent one ADS for every 5 ordinary shares.
US dollars per ADS
------------------
High Low
-----------------------------------------------
1996 19.25 11.94
1997 24.88 19.56
1998 38.50 18.00
1999
----
First Quarter 44.38 30.44
Second Quarter 46.00 39.75
Third Quarter 50.44 42.69
Fourth Quarter 83.13 47.50
2000
----
First Quarter 102.56 70.13
Second Quarter 85.50 56.50
Third Quarter 73.38 59.31
Fourth Quarter 67.45 50.25
2001
----
January 65.31 59.00
February 65.00 58.25
March 64.00 51.50
First Quarter 65.31 51.50
April 61.46 48.00
May 61.77 54.14
June* 53.99 53.92
Second Quarter* 61.77 48.00
*to June 5, 2001
-----------------------------------------------
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The depositary for the ADSs as at December 31, 2000 held 143,098,360 ordinary shares, approximately 12.9% of the outstanding ordinary shares, backing 28,619,672 outstanding ADRs.
ITEM 10. ADDITIONAL INFORMATION
B. MEMORANDUM AND ARTICLES OF ASSOCIATION
The following summarizes certain provisions of our memorandum and articles of association and applicable English law. This summary is qualified in its entirety by reference to the UK Companies Act 1985 and our memorandum and articles of association. A copy of our articles of association in the form adopted on June 25, 2001 is being filed as an exhibit to this annual report on Form 20-F.
Objects and Purposes
We are a public limited company incorporated under the name "WPP Group plc" in England and Wales with registered number 1003653. Clause 4 of our memorandum of association provides that our principal objects are to carry on the business or businesses of media advertising, market research, public relations, sales promotion and specialist communications and to develop concepts for advertising, marketing, research, sales promotion and similar operations. Our memorandum grants us a range of corporate capabilities to effect these objects.
Directors
Interested Transactions. Subject to any restrictions under the Companies Act 1985, and provided the director has disclosed the nature and extent of the interest to the board, the director may:
. have any kind of interest in a contract with or involving the company or
another company in which WPP has an interest;
. have any kind of interest in a company in which WPP has an interest;
. hold a position, other than auditor, for the company or another company in
which WPP has an interest on terms and conditions decided by the board; and
. either alone, or through a firm with which the director is associated, do
paid professional work other than as an auditor for WPP or another company in
which WPP has an interest on terms and conditions decided by the board.
When a director knows that he or she is in any way interested in a contract with WPP he or she must disclose the nature of that interest at a meeting of the directors. A general notice given to the board that a director has an interest of the kind stated in the notice in a contract involving a person identified in the notice is treated as a standing disclosure that the director has that interest.
Subject to the provisions of our articles of association, a director shall not vote (or be counted in the quorum at the meeting) on a resolution about a contract in which the director, or a person who is connected with the director, to his knowledge has a material interest. The director can vote, however, if the interest is only an interest in WPP's shares, debentures or other securities. In addition, a director can vote and be counted in the quorum on a resolution in which the director has a material interest, provided the material interest arises only because the resolution relates to:
. the giving of a guarantee, security or indemnity in respect of money lent or obligations incurred by the director or that other person at the request of, or for the benefit of, the company or any of its subsidiary undertakings;
. the giving of a guarantee, security or indemnity in respect of a debt or obligation of the company or any of its subsidiary undertakings to that other person, if the director has taken responsibility for all or any part of that debt or obligation by giving a guarantee, security or indemnity;
. the offer by the company or any of its subsidiary undertakings of any shares, debentures or other securities for subscription or purchase if the director takes part because the director is a holder of shares, debentures or other securities, or if the director takes part in the underwriting or sub- underwriting of the offer;
. a contract involving any other company if the director, and any person connected with the director, has any kind of interest in that company. This does not apply if the director owns 1% or more of that company;
. a contract regarding an arrangement for the benefit of employees of the company or any of its subsidiary undertakings which only give the director benefits which are also generally given to the employees to whom the arrangement relates; or
. a contract relating to the purchase of any insurance for the benefit of persons including directors.
A director shall not vote or be counted in a quorum on a resolution relating to his own appointment (including fixing or varying its terms) or the termination of his own appointment, as the holder of any office or place of profit with WPP or a company in which WPP is interested.
Subject to any restrictions under the Companies Act 1985 and our articles of association, the board may exercise or arrange the exercise of the voting rights attached to any shares in another company held by WPP and may exercise voting rights which they have as directors of that company in any way they decide. This includes voting in favor of a resolution appointment any of them as directors or officers of that company and determining their remuneration.
Remuneration. The directors (other than any director who for the time being holds an executive office of employment with WPP or a subsidiary of WPP) shall be paid out of the funds of WPP by way of remuneration for their services as directors such fees not exceeding in aggregate (Pounds)450,000 per annum or such larger sum as WPP may, by ordinary resolution, determine. Such remuneration shall be divided among the directors in such proportion and manner as the board may decide. The board may also make arrangements for such proportion of the fees payable to any director to be provided in the form of fully paid ordinary shares in the capital of the company in accordance with the provisions of the articles of association.
The board may also repay to a director all expenses properly incurred in attending and returning from general meetings, board meetings or board committee meetings, or expenses arising in any other way in connection with the company. A director may also be paid out of the funds of WPP all expenses incurred by him in obtaining professional advice in connection with the affairs of the company or the discharge of his duties as a director.
The board may grant special remuneration to a director who performs any special or extra services which the board considers extends beyond the ordinary duties of a director. Such special remuneration may be paid by way of lump sum, salary, commission, profit sharing or otherwise as decided by the board and may be paid in addition to any other remuneration payable.
The board may decide whether to provide pensions, annual payments or other allowances or benefits to any person, including those who are or who were directors, their relations or dependants,
or anyone connected to them. The board may also decide to contribute to a scheme, pension or fund or to pay premiums to a third party for these purposes.
Appointment. Directors may be appointed by the shareholders by ordinary resolution or by the board of directors. A director appointed by the board holds office only until the next annual general meeting but shall be eligible for reappointment. Unless otherwise determined by ordinary resolution, the number of directors shall not be less than six in number. There is no requirement of share ownership for a director's qualification.
Retirement and Age Limit. At each annual general meeting, any director then in office who has been appointed by the board since the previous annual general meeting, or any director who at the date of the notice convening the annual general meeting has held office for more than 30 months since he was appointed or last reappointed by the company in general meeting, shall retire from office but shall be eligible for reappointment. There is no age limit for directors.
Borrowing Powers. The board may exercise all the powers of the company to borrow money, mortgage or charge all or part of its undertaking, property and assets (present and future) and uncalled capital and to issue debentures and other securities and give security either outright or as collateral security for any debt, liability or obligation of the company or of any third party.
The board shall restrict the borrowings of the company and exercise all voting and other rights or powers of control exercisable by the company in relation to its subsidiary undertakings so as to secure that the aggregate amount of all borrowings at any time is not more than two and a half times adjusted capital and reserves. This affects subsidiary undertakings only to the extent the board can do this by exercising these rights or powers of control. This limit can be exceeded if the consent of the shareowners has been given in advance by passing an ordinary resolution. The limit does not include the borrowings owing by one group company to another group company.
Indemnity of Directors. Subject to any restrictions under the Companies Act 1985, every director or other officer (excluding an auditor) of the company shall be indemnified out of the assets of the company against all liabilities incurred by him in the actual or purported execution or discharge of his duties, or the exercise or purported exercise of his powers or otherwise in relation to or in connection with his duties, powers or office. This indemnity shall not apply to any liability to the extent that it is recovered from any other person.
Ordinary Shares
Each of the issued WPP ordinary shares is fully paid and not subject to any further calls or assessments by WPP. There are no conversion rights, redemption provisions or sinking fund provisions relating to any WPP ordinary shares. The WPP ordinary shares are issued in registered form.
[WPP may, subject to the Statutes and the articles of association issue share warrants with respect to fully paid shares. It may also, with the approval of shareowners in general meeting, convert all or any of its paid up shares into stock and re-convert stock into paid up shares of any denomination.]
Voting Rights and General Meetings. At a general meeting an ordinary resolution or any other question (other than a special or extraordinary resolution) put the vote shall be decided by a show of hands unless a poll is duly demanded. A poll may be demanded by:
. the chairman of the meeting;
. at least five shareowners present in person or by proxy, and who are entitled to vote on the resolution;
. any shareowner(s) present in person or by proxy, who represent in the aggregate at least 10% of the voting rights of all shareholders entitled to vote on the resolution; or
. any shareowner(s) present in person or by proxy, who hold shares providing a right to vote on the resolution on which the aggregate sum paid up on such shares is equal to not less than 10% of the total sum paid up on all the shares providing that right.
All special resolutions and extraordinary resolutions shall be decided on a poll.
Subject to disenfranchisement in the event of (i) non-payment of any call or other sum due and payable in respect of any shares or (ii) any non-compliance with any statutory notice requiring disclosure of the beneficial ownership of any shares, and subject to any special rights or restrictions as to voting for the time being attached to any shares on a show of hands, every holder of WPP ordinary shares who (being an individual) is present in person or (being a corporation) is present by a duly authorized representative at a general meeting of WPP will have one vote and every person present who has been appointed as a proxy shall have one vote, and on a poll, every holder of WPP ordinary shares who is present in person or by proxy will have one vote per share. In addition any proxy who has been appointed by the ADR Depositary shall have such number of votes as equals the number of shares in relation to which such proxy has been appointed.
In the case of joint holders, the vote of the person whose name stands first in the register of members and who tenders a vote is accepted to the exclusion of any votes tendered by any other joint holders.
The necessary quorum for a general shareholder meeting is a minimum of two persons entitled to vote on the business to be transacted, each being a shareholder or a proxy for a shareholder or a duly authorized representative of a corporate shareholder.
An annual general meeting and an extraordinary general meeting called for the passing of a special resolution or a resolution of which special notice is required by the Statutes or a resolution appointing any person (other than a retiring director) as a director shall be called by not less than twenty one clear days' notice. All other extraordinary general meetings shall be called by not less that 14 clear days' notice. Only those shareowners entered in the register of members 48 hours prior to the date of the meeting are entitled to vote at that meeting and the number of shares then registered in their respective names shall determine the number of votes such shareowner is entitled to cast at that meeting.
Dividends. WPP may, by ordinary resolution declare a dividend to be paid to the members according to their respective rights and interests in profits, and may fix the time for payment of such dividend. No dividend may be declared in excess of the amount recommended by the directors. The directors may from time to time declare and pay to the shareowners of WPP such interim dividends as appear to the directors to be justified by the profits of WPP available for distribution. There are no fixed dates on which entitlement to dividends arises on WPP ordinary shares.
The shareowners may pass, on the recommendation of the directors, an ordinary resolution to direct all or any part of a dividend to be paid by distributing specific assets, in particular paid up shares or debentures of any other company.
The articles also permit a scrip dividend scheme under which shareowners may be given the opportunity to elect to receive fully paid WPP ordinary shares instead of cash, or a combination of shares and cash, with respect to future dividends.
If a shareowner owes any money to the company relating in any way to shares, the board may deduct any of this money from any dividend on any shares held by the shareowner, or from other money payable by the company in respect of the shares. Money deducted in this way may be used to pay the amount owed to the company.
Unclaimed dividends and other money payable in respect of a share can be invested or otherwise used by directors for the benefit of the company until they are claimed. A dividend or other money remaining unclaimed twelve years after it was declared of first became due for payment will be forfeited and cease to remain owing by the company.
Return of capital. In the event of a winding-up or other return of capital of WPP, the assets of WPP available for distribution among the shareowners will be divided, subject to the rights attached to any other shares issued on any special terms and conditions, between the holders of WPP ordinary shares according to the respective amounts of nominal (par) value paid up on those shares and in accordance with the provisions of the Companies Act 1985. The liquidator may, if authorized by an extraordinary resolution of shareowners and subject to the Companies Act 1985, divide and distribute among the shareowners, the whole or any part of the non-cash assets of WPP in such manner as he may determine.
The liquidator may also, with the same authority, transfer any assets to trustees upon any trusts for the benefit of shareowners as the liquidator decides. No past or present shareowner can be compelled to accept any shares or other property which could subject him or her to a liability.
Alteration of Share Capital. WPP may from time by ordinary resolution of our shareowners:
. increase its share capital by the amount, to be divided into shares of the amounts, that the resolution prescribes;
. consolidate and divide all or any of its share capital into shares of a larger amount than the existing shares;
. cancel any shares which, at the date of the passing of the resolution, have not been taken, or agreed to be taken, by any person and diminish the amount of the share capital by the amount of the shares cancelled; and
. subject to the Statutes, subdivide any of its shares into shares of a smaller amount than that fixed by the memorandum of association, provided that the proportion between the amount paid and the amount, if any, unpaid on each reduced share must be the same as on the share from which the reduced share is derived, and the resolution may determine that any of the shares resulting from the sub-division may have any preference or advantage or have qualified or deferred rights or be subject to any restrictions.
Subject to the Statutes, WPP may purchase or enter into a contract to purchase
any of its own shares of any class (including any redeemable shares, if we
should decide to issue any) provided that the approval of either more than 50%
(in the case of open market purchases) or 75% (in the case of private purchases)
of attending shareholders present in person or by proxy at a general meeting of
shareowners is given. However, shares may only be repurchased out of
distributable profits or the proceeds of a fresh issue of shares made for that
purpose, and, if a premium is paid it must be paid out of distributable profits.
WPP may, by special resolution, reduce its share capital or any capital redemption reserve, share premium account or other nondistributable reserve, subject in each case to confirmation by the English Courts.
Transfer of Shares
Unless the articles of association specify otherwise, a shareowner may transfer some or all of his or her shares to another person in any manner which is permitted by the Statutes and is approved by the board. Transfers of uncertificated shares must be carried out using the relevant system. The instrument of transfer for certificated shares must be signed by or on behalf of the transferor and except in the case of a fully paid share, by or on behalf of the transferee and must be delivered to the registered office or any other place the directors decide.
The directors may refuse to register a transfer:
. if it is of shares which are not fully paid;
. if it is of shares on which WPP has a lien;
. if it is not stamped and duly presented for registration, together with the share certificate and
. evidence of title as the board reasonably requires;
. if it is with respect to more than one class of shares;
. if it is in favor of more than four persons jointly; or
. in certain circumstances, if the holder has failed to provide the required particulars to the investigating power referred to under "Disclosure of interests in shares" below.
WPP may not refuse to register transfers of WPP ordinary shares if this refusal would prevent dealings in the shares which have been admitted to official listing by the UK Listing Authority from taking place on an open and proper basis. If the board refuses to register a transfer of a share, it shall, within two months after the date on which the transfer was lodged or the Operator - instruction was received, send to the transferee notice of the refusal. The registration of transfers may be suspended at any time and for any period as the directors may determine. The register of shareowners may not be closed for more than 30 days in any year.
Variation of Rights
Subject to the provisions of the Companies Act 1985 and unless otherwise provided by the terms of issue of that class, the rights attached to any class of shares may be varied with the written consent of the holders of three-fourths in nominal (par) value of the issued shares of that class, or with the sanction of an extraordinary resolution passed at a separate general meeting of the holders of the shares of that class. At any separate general meeting, the necessary quorum is two persons holding or representing by proxy not less than one-third in nominal (par) value of the issued shares of the class in question (but at any adjourned meeting, any person holding shares of the class or his proxy is a quorum).
Preemption Rights
Under the Companies Act 1985, the issuance of equity securities, that are, or are to be, paid for wholly in cash, except shares held under an employees' share scheme, must be offered in the first instance to the existing equity shareowners in proportion to the respective nominal (par) values of their holdings on the same or more favorable terms, unless a special resolution to the contrary has been passed in a general meeting of shareowners. In this context, equity securities generally means, in relation to WPP, WPP ordinary shares, or shares with no restrictions on the amounts receivable in a distribution of dividends or capital, and all rights to subscribe for or convert into such shares.
Shareholder Notices
Record date for service. WPP may serve or deliver any notice, document or other communication by reference to the register of members at any time not more than 21 days before the date of service of delivery. No change in the register after that time shall invalidate that service or delivery.
Untraced Shareowners. WPP may sell, in such manner as the board may determine, any shares (including any share issued in right of a share) if:
. during the previous twelve years the shares have been in issue, at least three dividends have become payable and no dividend was claimed or payment cashed;
. after this twelve-year period, notice is given of the company's intention to sell the shares by advertisement in a UK national newspaper and a newspaper appearing in the area which includes the address held by the company for delivery of notices relating to the shares; and
. during this twelve-year period, and for three months after the last advertisement appears in the newspaper, the company has not heard from the shareholder or a person who is automatically entitled to the shares by law.
Notice to Shareowners with Foreign Addresses.
A shareowner whose registered address is outside the UK and who gives to the company an address in the UK where notices, documents or communications may be given shall be entitled to have notices, documents or communications given to him at that address. Otherwise, the shareowner is not entitled to receive any notices, documents or communications from the company.
Limitations on Voting and Shareholding
There are no limitations imposed by English law or our memorandum or articles of association on the right of non-residents or foreign persons to hold or vote WPP's ordinary shares or ADSs, other than limitations that would apply generally to all of the shareowners.
Change of Control.
There are currently no provisions in our memorandum or articles of association that would have an effect of delaying, deferring or preventing a change in of our control and that would operate only with respect to a merger, acquisition or corporate restructuring involving the company or any of its subsidiaries.
As an English public limited company we are, however, subject to the UK City Code on
Takeovers and Mergers. The applicability of the City Code may make it difficult or undesirable for a purchaser to acquire a substantial percentage of WPP shares and could, under certain circumstances, have the effect of delaying, deferring or preventing a change in our control. The City code does not have the force of law, but compliance with it is often required in practice by any public limited company considered to be resident in the United Kingdom, such as ourselves, and of any person wishing to use the facilities of the UK securities market.
Under the City Code, except with the consent of the UK panel on takeovers and Mergers, any person or persons acting in concert who:
. acquire shares which (together with shares already held by them) carry 30%
or more of our voting rights; or
. hold 30% to 50% of the voting rights and acquire, within a 12 month period,
further shares
must make an offer for all of WPP's equity and voting non-equity share capital in which such person or persons acting in concert hold shares. The offer must be made in cash, or have a cash alternative, for at least the highest price paid by the offeror or persons acting in concert with it for such shares in the previous 12 months.
Disclosure of interests in shares
The Companies Act 1985 gives WPP power to require persons who it knows, or reasonably believes are, or have been within the previous three years, interested in its relevant share capital to disclose prescribed particulars of those interests. For this purpose "relevant share capital" means issued share capital of WPP carrying the right to vote in all circumstances at a general meeting of WPP. Failure to provide the information requested within a prescribed period after the dates of sending of the notice may result in sanctions being imposed against the holder of the relevant shares as provided in the Companies Act 1985. Under our articles of association, WPP may also apply the following restrictions: the withdrawal of voting and certain other rights of such shares of the class, restrictions on the rights to receive dividends and to transfer such shares. In this context, the term "interest" is broadly defined and will generally include an interest of any kind in shares, including the interest of a holder of a WPP ordinary share.
In addition, under the Companies Act 1985, any person who acquires either alone or, in certain circumstances, with others a direct or indirect interest in the relevant share capital of WPP in excess of the "notifiable percentage", currently 3% or 10% for certain types of interest, is obligated to disclose prescribed information to WPP with respect to those shares within two days. An obligation of disclosure also arises where such person's notifiable interest subsequently falls below the notifiable percentage or where, above that level, the percentage, expressed in whole numbers of WPP's relevant capital in which such person is interested increases or decreases.
Exchange Controls and Other Limitations Affecting Security Holders
Until October 21, 1979, the rules issued under the United Kingdom Exchange Control Act of 1947 imposed restrictions on remittances by United Kingdom residents to persons not resident in the United Kingdom or certain other territories. These restrictions did not apply to remittances of dividends to persons resident or treated as resident in the United States or Canada who were not domiciled in the United Kingdom.
The legislation pursuant to which such exchange controls were imposed has been repealed and there are currently no such United Kingdom foreign exchange control restrictions on remittances of dividends on the ordinary shares or on the conduct of the Registrant's operations.
Under the Company's Memorandum and Articles of Association and English law in force at the date of this Report, persons who are neither residents nor nationals of the United Kingdom may freely hold, vote and transfer ordinary shares in the same manner as United Kingdom residents or nationals.
Taxation
The taxation discussion set forth below is intended only as a descriptive summary and does not purport to be a complete technical analysis or listing of all potential tax effects relevant to a decision to purchase, hold or in any way transfer ordinary shares or ADRs. The statements of United Kingdom and United States tax laws set out below are based on the laws in force as of the date of this Annual Report, and are subject to any changes in United States or United Kingdom law, and in any double taxation convention between the United States and the United Kingdom, occurring after that date.
The following summary of certain United States and United Kingdom tax consequences is not exhaustive of all possible tax considerations and prospective purchasers of ADSs are advised to satisfy themselves as to the overall tax consequences of their ownership of ADSs and the ordinary shares represented thereby by consulting their own tax advisers. In addition, this summary provides no advice with respect to a United States shareholder (either corporate or individual) where the shareholder controls, or is deemed to control, 10% or more of the voting stock of the Company.
As used herein, the term "United States corporation" means any corporation organized under the laws of the United States or any state or the District of Columbia.
For the purposes of the current United States - United Kingdom double taxation conventions and for the purposes of the United States Internal Revenue Code of 1986, as amended (the "Code"), discussed below, the holders of ADSs will be treated as the owners of the underlying ordinary shares represented by the ADSs that are evidenced by such ADRs.
Taxation of Dividends
In the case of an individual who is a United States citizen and a resident of the United Kingdom, the dividend must be reported as income in the shareholder's United States income tax liability, and the notional United Kingdom tax credit attached to the dividend and any further UK taxes suffered on the dividend income will be eligible to be claimed as a credit against the individual shareholder's
United States income tax liability, subject to certain limitations and, in any case, only to the extent that such tax exceeds the amount of ACT credit in respect of the related dividend.
Under the Income Tax Convention between the United States and the United Kingdom the tax treatment depends upon the status of the shareholder. A shareholder who is a United States resident individual or a United States corporation (other than a corporation which controls at least 10% of the voting stock of the Company), and whose holding is not effectively connected with (a) a permanent establishment through which the shareholder carries on business in the United Kingdom or (b) a fixed base regularly available and situated in the United Kingdom from which the shareholder performs independent personal services, is entitled to a payment equal to the tax credit to which a United Kingdom resident individual would have been entitled in respect of such dividend, subject to a withholding tax of 15% of the net dividend plus credit. Since April 6, 1999, this payment is effectively reduced to nil (as withholding tax is greater than the tax credit).
However, a portfolio investor (i.e. all investors holding less than 10% of the voting stock of the company) may elect to be treated as receiving the amount due from the UK government (i.e. 10 x tax credit less 15% withholding tax) by indicating the election on a timely filed form 8833 for the relevant year. With the election, a portfolio investor is treated as having received an additional dividend equal to the gross amount of the tax credit and having paid the withholding tax due, on the date of the distribution. The portfolio investor can thus include the gross payment received in dividend income and may claim a foreign tax credit. The amount of the creditable withholding tax cannot exceed the tax credit payable to the investor. Alternatively, portfolio investors can choose to be taxed on the net dividend received. Shareholders should consult with their tax advisor to determine whether there is an advantage in filing form 8833 in their case.
The gross dividend (the sum of the dividend paid by the Company plus any related United Kingdom tax credit) will be treated as foreign source dividend income for United States Federal income tax purposes provided that such dividend is paid out of the company's earnings and profits, as defined for United States Income Tax purposes. If the dividend is not paid out of earnings and profits, it will be treated as a return of capital (up to the holders' tax basis in their shares).
Any excess above the combination of the amounts treated as dividends and returns of capital will be treated as a capital gain. Dividends paid out of earnings and profits to a holder who is a United States citizen or a United States resident will not be eligible for the 70% dividends received deduction allowed to United States corporations under Section 243 of the Code. However, subject to certain limitations on foreign tax credits generally, the applicable United Kingdom withholding tax (if any) will be treated as a foreign income tax eligible for credit against such share owners' United States Federal income taxes.
In certain cases the tax treatment under the Income Tax Convention described above may be limited or denied if the holder acquired the ADRs or ordinary shares primarily to secure the benefits of the Convention and not for bona fide commercial reasons.
Taxation of Capital Gains
An individual shareholder resident in the United Kingdom will be liable to United Kingdom taxation on capital gains realized on the disposal of their ADSs or ordinary shares.
Holders of ADSs or ordinary shares who are United States resident individuals or United States corporations, and who are not resident or ordinarily resident in the United Kingdom, will not be liable to United Kingdom taxation of capital gains realized on the disposal of their ADSs or ordinary shares unless the ADSs or ordinary shares are used or held for the purposes of a trade carried on in the United Kingdom through a permanent establishment. However, a holder of ADSs or ordinary shares who is a United States citizen or a United States resident (as defined above) will be liable to taxation on such capital gains under the laws of the United States.
Estate and Gift Tax
The current Estate and Gift Tax Convention between the United States and the United Kingdom generally relieves from United Kingdom inheritance tax (the equivalent of United States estate and gift tax) the transfer of ordinary shares or of ADSs where the shareholder or holder of the ADS's making the transfer is domiciled for the purposes of the Convention in the United States and is not a national of the United Kingdom. This will not apply if the ordinary shares or ADSs are part of the business property of an individual's permanent establishment in the United Kingdom or are related to the fixed base in the United Kingdom of a person providing independent personal services.
If no relief is given under the Convention, inheritance tax will be charged at a rate worked out on a cumulative basis on the amount by which the value of the transferor's estate is reduced as a result of any transfer (unless the transfer is exempt or "potentially exempt") made by way of gift or other gratuitous transaction by an individual or on the death of an individual or into certain defined trusts.
Potentially exempt transfers are transfers made to certain specified classes of person and become wholly exempt if made at least more than seven years before the death of the transferor and it becomes chargeable if not so made. Special rules apply to gifts made subject to a reservation of benefit. In the unusual case where ordinary shares or ADSs are subject to both United Kingdom inheritance tax and United States gift or estate tax, the Convention generally provides for tax paid in the United Kingdom to be credited against tax payable in the United States or for tax paid in the United States to be credited against tax payable in the United Kingdom based on priority rules set forth in the Convention.
Stamp Duty and Stamp Duty Reserve Tax
Under the Finance Act 1986 (the "Finance Act"), no UK Stamp Duty will be payable on any transfer of an ADS or on any delivery or negotiation of an ADR, provided that the instrument of transfer is executed and remains outside the UK nor will there be any liability to Stamp Duty Reserve Tax in respect of any agreement for transfer of ADSs. Dealings in ADRs in bearer form outside the UK will be free of Stamp Duty, but certain bearer dealings within the UK may attract Stamp Duty at the rate of 1.5%.
The Finance Act provides that, as from October 27, 1986, there will be a charge to ad valorem Stamp Duty on any instrument transferring ordinary shares to a nominee or agent for a depositary which then issues depositary receipts (such as the ADRs). Where the instrument is liable to Stamp Duty as a "conveyance on sale" then the rate of duty is 1.5% of the consideration for the sale implemented by the instrument.
Where the instrument of transfer is not stampable as a conveyance on sale, then the rate of duty is 1.5% of the market value of the security transferred by the instrument, except that the rate of duty is reduced to 1% in the case of certain transfers effected by a qualified dealer in securities (as defined in the Finance Act).
The Finance Act also provides that there is to be a charge to Stamp Duty Reserve Tax which will apply where ordinary shares are transferred, issued or appropriated to a nominee or agent for a depositary under an arrangement under which the depositary issues ADRs. Stamp Duty Reserve Tax, which is payable by the depositary, is charged at a rate of 1.5% of the consideration for the transfer. Where there is no such consideration, the rate of Stamp Duty Reserve Tax is 1.5% of the market value of the securities transferred or 1% in the case of certain transfers effected by a qualified dealer in securities (as defined in the Finance Act). The charge to Stamp Duty Reserve Tax will, however, be reduced by the amount, if any, of ad valorem Stamp Duty paid on the instrument transferring the ordinary shares.
In the case of conveyances or transfers of ordinary shares executed pursuant to contracts made after October 27, 1986 the rate of duty is 1/2% of the consideration, if any, for the transfer. There is a charge to Stamp Duty Reserve Tax at a rate of 1/2% of the consideration for the transaction where there is an agreement for the sale of ordinary shares. The Stamp Duty Reserve Tax will in general be payable by the purchaser of the ordinary shares but regulations have been made which provide for the tax to be collected in certain circumstances from persons other than the purchaser (e.g. a market maker). The charge to Stamp Duty Reserve Tax will, however, be reduced by the amount, if any, of ad valorem Stamp Duty paid on the instrument transferring the ordinary shares.
A gift for no consideration of ordinary shares (other than as part of ADR arrangements) will not attract a Stamp Duty charge after May 1, 1987 (if appropriately certified) and is exempt from Stamp Duty Reserve Tax.
A transfer of ordinary shares from a depositary or its agent or nominee to a person purchasing from an ADS holder on cancellation of an ADR is liable to duty as a "conveyance on sale" because it completes a sale of such ordinary shares and will be liable to ad valorem Stamp Duty, payable by the purchaser.
A transfer of ordinary shares from a depositary or its agent or nominee to an ADS holder on cancellation of an ADR which is not liable to duty as a "conveyance on sale" is currently understood to be liable to a fixed Duty of 50p.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's principal market risks are changes in interest rates and currency exchange rates. Following evaluation of these positions, the Company selectively enters into derivative financial instruments to manage its risk exposure.
The Company has entered into interest rate swap agreements with off-balance sheet risk in order to reduce its exposure to changes in interest rates on its variable rate long-term debt. As of December 31, 2000, the Company had obtained interest rate protection agreements with respect to $350 million of indebtedness maturing at various times through 2003. The fair value of the swaps at December 31, 2000 was $349.3 million (at December 31, 1999 -$353.4 million). All interest rate derivative contracts are approved by senior financial management prior to execution.
Credit risk related to the interest rate swap agreements is the possibility that the counterparty will fail to fulfill its contractual commitment, and the amount of this risk is represented by the positive fair value of the interest rate swaps outstanding at the given time. The Company only enters into derivative contracts with well known trading banks which are members of the Revolving Credit Facility syndicate and which are investment grade. The following table provides the Company's outstanding interest rate swaps with the notional principal value and the weighted average fixed interest rate by maturity date.
$ millions 2000 2001 2002
-----------------------------------------------------------------------------------
Notional Principal Outstanding at $ 350 $ 250 $ 200
December 31, 2000
Weighted Average Fixed Rate Payable 6.17% 6.20% 6.22%
Average Variable Rate Receivable Six-month Six-month Six-month
LIBOR LIBOR LIBOR
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The variable rate receivable on the interest rate swaps is based on three and six month LIBOR and is not forecast in this table. The six-month LIBOR rate at December 31, 2000 was 5.87%. However, the rate on the underlying variable rate debt drawn under the Revolving Credit Facility is payable based on LIBOR plus a margin, offsetting the interest rate receivable under the interest rate swap (excluding the margin).
Analysis of fixed and floating rate debt by currency:
(Pounds)m Fixed Floating Period
Currency rate /1/ basis (months)/1/
-------------------------------------------------------------------------------------------------------
US$ 624.9/2/ 5.37% n/a 42
US$ 148.0 n/a LIBOR n/a
(Pounds) 178.0 n/a LIBOR n/a
Euro 71.6 n/a LIBOR n/a
Other 3.7 n/a various n/a
------------------------------------------------------------------------------------------------------
1,026.2
------------------------------------------------------------------------------------------------------
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/1/Weighted average.
/2/Including drawings on working capital facility.
At December 31, 2000 the Group had one forward rate agreement in place capping
short-term US$ interest rates at an average rate of 5.65% on $25 million of
borrowings.
The Company's approach to managing foreign exchange rate risk is discussed in Item 5-Operating and Financial Review and Prospects.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
In October 2000, in connection with the Company's acquisition of Young &
Rubicam, the Company agreed to guarantee Young & Rubicam's outstanding 3%
Convertible Subordinated Notes due 2005 (the "Y&R Notes"). In connection with
the Company's guarantee, the indenture for the Y&R Notes was amended to permit
WPP to satisfy Young & Rubicam's obligation thereunder to file public reports
by: (1) filing with the SEC all periodic reports WPP is required to file under
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as
amended; and (2) furnishing to the holders of the Y&R Notes and the indenture
trustee all financial information WPP furnishes to the holders of its ADSs. In
addition, in view of the fact that the Y&R Notes would be convertiable into WPP
ADSs after the merger and the registration in connection with the merger of the
Y&R Notes and the ADSs issuable upon conversion of the Y&R Notes, a registration
agreement between Young & Rubicam and the holders of the Y&R notes was amended
to release Young & Rubicam from its obligation to register the Y&R Notes and the
securities issuable upon conversion of the Y&R Notes.
ITEM 15. [Reserved]
ITEM 16. [Reserved]
ITEM 17. FINANCIAL STATEMENTS
The Registrant has responded to Item 18 in lieu of responding to this item.
PART III
ITEM 18. FINANCIAL STATEMENTS
Consolidated Financial Statements of WPP Group plc as at December 31, 2000,
1999, and 1998
ITEM 19. EXHIBITS.
Exhibit No. Exhibit Title
----------- ----------------------------------------------------------------
1.1 Memorandum and Articles of Association of WPP Group plc.*
2.1 Amended and Restated Deposit Agreement, dated as of October 24,
1995, among WPP Group plc, Citibank, N.A., as Depositary, and all
holders and beneficial owners from time to time of American
Depositary Receipts issued thereunder (incorporated herein by
reference to Exhibit (a) of the Registration Statement on Form
F-6 filed with the Securities and Exchange Commission on October
31, 1996 (Reg. No. 333-5906)).
2.2 Amendment No. 1 to Amended and Restated Deposit Agreement, dated
as of November 9, 1999, by and among WPP Group plc, Citibank,
N.A., as Depositary, and all holders and beneficial owners from
time to time of American Depositary Receipts issued thereunder
(incorporated herein by reference to Exhibit (a)(i) of Amendment
No. 1 to the Registration Statement on Form F-6 filed with the
Securities and Exchange Commission on November 9, 1999 (Reg. No.
333-5906)).
2.3 Amendment No. 2 to Amended and Restated Deposit Agreement, dated
October 3, 2000, among WPP Group plc, Citibank, N.A., as
Depositary, and all holders and beneficial owners from time to
time of American Depositary Receipts issued thereunder
(incorporated herein by reference to Exhibit (a)(i) of Amendment
No. 2 to the Registration Statement on Form F-6, filed with the
Securities and Exchange Commission on June 30, 2000 (Reg. No.
333-5906).
2.4 Registration Agreement dated as of January 20, 2000 between Young
& Rubicam Inc. and Salomon Smith Barney Inc., Bear Stearns & Co.
Inc., Donaldson Lufkin & Jenrette Securities Corporation, Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co.
Incorporated and Thomas Weisel Partners LLC. (incorporated herein
by reference to Exhibit 4.3 to the Registration Statement on Form
S-3 filed by Young & Rubicam Inc. with the Securities and
Exchange Commission on April 17, 2000 (Reg. No. 333-34948)).
2.5 Form of Amendment to Registration Agreement between Young &
Rubicam Inc. and the initial purchasers of Young & Rubicam's 3%
Convertible Subordinated Notes due 2005 (incorporated herein by
reference to Exhibit 4.10 of Amendment No. 1 to the Registration
Statement on Form F-4 filed with the Securities and Exchange
Commission on August 29, 2000 (File Nos. 333-43650 and
333-43640)).
2.6 Indenture dated as of January 20, 2000 between Young & Rubicam
Inc. and The Bank of New York as trustee (incorporated herein by
reference to Exhibit 10.28 to Young & Rubicam Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1999 (File
No. 001-14093)).
2.7 Form of 3% Convertible Subordinated Note due 2005 (incorporated
herein by reference to Exhibit A to Exhibit 10.28 to Young &
Rubicam Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1999 (File No. 001-14093)).
2.8 Form of First Supplemental Indenture to the Indenture dated as of
January 20, 2000 for the 3% Convertible Subordinated Notes due
2005, among Young & Rubicam Inc., WPP Group plc, and The Bank of
New York (incorporated herein by reference to Exhibit 4.7 of
Amendment No. 1 to the Registration Statement on Form F-4 filed
with the Securities and Exchange Commission on August 29, 2000
(File Nos. 333-43650 and 333-43640)).
63
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2.9 Form of Second Supplemental Indenture to the Indenture dated as
of January 20, 2000 for the 3% Convertible Subordinated Notes due
2005, among Young & Rubicam Inc., WPP Group plc, and The Bank of
New York (incorporated herein by reference to Exhibit 4.8 of
Amendment No. 1 to the Registration Statement on Form F-4 filed
with the Securities and Exchange Commission on August 29, 2000
(File Nos. 333-43650 and 333-43640)).
2.10 Indenture dated as of July 15, 1998 between WPP Finance (USA)
Corporation, WPP Group plc and Bankers Trust Company, as Trustee,
in connection with the issuance of 6 5/8% Notes due July 15, 2005
and 6 7/8% Notes due July 15, 2008 (incorporated herein by
reference to Exhibit 4.1 to WPP Finance (USA) Corporation's and
WPP Group plc's Registration Statement on Form F-3 filed with the
Securities and Exchange Commission on July 8, 1998 (File No.
333-9058)).
2.11 Forms of 6 5/8% Notes due July 15, 2005 and 6 7/8% Notes due July
15, 2008 (incorporated herein by reference to Exhibit 4.2 to WPP
Finance (USA) Corporation's and WPP Group plc's Registration
Statement on Form F-3 filed with the Securities and Exchange
Commission on July 8, 1998 (File No. 333-9058)).
2.12 Agreement of Registrant to file, if requested by Securities and
Exchange Commission, indenture and form of notes relating to the
issuance of 5.125% Bonds due June 2004 and the issuance of 6.0%
Bonds due June 2008.*
4.1 Amended and Restated Agreement and Plan of Merger, dated as of
May 11, 2000, by and among WPP Group plc, Young & Rubicam Inc.,
York Merger Corp. and York II Merger Corp. (incorporated herein
by reference to Exhibit 2 of Amendment No. 1 to the Registration
Statement on Form F-4 filed with the Securities and Exchange
Commission on August 25, 2000).
4.2 Consolidated Revolving Credit Facility Agreement, dated July 3,
1998, amending, modifying and restating the Revolving Credit
Facility Agreement dated July 4, 1997 by and between WPP Group
plc, the original Borrowers, the Guarantors, Bankers Trust
Company (as facility agent) and the Lenders and Arrangers
referred to therein (incorporated by reference to Exhibit 1(b) of
the Annual Report on Form 20-F filed with the Securities and
Exchange Commission on July 2, 1999).
4.3 Revolving Credit Facility and Term Out Facility Agreement, dated
August 7, 2000 (incorporated herein by reference to Exhibit 99.1
of Form 6-K filed with the Securities and Exchange Commission on
August 28, 2000).
4.4 The WPP Executive Stock Option Plan (incorporated herein by
reference to Exhibit 99 of the Registration Statement on Form S-8
filed with the Securities and Exchange Commission on August 6,
1996 (File No. 333-04302).
4.5 Leadership Equity Acquisition Plan, adopted by WPP Group plc in
September 1999.*
4.6 WPP Group plc Performance Share Plan.*
4.7 2001-2003 Long Term Incentive Plan ("LTIP") The Ogilvy Group,
Inc. Participant Guide.*
4.8 2001-2003 Long Term Incentive Plan ("LTIP") J. Walter Thompson
Company, Inc. Participant Guide.*
4.9 J. Walter Thompson Company, Inc. Retained Benefit Supplemental
Employee Retirement Plan.*
4.10 Young & Rubicam Inc. Deferred Compensation Plan (incorporated by
reference to Exhibit 10.26 to Young & Rubicam's Registration
Statement on Form S-1 (File No. 333-46929)).
64
|
4.11 Amendment No. 1 to Young & Rubicam Inc. Deferred Compensation
Plan effective as of November 19, 1997 (incorporated by reference
to Exhibit 10.26 to Young & Rubicam's Annual Report on Form 10-K
for the year ended December 31, 1998).
4.12 Amendment No. 2 to Young & Rubicam Inc. Deferred Compensation
Plan effective as of January 1, 1999 (incorporated by reference
to Exhibit 10.27 to Young & Rubicam's Annual Report on Form 10-K
for the year ended December 31, 1998).
4.13 Young & Rubicam Holdings Inc. Restricted Stock Plan (incorporated
by reference to Exhibit 10.4 to the Young & Rubicam's
Registration Statement on Form S-1 (File No. 333-46929)).
4.14 Young & Rubicam Holdings Inc. Management Stock Option Plan
(incorporated by reference to Exhibit 10.5 to Young & Rubicam's
Registration Statement on Form S-1 (File No. 333-46929)).
4.15 Young & Rubicam Inc. 1997 Incentive Compensation Plan
(incorporated by reference to Exhibit 10.6 to Young & Rubicam's
Registration Statement on Form S-1 (File No. 333-46929)).
4.16 Amendment to Young & Rubicam Inc. 1997 Incentive Compensation
Plan (incorporated by reference from Exhibit 10.28 to Young &
Rubicam's Registration Statement on Form S-1 (File No.
333-46929)).
4.17 Amendment No. 2 to Young & Rubicam Inc. 1997 Incentive
Compensation Plan (incorporated by reference to Exhibit 10.23 to
Young & Rubicam's Annual Report on Form 10-K for the year ended
December 31, 1999).
4.18 Young & Rubicam Inc. Director Stock Option Plan (incorporated by
reference to Exhibit 10.25 to Young & Rubicam's Annual Report on
Form 10-K for the year ended December 31, 1999).
4.19 Young & Rubicam Inc. Executive Income Deferral Program.*
4.20 Ogilvy & Mather ERISA Excess Plan Summary Plan Description.*
4.21 Ogilvy & Mather Executive Savings Plan Summary Plan Description,
in connection with a 25% matching contribution.*
4.22 Ogilvy & Mather Executive Savings Plan Summary Plan Description,
in connection with a 50% matching contribution.*
4.23 Ogilvy & Mather Deferred Compensation Plan Summary Plan
Description.*
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8.1 List of subsidiaries.*
10.1 Consent Of Independent Chartered Accountants.*
Signatures
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the Registrant certifies that it meets all of the requirements for filing on Form 20-F and has duly caused this annual report to be signed on its behalf by the undersigned thereunto duly authorised.
WPP Group plc
By: /S/ P W G Richardson
-----------------------
Paul W G Richardson
Group Finance Director
|
WPP GROUP plc
INDEX TO FINANCIAL STATEMENTS
ITEM 18.
Financial
Statement
Number Page
------ ----
A. Consolidated Financial Statements of WPP Group plc as of
the years ended December 31, 2000, 1999, and 1998
(i) Report of Independent Chartered Accountants F-2
(iii) Accounting policies F-3
(iv) Consolidated profit and loss account for the years ended
December 31, 2000, 1999, and 1998 F-6
(v) Consolidated statement of cash flows for the years
ended December 31, 2000, 1999, and 1998 F-7
(vi) Consolidated statement of recognised gains and losses
for the years ended December 31, 2000, 1999, and 1998 F-7
(vii) Consolidated balance sheet as of December 2000,
1999, and 1998 F-8
(viii) Consolidated statement of changes in share owners'
funds for the years ended December 31, 2000, 1999,
and 1998 F-9
(ix) Notes to the consolidated profit and loss account F-10
(x) Notes to the consolidated cash flow statement F-13
(xi) Notes to the consolidated balance sheet F-15
(xii) Reconciliation to Generally Accepted US Accounting Principles F-22
|
REPORT OF INDEPENDENT CHARTERED ACCOUNTANTS
To the Board of Directors and share owners of WPP Group plc:
We have audited the accompanying consolidated balance sheets of WPP Group plc and subsidiaries as of December 31, 2000, 1999, and 1998 and the related consolidated statement of income, statement of changes in share owners' funds, statement of recognised gains and losses and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United Kingdom and the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of WPP Group plc and subsidiaries as of December 31, 2000, 1999, and 1998 and the results of their operations and their cash flows for the years then ended December 31, 2000 in conformity with generally accepted accounting principles in the United Kingdom.
Certain accounting practices of WPP Group plc used in preparing the accompanying consolidated financial statements conform with generally accepted accounting principles in the United Kingdom, but do not conform with accounting principles generally accepted in the United States. A description of these differences and the adjustments required to conform the consolidated financial statements to accounting principles generally accepted in the United States are set forth on F-22 to F-23.
May 4, 2001 Arthur Andersen
Chartered Accountants
and Registered Auditors
London, England
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Accounting policies
The financial statements have been prepared in accordance with applicable accounting standards in the United Kingdom. A summary of the Group's principal accounting policies, which have been applied consistently throughout the year and the preceding year (except as disclosed in accounting policy 14), is set out below.
1 Basis of accounting and presentation of financial statements.
The financial statements are prepared under the historical cost convention.
2 Basis of consolidation
The consolidated financial statements include the results of the Company and all its subsidiary undertakings made up to the same accounting date. The results of subsidiary undertakings acquired or disposed of during the year are included or excluded from the profit and loss account from the effective date of acquisition or disposal.
3 Goodwill and intangible fixed assets
Intangible fixed assets comprise goodwill and certain acquired separable corporate brand names.
Goodwill represents the excess of the fair value attributed to investments in businesses or subsidiary undertakings over the fair value of the underlying net assets at the date of their acquisition. In accordance with FRS 10, for acquisitions made on or after 1 January 1998, goodwill has been capitalised as an intangible asset. Goodwill arising on acquisitions prior to that date was written off to reserves in accordance with the accounting standard then in force. On disposal or closure of a business, the attributable amount of goodwill previously written off to reserves is included in determining the profit or loss on disposal.
Corporate brand names acquired as part of acquisitions of business are capitalised separately from goodwill as intangible fixed assets if their value can be measured reliably on initial recognition.
The directors have reassessed their opinion that all the goodwill and intangible assets of the Group have an infinite economic life. For certain acquisitions, where the directors consider it more appropriate, goodwill is now amortised over its useful life up to a 20 year period, from the date of acquisition. The remaining goodwill and intangible assets of the Group are considered to have an infinite economic life because of the institutional nature of the corporate brand names, their proven ability to maintain market leadership and profitable operations over long periods of time and WPP's commitment to develop and enhance their value. The carrying value of these intangible assets will continue to be reviewed annually for impairment and adjusted to the recoverable amount if required.
The financial statements depart from the specific requirement of companies legislation to amortise goodwill over a finite period in order to give a true and fair view. The directors consider this to be necessary for the reasons given above. Because of the infinite life of these intangible assets, it is not possible to quantify its impact.
4 Tangible fixed assets
Tangible fixed assets are shown at cost less accumulated depreciation with the exception of freehold land which is not depreciated. Depreciation is provided at rates calculated to write off the cost
less estimated residual value of each asset on a straight-line basis over its estimated useful life, as follows:
Freehold buildings - 2% per annum Leasehold land and buildings - over the term of the lease Fixtures, fittings and equipment - 10%-33% per annum Computer equipment - 33% per annum |
5 Investments
Except as stated below, fixed asset investments are shown at cost less provision for diminution in value.
The Group's share of the profits less losses of associated undertakings is included in the consolidated profit and loss account and the investments are shown in the Group balance sheet as the Group's share of the net assets. The Group's share of the profits less losses and net assets is based on current information produced by the undertakings, adjusted to conform with the accounting policies of the Group.
6 Stocks and work in progress
Work in progress is valued at cost or on a percentage of completion basis. Cost comprises outlays incurred on behalf of clients and an appropriate proportion of direct costs and overheads on incomplete assignments. Provision is made for irrecoverable costs where appropriate. Stocks are stated at the lower of cost and net realisable value.
7 Debtors
Debtors are stated net of provisions for bad and doubtful debts.
8 Taxation
Corporate taxes are payable on taxable profits at current rates.
9 Incentive plans
The Group's share based incentive plans are accounted for in accordance with Urgent Issues Task Force ('UITF') Abstract 17 'Employee Share Schemes'. The cost of shares acquired by the Group's ESOP trusts or the fair market value of the shares at the date of the grant, less any consideration to be received from the employee, is charged to the Group's profit and loss account over the period to which the employee's performance relates. Where awards are contingent upon future events (other than continued employment) an assessment of the likelihood of these conditions being achieved is made at the end of each reporting period and an appropriate accrual made.
10 Pension costs
The charge to the profit and loss account in respect of defined benefit pension schemes is the estimated regular cost of providing the benefits accrued in the year, adjusted to reflect variations from that cost. The regular cost is calculated to achieve a substantially level percentage of the current and expected future pensionable payroll. Variations from regular costs are allocated to the profit and loss account over a period approximating to the scheme members' average remaining service lives. For defined contribution schemes, contributions are charged to the profit and loss account as payable in respect of the accounting period.
11 Operating leases
Operating lease rentals are charged to the profit and loss account on a systematic basis. Any premium or discount on the acquisition of a lease is spread over the life of the lease or until the date of the first rent review.
12 Turnover, cost of sales and revenue recognition
Turnover comprises the gross amounts billed to clients in respect of commission-based income together with the total of other fees earned. Cost of sales comprises media payments and production costs. Revenue comprises commission and fees earned in respect of turnover. Turnover and revenue are stated exclusive of VAT, sales taxes and trade discounts.
Advertising and media investment management
Revenue is typically derived from commissions on media placements and fees for advertising services. Traditionally, the Group's advertising clients were charged a standard commission on their total media and production expenditure. In recent years, however, this frequently has tended to become a matter of individual negotiation. Compensation may therefore consist of various arrangements involving commissions, fees, incentive-based compensation or a combination of the three, as agreed upon with each client.
Revenue is recognised when the service is performed, in accordance with the terms of the contractual arrangement. Incentive-based compensation typically comprises both quantitative and qualitative elements; on the element related to quantitative targets, revenue is recognised when the quantitative targets have been achieved; on the element related to qualitative targets, revenue is recognised when the incentive is received/receivable.
Public relations & public affairs and Branding & identity, healthcare and specialist communications Revenue is typically derived from retainer fees and services to be performed subject to specific agreement. Revenue is recognised when the service is performed, in accordance with the terms of the contractual arrangement. Revenue is recognised on long-term contracts, if the final outcome can be assessed with reasonable certainty, by including in the profit and loss account revenue and related costs as contract activity progresses.
Information & consultancy
Revenue is recognised on each market research contract in proportion to the level of service performed. Costs, including an appropriate proportion of overheads relating to contracts in progress at the balance sheet date, are carried forward in work in progress. Losses are recognised as soon as they are foreseen.
13 Translation of foreign currencies
Foreign currency transactions arising from normal trading activities are recorded in local currency at current exchange rates. Monetary assets and liabilities denominated in foreign currencies at the year-end are translated at the year-end exchange rate. Foreign currency gains and losses are credited or charged to the profit and loss account as they arise. The profit and loss accounts of overseas subsidiary undertakings are translated into pounds sterling at average exchange rates and the year-end net investments in these companies are translated at year-end exchange rates. Exchange differences arising from retranslation at year-end exchange rates of the opening net investments and results for the year are dealt with as movements in reserves.
14 Changes in accounting policies
The Group adopted FRS 19 (Deferred Tax) during the year. Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. Timing differences are differences between the Group's taxable profits and its results as stated in the financial statements that arise from the inclusion of gains and losses in tax assessments in periods different from those in which they are recognised in the financial statements. A net deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.
The Group also adopted FRS 15 (Tangible Fixed Assets) and FRS 16 (Current Tax) during the year. There has been no material impact on the financial statements as a result of the adoption of these new standards.
Consolidated profit and loss account
For the years ended 31 December 2000, 1999 and 1998
2000
-----------------------------------------
Acquisitions
Continuing (Young &
operations* Rubicam only) Total 1999 1998
Note (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m
----------------------------------------------------------------------------------------------------------------------------
1 Turnover (gross billings) 12,212.7 1,736.7 13,949.4 9,345.9 8,000.1
Cost of sales (9,591.4) (1,377.3) (10,968.7) (7,173.3) (6,081.7)
----------------------------------------------------------------------------------------------------------------------------
1 Revenue 2,621.3 359.4 2,980.7 2,172.6 1,918.4
Direct costs (244.6) - (244.6) (317.3) (285.9)
----------------------------------------------------------------------------------------------------------------------------
Gross profit 2,376.7 359.4 2,736.1 1,855.3 1,632.5
2 Operating costs (2,046.3) (311.8) (2,358.1) (1,591.8) (1,403.4)
----------------------------------------------------------------------------------------------------------------------------
Operating profit 330.4 47.6 378.0 263.5 229.1
Income from associates 35.4 2.6 38.0 27.3 16.1
----------------------------------------------------------------------------------------------------------------------------
1 Profit on ordinary activities
before interest and taxation 365.8 50.2 416.0 290.8 245.2
----------------------------------------------------------------------------------------------------------------------------
4 Net interest payable and
similar charges (47.8) (2.5) (50.3) (35.4) (32.4)
----------------------------------------------------------------------------------------------------------------------------
Profit on ordinary activities before taxation 318.0 47.7 365.7 255.4 212.8
5 Taxation on profit on ordinary activities (109.7) (76.6) (67.0)
----------------------------------------------------------------------------------------------------------------------------
Profit on ordinary activities after taxation 256.0 178.8 145.8
Minority interests (11.3) (6.0) (5.5)
----------------------------------------------------------------------------------------------------------------------------
Profit attributable to ordinary share owners 244.7 172.8 140.3
6 Ordinary dividends (37.8) (24.0) (19.6)
----------------------------------------------------------------------------------------------------------------------------
Retained profit for the year 206.9 148.8 120.7
============================================================================================================================
7 Earnings per share
Basic earnings per ordinary share 29.3p 22.9p 19.1p
----------------------------------------------------------------------------------------------------------------------------
Diluted earnings per ordinary share 28.4p 22.5p 18.8p
============================================================================================================================
6 Ordinary dividend per share
Interim dividend 1.2p 1.0p 0.84p
----------------------------------------------------------------------------------------------------------------------------
Final dividend 2.55p 2.1p 1.72p
============================================================================================================================
Earnings per ADR
Basic earnings per ADR 146.5p 114.5p 95.5p
----------------------------------------------------------------------------------------------------------------------------
Diluted earnings per ADR 142.0p 112.5p 94.0p
============================================================================================================================
Ordinary dividend per ADR (net)
Interim 6.0p 5.0p 4.2p
----------------------------------------------------------------------------------------------------------------------------
Final 12.8p 10.5p 8.6p
============================================================================================================================
|
The accompanying notes form an integral part of this profit and loss
account.
There is no material difference between the results disclosed in the profit
and loss account and the historical cost profit as defined by FRS 3.
Movements in share owners' funds are set out on page F-9.
The 1998 figures in the profit and loss account have been restated
following a change in the ratio of ordinary shares per ADR from 10 ordinary
shares per ADR to five ordinary shares per ADR in 1999.
*The figures presented for continuing operations include 2000 acquisitions,
other than Young & Rubicam Inc. Aggregated figures for acquisitions were
revenue of (Pounds)438.9 million, operating profit of (Pounds)61.5 million
and PBIT of (Pounds)66.4 million.
Consolidated cash flow statement
For the years ended 31 December 2000, 1999 and 1998
--------------------------------------------------------------------------------------------------------------
2000 1999 1998
Notes (Pounds)m (Pounds)m (Pounds)m
--------------------------------------------------------------------------------------------------------------
9 Net cash inflow from operating activities 623.0 348.5 256.0
Dividends received from associates 7.6 4.3 3.4
10 Return on investments and servicing of finance (64.6) (37.1) (28.7)
United Kingdom and overseas tax paid (81.4) (58.4) (59.0)
10 Capital expenditure and financial investment (199.1) (80.5) (82.1)
10 Acquisition payments (281.0) (202.2) (115.5)
Equity dividends paid (25.6) (21.1) (16.6)
--------------------------------------------------------------------------------------------------------------
Net cash outflow before financing (21.1) (46.5) (42.5)
10 Net cash inflow from financing 204.6 270.0 78.1
--------------------------------------------------------------------------------------------------------------
Increase in cash and overdrafts for the year 183.5 223.5 35.6
Translation difference 35.1 (0.6) 0.9
Balance of cash and overdrafts at beginning of year 551.4 328.5 292.0
--------------------------------------------------------------------------------------------------------------
Balance of cash and overdrafts at end of year 770.0 551.4 328.5
==============================================================================================================
Reconciliation of net cash flow to movement in net funds:
Increase in cash and overdrafts for the year 183.5 223.5 35.6
Cash inflow from increase in debt financing (126.6) (258.0) (95.2)
Debt acquired (194.9) - -
Other movements (1.9) (1.7) (0.9)
Translation difference 23.4 (6.2) 0.1
--------------------------------------------------------------------------------------------------------------
Movement in net (debt)/funds in the year (116.5) (42.4) (60.4)
8 Net funds at beginning of year 91.9 134.3 194.7
--------------------------------------------------------------------------------------------------------------
8 Net (debt)/funds at end of year (24.6) 91.9 134.3
==============================================================================================================
|
The accompanying notes form an integral part of this cash flow statement.
Consolidated statement of total recognised gains and losses For the years ended 31 December 2000, 1999 and 1998
====================================================================================================================
2000 1999 1998
Notes (Pounds)m (Pounds)m (Pounds)m
---------------------------------------------------------------------------------------------------------------------
Profit for the financial year 244.7 172.8 140.3
Exchange adjustments on foreign currency net investments (133.0) (31.2) 4.0
---------------------------------------------------------------------------------------------------------------------
Total recognised gains and losses relating to the year 111.7 141.6 144.3
---------------------------------------------------------------------------------------------------------------------
Prior year adjustment on implementation of FRS 19 (Deferred Tax) 28.0
---------------------------------------------------------------------------------------------------------------------
Total gains and losses recognised since last annual report 139.7
====================================================================================================================
|
The accompanying notes form an integral part of this statement of total recognised gains and losses.
Consolidated balance sheet
As at 31 December 2000, 1999 and 1998
=========================================================================================================================
2000 1999 1998
Restated* Restated*
Notes (Pounds)m (Pounds)m (Pounds)m
-------------------------------------------------------------------------------------------------------------------------
Fixed assets
Intangible assets
13 Corporate brands 950.0 350.0 350.0
13 Goodwill 3,497.3 410.3 158.0
14 Tangible assets 390.2 196.7 166.7
15 Investments 551.5 356.9 268.2
-------------------------------------------------------------------------------------------------------------------------
5,389.0 1,313.9 942.9
-------------------------------------------------------------------------------------------------------------------------
Current assets
16 Stocks and work in progress 241.1 113.5 107.3
17 Debtors 2,181.0 1,068.4 921.1
18 Debtors within working capital facility:
Gross debts 464.9 345.7 294.5
Non-returnable proceeds (231.6) (214.1) (209.2)
-------------------------------------------------------------------------------------------------------------------------
233.3 131.6 85.3
Cash at bank and in hand 1,067.6 607.0 423.9
-------------------------------------------------------------------------------------------------------------------------
3,723.0 1,920.5 1,537.6
19 Creditors: amounts falling due within one year (4,252.4) (2,148.0) (1,777.3)
-------------------------------------------------------------------------------------------------------------------------
Net current liabilities (529.4) (227.5) (239.7)
-------------------------------------------------------------------------------------------------------------------------
Total assets less current liabilities 4,859.6 1,086.4 703.2
20 Creditors: amounts falling due after more than one year
(including convertible loan note) (1,279.6) (652.5) (401.5)
21 Provisions for liabilities and charges (145.9) (79.2) (77.9)
-------------------------------------------------------------------------------------------------------------------------
Net assets 3,434.1 354.7 223.8
-------------------------------------------------------------------------------------------------------------------------
Capital and reserves
23 Called up share capital 111.2 77.5 76.6
Share premium account 709.0 602.9 562.9
Shares to be issued 386.7 - -
Merger reserve 2,630.2 121.3 120.5
24 Other reserves (256.2) (123.2) (92.0)
Profit and loss account (171.0) (332.3) (452.3)
-------------------------------------------------------------------------------------------------------------------------
Equity share owners' funds 3,409.9 346.2 215.7
Minority interests 24.2 8.5 8.1
-------------------------------------------------------------------------------------------------------------------------
Total capital employed 3,434.1 354.7 223.8
=========================================================================================================================
|
The accompanying notes form an integral part of this balance sheet. *The 1999 and 1998 balance sheets have been restated as a result of the implementation of FRS 19 in the Group's 2000 financial statements. The resulting prior year adjustment is shown on F-9.
Signed on behalf of the Board on 4 May 2001:
Sir Martin Sorrell
Group chief executive
P W G Richardson
Group finance director
Consolidated statement of share owners' funds
For the years ended 31 December 2000, 1999 and 1998
Ordinary Share Shares Profit
share premium to be Merger Other and loss
capital account issued reserve reserves account/1/ Total
(Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m
------------------------------------------------------------------------------------------------------------------------------
Balance at 1 January 1998 73.6 421.6 - - (1,082.0) 561.6 (25.2)
FRS 19 (Deferred Tax) Restatement - - - - - 28.0 28.0
Adjusted balance at 1 January 1998 73.6 421.6 - - (1,082.0) 589.6 2.8
1998 movements
Ordinary shares issued in respect of acquisitions 3.1 129.6 - - - (27.3)/2/ 105.4
Other ordinary shares issued 0.5 11.7 - - - (8.1) 4.1
Transfers between reserves - - - 120.5 985.4 (1,105.9) -
Currency translation movement - - - - 4.0 - 4.0
Retained profit for the financial year - - - - - 120.7 120.7
Share buy-backs (0.6) - - - 0.6 (21.3) (21.3)
------------------------------------------------------------------------------------------------------------------------------
Adjusted balance at 31 December 1998 76.6 562.9 - 120.5 (92.0) (452.3) 215.7
------------------------------------------------------------------------------------------------------------------------------
1999 movements
Ordinary shares issued 0.9 40.0 - 0.8 - (28.8)/2/ 12.9
Currency translation movement - - - - (31.2) - (31.2)
Retained profit for the financial year - - - - - 148.8 148.8
------------------------------------------------------------------------------------------------------------------------------
Adjusted balance at 31 December 1999 77.5 602.9 - 121.3 (123.2) (332.3) 346.2
------------------------------------------------------------------------------------------------------------------------------
2000 movements
Ordinary shares issued in respect of acquisitions 30.2 - 547.3 2,383.3 - - 2,960.8
Exercises of options granted on acquisition of
Young & Rubicam Inc. 2.9 62.5 (160.6) 160.6 - (13.9) 51.5
Share issue costs charged to merger reserve - - - (35.0) - - (35.0)
Other ordinary shares issued 0.6 43.6 - - - (31.7)/2/ 12.5
|
Currency translation movement - - - - (133.0) - (133.0) Retained profit for the financial year - - - - - 206.9 206.9 ------------------------------------------------------------------------------------------------------------------------------ Balance at 31 December 2000 111.2 709.0 386.7 2,630.2 (256.2) (171.0) 3,409.9 ------------------------------------------------------------------------------------------------------------------------------ |
/1/Share owners' funds have been restated as a result of the implementation of FRS 19 in the Group's 2000 financial statements. The impact of this on opening funds of (Pounds)318.2 million as previously reported, is to increase these to (Pounds)346.2 million as restated.
/2/Represents the difference between the legal share capital and premium, recorded on the issue of new shares to satisfy option exercises, and the cash proceeds received on exercise.
The Group is the leading worldwide communications services organisation offering national and multinational clients a comprehensive range of communications services. These services include advertising and media investment management, information and consultancy, public relations and public affairs, and branding & identity, healthcare and specialist communications. The Group derives a substantial proportion of its revenue and operating income from North America, the United Kingdom and Continental Europe and the Group's performance has historically been linked with the economic performance of these regions.
Acquisitions
(Young &
Continuing Rubicam Total
operations* only) 2000 Change 1999 Change 1998
(Pounds)m (Pounds)m (Pounds)m % (Pounds)m % (Pounds)m
------------------------------------------------------------------------------------------------------------------------------------
Turnover
United Kingdom 1,235.7 100.6 1,336.3 17.9 1,133.7 25.7 902.1
United States 5,158.9 864.9 6,023.8 49.8 4,021.3 13.8 3,534.9
Continental Europe 2,907.1 437.2 3,344.3 50.0 2,230.2 21.1 1,841.2
Canada, Asia Pacific, Latin America,
Africa & Middle East 2,911.0 334.0 3,245.0 65.5 1,960.7 13.9 1,721.9
------------------------------------------------------------------------------------------------------------------------------------
12,212.7 1,736.7 13,949.4 49.3 9,345.9 16.8 8,000.1
====================================================================================================================================
Revenue
United Kingdom 503.4 29.0 532.4 22.5 434.7 10.5 393.5
United States 1,096.8 176.8 1,273.6 39.2 915.2 19.7 764.4
Continental Europe 499.1 87.2 586.3 37.6 426.2 7.6 396.0
Canada, Asia Pacific, Latin America,
Africa & Middle East 522.0 66.4 588.4 48.4 396.5 8.8 364.5
------------------------------------------------------------------------------------------------------------------------------------
2,621.3 359.4 2,980.7 37.2 2,172.6 13.3 1,918.4
------------------------------------------------------------------------------------------------------------------------------------
PBIT/1/
United Kingdom 61.5 1.5 63.0 22.3 51.5 22.0 42.2
United States 171.1 20.5 191.6 37.8 139.0 24.6 111.6
Continental Europe 67.8 14.1 81.9 46.8 55.8 1.5 55.0
Canada, Asia Pacific, Latin America,
Africa & Middle East 65.4 14.1 79.5 78.7 44.5 22.3 36.4
------------------------------------------------------------------------------------------------------------------------------------
365.8 50.2 416.0 43.1 290.8 18.6 245.2
------------------------------------------------------------------------------------------------------------------------------------
|
There is no significant cross-border trading.
Acquisitions
(Young &
Continuing Rubicam Total
operations* only) 2000 Change 1999 Change 1998
(Pounds)m (Pounds)m (Pounds)m % (Pounds)m % (Pounds)m
------------------------------------------------------------------------------------------------------------------------------------
Turnover
Advertising and media investment
management 10,100.9 1,354.7 11,455.6 49.0 7,690.1 16.8 6,582.5
Information & consultancy 517.5 0.0 517.5 21.6 425.5 8.6 391.9
Public relations & public affairs 287.3 135.2 422.5 112.2 199.1 20.9 164.7
Branding & identity, healthcare and
specialist communications 1,307.0 246.8 1,553.8 50.7 1,031.2 19.8 861.0
------------------------------------------------------------------------------------------------------------------------------------
12,212.7 1,736.7 13,949.4 49.3 9,345.9 16.8 8,000.1
------------------------------------------------------------------------------------------------------------------------------------
Revenue
Advertising and media investment
management 1,227.7 171.3 1,399.0 38.1 1,013.1 6.5 951.3
Information & consultancy 512.1 0.0 512.1 22.0 419.7 14.3 367.2
Public relations & public affairs 262.2 67.9 330.1 84.5 178.9 32.7 134.8
Branding & identity, healthcare and
specialist communications 619.3 120.2 739.5 31.8 560.9 20.6 465.1
------------------------------------------------------------------------------------------------------------------------------------
2,621.3 359.4 2,980.7 37.2 2,172.6 13.3 1,918.4
------------------------------------------------------------------------------------------------------------------------------------
PBIT/1/
Advertising and media investment
management 192.3 39.0 231.3 48.4 155.9 10.3 141.3
Information & consultancy 51.6 0.0 51.6 22.6 42.1 7.1 39.3
Public relations & public affairs 39.1 4.2 43.3 81.2 23.9 52.2 15.7
Branding & identity, healthcare and
specialist communications 82.8 7.0 89.8 30.3 68.9 40.9 48.9
------------------------------------------------------------------------------------------------------------------------------------
365.8 50.2 416.0 43.1 290.8 18.6 245.2
------------------------------------------------------------------------------------------------------------------------------------
|
/1/PBIT: Profit on ordinary activities before interest and taxation.
* The figures presented for continuing operations include 2000 acquisitions,
other than Young & Rubicam Inc.
2000 1999 1998
(Pounds)m (Pounds)m (Pounds)m
--------------------------------------------------------------------------------
Domestic (UK) 37.3 45.1 39.4
Foreign 326.9 210.3 173.4
--------------------------------------------------------------------------------
Income before income taxes 364.2 255.4 212.8
================================================================================
|
2 Operating costs 2000 1999 1998
(Pounds)m (Pounds)m (Pounds)m
--------------------------------------------------------------------------------
Total staff costs (note 3) 1,617.6 1,091.3 952.9
Establishment costs 216.8 158.3 142.4
Other operating expenses (net) 522.4 341.3 307.2
Loss on sale of tangible fixed assets 1.3 0.9 0.9
--------------------------------------------------------------------------------
2,358.1 1,591.8 1,403.4
================================================================================
Operating expenses include:
Depreciation of tangible fixed assets 63.8 42.2 33.7
Amortisation of intangible fixed assets 6.6 - -
Impairment of intangible fixed assets 8.5 - -
--------------------------------------------------------------------------------
Operating lease rentals:
Property (excluding real estate taxes) 125.2 83.1 72.5
Plant and machinery 21.8 19.6 16.4
--------------------------------------------------------------------------------
147.0 102.7 88.9
================================================================================
Auditors' remuneration:
Audit fees
- Andersen 3.7 2.4 2.0
- other 0.4 0.3 0.3
--------------------------------------------------------------------------------
4.1 2.7 2.3
--------------------------------------------------------------------------------
Fees in respect of other advisory work 6.4 3.7 2.8
================================================================================
|
Fees paid to the auditors in respect of other advisory work include advice to the Group on taxation, acquisitions and, in 2000, work performed in connection with the acquisition of Young & Rubicam Inc.
Minimum committed annual rentals
Plant and machinery Property
--------------------------------- ----------------------------------
2001 2000 1999 2001 2000 1999
(Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m
----------------------------------------------------------------------------------------------------------------
In respect of operating leases
which expire:
- within one year 5.4 4.7 5.1 10.2 4.8 7.0
- within two to five years 16.2 15.9 13.2 39.1 24.7 20.4
- after five years 0.3 1.5 0.2 62.3 65.8 49.2
----------------------------------------------------------------------------------------------------------------
21.9 22.1 18.5 111.6 95.3 76.6
================================================================================================================
|
Minimum Less
rental sub-let Net
payments rentals payment
(Pounds)m (Pounds)m (Pounds)m
--------------------------------------------------------------------------------
Year ended 31 December
2001 133.5 (11.3) 122.2
2002 158.7 (8.9) 149.8
2003 147.2 (8.1) 139.1
2004 120.0 (7.7) 112.3
2005 109.5 (7.2) 102.3
Later years (to 2011) 322.0 (44.6) 277.4
--------------------------------------------------------------------------------
990.9 (87.8) 903.1
================================================================================
|
-------------------------------------------------------------------------------------------------
2000 1999 1998
Number Number Number
-------------------------------------------------------------------------------------------------
United Kingdom 5,425 4,439 3,973
United States 11,058 8,033 7,082
Continental Europe 7,985 5,650 4,922
Canada, Asia Pacific, Latin America, Africa & Middle East 11,689 9,589 9,612
-------------------------------------------------------------------------------------------------
36,157 27,711 25,589
=================================================================================================
|
At the end of 2000 staff numbers were 51,195 compared with 29,168 in 1999.
Total staff costs were made up as follows:
----------------------------------------------------------------------------------------
2000 1999 1998
(Pounds)m (Pounds)m (Pounds)m
----------------------------------------------------------------------------------------
Wages and salaries 1,125.1 763.6 666.4
Payments and provisions charged under short- and
long-term incentive plans 118.3 71.3 58.6
Social security costs 120.5 86.3 76.7
Other pension costs 40.8 27.7 20.7
Other staff costs 212.9 142.4 130.5
----------------------------------------------------------------------------------------
1,617.6 1,091.3 952.9
========================================================================================
|
------------------------------------------------------------------------------------------------
2000 1999 1998
(Pounds)m (Pounds)m (Pounds)m
On bank loans and overdrafts, and other loans
- repayable within five years, by instalments 3.2 3.7 2.0
- repayable within five years, not by instalments 38.7 16.0 21.1
- on all other loans (including corporate bond) 14.7 14.1 6.9
Total interest payable 56.6 33.8 30.0
Interest receivable (22.5) (10.4) (10.8)
------------------------------------------------------------------------------------------------
Net interest payable 34.1 23.4 19.2
Charges in respect of working capital facilities 16.2 12.0 13.2
------------------------------------------------------------------------------------------------
50.3 35.4 32.4
================================================================================================
|
Net interest payable increased to (Pounds)34.1 million from (Pounds)23.4 million, reflecting the increased level of acquisitions and share repurchases during the year.
Interest on the majority of the Group's borrowings, other than the USA bond, is payable at a margin of between 0.20% and 0.55% over relevant LIBOR depending on certain covenant conditions being met and, for a significant proportion of borrowings, is hedged to January 2003 at US dollar LIBOR rates of 6.25% or less (excluding margin costs).
The majority of the Group's long-term debt is represented by $300 million of USA bonds at a weighted average interest rate of 6.71% and $287.5 million of convertible bonds at a rate of 3%. Average borrowings under the Syndicated Revolving Credit Facilities (note 8) amounted to $422 million at an average interest rate of 6.2% (1999: 6.1%, 1998: 5.7%) inclusive of margin.
Derivative financial instruments
The Group entered into various types of US dollar interest rate contracts in managing its interest rate risk, as below. The rates below exclude margin costs.
----------------------------------------------------------------------------- Swaps 2000 1999 1998 ----------------------------------------------------------------------------- Notional principal amount $350m $350m $350m Average pay rate 6.17% 6.17% 5.84% Average receive rate LIBOR LIBOR LIBOR Average term 5 months 5 months 6 months Latest maturity date Jan 2003 Jan 2003 Jan 2003 ============================================================================= |
The Group enters into interest rate swap agreements to reduce the impact of changes in interest rates on its floating rate debt. Under the swap agreements the Group agrees with other parties to exchange, at specified intervals, the difference between the fixed strike rate and prevailing relevant floating US dollar LIBOR calculated by reference to the agreed notional principal amount.
The differential paid or received by the Group on the swap agreements is charged/ (credited) to interest expense in the year to which it relates.
The term of such instruments is not greater than the term of the debt being hedged and any anticipated refinancing or extension of the debt.
The Group is exposed to credit-related losses in the event of non- performance by counterparties to financial instruments, but it does not expect any counterparties to fail to meet their obligations given the Group's policy of selecting only counterparties with high credit ratings.
Other than the above, the Group has no significant utilisation of derivative financial instruments.
The fair value of derivatives is disclosed in note 22.
The tax charge is based on the profit for the year and comprises:
--------------------------------------------------------------------------------------------
2000 1999 1998
(Pounds)m (Pounds)m (Pounds)m
--------------------------------------------------------------------------------------------
Corporation tax at 30.0% (1999: 30.25%, 1998: 31.0%) 6.4 12.4 12.9
Deferred taxation (10.6) (0.7) -
Overseas taxation 100.3 56.5 51.4
Tax on profits of associate companies 13.6 8.1 6.8
Write-back of previously written-off ACT - - (4.1)
Advance corporation tax written off - 0.3 -
--------------------------------------------------------------------------------------------
109.7 76.6 67.0
--------------------------------------------------------------------------------------------
Effective tax rate on profit before tax 30.0% 30.0% 31.5%
============================================================================================
|
Reconciliation of the Group's tax to the United Kingdom statutory tax rate:
===============================================================================================
2000 1999 1998
(Pounds)m (Pounds)m (Pounds)m
-----------------------------------------------------------------------------------------------
Tax on pre-tax income at statutory rates of 30.0% 109.7 77.3 66.0
(1999: 30.25% and 1998: 31.0%)
Effects of:
Permanent differences between expenditures charged
in arriving at income and expenditures allowed for
tax purposes (4.1) (3.4) 4.3
Utilisation of tax losses brought forward (9.7) (4.7) (5.6)
Unused tax losses carried forward 9.4 6.3 4.6
Differences between UK and overseas statutory standard
tax rates 4.4 0.8 1.8
Write-back of previously written-off ACT - - (4.1)
Advance corporation tax written off - 0.3 -
-----------------------------------------------------------------------------------------------
Tax on profit on ordinary activities 109.7 76.6 67.0
===============================================================================================
|
There are tax losses available within the Young & Rubicam Inc. business which may be available to the Group going forward.
--------------------------------------------------------------------------------
2000 1999 1998 2000 1999 1998
-----------------------
Pence per share (Pounds)m (Pounds)m (Pounds)m
--------------------------------------------------------------------------------
Interim dividend paid 1.20p 1.0p 0.84p 9.3 7.8 6.2
Final dividend proposed 2.55p 2.1p 1.72p 28.5 16.2 13.4
--------------------------------------------------------------------------------
3.75p 3.1p 2.56p 37.8 24.0 19.6
================================================================================
|
No ACT is payable in respect of the 1998 final dividend, the 1999 and 2000 dividends, owing to the abolition of ACT with effect from April 1999.
Basic and diluted earnings per share have been calculated in accordance with FRS
14 'Earnings per Share'.
Basic earnings per share have been calculated using earnings of
(Pounds)244.7 million (1999: (Pounds)172.8 million, 1998:(Pounds)140.3 million)
and weighted average shares in issue during the year of 834,280,801 shares
(1999: 753,324,054 shares, 1998: 735,700,122 shares).
Diluted earnings per share have been calculated using earnings of(Pounds)244.7 million (1999: (Pounds)172.8 million, 1998:(Pounds)140.3 million), as adjusted for income arising on the convertible loan note of(Pounds)0.9 million (1999:(Pounds)nil, 1998:(Pounds)nil). The weighted average shares used was 865,978,000 shares (1999: 768,691,993 shares, 1998: 746,939,733 shares). This takes into account the exercise of employee share options where these are expected to dilute earnings and the $287.5 million of convertible bond.
Basic and diluted earnings per ADR have been calculated using the same method as for earnings per share, multiplied by a factor of five. The 1998 figures have been restated following a change in the ratio of ordinary shares per ADR from 10 ordinary shares per ADR to five ordinary shares per ADR.
Notes to the consolidated cash flow statement
The following table is a supplementary disclosure to the consolidated cash flow statement, summarising the equity and debt financing of the Group, and changes during the year:
------------------------------------------------------------------------------------------------------------
2000 2000 1999 1999 1998 1998
Shares Debt Shares Debt Shares Debt
(Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m
------------------------------------------------------------------------------------------------------------
Analysis of changes in
financing
Beginning of year 680.4 459.5 639.5 194.2 495.2 97.3
Shares issued in respect of
acquisitions 30.2 - - - 132.7 -
Other issues of share capital 109.6 - 40.9 - 12.2 -
Shares bought back
and cancelled - - - - (0.6) -
Increase in drawings on
bank loans - 126.6 - 258.0 - 97.3
Debt acquired - 194.9 - - - -
Amortisation/(payment) of
financing costs included in
net debt - 0.5 - 1.7 - (1.2)
Exchange adjustments on
long-term borrowings - 13.1 - 5.6 - 0.8
------------------------------------------------------------------------------------------------------------
End of year 820.2 794.6 680.4 459.5 639.5 194.2
============================================================================================================
|
The above table excludes bank overdrafts which fall within cash for the purposes of the consolidated cash flow statement.
Shares
At 31 December 2000, the Company's share base was entirely composed of ordinary
equity share capital and share premium of (pound)820.2 million (1999:
(pound)680.4 million, 1998: (pound)639.5 million), further details of which are
disclosed on pages F-9, F-19 and F-20.
Debt
USA bond The Group has in issue US$200 million of 6.625% Notes due 2005 and US$100 million of 6.875% Notes due 2008.
Revolving Credit Facilities The Group's debt is also funded by a $500 million syndicated Revolving Credit Facility dated July 1998 and a $700 million facility dated August 2000. The $500 million facility is due to expire in July 2002 and the $700 million facility is due to expire in August 2001 although the Group has the ability to extend drawings under this facility until August 2003. The Group's syndicated borrowings drawn down under these agreements averaged $422 million during the year.
Borrowings under the Revolving Credit Facilities are governed by certain financial covenants based on the results and financial position of the Group.
Convertible Debt
In October 2000, with the purchase of Young & Rubicam Inc., the Group acquired $287.5 million of 3% Convertible Notes due 15 January 2005. At the option of the holder, the notes are convertible into shares of our common stock at a conversion price of $87.856 per ADR. The notes may be redeemed at WPP's option on or after 20 January 2003. Additionally, under certain circumstances, holders of the notes may have the right to require WPP to repurchase the notes. Interest on the notes is payable on 15 January and 15 July of each year, beginning on 15 July 2000. The notes are unsecured obligations of Y&R and are guaranteed by WPP.
The following table is an analysis of net funds with debt analysed by year of repayment:
----------------------------------------------------------------------------------------------------------------------
Change Change
2000 in year/1/ 1999 in year 1998
(Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m
----------------------------------------------------------------------------------------------------------------------
Debt
Within one year - 92.7 (92.7) (92.7) -
Between one and two years - - - - -
Between two and five years (727.7) (544.6) (183.1) (168.0) (15.1)
Over five years - by instalments (66.9) 116.8 (183.7) (4.6) (179.1)
----------------------------------------------------------------------------------------------------------------------
Debt financing under the Credit
Facility Agreement and from
unsecured loan notes (794.6) (335.1) (459.5) (263.5) (194.2)
Short-term overdrafts - within one year (297.6) (242.0) (55.6) 39.8 (95.4)
Cash at bank and in hand 1,067.6 460.6 607.0 183.1 423.9
---------------------------------------------------------------------------------------------------------------------
Net (debt)/funds (24.6) (116.5) 91.9 (42.4) 134.3
=====================================================================================================================
|
/1/ Includes (Pounds)194.9 million of debt, (Pounds)117.1 million of short-term overdrafts and (Pounds)83.5 million of cash at bank acquired.
Fixed Floating Period
Currency (Pounds)m rate/1/ basis (months)/1/
---------------------------------------------------------------------------
US$ 624.92/2/ 5.37% n/a 42
US$ 148.0 n/a LIBOR n/a
(Pounds) 178.0 n/a LIBOR n/a
Euro 71.6 n/a LIBOR n/a
Other 3.7 n/a various n/a
----------------------------------------------------------------------------
1,026.2
----------------------------------------------------------------------------
/1/ Weighted average.
|
/2/ Including drawings on working capital facility as described in note 18.
9 Reconciliation of operating profit to net cash inflow from operating activities
------------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998
(Pounds)m (Pounds)m (Pounds)m
------------------------------------------------------------------------------------------------------------------------------------
Operating profit 378.0 263.5 229.1
Depreciation, amortisation and impairment charge 78.9 42.2 33.7
Decrease/(increase) in working capital and provisions 164.8 41.9 (7.7)
Loss on sale of tangible fixed assets 1.3 0.9 0.9
------------------------------------------------------------------------------------------------------------------------------------
Net cash inflow from operating activities 623.0 348.5 256.0
====================================================================================================================================
|
The following table analyses the changes in working capital and provisions that have contributed to the net cash inflow from operating activities in the consolidated cash flow statement:
------------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998
(Pounds)m (Pounds)m (Pounds)m
------------------------------------------------------------------------------------------------------------------------------------
Changes in working capital and provisions
(Increase)/decrease in stocks and work in progress (14.7) (1.5) 0.2
(Increase)/decrease in debtors (434.9) (165.3) 23.9
Increase/(decrease) in creditors - short term 537.8 155.4 (29.2)
- long term 1.7 43.2 (7.9)
Increase in provisions 74.9 10.1 5.3
------------------------------------------------------------------------------------------------------------------------------------
Decrease/(increase) in working capital
and provisions 164.8 41.9 (7.7)
|
The following tables analyse the items included within the main cash flow headings on page F-7:
2000 1999 1998
(Pounds)m (Pounds)m (Pounds)m
---------------------------------------------------------------------------------------------
Returns on investments and servicing of finance
Interest and similar charges paid (74.8) (42.0) (36.8)
Interest received 17.9 9.3 10.6
Dividends paid to minorities (7.7) (4.4) (2.5)
---------------------------------------------------------------------------------------------
Net cash outflow (64.6) (37.1) (28.7)
---------------------------------------------------------------------------------------------
Capital expenditure and financial investment
Purchase of tangible fixed assets (note 14) (111.9) (64.6) (51.6)
Purchase of own shares by ESOP trust (note 15) (94.1) (17.9) (33.3)
Proceeds from sale of tangible fixed assets 6.9 2.0 2.8
---------------------------------------------------------------------------------------------
Net cash outflow (199.1) (80.5) (82.1)
---------------------------------------------------------------------------------------------
Acquisition payments
Cash consideration for acquisitions (206.5) (242.2) (111.8)
Less (overdraft)/cash acquired (33.6) 51.8 6.1
Net purchase of other investments (40.9) (11.8) (9.8)
---------------------------------------------------------------------------------------------
Net cash outflow (281.0) (202.2) (115.5)
---------------------------------------------------------------------------------------------
Financing activities
Increase/(reduction) in drawings on bank loans 126.6 258.0 (81.4)
Share buy-backs - - (21.3)
Financing costs - - (2.3)
Proceeds from issue of shares 78.0 12.0 4.3
Proceeds from issue of bond - - 178.8
---------------------------------------------------------------------------------------------
Net cash inflow 204.6 270.0 78.1
---------------------------------------------------------------------------------------------
|
2000
(Pounds)m
--------------------------------------------------------------------------------
2001 -
2002 -
2003 402.8
2004 -
2005 324.9
2006 and beyond 66.9
--------------------------------------------------------------------------------
|
11 Major non-cash transactions
A certain proportion of the consideration for the acquisitions of subsidiary undertakings during the year comprised the issue of shares. Further details are given in note 25.
12 Segment information
Non-interest bearing
Total assets employed assets/(liabilities)
---------------------------------- ---------------------------------
2000 1999 1998 2000 1999 1998
Restated* Restated* Restated* Restated*
(Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m
-------------------------------------------------------------------------------------------------------
United Kingdom 981.8 624.6 436.9 144.4 143.2 54.0
United States 5,131.0 990.4 651.4 2,631.0 (296.0) (331.9)
Continental Europe 1,454.5 714.7 621.2 296.9 144.4 95.6
Canada, Asia Pacific, Latin
America, Africa & Middle East 1,544.7 904.7 771.0 386.4 271.2 271.8
-------------------------------------------------------------------------------------------------------
9,112.0 3,234.4 2,480.5 3,458.7 262.8 89.5
-------------------------------------------------------------------
Net interest bearing (debt)/funds (24.6) 91.9 134.3
-------------------------------------------------------------------------------------------------------
Net assets
in the consolidated
balance sheet 3,434.1 354.7 223.8
-------------------------------------------------------------------------------------------------------
|
Non-interest bearing
Total assets employed assets/(liabilities)
---------------------------------- ---------------------------------
2000 1999 1998 2000 1999 1998
Restated* Restated* Restated* Restated*
(Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m
-------------------------------------------------------------------------------------------------------
Advertising and media
investment management 6,494.9 1,878.8 1,644.0 2,582.4 (231.3) (111.2)
Information & consultancy 630.1 455.0 294.8 154.6 173.5 71.8
Public relations & public
affairs 552.7 247.7 167.8 223.3 121.4 68.3
Branding & identity,
healthcare and specialist
communications 1,434.3 652.9 373.9 498.4 199.2 60.6
-------------------------------------------------------------------------------------------------------
9,112.0 3,234.4 2,480.5 3,458.7 262.8 89.5
------------------------------------------------------------------
Net interest bearing (debt)/funds (24.6) 91.9 134.3
-------------------------------------------------------------------------------------------------------
Net assets
in the consolidated
balance sheet 3,434.1 354.7 223.8
-------------------------------------------------------------------------------------------------------
|
Certain items, including the valuation of corporate brand names, have been allocated within the above analyses on the basis of the revenue of the subsidiary undertakings to which they relate.
* The 1999 and 1998 balance sheets have been restated as a result of the implementation of FRS 19 in the Group's 2000 financial statements, increasing the deferred tax asset by (Pounds)28 million.
2000 1999 1998
(Pounds)m (Pounds)m (Pounds)m
--------------------------------------------------------------------------------
Corporate brand names 950.0 350.0 350.0
--------------------------------------------------------------------------------
|
Brought forward corporate brand names represent J. Walter Thompson, Hill and Knowlton and Ogilvy & Mather Worldwide. The Group has capitalised an additional (Pounds)600 million for the corporate brand names from the Young & Rubicam Group, which was acquired during the year. These assets are carried at historical cost in accordance with the Group's accounting policy for intangible fixed assets as stated on page F-4.
Goodwill (Pounds)m ------------------------------------------------------------------------------- 1 January 1999 158.0 Additions 252.3 31 December 1999 410.3 Additions 3,102.1 Amortisation (6.6) Impairment (8.5) -------------------------------------------------------------------------------- 31 December 2000 3,497.3 -------------------------------------------------------------------------------- |
Additions represent goodwill arising on the acquisition of subsidiary undertakings. This includes (Pounds)2,818.5 million arising from the acquisition of Young & Rubicam Inc., which was completed on 4 October 2000. Goodwill arising on the acquisition of associate undertakings is shown within fixed asset investments in note 15. Gross goodwill of (Pounds)131.0 million is subject to amortisation.
The movements in 2000 and 1999 were as follows:
----------------------------------------------------------------------------------------------
Land and buildings
-----------------------
Fixtures,
fittings
Short and Computer
Freehold/1/ leasehold equipment equipment Total
Cost: (Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m
----------------------------------------------------------------------------------------------
1 January 1999 11.6 124.9 98.3 131.6 366.4
Additions 0.3 13.0 15.3 36.0 64.6
New acquisitions 0.4 5.0 7.7 5.3 18.4
Disposals - (2.8) (3.0) (7.7) (13.5)
Exchange adjustments 0.1 1.5 0.6 (1.0) 1.2
31 December 1999 12.4 141.6 118.9 164.2 437.1
Additions 1.0 31.2 22.4 57.3 111.9
New acquisitions 57.8 66.2 111.4 104.0 339.4
Disposals (0.6) (6.0) (9.0) (10.2) (25.8)
Exchange adjustments (0.3) 6.8 3.6 4.3 14.4
----------------------------------------------------------------------------------------------
31 December 2000 70.3 239.8 247.3 319.6 877.0
==============================================================================================
Depreciation:
1 January 1999 2.8 50.9 61.9 84.1 199.7
New acquisitions 0.1 2.2 3.5 2.4 8.2
Charge 0.3 8.7 11.8 21.4 42.2
Disposals - (1.9) (2.0) (6.7) (10.6)
Exchange adjustments 0.1 1.0 0.4 (0.6) 0.9
----------------------------------------------------------------------------------------------
31 December 1999 3.3 60.9 75.6 100.6 240.4
New acquisitions 15.5 29.9 74.3 69.9 189.6
Charge 0.7 13.5 10.0 39.6 63.8
Disposals (0.5) (1.8) (5.2) (10.1) (17.6)
Exchange adjustments (0.3) 3.9 3.1 3.9 10.6
----------------------------------------------------------------------------------------------
31 December 2000 18.7 106.4 157.8 203.9 486.8
==============================================================================================
Net book value:
31 December 2000 51.6 133.4 89.5 115.7 390.2
----------------------------------------------------------------------------------------------
31 December 1999 9.1 80.7 43.3 63.6 196.7
----------------------------------------------------------------------------------------------
1 January 1999 8.8 74.0 36.4 47.5 166.7
==============================================================================================
|
/1/Includes land of(Pounds)18.3 million.
Leased assets (other than leasehold property) included above have a net book value of (Pounds)3.6 million (1999: (Pounds)3.1 million, 1998: (Pounds)2.3 million).
At the end of the year, capital commitments contracted, but not provided for were:
-----------------------------------------------------------------------
2000 1999 1998
(Pounds)m (Pounds)m (Pounds)m
-----------------------------------------------------------------------
Capital commitments 12.6 1.4 0.6
=======================================================================
|
The following are included in the net book value of fixed asset investments:
-----------------------------------------------------------------------------------------------------------
Goodwill on
Associate associate Other
under- under- Own invest-
takings takings shares ments Total
(Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m
-----------------------------------------------------------------------------------------------------------
1 January 1999 86.4 90.6 58.1 33.1 268.2
Additions 2.6 - 17.9 19.2 39.7
Goodwill arising on acquisition
of new associates - 40.5 - - 40.5
Share of profits after tax of
associate undertakings 19.2 - - - 19.2
Dividends and other movements (6.3) - - (1.5) (7.8)
Exchange adjustments 7.6 - - - 7.6
Disposals (2.3) - (4.7) (3.5) (10.5)
-----------------------------------------------------------------------------------------------------------
31 December 1999 107.2 131.1 71.3 47.3 356.9
Additions 50.6 - 94.1 42.3 187.0
Goodwill arising on acquisition
of new associates - 5.1 - - 5.1
Share of profits after tax of
associate undertakings 22.1 - - - 22.1
Dividends (7.4) - - - (7.4)
Other movements (2.0) 5.8 - (5.8) (2.0)
Exchange adjustments (4.7) - - - (4.7)
Disposals - - (5.2) (0.3) (5.5)
-----------------------------------------------------------------------------------------------------------
31 December 2000 165.8 142.0 160.2 83.5 551.5
===========================================================================================================
|
The Group's principal associate undertakings include:
-----------------------------------------------------------------------------------------
Country of
% controlled incorporation
-----------------------------------------------------------------------------------------
Asatsu-DK 20.0 Japan
Batey Ads (Pte) Limited 32.4 Singapore
Brierley & Partners 20.0 USA
Chime Communications PLC 24.9 United Kingdom
DYR Tokyo Agency1 49.0 Japan
High Co S.A. 30.0 France
IBOPE Group 31.0 Brazil
Singleton, Ogilvy & Mather (Holdings) Pty Limited 40.7 Australia
=========================================================================================
|
/1/acquired in 2000
The Company's holdings of own shares are stated at cost and represent purchases by the Employee Share Option Plan ('ESOP') trust of shares in WPP Group plc for the purpose of funding certain of the Group's long-term incentive plan liabilities.
The trustees of the ESOP purchase the Company's ordinary shares in the open market using funds provided by the Company. The Company also has an obligation to make regular contributions to the ESOP to enable it to meet its administrative costs.
The number and market value of the ordinary shares of the Company held
by the ESOP at 31 December 2000 was 36,208,185, (1999: 27,888,766, 1998:
25,532,484) and (Pounds)315.7 million (1999: (Pounds)273.6 million,
1998: (Pounds)93.4 million) respectively.
The market value of the Group's shares in its principal listed associate undertakings at 31 December 2000 was as follows: Asatsu-DK - (Pounds)166.0 million, Chime Communications PLC - (Pounds)76.5 million, High Co S.A. - (Pounds)19.8 million. The Group's investments in its principal associate undertakings are represented by ordinary shares.
Other investments include a UK listed investment of (Pounds)24.3 million (1999: (Pounds)24.3 million, 1998: (Pounds)19.9 million). This represents an interest of 17.5% (1999: 18.1%, 1998: 17.9%) in the ordinary share capital of Tempus Group PLC, Europe's second-largest independent media investment manager.
The following are included in the net book value of stocks and work in progress:
--------------------------------------------------------------------------------
2000 1999 1998
(Pounds)m (Pounds)m (Pounds)m
--------------------------------------------------------------------------------
Work in progress 238.2 110.4 104.5
Stocks 2.9 3.1 2.8
--------------------------------------------------------------------------------
241.1 113.5 107.3
================================================================================
|
17 Debtors
The following are included in debtors:
--------------------------------------------------------------------------------
2000 1999 1998
Restated* Restated*
(Pounds)m (Pounds)m (Pounds)m
--------------------------------------------------------------------------------
Amounts falling due within one year
Trade debtors outside working capital facility 1,699.4 770.0 678.9
VAT and sales taxes recoverable 20.9 13.5 4.0
Corporate income taxes recoverable 13.2 8.7 9.9
Deferred tax 57.4 28.0 28.0
Other debtors 229.6 143.4 126.5
Prepayments and accrued income 121.4 64.3 46.8
--------------------------------------------------------------------------------
|
2,141.9 1,027.9 894.1
================================================================================
Amounts falling due after more than one year
Other debtors 31.2 34.7 20.5
Prepayments and accrued income 7.9 5.8 6.5
--------------------------------------------------------------------------------
39.1 40.5 27.0
--------------------------------------------------------------------------------
2,181.0 1,068.4 921.1
================================================================================
|
Movements on bad debt provisions were as follows:
--------------------------------------------------------------------------------
2000 1999 1998
(Pounds)m (Pounds)m (Pounds)m
--------------------------------------------------------------------------------
Balance at beginning of year 16.6 16.5 15.6
Charged/(credited):
To costs and expenses 16.5 4.0 4.6
Exchange adjustments 0.8 (0.1) (0.4)
Other (10.5) (3.8) (3.3)
--------------------------------------------------------------------------------
Balance at end of year 23.4 16.6 16.5
================================================================================
|
The allowance for doubtful debts is equivalent to 1.2% (1999: 1.8%, 1998: 2.1%) of gross trade accounts receivable.
Deferred taxation
-------------------------------------------------------------------------------
2000 1999 1998
Restated* Restated*
(Pounds)m (Pounds)m (Pounds)m
--------------------------------------------------------------------------------
Deferred tax assets:
Unutilised tax losses 12.0 7.0 11.3
Deferred compensation 67.5 46.4 29.0
Acquisition related provisions 20.0 - -
Other 7.1 8.1 7.6
-----------------------------------------------------------------------------
106.6 61.5 47.9
Less:
Provision against (14.3) (4.1) -
deferred tax assets
Deferred tax liabilities:
Accelerated capital allowances (3.8) (3.7) (4.1)
Interest receivable (19.6) (17.2) (15.8)
Other (11.5) (8.5) -
-----------------------------------------------------------------------------
Temporary timing differences (34.9) (29.4) (19.9)
-----------------------------------------------------------------------------
57.4 28.0 28.0
==============================================================================
|
Unutilised tax losses include tax losses arising in the US. These losses do not expire for more than 10 years. The life of losses carried forward in other international jurisdictions varies according to local tax laws. Deferred tax liabilities and assets attributable to different tax jurisdictions have not been offset.
A deferred tax asset of (Pounds)77 million has not been recognised on losses available to carry forward across the Group. These will be offsettable only against taxable profits generated in the entities concerned, and currently there is insufficient evidence that any asset would be recoverable.
*The 1999 and 1998 balance sheets have been restated as a result of the implementation of FRS 19 in the Group's 2000 financial statements. The impact of this restatement is to increase debtors falling due within one year by (Pounds)28.0 million in 1998 and 1999. There was no impact on the tax charge in 1998 or 1999 as a result of this restatement.
The following are included in debtors within the Group's working capital facilities:
-------------------------------------------------------------------------------
2000 1999 1998
(Pounds)m (Pounds)m (Pounds)m
-------------------------------------------------------------------------------
Gross debts 464.9 345.7 294.5
Non-returnable proceeds (231.6) (214.1) (209.2)
-------------------------------------------------------------------------------
233.3 131.6 85.3
===============================================================================
|
Within the Group's overall working capital facilities, certain trade debts have been assigned as security against the advance of cash. This security is represented by the assignment of a pool of trade debts, held by one of the Group's subsidiaries, to a trust for the benefit of the providers of this working capital facility. The financing provided against this pool takes into account, inter alia, the risks that may be attached to individual debtors and the expected collection period.
The Group is not obliged (and does not intend) to support any credit- related losses arising from the assigned debts against which cash has been advanced. The providers of the finance have confirmed in writing that, in the event of default in payment by a debtor, they will only seek repayment of cash advanced from the remainder of the pool of debts in which they hold an interest, and that repayment will not be sought from the Group in any other way.
The following are included in creditors falling due within one year:
-------------------------------------------------------------------------------
2000 1999 1998
(Pounds)m (Pounds)m (Pounds)m
-------------------------------------------------------------------------------
Bank loans and overdrafts (note 8) 297.6 148.3 95.4
Trade creditors 2,574.9 1,315.0 1,102.4
Corporate income taxes payable 42.4 34.6 50.0
Other taxation and social security 122.5 68.9 52.0
Dividends proposed 28.5 16.2 13.4
Payments due to vendors 94.1 41.2 14.3
Other creditors and accruals 824.8 398.0 338.7
Deferred income 267.6 125.8 111.1
-------------------------------------------------------------------------------
4,252.4 2,148.0 1,777.3
===============================================================================
|
Bank loans and overdrafts include overdrafts of (Pounds)297.6 million (1999:(Pounds)55.6 million, 1998: (Pounds)95.4 million).
The following are included in creditors falling due after more than one year:
-------------------------------------------------------------------------------
2000 1999 1998
(Pounds)m (Pounds)m (Pounds)m
-------------------------------------------------------------------------------
Corporate bond, convertible loan note and
bank loans (note 8) 794.6 366.8 194.2
Corporate income taxes payable 212.5 122.9 91.3
Payments due to vendors 208.2 131.2 83.6
Other creditors and accruals 64.3 31.6 32.4
-------------------------------------------------------------------------------
1,279.6 652.5 401.5
===============================================================================
|
The movement in the year on provisions comprises:
-------------------------------------------------------------------------------
Pensions
and other Long-
post- term
retirement incentive
benefits plans Other Total
(Pounds)m (Pounds)m (Pounds)m (Pounds)m
-------------------------------------------------------------------------------
1 January 1999 42.7 21.8 13.4 77.9
-------------------------------------------------------------------------------
Charged to the profit and loss account 4.1 15.2 2.5 21.8
New acquisitions - - 0.8 0.8
Utilised (3.2) (14.4) (1.8) (19.4)
Transfers 0.4 - (0.3) 0.1
Exchange adjustments (2.1) - 0.1 (2.0)
-------------------------------------------------------------------------------
31 December 1999 41.9 22.6 14.7 79.2
===============================================================================
Charged to the profit and loss account 5.1 17.5 1.2 23.8
New acquisitions 25.3 - 27.6 52.9
Utilised (2.8) (9.3) (4.1) (16.2)
Transfers 0.2 - 2.1 2.3
Exchange adjustments 0.7 1.4 1.8 3.9
-------------------------------------------------------------------------------
31 December 2000 70.4 32.2 43.3 145.9
===============================================================================
|
During the year (Pounds)7.9 million of excess provisions relating to prior year acquisitions were released to the profit and loss account.
Long-term incentive plans
Long-term incentive plans are operated by certain of the Group's subsidiaries, the provision representing accrued compensation to 31 December 2000 that may become payable after more than one year.
Other provisions
Other provisions comprise other liabilities where there is uncertainty about the timing of settlement, but where a reliable estimate can be made of the amount. These include certain contingent liabilities where the likelihood of settlement is considered probable.
Contingent liabilities
The Company and various of its subsidiaries are, from time to time, parties to legal proceedings and claims which arise in the ordinary course of business. The directors do not anticipate that the outcome of these proceedings and claims will have a material adverse effect on the Group's financial position or on the results of its operations.
21 Provisions for liabilities, charges and contingent liabilities continued
Pension provisions and pension arrangements
Companies within the Group operate a large number of both defined benefit and
defined contribution pension schemes, the forms and benefits of which vary with
conditions and practices in the countries concerned.
The Group's pension costs are analysed as follows:
-----------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998
(pounds)m (pounds)m (pounds)m
-----------------------------------------------------------------------------------------------------------------------------------
Defined contribution schemes 25.3 21.4 14.7
Defined benefit schemes 10.7 6.4 5.9
-----------------------------------------------------------------------------------------------------------------------------------
36.0 27.8 20.6
-----------------------------------------------------------------------------------------------------------------------------------
Defined benefit schemes
Defined benefit schemes exist in many countries. However, the principal schemes
are operated in the US, UK and Japan. Pension costs for these schemes are
assessed in accordance with actuarial advice/+/. Valuations of the principal
schemes have generally been carried out as at 31 December 2000. The following
table discloses the method and assumptions used to derive the pensions charge
for the principal schemes:
-----------------------------------------------------------------------------------------------------------------------------------
|
Main actuarial assumptions
-------------------------------------
Market
2000 valuation Valuation Investment Salary Pension Dividend Spreading Funding
Pension cost of assets/1/ method return increase increase growth method ratio
(pounds)m (pounds)m % pa % pa % pa % pa %
-----------------------------------------------------------------------------------------------------------------------------------
US Schemes
O&M Account
Balance Plan 4.1 51.6 projected unit 7.5 5.50 nil n/a straight line 97%
Ogilvy PR 0.8 4.0 projected unit 8.0 5.25 nil n/a straight line 83%
Y&R Pension Plan 0.1 91.4 projected unit 8.25 7.57 nil n/a straight line 102%
-----------------------------------------------------------------------------------------------------------------------------------
UK Schemes
O&M Pension Plan 0.9 74.8 Attained Age 9.50 6.00 5.0 5.00 Fixed % of pay 97%
JWT Pension Scheme 0.7 45.0 Attained Age 6(pre)/5.25(post) 4.00 3.0 n/a Fixed % of pay 93%
JWT Directors' Scheme 0.3 28.6 Attained Age 6(pre)/5.25(post) 0.00 3.0 n/a Fixed % of pay 90%
-----------------------------------------------------------------------------------------------------------------------------------
Japan Schemes
JWT Employee
Retirement Plan 2.3 0.8 projected unit 3.00 2.00 nil n/a straight line 11%
-----------------------------------------------------------------------------------------------------------------------------------
|
/+/ From an independent qualified actuary.
/1/ All schemes allow for the market value of assets for funding and accounting purposes, except for the UK O&M Pension Plan, which allows for an actuarial value of assets of (pound)46.2 million.
22 Fair value of financial instruments
Derivative financial instruments
The fair value of derivatives, based on the amount that would be receivable or (payable) if the Group had sought to enter into such transactions, based on quoted market prices where possible, was as follows:
-------------------------------------------------------------------------------
31 March 2001 31 December 2000 31 December 1999
------------- ---------------- ----------------
Swaps Swaps Swaps
(pounds)m (pounds)m (pounds)m
-------------------------------------------------------------------------------
Fair value (3.8) (0.5) 3.7
Book value nil nil nil
===============================================================================
|
Non-derivative financial instruments
The Group estimates that the aggregate fair value of non-derivative financial instruments at 31 December 2000 does not differ materially from their aggregate carrying values recorded in the consolidated balance sheet.
The Group has used the methods and assumptions detailed below to estimate the fair values of the Group's financial instruments.
Cash, accounts receivable, accounts payable, overdrafts and short-term borrowings (including those drawn under the Revolving Credit Facilities) - considered to approximate to fair value because of the short maturity of such instruments.
The fair value of our US$300 million bonds and US$287.5 million convertible debt at 31 December 2000 was (Pounds)394.0 million. This is calculated by reference to market prices at 31 December 2000. Considerable judgement is required in interpreting market data to develop the estimates of fair value, and, accordingly, the estimates are not necessarily indicative of the amounts that could be realised in a current market exchange.
-----------------------------------------------------------------------------------------
2000 2000 1999 1999 1998 1998
Number Number Number
m (Pounds)m m (Pounds)m m (Pounds)m
-----------------------------------------------------------------------------------------
Authorised:
Equity ordinary shares of
10p each 1,750 175.0 1,250 125.0 1,250 125.0
-----------------------------------------------------------------------------------------
Issued:
Equity ordinary shares of
10p each 1,111.9 111.2 774.5 77.5 766.5 76.6
-----------------------------------------------------------------------------------------
|
Movements in each year are shown in note 24.
Share options
As at 31 December 2000, unexercised options over ordinary shares of 20,342,000 and unexercised options over ADRs of 16,373,106 have been granted under the WPP Executive Share Option Scheme as follows:
-------------------------------------------------------------------------------
Number of ordinary Exercise price
shares under option per share(Pounds) Exercise dates
-------------------------------------------------------------------------------
39,879 1.330 1996 - 2001
91,474 0.560 1997 - 2002
90,052 0.295 1995 - 2002
161,183 1.020 1996 - 2003
19,194 1.150 1997 - 2004
1,503,799 1.190 1997 - 2004
834,181 1.080 1998 - 2005
3,088,265 1.540 1998 - 2005
918,723 2.140 1999 - 2006
3,630,607 2.335 1999 - 2006
12,074 2.535 2000 - 2007
3,478,770 2.835 2000 - 2007
30,132 3.030 2001 - 2008
4,333,770 2.930 2001 - 2008
47,450 3.270 2001 - 2008
419,811 5.185 2002 - 2009
766,479 5.700 2002 - 2009
94,691 10.770 2003 - 2010
781,466 9.010 2003 - 2010
-------------------------------------------------------------------------------
|
-------------------------------------------------------------------------------
Number of ADRs Exercise price
under option per adr ($) Exercise dates
-------------------------------------------------------------------------------
2,241,707 2.300 2000 - 2006
1,708,927 9.200 2000 - 2006
243,173 9.200 2000 - 2007
4,062,843 14.750 2000 - 2007
34,504 14.750 2000 - 2008
42,397 17.150 2000 - 2008
125,250 17.950 2000 - 2008
33,400 29.950 2000 - 2008
125,250 34.000 2000 - 2008
470,426 34.050 2000 - 2008
16,700 34.150 2000 - 2008
76,820 35.650 2000 - 2008
146,125 37.150 2000 - 2008
1,714,551 44.600 2000 - 2009
8,350 45.800 2000 - 2009
477,228 46.475 2002 - 2009
78,885 46.550 2000 - 2009
8,350 47.700 2000 - 2009
16,700 48.200 2000 - 2010
16,700 48.500 2000 - 2009
104,375 48.800 2000 - 2009
4,175 50.300 2000 - 2010
1,155,546 51.050 2001 - 2010
1,155,546 51.050 2002 - 2010
1,155,546 51.050 2003 - 2010
8,350 51.350 2000 - 2009
16,700 51.850 2000 - 2009
35,070 53.450 2000 - 2009
253,005 54.050 2000 - 2009
2,088 54.800 2000 - 2009
4,175 54.850 2000 - 2009
8,350 55.300 2000 - 2009
75,150 56.300 2000 - 2009
4,886 56.300 2000 - 2010
12,525 57.200 2000 - 2009
2,227 59.650 2001 - 2010
2,227 59.650 2002 - 2010
2,227 59.650 2003 - 2010
6,976 60.000 2003 - 2010
1,392 60.350 2001 - 2010
1,392 60.350 2002 - 2010
1,392 60.350 2003 - 2010
6,263 60.500 2000 - 2010
4,830 62.110 2005 - 2010
106,694 62.110 2003 - 2010
402,505 63.263 2003 - 2010
2,227 63.450 2001 - 2010
2,227 63.450 2002 - 2010
2,227 63.450 2003 - 2010
6,958 63.700 2001 - 2010
6,958 63.700 2002 - 2010
6,958 63.700 2003 - 2010
1,948 63.750 2001 - 2010
1,948 63.750 2002 - 2010
1,948 63.750 2003 - 2010
33,400 64.350 2000 - 2010
2,783 64.600 2001 - 2010
2,783 64.600 2002 - 2010
2,783 64.600 2003 - 2010
1,391 65.100 2001 - 2010
1,391 65.100 2002 - 2010
1,391 65.100 2003 - 2010
7,120 66.700 2001 - 2010
7,120 66.700 2002 - 2010
7,120 66.700 2003 - 2010
2,227 67.050 2001 - 2010
2,227 67.050 2002 - 2010
2,227 67.050 2003 - 2010
2,783 68.500 2001 - 2010
2,783 68.500 2002 - 2010
2,783 68.500 2003 - 2010
15,865 71.800 2000 - 2010
1,058 72.600 2001 - 2010
1,058 72.600 2002 - 2010
1,058 72.600 2003 - 2010
41,428 84.485 2003 - 2010
15,030 84.750 2000 - 2010
===============================================================================
|
As at 31 December 2000, unexercised options totalling 4,634,490 have been granted under the WPP Worldwide Share Ownership Program as follows:
-------------------------------------------------------------------------------
Number of ordinary Exercise price
shares under option per share (Pounds) Exercise dates
-------------------------------------------------------------------------------
WPP Worldwide Share Ownership Programme
-------------------------------------------------------------------------------
266,325 2.695 2000 - 2007
1,762,075 3.030 2001 - 2008
1,394,225 5.315 2002 - 2009
1,211,865 7.790 2003 - 2010
===============================================================================
|
Further grants were made on 19 March 2001 of 1,024 options on ordinary shares at (Pounds)8.11 exercisable between 2005 and 2011; 2,560 options on ordinary shares at (Pounds)8.11 exercisable between 2004 and 2005; 133,877 options on ordinary shares at (Pounds)8.11 exercisable between 2004 and 2011; 69,805 options on ADRs at $58.2375 exercisable between 2004 and 2011.
The aggregate status of the WPP Share Option Schemes during 2000 was as follows:
Granted as
consideration
1 January for the 31 December
2000 Granted acquisition Exercised Lapsed 2000
number number of Y&R number number number
-------------------------------------------------------------------------------
WPP 32,940,834 6,419,489 - 6,196,125 2,989,401 30,174,797
Y&R - - 105,229,764 28,562,541 - 76,667,223
-------------------------------------------------------------------------------
32,940,834 6,419,489 105,229,764 34,758,666 2,989,401 106,842,020
===============================================================================
|
Range of Weighted average Weighted average
exercise prices exercise price contractual life
(pound) (pound) Months
--------------------------------------------------------------------------------
0.2950-10.77 3.15 79.51
--------------------------------------------------------------------------------
Options outstanding over ADRs
--------------------------------------------------------------------------------
Range of Weighted average Weighted average
exercise prices exercise price contractual life
$ $ Months
--------------------------------------------------------------------------------
2.30-84.75 28.94 91.79
--------------------------------------------------------------------------------
|
2000 1999 1998
--------------------------------------------------------------------------------
Fair value of UK options (shares) 286.1p 134.0p 71.5p
Fair value of US options (ADRs) $ 16.18 - -
Weighted average assumptions:
UK Risk-free interest rate 6.02% 5.23% 5.84%
US Risk-free interest rate 5.94% - -
Expected life (months) 36 36 36
Expected volatility 40% 28% 25%
Dividend yield 0.6% 0.6% 0.6%
--------------------------------------------------------------------------------
|
Options are issued at an exercise price equal to market value on the date of grant.
2000 1999
--------------------------------------------------------------------------------
Fair value 299.9p 233.8p
Weighted average assumptions:
Risk-free interest rate 5.80% 5.23%
Expected life (months) 48 60
Expected volatility 40% 28%
Dividend yield 0.6% 0.6%
|
24 Shareowner's funds
Other reserves at 31 December 2000 comprise: currency translation deficit(Pounds)257.5 million (1999:(Pounds)124.5 million, 1998 (Pounds)93.3 million), capital redemption reserve(Pounds)1.3 million (1999:(Pounds)1.3 million, 1998:(Pounds)1.3 million) and goodwill write-off reserve (Pounds)nil (1999:(Pounds)nil, 1998:(Pounds)1,160.4 million).
On 4 October 2000 the Company finalised its acquisition of Young & Rubicam Inc. As a result the value of the consideration which was satisfied entirely by the issue of new WPP ordinary shares or WPP American Depositary Shares has been calculated by reference to the opening WPP share price on 4 October 2000 of (Pounds)7.99.
The following table sets out the book values of the identifiable assets and liabilities acquired and their fair value to the group:
--------------------------------------------------------------------------------------------------------
Book Account- Fair value Fair
value at ing policy adjust- value
acquisition alignments/1/ ments/2/ to Group
(Pounds)m (Pounds)m (Pounds)m (Pounds)m
--------------------------------------------------------------------------------------------------------
Goodwill and intangible fixed assets 34.5 (8.6) 597.8/(i)/ 623.7
Tangible fixed assets 128.6 (5.1) 14.4/(ii)/ 137.9
Investments 102.8 - (54.1)/(iii)/ 48.7
Current assets 1,113.5 - (164.8)/(iv)/ 948.7
--------------------------------------------------------------------------------------------------------
Total assets 1,379.4 (13.7) 393.3 1,759.0
--------------------------------------------------------------------------------------------------------
Payments due to vendors within one year - (15.0) - (15.0)
Other creditors due within one year (1,104.3) - (51.7)/(v)/ (1,156.0)
Payments due to vendors after one year - (53.0) - (53.0)
Other creditors due after one year (281.5) - - (281.5)
Provision for reorganisation
and restructuring/3/ (23.9) - - (23.9)
Other provisions (39.9) - (19.6)/(vi)/ (59.5)
--------------------------------------------------------------------------------------------------------
Total liabilities (1,449.6) (68.0) (71.3) (1,588.9)
--------------------------------------------------------------------------------------------------------
Net assets (70.2) (81.7) 322.0 170.1
========================================================================================================
|
--------------------------------------------------------------------------------------------------------
Book Account- Fair value Fair
value at ing policy adjust- value
acquisition alignments/1/ ments/2/ to Group
(Pounds)m (Pounds)m (Pounds)m (Pounds)m
--------------------------------------------------------------------------------------------------------
Minority interest (9.7)
Goodwill 2,818.5
--------------------------------------------------------------------------------------------------------
Consideration 2,978.9
--------------------------------------------------------------------------------------------------------
Consideration satisfied by:
Shares issued 2,412.1
Shares to be issued 547.3
Capitalised acquisition costs 19.5
--------------------------------------------------------------------------------------------------------
2,978.9
========================================================================================================
|
Notes
The table above sets out the details of the merger with Young & Rubicam Inc.,
which was completed on 4 October 2000 and has been accounted for as an
acquisition.
1 Accounting policy alignments
These comprise adjustments to bring the assets and liabilities of Young & Rubicam Inc. into compliance with WPP Group plc's UK GAAP accounting practices and policies. These adjustments include recognition of contingent consideration due to vendors based upon the directors' best estimate of payments likely to be made as at the date of acquisition.
2 Fair value adjustments
These comprise adjustments to bring the book value of the assets and
liabilities of Young & Rubicam Inc. to fair value:
(i) Recognition of the corporate brand name of Young & Rubicam Inc.
(ii) Revaluation of freehold interest in Young & Rubicam's New York offices at
285 Madison Avenue to fair value and write down of certain other tangible fixed
assets, primarily computer equipment, to fair value.
(iii) Revaluation of internet investments to fair value.
(iv) Restatement of deferred tax assets.
(v) Recognition of accrual for social taxes payable on share options and
accruals for the costs of legal cases existing at the date of acquisition.
(vi) Provision for certain contingent liabilities where the likelihood of
settlement is considered probable at the date of acquisition.
3 Provision for reorganisation and restructuring
Accruals for severance payments arising from change in control clauses in employee contracts, triggered as a result of the acquisition by WPP Group plc.
Net cash outflows in respect of the acquisition of Young & Rubicam Inc.
comprised:
-------------------------------------------------------------------------------
(Pounds)m
-------------------------------------------------------------------------------
Cash at bank and in hand acquired 78.2
Bank overdrafts acquired (99.7)
Share issue and acquisition costs (24.6)
-------------------------------------------------------------------------------
(46.1)
===============================================================================
Young & Rubicam Inc. contributed (pound)203.4 million to the Group's net
operating cash flows, paid (pound)3.3 million in respect of net returns on
investment and servicing of finance, paid (pound)7.2 million in respect of
taxation and utilised (pound)21.9 million for capital expenditure.
|
The summarised profit and loss accounts and statements of total recognised gains and losses of Young & Rubicam Inc. for the period from 1 January 2000 to 4 October 2000 and the year ended 31 December 1999 are summarised below. These amounts are shown in US Dollars, on the basis of the accounting policies of Young & Rubicam Inc. prior to the acquisition. The post acquisition contribution of Young & Rubicam Inc. is shown on the face of the group's profit and loss account on page F-6.
Young & Rubicam Inc.
Profit and loss account- Period ended Year ended
period ended 4 October 2000 4 October 2000 31 December 1999
$USm $USm
--------------------------------------------------------------------------------
Turnover 6,208.1 8,530.9
Cost of sales (4,796.1) (6,813.7)
--------------------------------------------------------------------------------
Gross profit 1,412.0 1,717.2
Other operating expenses (net) (1,276.2) (1,509.1)
--------------------------------------------------------------------------------
Operating profit 135.8 208.1
Exceptional items:
Merger costs (66.0) -
Other income/1/ 12.2 85.0
Finance charges (net) (13.9) (14.8)
--------------------------------------------------------------------------------
Profit on ordinary activities before taxation 68.1 278.3
Tax on profit on ordinary activities (47.3) (111.3)
--------------------------------------------------------------------------------
Profit on ordinary activities after taxation 20.8 167.0
Equity income/2/ 3.0 4.5
--------------------------------------------------------------------------------
Minority interests (2.2) (4.4)
--------------------------------------------------------------------------------
Profit for the financial period 21.6 167.1
--------------------------------------------------------------------------------
Statement of comprehensive income $USm $USm
--------------------------------------------------------------------------------
Profit for the financial period 21.6 167.1
Unrealised (deficit)/surplus on
revaluation
of equity securities (177.0) 145.0
Loss on foreign currency translation (22.7) (22.3)
-------------------------------------------------------------------------------
Minimum pension liability - 0.4
-------------------------------------------------------------------------------
Total recognised gains and losses
relating to the period (178.1) 290.2
===============================================================================
|
/1/Other income in the period ended 4 October 2000 includes the gain on sale of certain assets and rights known as Y&R Teamspace to eMotion Inc. and other net gains from investing activities, including additional consideration received as a result of achieving revenue and operating profit performance targets of the Brand Dialogue assets contributed to Luminant Worldwide corporation in 1999. Other income in 1999 includes the net pre-tax gain on the sale of certain assets of Brand Dialogue operations in exchange for an ownership interest in Luminant and additional consideration received as a result of achieving revenue and operating profit performance targets of the Brand Dialogue contributed assets. /2/Equity income has been presented below profit on ordinary activities after taxation in accordance with US GAAP.
Other acquisitions
The Group undertook a number of other acquisitions in the year. Goodwill arising on these acquisitions was calculated as follows:
-------------------------------------------------------------------------------
Fair
value Cost of
Book adjust- Fair acquisi-
value ments value tion Goodwill
(Pounds)m (Pounds)m (Pounds)m (Pounds)m (Pounds)m
-------------------------------------------------------------------------------
Sifo Research & Consulting (10.6) (2.8) (13.4) 30.9 44.3
Other 11.9 (28.3) (16.4) 212.9 229.3
-------------------------------------------------------------------------------
1.3 (31.1) (29.8) 243.8 273.6
===============================================================================
|
Goodwill above of (Pounds)273.6 million includes (Pounds)268.5 million in respect of the acquisition of subsidiary undertakings and (Pounds)5.1 million in respect of associate undertakings. Included in these amounts are (Pounds)141.6 million of cash paid and (Pounds)102.2 million of additional future anticipated payments to vendors, based on the directors' best estimates of future obligations, which are dependent on future performance of the interests acquired. Cash paid to vendors in respect of consideration accrued in prior years amounted to (Pounds)40.3 million.
Fair value adjustments of (Pounds)31.1 million arising on these acquisitions include (Pounds)17.1 million of additional tax liabilities and (Pounds)14.0 million of other liabilities.
Reconciliation to US Generally Accepted Accounting Principles
The following is a summary of the significant adjustments to profit and ordinary share owners' funds which would be required if US Generally Accepted Accounting Principles (US GAAP) had been applied:
-------------------------------------------------------------------------------
For the year ended 31 December
--------------------------------
2000 1999* 1998*
Notes (pounds)m (pounds)m (pounds)m
-------------------------------------------------------------------------------
Net income
Profit attributable to ordinary share
owners under UK GAAP 244.7 172.8 140.3
US GAAP adjustments:
Amortisation of goodwill and other
intangibles 1 (83.2) (42.1) (38.2)
Executive compensation 1 (38.3) (58.4) (2.6)
Contingent consideration deemed as
compensation 1 (8.6) - -
Deferred tax items 1 8.3 9.6 0.9
-------------------------------------------------------------------------------
(121.8) (90.9) (39.9)
-------------------------------------------------------------------------------
Net income as adjusted for US GAAP 122.9 81.9 100.4
===============================================================================
Statement of comprehensive income
Net income as adjusted for US GAAP 122.9 81.9 100.4
-------------------------------------------------------------------------------
Revaluation of investments marked to market (6.8) 41.2 -
-------------------------------------------------------------------------------
Foreign currency net investment (133.0) (31.2) 4.0
-------------------------------------------------------------------------------
Total recognised gains & losses relating
to the period (16.9) 91.9 104.4
-------------------------------------------------------------------------------
Earnings per share
Basic earnings per share as adjusted for
US GAAP (p) 2 14.7 10.9 13.6
-------------------------------------------------------------------------------
Diluted earnings per share as adjusted for
US GAAP (p) 2 14.1 10.6 13.4
===============================================================================
|
A reconciliation from UK to US GAAP in respect of earnings per share is shown below.
2000 1999 1998
------------------------------------------------------------------------------
Net income as adjusted for US GAAP:
As reported ((Pounds)m) 122.9 81.9 100.4
Pro forma ((Pounds)m) 116.0 77.7 97.7
------------------------------------------------------------------------------
Basic earnings per share per US GAAP:
As reported (p) 14.7 10.9 13.6
Pro forma (p) 13.9 10.3 13.3
==============================================================================
|
Further details regarding stock option plans and the fair valuation of option grants can be found on pages F-19 and F-20.
==============================================================================
As at 31 December
------------------------------------
2000 1999* 1998*
Notes (Pounds)m (Pounds)m (Pounds)m
------------------------------------------------------------------------------
Share owners' funds
Share owners' funds under UK GAAP 3,409.9 346.2 215.7
US GAAP adjustments:
Capitalisation of goodwill arising on
acquisition (net of accumulated
amortisation and amounts capitalised
under UK GAAP) 1 834.5 685.2 762.7
Revaluation of investments marked to
market 34.4 41.2 -
Contingent consideration deemed as
compensation 1 (8.6) - -
Shares owned by Employee Share Option
Plan (ESOP) 1 (160.2) (71.3) (58.1)
Deferred tax items 1 14.3 6.0 (3.6)
Proposed final ordinary dividend, not
yet declared 1 28.5 16.2 13.4
Other (3.7) (3.9) (4.4)
------------------------------------------------------------------------------
739.2 673.4 710.0
------------------------------------------------------------------------------
Share owners' funds as adjusted for US GAAP 2 4,149.1 1,019.6 925.7
==============================================================================
|
Gross goodwill capitalised under US GAAP (before accumulated amortisation)
amounted to (Pounds)4,776.8 million (1999: (Pounds)1,582.6 million, 1998:
(Pounds)1,509.5 million), net of disposals made. The movement in goodwill arises
due to the impact of acquisitions made during the year and also its denomination
in various currencies, resulting in exchange rate movements against sterling.
Movement in share owners' funds under US GAAP
--------------------------------------------------------------------------------
2000 1999* 1998*
(Pounds)m (Pounds)m (Pounds)m
------------------------------------------------------------------------------
Net income for the year under US GAAP 122.9 81.9 100.4
Prior year final dividend (16.2) (13.4) (10.5)
Current year interim dividend (9.3) (7.8) (6.2)
------------------------------------------------------------------------------
Retained earnings for the year 97.4 60.7 83.7
Ordinary shares issued in respect of acquisitions 3,225.3 0.8 105.4
Share issue costs charged to merger reserve (35.0) - -
Share options exercised 64.0 12.1 4.1
Shares owned by Employee Share Option Plan (88.9) (13.2) (31.1)
Revaluation of investments marked to market (6.8) 41.2 -
Share buy-backs - - (21.3)
Exchabge adjustments:
Revaluation of goodwill (31.8) (34.9) 43.1
Foreign currency net investment (133.0) 58.4 2.6
------------------------------------------------------------------------------
New additions to share owner's funds 3,129.6 93.9 190.6
Share owner's funds at 1 January 1,019.6 925.7 735.2
------------------------------------------------------------------------------
Share owner's funds at 31 December 4,149.1 1,019.6 925.7
==============================================================================
|
* The 1999 and 1998 balance sheets and net income statements have been restated as a result of the implementation of FRS 19 (Deferred Tax) in the Group's 2000 financial statements.
Notes to Reconciliation to US Generally Accepted Accounting Principles
The Group's financial statements are prepared in accordance with Generally Accepted Accounting Principles (GAAP) applicable in the UK which differ in certain significant respects from those applicable in the US. These differences relate principally to the following items:
Goodwill, US purchase accounting and long-lived assets
Under US and UK GAAP, purchase consideration in respect of subsidiaries acquired is allocated on the basis of fair values to the various net assets, including intangible fixed assets, of the subsidiaries at the dates of acquisition and any net balance is treated as goodwill. Under UK GAAP, and in accordance with FRS 10 (Goodwill and Intangible Assets), goodwill arising on acquisitions on or after 1 January 1998 has been capitalised as an intangible asset. For certain acquisitions, where the directors consider it more appropriate, goodwill is amortised over its useful life up to a 20 year period, from the date of acquisition. The remaining goodwill and intangible assets of the Group are considered to have an infinite economic life for the reasons described in the note on accounting policies in the financial statements. Goodwill arising on acquisitions before 1 January 1998 was fully written off against share owners' equity, in accordance with the then preferred treatment under UK GAAP. Under US GAAP, goodwill in respect of business combinations accounted for as purchases would be charged against income over its estimated useful life, being not more than 40 years. Accordingly, for US GAAP purposes, the Group is amortising goodwill over 40 years. The Group evaluates the carrying value of its tangible and intangible assets whenever events or circumstances indicate their carrying value may exceed their recoverable amount. An impairment loss is recognised when the estimated future cash flows (undiscounted and without interest) expected to result from the use of an asset are less than the carrying amount of the asset. Measurement of an impairment loss is based on fair value of the asset computed using discounted cash flows if the asset is expected to be held and used.
Contingent consideration
Under UK GAAP, the Group provides for contingent consideration as a liability when it considers the likelihood of payment as probable. Under US GAAP, contingent consideration is not recognised until the liability is determined beyond reasonable doubt. At 31 December 2000, the Group's liabilities for vendor payments under UK GAAP totalled (Pounds)302.3 million (1999: (Pounds)172.4 million, 1998: (Pounds)97.9 million). As these liabilities are represented by goodwill arising on acquisition, there is no net effect on shareholders' funds. In certain transactions the Group considers that there is a commercial need to tie in vendors to the businesses acquired however believe that, in substance, payments made under earnouts represent purchase consideration rather than compensation for services. Under US GAAP, payments made to vendors which are conditional upon them remaining in employment with the company under earnout are required to be treated as compensation, regardless of the substance of the transaction, and the anticipated compensation expense is therefore accrued on a systematic basis over the earnout period.
Share consideration
Under UK GAAP, the share consideration for the acquisition of Young & Rubicam, Inc. was measured by reference to the opening share price on 4 October 2000 of (Pounds)7.99, which was when the acquisition became effective. The relevant measurement date for US GAAP was 12 May 2000, being the date of the announcement of the proposed acquisition and its recommendation to share owners by the respective Boards of directors of WPP Group plc and Young & Rubicam, Inc. The opening share price on 12 May 2000 was (Pounds)8.45.
Corporate brand names
Under UK GAAP, the Group carries corporate brand names as intangible fixed assets in the balance sheet. The initial recognition of the J. Walter Thompson corporate brand was booked as a revaluation in the year following acquisition and is not recognised under US GAAP. The Ogilvy & Mather and Young & Rubicam, Inc. brand names, acquired as part of The Ogilvy Group, Inc. and Young & Rubicam, Inc. respectively, were booked as acquisition adjustments to balance sheet assets acquired and are amortised as part of goodwill over 40 years.
Dividends
Under UK GAAP, final ordinary dividends are provided in the financial statements on the basis of recommendation by the directors. This requires subsequent approval by the share owners to become a legal obligation of the Group. Under US GAAP, dividends are provided only when the legal obligation to pay arises.
Deferred tax
The Group adopted FRS 19 (Deferred Tax) during the year and, for UK GAAP, the Group now accounts for deferred tax in accordance with the policy described in the note on accounting policies in the financial statements. Under US GAAP, deferred taxes are accounted for on all timing differences and a valuation allowance is established in respect of those deferred tax assets where it is more likely than not that some portion will remain unrealised.
Executive compensation
Under UK GAAP the part of executive compensation satisfied in stock is charged through the profit and loss account at the cost to the Group of acquiring the stock. Under US GAAP such compensation is measured at the fair value of WPP common stock at the date the performance condition is met or the award vests with the employee. Differences occur as the WPP Share Ownership Plan acquires stock before the liability to the employee arises.
Additionally, under UK GAAP stock options granted with performance criteria do not give rise to a profit and loss account charge provided that the exercise price is equal to the fair value of the stock at the date of grant. Under US GAAP stock options granted with performance criteria (other than a requirement for employment to continue) are subject to variable plan accounting under APB Opinion 25. Under variable plan accounting any appreciation in stock value from the date of grant to the date upon which the performance conditions are satisfied is charged to the profit and loss account.
Cash flows
Under UK GAAP the Group complies with the Financial Reporting Standard No. 1 Revised 'Cash Flow Statements' (FRS 1 Revised), the objective and principles of which are similar to those set out in SFAS 95 'Statement of Cash Flows' (SFAS). The principal difference between the two standards is in respect of classification. Under FRS 1 Revised, the Group presents its cash flows for (a) operating activities; (b) returns on investments and servicing of finance; (c) taxation; (d) investing activities; (e) equity dividends paid and (f) financing activities. SFAS 95 requires only three categories of cash flow activity (a) operating; (b) investing; and (c) financing. Cash flows arising from taxation and returns on investment and servicing of finance under FRS 1 Revised would be included as a financing activity under SFAS 95. Payments made against provisions set up on the acquisition of subsidiaries have been included in investing activities in the consolidated statement of cash flows. Under US GAAP these payments would be included in determining net cash provided by operating activities.
Shares owned by Employee Share Option Plan (ESOP)
Under UK GAAP, shares purchased by the ESOP are recorded as fixed asset investments at cost less amounts written off. Under US GAAP, these shares are recorded at cost and deducted from share owners' equity. The Group's ESOPs comprise trusts which acquire WPP shares in the open market to fulfil obligations under the Group's stock-based compensation plans. These trusts do not meet the definition of an 'ESOP' under US GAAP.
Listed investments
Under UK GAAP, the carrying value of listed investments, where these represent an interest of less than 20%, is determined as cost less any provision for diminution in value. Under US GAAP, such investments are marked to market and any resulting unrealised gain or loss is taken to share owners' funds. Where the decline in value is other than temporary, the resulting loss would be taken to the profit and loss account under both UK and US GAAP. The material listed investments of the Group are considered to be 'available for sale' securities under US GAAP.
Notes to Reconciliation to US Generally Accepted Accounting Principles continued
Basic Diluted
earnings earnings
per share per share
Year ended 31 December 2000 No. No.
--------------------------------------------------------------------------------
Under UK GAAP 834,280,801 865,978,000
--------------------------------------------------------------------------------
Weighted average number of share options issued
with exercise criteria not yet satisfied at
31 December 2000 - 4,830,727
--------------------------------------------------------------------------------
Under US GAAP 834,280,801 879,808,727
--------------------------------------------------------------------------------
Year ended 31 December 1999
--------------------------------------------------------------------------------
Under UK GAAP 753,324,054 768,691,993
--------------------------------------------------------------------------------
Weighted average number of share options issued
with exercise criteria not yet satisfied at
31 December 1999 - 5,430,846
--------------------------------------------------------------------------------
Under US GAAP 753,324,054 774,122,839
--------------------------------------------------------------------------------
Year ended 31 December 1998
--------------------------------------------------------------------------------
Under UK GAAP 735,700,122 746,939,733
--------------------------------------------------------------------------------
Weighted average number of share options issued
with exercise criteria not yet satisfied at
31 December 1998 - 4,115,097
--------------------------------------------------------------------------------
Under US GAAP 735,700,122 751,054,830
--------------------------------------------------------------------------------
|
Accounting for Derivative Instruments and Hedging Activities
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. The Statement establishes accounting and reporting
standards in the United States requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at its
fair value. The Statement requires that changes in the derivative's fair value
be recognised currently in earnings unless specific hedge accounting criteria
are met. Special accounting for qualifying hedges allows a derivative's gains
and losses to offset related results on the hedged item in the income statement,
and requires that a company must formally document, designate, and assess the
effectiveness of transactions that receive hedge accounting.
Statement 133, as amended by Statement 137, is effective for fiscal years
beginning after 15 June 2000. A company may also implement the Statement as of
the beginning of any fiscal quarter after issuance (that is, fiscal quarters
beginning 16 June 1998 and thereafter). Statement 133 cannot be applied
retroactively. Statement 133 must be applied to (a) derivative instruments and
(b) certain derivative instruments embedded in hybrid contracts that were
issued, acquired, or substantively modified after 31 December 1997.
The Group has not yet quantified the impact of adopting Statement 133 on the
amounts presented under US generally accepted accounting standards. However, the
Statement could increase volatility in earnings and other comprehensive income.
The following table shows the information required to be disclosed in accordance with SFAS No.132 concerning the funded status of the Group's defined benefit schemes at 31 December 2000.
Year ending 31 December 2000
-----------------------------------------------------------------------------------------------------------------------------------
US Non-US
schemes schemes Total
Change in benefit obligation (Pounds)m (Pounds)m (Pounds)m
-----------------------------------------------------------------------------------------------------------------------------------
Benefit obligation at beginning of year 60.3 137.5 197.8
Service cost 8.3 5.8 14.1
Interest cost 4.5 7.5 12.0
Member contributions 0.0 0.7 0.7
Amendments 0.0 0.0 0.0
Actuarial (gain)/loss 1.2 48.6 49.8
Acquisition 92.8 5.3 98.1
Adjustments (5.1) 44.4 39.3
Benefits paid (4.2) (7.6) (11.8)
Benefit obligation at end of year 157.8 242.2 400.0
-----------------------------------------------------------------------------------------------------------------------------------
Change in plan assets
Fair value of plan assets at beginning of year 56.2 146.0 202.2
Actual return on plan assets 4.9 10.0 14.9
Acquisition 92.8 0.0 92.8
Adjustments (4.7) 50.5 45.8
Employer contributions 4.6 4.1 8.7
Members' contributions 0.0 0.7 0.7
Benefits paid (4.2) (7.6) (11.8)
Fair value of plan assets at end of year 149.6 203.7 353.3
-----------------------------------------------------------------------------------------------------------------------------------
Funded status at end of year (8.2) (38.5) (46.7)
Unrecognised net actuarial (gain)/loss (12.0) 17.6 5.6
Unrecognised prior service cost 0.0 0.0 0.0
Unrecognised net transition (asset)/obligation 0.0 0.0 0.0
Net amount recognised (20.2) (20.9) (41.1)
-----------------------------------------------------------------------------------------------------------------------------------
Prepaid/(accrued) benefit cost (20.2) (20.9) (41.1)
-----------------------------------------------------------------------------------------------------------------------------------
Components of net periodic pension cost
Service cost 8.3 5.8 14.1
Interest cost 4.5 7.5 12.0
Expected return on plan assets (3.7) (9.5) (13.2)
Amortisation of transition (asset)/obligation 0.1 (2.5) (2.4)
Amortisation of prior service cost 0.2 0.0 0.2
Amortisation of net (gain)/loss 0.0 0.0 0.0
Curtailment charge 0.0 0.0 0.0
Net periodic pension cost 9.4 1.3 10.7
-----------------------------------------------------------------------------------------------------------------------------------
Weighted-average assumptions as of end of year
Discount rate 8.0% 5.5% 6.5%
Expected return on plan assets 8.8% 6.5% 7.3%
Rate of compensation increase 6.5% 4.5% 5.3%
-----------------------------------------------------------------------------------------------------------------------------------
Footnotes:
1. The defined benefit pension cost for 2000 was (Pounds)10.7 million.
2. The pension cost for defined contribution schemes for 2000 was (Pounds)25.3 million.
3. A number of plans have an unfunded accumulated benefit obligation. The breakdown showing
this is as follows:
------------------------------------------------------------------------------------------------------------------------------------
US Non-US
plans plans Total
(Pounds)m (Pounds)m (Pounds)m
Assets 0.0 181.5 181.5
Accumulated benefit obligation 5.3 212.1 217.4
------------------------------------------------------------------------------------------------------------------------------------
|
NOTE 5. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
Young & Rubicam Inc. ("Y&R Inc.") is an issuer of certain securities registered under the Securities Act of 1933, guaranteed by WPP Group plc, thus subjecting both Y&R Inc. and WPP Group plc to reporting requirements under Section 15 (d) of the Securities Exchange Act of 1934. The following condensed consolidating financial information is presented in lieu of consolidated financial statements of these companies because the Y&R Inc. securities are fully and unconditionally guaranteed by WPP Group plc. As the merger between WPP Group plc and Y&R Inc. occurred October 4, 2000, any profit & loss account amounts for Y&R Inc. and its consolidated subsidiaries (whether included in the Y&R Inc., Non-guarantor Subsidiaries, or Reclassifications/Eliminations columns) are for the period from October 5, 2000 through December 31, 2000. Note that prior to October 4, 2000, Y&R Inc., whose common stock was listed on the New York Stock Exchange, filed periodic reports and other information with the Securities and Exchange Commission.
Consolidating profit and loss account (UK Sterling)
For the year ended 31 December 2000
-----------------------------------------------------------------------------------------------------------------------------------
WPP Group plc Y&R Inc. Non-guarantor Reclassifications/Eliminations Consolidated
(Pounds)m (Pounds)m Subsidiaries (Pounds)m WPP Group plc
(Pounds)m (Pounds)m
-----------------------------------------------------------------------------------------------------------------------------------
Turnover (gross billings) 858.3 13,091.1 13,949.4
Cost of sales (687.5) (10,281.2) (10,968.7)
--------------------------------------------------------------------------------------------
Revenue 170.8 2,809.9 2,980.7
Direct costs - (244.6) (244.6)
--------------------------------------------------------------------------------------------
Gross profit 170.8 2,565.3 2,736.1
Operating costs 20.7 (163.1) (2,215.7) (2,358.1)
--------------------------------------------------------------------------------------------
Operating profit 20.7 7.7 349.6 378.0
Income from subsidiaries (687.3) 39.0 (16.1) 664.4 -
Income from associates - 0.1 37.9 38.0
--------------------------------------------------------------------------------------------
Profit on ordinary activities
before interest and taxation (666.6) 46.8 371.4 664.4 416.0
Investment Income 923 27.5 (950.5) -
Net interest payable and similar
charges (11.7) (2.2) (36.4) (50.3)
--------------------------------------------------------------------------------------------
Profit on ordinary activities 244.7 44.6 362.5 (286.1) 365.7
before taxation
Taxation on profit on ordinary
activities - 5.8 (115.5) - (109.7)
--------------------------------------------------------------------------------------------
Profit on ordinary activities 244.7 50.4 247.0 (286.1) 256.0
after taxation
Minority interests - - (11.3) (11.3)
--------------------------------------------------------------------------------------------
Profit attributable to ordinary 244.7 50.4 235.7 (286.1) 244.7
share owners
Ordinary dividends (37.8) - - (37.8)
Intercompany dividends - (27.5) (923.0) 950.5 -
--------------------------------------------------------------------------------------------
Retained profit for the year 206.9 22.9 (687.3) 664.4 206.9
-------------------------------------------------------------------------------------------------------------------------------
|
Consolidating cash flow statement
For the year ended 31 December 2000
-----------------------------------------------------------------------------------------------------------------------------------
WPP Group plc Y&R Inc. Non-guarantor Reclassifications/Eliminations Consolidated
(Pounds)m (Pounds)m Subsidiaries (Pounds)m WPP Group plc
(Pounds)m (Pounds)m
------------------------------------------------------------------------------------------------------------------------------------
Net cash inflow from
operating activities 65.3 100.6 457.1 623.0
Dividends received from
associates - - 7.6 7.6
Return on investments and
servicing of finance 3.4 (1.7) (23.0) (43.3) (64.6)
United Kingdom and overseas
tax paid (9.6) (2.5) (69.3) (81.4)
Capital expenditure and
financial investment (99.9) (12.3) (86.9) (199.1)
Acquisition payments, net
of cash and overdrafts
acquired (53.5) (71.5) (206.9) 50.9 (281.0)
Equity dividends paid (25.6) (27.5) (15.8) 43.3 (25.6)
--------------------------------------------------------------------------------------------
Net cash inflow (outflow)
before financing (119.9) (14.9) 62.8 50.9 (21.1)
Proceeds from issue of shares 78.0 - 50.9 (50.9) 78.0
Net change in intercompany
balance 283.6 (45.3) (238.3) -
Net increase (decrease) in
debt (180.3) 2.0 304.9 126.6
--------------------------------------------------------------------------------------------
Net cash inflow (outflow)
from financing 181.3 (43.3) 117.5 (50.9) 204.6
Increase in cash and
overdrafts for the year 61.4 (58.2) 180.3 183.5
Translation difference - 7.2 27.9 35.1
Balance of cash and
overdrafts at beginning of
year (23.1) 574.5 551.4
--------------------------------------------------------------------------------------------
Balance of cash and
overdrafts at end of year 38.3 (51.0) 782.7 - 770.0
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
|
Consolidating balance sheet
As at 31 December 2000
----------------------------------------------------------------------------------------------------------------------------------
WPP Group plc Y&R Inc. Non-guarantor Reclassifications/Eliminations Consolidated
(Pounds)m (Pounds)m Subsidiaries (Pounds)m WPP Group plc
(Pounds)m (Pounds)m
-----------------------------------------------------------------------------------------------------------------------------------
Fixed assets
Goodwill/Intangible assets - 1,970.0 2,477.3 4,447.3
Tangible assets 13.4 91.1 285.7 390.2
Investment in subsidiaries 4,253.5 1,634.0 1,388.5 (7,276.0) -
Investments 160.2 28.5 362.8 551.5
--------------------------------------------------------------------------------------------
4,427.1 3,723.6 4,514.3 (7,276.0) 5,389.0
Current assets
Stocks and work in progress - 41.2 199.9 241.1
Trade debtors - 265.2 1,667.5 1,932.7
Other debtors 35.8 21.4 424.4 481.6
Cash at bank and in hand 49.2 35.5 982.9 1,067.6
--------------------------------------------------------------------------------------------
85.0 363.3 3,274.7 - 3,723.0
Creditors: amounts falling due
within one year
Bank overdrafts (10.9) (86.5) (200.2) (297.6)
Trade creditors - (503.6) (2,071.3) (2,574.9)
Deferred income - (40.0) (227.6) (267.6)
Other creditors and accruals (74.2) (145.7) (892.4) (1,112.3)
--------------------------------------------------------------------------------------------
(85.1) (775.8) (3,391.5) - (4,252.4)
Net current assets (liabilities) (0.1) (412.5) (116.8) - (529.4)
Total assets less current 4,427.0 3,311.1 4,397.5 (7,276.0) 4,859.6
liabilities
Creditors: amounts falling due
after more than one year
(including convertible loan
note)
Loans - (192.7) (601.9) (794.6)
Other creditors and accruals (10.2) (115.0) (359.8) (485.0)
--------------------------------------------------------------------------------------------
(10.2) (307.7) (961.7) - (1,279.6)
Provisions for liabilities and - (27.9) (118.0) (145.9)
charges
Intercompany receivable (982.7) 47.0 935.7 -
(payable)
Net assets 3,434.1 3,022.5 4,253.5 (7,276.0) 3,434.1
----------------------------------------------------------------------------------------------------------------------------
|
Reconciliation to US Accounting Principles
For the year ended and as at 31 December 2000
The following is a summary of the significant adjustments to profit and ordinary share owners' funds which would be required if US Generally Accepted Accounting Principles had been applied:
----------------------------------------------------------------------------------------------------------------------------------
WPP Group plc Y&R Inc. Non-guarantor Reclassifications/Eliminations Consolidated
(Pounds)m (Pounds)m Subsidiaries (Pounds)m WPP Group plc
(Pounds)m (Pounds)m
-----------------------------------------------------------------------------------------------------------------------------------
Profit attributable to
ordinary share owners under
UK GAAP 244.7 50.4 235.7 (286.1) 244.7
US GAAP adjustments:
Income from subsidiaries (120.6) (14.8) 135.4 -
Amortisation of goodwill and
other intangibles (14.8) (68.4) (83.2)
Executive compensation (2.9) (35.4) (38.3)
Contingent consideration
deemed as compensation (8.6) (8.6)
Deferred tax items 1.7 6.6 8.3
--------------------------------------------------------------------------------------------
(121.8) (14.8) (120.6) 135.4 (121.8)
Net income as adjusted for US
GAAP 122.9 35.6 115.1 (150.7) 122.9
---------------------------------------------------------------------------------------------------------------------------
|
Share owners' funds under UK
GAAP (excludes minority
interest) 3,409.9 3,022.5 4,229.3 (7,251.8) 3,409.9
US GAAP adjustments:
Investment in subsidiaries 862.0 114.9 (976.9)
Capitalisation of goodwill
arising on acquisition (net
of accumulated amortisation
and amounts capitalised under
UK GAAP) 118.2 716.3 834.5
Revaluation of investments
marked to market (3.3) 37.7 34.4
Contingent consideration
deemed as compensation (8.6) (8.6)
Shares owned by Employee Share
Option Plan (ESOP) (160.2) (160.2)
Deferred tax items 8.9 5.4 14.3
Proposed final ordinary
dividend, not yet declared 28.5 28.5
Other (3.7) (3.7)
--------------------------------------------------------------------------------------------
739.2 114.9 862.0 (976.9) 739.2
Share owners' funds as
adjusted for US GAAP 4,149.1 3,137.4 5,091.3 (8,228.7) 4,149.1
----------------------------------------------------------------------------------------------------------------------------
|
Consolidating profit and loss account (UK Sterling)
For the year ended 31 December 1999
-----------------------------------------------------------------------------------------------------------------------------------
WPP Group plc Non-guarantor Reclassifications/Eliminations Consolidated
(Pounds)m Subsidiaries (Pounds)m WPP Group plc
(Pounds)m (Pounds)m
------------------------------------------------------------------------------------------------------------------------------------
Turnover (gross billings) 9,345.9 9,345.9
Cost of sales (7,173.3) (7,173.3)
--------------------------------------------------------------------------------
Revenue 2,172.6 2,172.6
Direct costs (317.3) (317.3)
--------------------------------------------------------------------------------
Gross profit 1,855.3 1,855.3
Operating costs (0.8) (1,591.0) (1,591.8)
--------------------------------------------------------------------------------
Operating profit (loss) (0.8) 264.3 263.5
Income from subsidiaries 145.2 - (145.2) -
Income from associates - 27.3 27.3
--------------------------------------------------------------------------------
Profit on ordinary activities
before interest and taxation 144.4 291.6 (145.2) 290.8
Investment Income 39.3 - (39.3) -
Net interest payable and similar
charges (9.4) (26.0) (35.4)
--------------------------------------------------------------------------------
Profit on ordinary activities
before taxation 174.3 265.6 (184.5) 255.4
Taxation on profit on ordinary
activities (1.5) (75.1) (76.6)
--------------------------------------------------------------------------------
Profit on ordinary activities
after taxation 172.8 190.5 (184.5) 178.8
Minority interests - (6.0) (6.0)
--------------------------------------------------------------------------------
Profit attributable to ordinary
share owners 172.8 184.5 (184.5) 172.8
Ordinary dividends (24.0) - (24.0)
Intercompany dividends - (39.3) 39.3 -
--------------------------------------------------------------------------------
Retained profit for the year 148.8 145.2 (145.2) 148.8
------------------------------------------------------------------------------------------------------------------
|
Consolidating cash flow statement
For the year ended 31 December 1999
-----------------------------------------------------------------------------------------------------------------------------------
WPP Group plc Non-guarantor Reclassifications/Eliminations Consolidated
(Pounds)m Subsidiaries (Pounds)m WPP Group plc
(Pounds)m (Pounds)m
------------------------------------------------------------------------------------------------------------------------------------
Net cash inflow (outflow) from
operating activities (20.8) 369.3 348.5
Dividends received from
associates - 4.3 4.3
Return on investments and
servicing of finance 16.9 (20.2) (33.8) (37.1)
United Kingdom and overseas tax
paid (6.9) (51.5) (58.4)
Capital expenditure and
financial investment (23.7) (56.8) (80.5)
Acquisition payments, net
of cash and overdrafts
acquired (69.2) (201.3) 68.3 (202.2)
Equity dividends paid (21.1) (33.8) 33.8 (21.1)
--------------------------------------------------------------------------------
Net cash inflow (outflow)
before financing (124.8) 10.0 68.3 (46.5)
Proceeds from issue of shares 12.0 68.3 (68.3) 12.0
Net change in intercompany
balance (32.7) 32.7 -
Net increase (decrease) in debt 170.3 87.7 258.0
--------------------------------------------------------------------------------
Net cash inflow (outflow) from
financing 149.6 188.7 (68.3) 270.0
(Decrease) Increase in cash and
overdrafts for the year 24.8 198.7 223.5
Translation difference - (0.6) (0.6)
Balance of cash and overdrafts
at beginning of year (47.9) 376.4 328.5
--------------------------------------------------------------------------------
Balance of cash and overdrafts
at end of year (23.1) 574.5 551.4
----------------------------------------------------------------------------------------------------------------
|
Consolidating balance sheet
As at 31 December 1999
-----------------------------------------------------------------------------------------------------------------------------------
WPP Group plc Non-guarantor Reclassifications/Eliminations Consolidated
(Pounds)m Subsidiaries (Pounds)m WPP Group plc
(Pounds)m (Pounds)m
-----------------------------------------------------------------------------------------------------------------------------------
Fixed assets
Goodwill/Intangible assets 760.3 760.3
Tangible assets 10.3 186.4 196.7
Investment in subsidiaries 994.0 - (994.0) -
Investments 71.3 285.6 356.9
--------------------------------------------------------------------------------
1,075.6 1,232.3 (994.0) 1,313.9
Current assets
Stocks and work in progress - 113.5 113.5
Trade debtors - 901.6 901.6
Other debtors 39.0 259.4 298.4
Cash at bank and in hand 2.4 604.6 607.0
--------------------------------------------------------------------------------
41.4 1,879.1 - 1,920.5
Creditors: amounts falling due
within one year
Bank overdraft/Short-term loans (25.5) (122.8) (148.3)
Trade creditors - (1,315.0) (1,315.0)
Deferred income - (125.8) (125.8)
Other creditors and accruals (31.5) (527.4) (558.9)
--------------------------------------------------------------------------------
(57.0) (2,091.0) - (2,148.0)
Net current assets (liabilities) (15.6) (211.9) (227.5)
Total assets less current
liabilities 1,060.0 1,020.4 (994.0) 1,086.4
Creditors: amounts falling due
after more than one year
(including convertible loan note)
Loans (180.3) (186.5) (366.8)
Other creditors and accruals (8.9) (276.8) (285.7)
--------------------------------------------------------------------------------
(189.2) (463.3) - (652.5)
Provisions for liabilities and
charges - (79.2) (79.2)
Intercompany receivable (payable) (516.1) 516.1 -
Net assets 354.7 994.0 (994.0) 354.7
------------------------------------------------------------------------------------------------------------------
|
Reconciliation to US Accounting Principles
For the year ended and as at 31 December 1999
------------------------------------------------------------------------------------------------------------------------------------
WPP Group plc Non-guarantor Reclassifications/Eliminations Consolidated
(Pounds)m Subsidiaries (Pounds)m WPP Group plc
(Pounds)m (Pounds)m
------------------------------------------------------------------------------------------------------------------------------------
Profit attributable to ordinary
share owners under UK GAAP 172.8 184.5 (184.5) 172.8
US GAAP adjustments:
Income from subsidiaries (75.7) 75.7
Amortisation of goodwill and
other intangibles (42.1) (42.1)
Executive compensation (22.4) (36.0) (58.4)
Deferred tax items 7.2 2.4 9.6
--------------------------------------------------------------------------------
(90.9) (75.7) 75.7 (90.9)
Net income as adjusted for US GAAP
81.9 108.8 (108.8) 81.9
------------------------------------------------------------------------------------------------------------------
|
Share owners' funds under UK GAAP
(excludes minority interest) 346.2 985.5 (985.5) 346.2
US GAAP adjustments:
Investment in subsidiaries 728.5 (728.5) -
Capitalisation of goodwill
arising on acquisition (net of
accumulated amortisation and
amounts capitalised under UK
GAAP) 685.2 685.2
Revaluation of investments marked
to market 41.2 41.2
Shares owned by
Employee Share Option
Plan (ESOP) (71.3) (71.3)
Deferred tax items 6.0 6.0
Proposed final ordinary dividend,
not yet declared 16.2 16.2
Other (3.9) (3.9)
-------------------------------------------------------------------
673.4 728.5 (728.5) 673.4
Share owners' funds as adjusted
for US GAAP 1,019.6 1,714.0 (1,714.0) 1,019.6
-----------------------------------------------------------------------------------------------------
|
Consolidating profit and loss account (UK Sterling)
For the year ended 31 December 1998
-----------------------------------------------------------------------------------------------------------------------------------
WPP Group plc Non-guarantor Reclassifications/Eliminations Consolidated
(Pounds)m Subsidiaries (Pounds)m WPP Group plc
(Pounds)m (Pounds)m
-----------------------------------------------------------------------------------------------------------------------------------
Turnover (gross billings) 8,000.1 8,000.1
Cost of sales (6,081.7) (6,081.7)
--------------------------------------------------------------------------------------
Revenue 1,918.4 1,918.4
Direct costs (285.9) (285.9)
--------------------------------------------------------------------------------------
Gross profit 1,632.5 1,632.5
Operating costs (5.4) (1,398.0) (1,403.4)
--------------------------------------------------------------------------------------
Operating profit (loss) (5.4) 234.5 229.1
Income from subsidiaries 149.7 (149.7) -
Income from associates - 16.1 16.1
--------------------------------------------------------------------------------------
Profit on ordinary activities
before interest and taxation 144.3 250.6 (149.7) 245.2
Investment Income 31.5 (31.5) -
Net interest payable and similar
charges (27.3) (5.1) (32.4)
--------------------------------------------------------------------------------------
Profit on ordinary activities
before taxation 148.5 245.5 (181.2) 212.8
Taxation on profit on ordinary
activities (8.2) (58.8) (67.0)
--------------------------------------------------------------------------------------
Profit on ordinary activities
after taxation 140.3 186.7 (181.2) 145.8
Minority interests - (5.5) (5.5)
--------------------------------------------------------------------------------------
Profit attributable to ordinary
share owners 140.3 181.2 (181.2) 140.3
Intercompany dividends - (31.5) 31.5 -
Ordinary dividends (19.6) - - (19.6)
--------------------------------------------------------------------------------------
Retained profit for the year 120.7 149.7 (149.7) 120.7
-------------------------------------------------------------------------------------------------------------------------
|
Consolidating cash flow statement
For the year ended 31 December 1998
------------------------------------------------------------------------------------------------------------------------------------
WPP Group plc Non-guarantor Reclassifications/Eliminations Consolidated
(Pounds)m Subsidiaries (Pounds)m WPP Group plc
(Pounds)m (Pounds)m
-----------------------------------------------------------------------------------------------------------------------------------
Net cash inflow (outflow) from
operating activities (13.8) 269.8 256.0
Dividends received from associates 3.4 3.4
Return on investments and
servicing of finance 13.1 (15.6) (26.2) (28.7)
United Kingdom and overseas tax
paid (5.6) (53.4) (59.0)
Capital expenditure and financial
investment (37.0) (45.1) (82.1)
Acquisition payments, net of cash
and overdrafts acquired (11.6) (110.4) 6.5 (115.5)
Equity dividends paid (16.6) (26.2) 26.2 (16.6)
---------------------------------------------------------------------------------------
Net cash inflow (outflow) before
financing (71.5) 22.5 6.5 (42.5)
Proceeds from issue of bond 178.8 178.8
Share buy-backs (21.3) (21.3)
Financing costs (2.3) (2.3)
Proceeds from issue of shares 4.3 6.5 (6.5) 4.3
Net change in intercompany balance 21.4 (21.4) -
Net increase (decrease) in debt 10.0 (91.4) (81.4)
---------------------------------------------------------------------------------------
Net cash inflow (outflow) from
financing 35.7 48.9 (6.5) 78.1
(Decrease)/Increase in cash and
overdrafts for the year (35.8) 71.4 35.6
Translation difference - 0.9 0.9
Balance of cash and overdrafts at
beginning of year (12.1) 304.1 292.0
---------------------------------------------------------------------------------------
Balance of cash and overdrafts at
end of year (47.9) 376.4 328.5
-------------------------------------------------------------------------------------------------------------------------
|
Consolidating balance sheet
As at 31 December 1998
------------------------------------------------------------------------------------------------------------------------------------
WPP Group plc Non-guarantor Reclassifications/Eliminations Consolidated
(Pounds)m Subsidiaries (Pounds)m WPP Group plc
(Pounds)m (Pounds)m
------------------------------------------------------------------------------------------------------------------------------------
Fixed assets
Goodwill/Intangible assets - 508.0 508.0
Tangible assets 5.8 160.9 166.7
Investment in subsidiaries 774.1 - (774.1)
Investments 58.1 210.1 268.2
---------------------------------------------------------------------------------------
838.0 879.0 (774.1) 942.9
Current assets
Stocks and work in progress - 107.3 107.3
Trade debtors - 764.2 764.2
Other debtors 31.6 210.6 242.2
Cash at bank and in hand 1.2 422.7 423.9
---------------------------------------------------------------------------------------
32.8 1,504.8 - 1,537.6
Creditors: amounts falling due within
one year
Bank overdraft (49.1) (46.3) (95.4)
Trade creditors - (1,102.4) (1,102.4)
Deferred income - (111.1) (111.1)
Other creditors and accruals (35.4) (433.0) (468.4)
---------------------------------------------------------------------------------------
(84.5) (1,692.8) - (1,777.3)
Net current assets (liabilities) (51.7) (188.0) (239.7)
Total assets less current liabilities 786.3 691.0 (774.1) 703.2
Creditors: amounts falling due after
more than one year (including
convertible loan note)
Loans - (194.2) (194.2)
Other creditors and accruals (22.3) (185.0) (207.3)
---------------------------------------------------------------------------------------
(22.3) (379.2) - (401.5)
Provisions for liabilities and charges - (77.9) (77.9)
Intercompany receivable (payable) (540.2) 540.2 -
Net assets 223.8 774.1 (774.1) 223.8
--------------------------------------------------------------------------------------------------------------------------------
|
Reconciliation to US Accounting Principles
For the year ended and as at 31 December 1998
------------------------------------------------------------------------------------------------------------------------------------
WPP Group plc Non-guarantor Reclassifications/Eliminations Consolidated
(Pounds)m Subsidiaries (Pounds)m (Pounds)m WPP Group plc
(Pounds)m
------------------------------------------------------------------------------------------------------------------------------------
Profit attributable to ordinary share
owners under UK GAAP 140.3 181.2 (181.2) 140.3
US GAAP adjustments:
Income from subsidiaries (38.0) 38.0 -
Amortisation of goodwill and other
intangibles (38.2) (38.2)
Executive compensation (1.9) (0.7) (2.6)
Deferred tax items 0.9 0.9
----------------------------------------------------------------------------------------
(39.9) (38.0) 38.0 (39.9)
Net income as adjusted for US GAAP 100.4 143.2 (143.2) 100.4
---------------------------------------------------------------------------------------------------------------------------------
|
Share owners' funds under UK GAAP
(excludes minority interest) 215.7 766.0 (766.0) 215.7
US GAAP adjustments:
Investment in subsidiaries 754.7 (754.7) -
Capitalisation of goodwill arising on
acquisition (net of accumulated
amortisation and amounts capitalised
under UK GAAP) 762.7 762.7
Shares owned by Employee Share Option
Plan (ESOP) (58.1) (58.1)
Deferred tax items (3.6) (3.6)
Proposed final ordinary dividend, not
yet declared 13.4 13.4
Other (4.4) (4.4)
----------------------------------------------------------------------------------------
710.0 754.7 (754.7) 710.0
Share owners' funds as adjusted for US
GAAP 925.7 1,520.7 (1,520.7) 925.7
---------------------------------------------------------------------------------------------------------------------------------
|
Note 6 - Pro forma financial information (unaudited)
The following table sets out certain pro forma financial information for WPP Group plc ("WPP") as if the acquisition of Young & Rubicam Inc ("Y&R Inc.") had occurred at the beginning of each period presented. The proforma financial information is stated in accordance with UK GAAP.
The financial information for Y&R Inc. for the year ended 31 December 1999 has been extracted without material adjustment from the audited financial statements contained in Y&R Inc.'s annual report filed on Form 10-K with the SEC for the year ended 31 December 1999. These financial statements were prepared in accordance with US GAAP. In order to arrive at a UK GAAP presentation, and one consistent with the accounting policies adopted by WPP, a number of adjustments have been made. These relate principally to the amortisation of goodwill, equity accounting, the measurement of compensation in connection with share awards and the recognition of gains on the disposal of fixed assets in exchange for an equity interest in another entity.
The proforma financial information for the year ended 31 December 2000 has been compiled in a similar manner.
The unaudited pro forma financial information has been prepared for comparative purposes only and does not purport to be indicative of the results of operations which would have actually resulted had the combination been in effect on January 1, 1999 or January 1, 2000.
Proforma
-------------------------------------------------
Year ended Year ended
31 December 2000 31 December 1999
(pounds)m (pounds)m
Revenue 3,898.7 3,234.0
Income before extraordinary items* 305.0 281.1
Net income* 305.0 281.1
===== =====
Basic earnings per ordinary share 28.7 p 27.0 p
Diluted earnings per ordinary share 27.1 p 25.2 p
|
*Under UK GAAP, if repurchased Treasury stock is used for the purpose of satisfying the Company's obligation upon exercise of stock options issued to employees, the Company should record as an operating cost, the excess of the cost of repurchasing the treasury stock over the proceeds from employees on exercising stock options. In the pro forma financial information for the year ended 31 December 2000, this resulted in a charge (net of taxes) to the profit and loss account of Y&R Inc. of (pound)17.6 million. For 1999, the difference between the proceeds on exercise of employee share options and the cost of satisfying these options was not material.
Exhibit 1.1
THE COMPANIES ACT 1985
A PUBLIC COMPANY LIMITED BY SHARES
NEW
ARTICLES OF ASSOCIATION
OF
WPP GROUP plc
(ADOPTED BY SPECIAL RESOLUTION PASSED ON 25 JUNE 2001)
NO. 1003653
ALLEN & OVERY
London
CO:823300.1
CONTENTS
PRELIMINARY................................................................................................ 1 1. Table A not to apply.................................................................................. 1 2. Interpretation........................................................................................ 1 SHARE CAPITAL.............................................................................................. 4 3. Authorised share capital.............................................................................. 4 4. Rights attached to shares............................................................................. 4 5. Unissued shares....................................................................................... 4 6. Authority to allot relevant securities................................................................ 4 7. Dis-application of pre-emption rights................................................................. 4 8. Power to pay commission and brokerage................................................................. 5 9. Power to increase, consolidate, sub-divide and cancel shares.......................................... 5 10. Power to issue redeemable shares...................................................................... 6 11. Power to purchase own shares.......................................................................... 6 12. Power to reduce capital............................................................................... 6 13. Trusts not recognised................................................................................. 7 14. Conversion of shares into stock....................................................................... 7 15. Share warrants........................................................................................ 7 UNCERTIFICATED SHARES - GENERAL POWERS..................................................................... 8 16. Uncertificated shares - general powers................................................................ 8 VARIATION OF RIGHTS........................................................................................ 9 17. Variation of rights................................................................................... 9 TRANSFERS OF SHARES........................................................................................ 10 18. Right to transfer shares.............................................................................. 10 19. Transfers of uncertificated shares.................................................................... 10 20. Transfers of certificated shares...................................................................... 10 21. Other provisions relating to transfers................................................................ 10 22. Notice of refusal..................................................................................... 11 TRANSMISSION OF SHARES..................................................................................... 11 23. Transmission on death................................................................................. 11 24. Election of person entitled by transmission........................................................... 11 25. Rights of person entitled by transmission............................................................. 11 DISCLOSURE OF INTERESTS IN SHARES.......................................................................... 12 26. Disclosure of interests in shares..................................................................... 12 GENERAL MEETINGS........................................................................................... 14 27. Annual general meetings............................................................................... 14 28. Extraordinary general meetings........................................................................ 14 29. Convening of extraordinary general meetings........................................................... 14 30. Separate general meetings............................................................................. 14 NOTICE OF GENERAL MEETINGS................................................................................. 14 31. Length and form of notice............................................................................. 14 32. Omission or non-receipt of notice..................................................................... 15 PROCEEDING AT GENERAL MEETINGS............................................................................. 15 33. Quorum................................................................................................ 15 34. Security.............................................................................................. 15 35. Chairman.............................................................................................. 15 36. Right to attend and speak............................................................................. 16 37. Resolutions and amendments............................................................................ 16 38. Adjournment........................................................................................... 16 39. Meeting at more than one place........................................................................ 17 40. Method of voting and demand for poll.................................................................. 17 |
41. How poll is to be taken............................................................................... 18 42. Chairman's casting vote............................................................................... 18 VOTES OF MEMBERS........................................................................................... 19 43. Voting rights......................................................................................... 19 44. Representation of corporations........................................................................ 19 45. Voting rights of joint holders........................................................................ 19 46. Voting rights of members incapable of managing their affairs.......................................... 19 47. Voting rights suspended where sums overdue............................................................ 20 48. Objections to admissibility of votes.................................................................. 20 PROXIES.................................................................................................... 20 49. Proxies............................................................................................... 20 50. Appointment of proxy.................................................................................. 20 51. Receipt of proxy...................................................................................... 20 52. Notice of revocation of authority..................................................................... 22 53. ADR Depositary can appoint multiple proxies........................................................... 22 54. The ADR Depositary shall keep a Proxy Register........................................................ 22 55. Appointed Proxies can only attend general meetings if properly appointed.............................. 22 56. Rights of Appointed Proxies........................................................................... 22 57. Sending information to an Appointed Proxy............................................................. 23 58. The Proxy Register may be fixed at a certain date..................................................... 23 59. The nature of an Appointed Proxy's interest........................................................... 23 60. Validity of the appointment of Appointed Proxies...................................................... 23 DIRECTORS.................................................................................................. 24 61. Number of directors................................................................................... 24 62. Directors need not be members......................................................................... 24 63. Age of directors...................................................................................... 24 APPOINTMENT, RETIREMENT AND REMOVAL OF DIRECTORS........................................................... 24 64. Appointment of directors by the Company............................................................... 24 65. Separate resolutions for appointment of each director................................................. 24 66. The board's power to appoint directors................................................................ 25 67. Retirement of directors............................................................................... 25 68. Removal of directors.................................................................................. 25 69. Vacation of office of director........................................................................ 25 70. Executive directors................................................................................... 26 ALTERNATE DIRECTORS........................................................................................ 26 71. Power to appoint alternate directors.................................................................. 26 ASSOCIATE DIRECTORS........................................................................................ 27 72. Power to appoint associate directors.................................................................. 27 REMUNERATION, EXPENSES AND PENSIONS........................................................................ 27 73. Remuneration of directors............................................................................. 27 74. Special remuneration.................................................................................. 28 75. Expenses.............................................................................................. 28 76. Pensions and other benefits........................................................................... 28 POWERS OF THE BOARD........................................................................................ 29 77. General powers of the board to manage the Company's business.......................................... 29 78. Power to act notwithstanding vacancy.................................................................. 29 79. Provisions for employees.............................................................................. 29 80. Power to borrow money................................................................................. 29 DELEGATION OF BOARD'S POWERS............................................................................... 33 81. Delegation to individual directors.................................................................... 33 82. Committees............................................................................................ 33 83. Local boards.......................................................................................... 33 84. Powers of attorney.................................................................................... 34 |
DIRECTORS' INTERESTS...................................................................................... 34 85. Directors' interests and voting...................................................................... 34 PROCEEDINGS OF THE BOARD.................................................................................. 37 86. Board meetings....................................................................................... 37 87. Notice of board meetings............................................................................. 37 88. Quorum............................................................................................... 37 89. Chairman or deputy chairman to preside............................................................... 37 90. Competence of board meetings......................................................................... 37 91. Voting............................................................................................... 37 92. Telephone board meeting.............................................................................. 37 93. Resolutions without meetings......................................................................... 38 94. Validity of acts of directors in spite of formal defect.............................................. 38 95. Minutes.............................................................................................. 38 SECRETARY................................................................................................. 38 96. Secretary............................................................................................ 38 SHARE CERTIFICATES........................................................................................ 39 97. Issue of certificates................................................................................ 39 98. Charges for and replacement of certificates.......................................................... 39 LIEN ON SHARES............................................................................................ 40 99. Lien on partly paid shares........................................................................... 40 00. Enforcement of lien.................................................................................. 40 CALLS ON SHARES........................................................................................... 40 101. Calls............................................................................................... 40 102. Interest on calls................................................................................... 40 103. Sums treated as calls............................................................................... 41 104. Power to differentiate.............................................................................. 41 105. Payment of calls in advance......................................................................... 41 FORFEITURE OF SHARES...................................................................................... 41 106. Notice of unpaid calls.............................................................................. 41 107. Forfeiture on non-compliance with notice............................................................ 41 108. Power to annul forfeiture or surrender.............................................................. 41 109. Disposal of forfeited or surrendered shares......................................................... 42 110. Arrears to be paid notwithstanding forfeiture or surrender.......................................... 42 SEAL...................................................................................................... 44 111. Seal................................................................................................ 42 DIVIDENDS................................................................................................. 43 112. Declaration of dividends by the Company............................................................. 43 113. Fixed and interim dividends......................................................................... 43 114. Calculation and currency of dividends............................................................... 43 115. Method of payment................................................................................... 44 116. Dividends not to bear interest...................................................................... 44 117. Calls or debts may be deducted from dividends....................................................... 44 118. Unclaimed dividends etc............................................................................. 45 119. Uncashed dividends.................................................................................. 45 120. Dividends in specie................................................................................. 45 121. Scrip dividends..................................................................................... 45 CAPITALISATION OF RESERVES................................................................................ 47 122. Capitalisation of reserves.......................................................................... 47 123. Capitalisation of reserves - employees' share schemes............................................... 47 RECORD DATES.............................................................................................. 48 124. Fixing of record dates.............................................................................. 48 ACCOUNTS.................................................................................................. 48 125. Accounting records.................................................................................. 48 |
NOTICES................................................................................................... 49 126. Form of notices..................................................................................... 49 127. Manner of giving notices............................................................................ 49 128. Notice by advertisement............................................................................. 49 129. When notice is deemed given......................................................................... 49 130. Record date for giving notices...................................................................... 50 131. Notice to person entitled by transmission........................................................... 50 UNTRACED MEMBERS.......................................................................................... 50 132. Sale of shares of untraced members.................................................................. 50 133. Application of proceeds of sale..................................................................... 51 DESTRUCTION OF DOCUMENTS.................................................................................. 52 134. Destruction of documents............................................................................ 52 WINDING UP................................................................................................ 53 135. Powers to distribute in specie...................................................................... 53 INDEMNITY................................................................................................. 53 136. Indemnity of officers............................................................................... 53 |
Company number
1003653
THE COMPANIES ACT 1985
A PUBLIC COMPANY LIMITED BY SHARES
NEW
ARTICLES OF ASSOCIATION
OF
WPP GROUP plc
(adopted by special resolution passed on 25 June, 2001)
PRELIMINARY
1. Table A not to apply
Neither the regulations in Table A in the First Schedule to the Companies
Act 1948 nor those in Table A in the Schedule to the Companies (Tables A to
F) Regulations 1985 shall apply to the Company.
2. Interpretation
(1) In these articles, unless the contrary intention appears:
(a) the following definitions apply:
Act ... means the Companies Act 1985;
ADR Depositary ... means a custodian or other person approved by
the directors who holds shares in the Company
under arrangements where either the custodian or
some other person issues American Depositary
Receipts which evidence American Depositary
Shares representing shares in the Company;
American Depositary ... means American Depositary Shares which
Shares represent shares in the Company and are
evidenced by American Depositary Receipts;
American Depositary ... means American Depositary Receipts which
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Receipts ... represent American Depositary Shares;
these articles ... means these articles of association, as from time
to time altered;
board ... means the board of directors for the time being of
the Company;
clear days ... means, in relation to the period of a notice, that
period excluding the day when the notice is given
or deemed to be given and the day for which it is
given or on which it is to take effect;
committee ... means a committee of the board;
communication ... has the same meaning as in the Electronic
Communications Act 2000;
director ... means a director for the time being of
the Company;
electronic ... has the same meaning as in the Electronic
communication Communications Act 2000;
holder ... in relation to any share means the member whose
name is entered in the register as the holder of
that share;
office ... means the registered office for the time being of
the Company;
paid up ... means paid up or credited as paid up;
person entitled by ... means a person whose entitlement to a share in
transmission consequence of the death or bankruptcy of a
member or of any other event giving rise to its
transmission by operation of law has been noted
in the register;
register ... means the register of members of the Company;
seal ... means any common seal of the Company or any
official seal or securities seal which the
Company may have or be permitted to have under
the Statutes;
secretary ... means the secretary of the Company or, if there
are joint secretaries, any of the joint secretaries
and includes an assistant or deputy secretary and
any person appointed by the board to perform any
of the duties of the secretary of the Company;
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Statutes --- means the Act and every other statute, statutory
instrument, regulation or order for the time being
in force concerning companies registered under
the Act; and
UKLA --- means the UK Listing Authority;
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(b) any reference to an uncertificated share, or to a share being held in uncertificated form, means a share which is for the time being recorded on the register as being held in uncertificated form, and any reference to a certificated share means any share other than an uncertificated share;
(c) any other words or expressions defined in the Act or, if not defined in the Act, in any other of the Statutes (in each case as in force on the date of adoption of these articles) have the same meaning in these articles except that the word "company" includes any body corporate;
(d) any reference elsewhere in these articles to any statute or statutory provision includes a reference to any modification or re-enactment of it for the time being in force;
(e) words importing the singular number include the plural number and vice versa, words importing one gender include the other gender and words importing persons include bodies corporate and unincorporated associations;
(f) any reference to writing includes a reference to any method of reproducing words in a legible form;
(g) any reference to doing something by electronic means includes doing it by an electronic communication;
(h) any reference to a signature or to something being signed or executed includes an electronic signature or other means of verifying the authenticity of an electronic communication which the board may from time to time approve, a signature printed or reproduced by mechanical or other means or any stamp or other distinctive marking made by or with the authority of the person required to sign the document to indicate it is approved by such person;
(i) any reference to a document being sealed or executed under seal or under the common seal of any body corporate (including the Company) or any similar expression includes a reference to its being executed in any other manner which has the same effect as if it were executed under seal;
(j) any reference to a meeting shall not be taken as requiring more than one person to be present in person if any quorum requirement can be satisfied by one person;
(k) any reference to a show of hands includes such other method of casting votes as the board may from time to time approve; and
(l) where the Company has a power of sale or other right of disposal in relation to any share, any reference to the power of the Company or the board to authorise a person to transfer that share to or as directed by the person to whom the share has been sold or disposed of shall, in the case of an uncertificated share, be deemed to include a
reference to such other action as may be necessary to enable that share to be registered in the name of that person or as directed by him.
(2) Subject to the Statutes, a special or extraordinary resolution shall be effective for any purpose for which an ordinary resolution is expressed to be required and a special resolution shall be effective for any purpose for which an extraordinary resolution is required under these articles.
(3) Headings to these articles are inserted for convenience only and shall not affect construction.
SHARE CAPITAL
3. Authorised share capital
The authorised share capital of the Company at the date of adoption of these articles is (Pounds)175,000,000 divided into 1,750,000,000 ordinary shares of 10p each.
4. Rights attached to shares
Subject to the Statutes and to the rights conferred on the holders of any other shares, any share may be issued with or have attached to it such rights and restrictions as the Company may by ordinary resolution decide or, if no such resolution is in effect or so far as the resolution does not make specific provision, as the board may decide.
5. Unissued shares
Subject to the Statutes, these articles and any resolution of the Company, the board may offer, allot (with or without conferring a right of renunciation), grant options over or otherwise deal with or dispose of any unissued shares (whether forming part of the original or any increased capital) to such persons, at such times and generally on such terms as the board may decide.
6. Authority to allot relevant securities
The Company may from time to time pass an ordinary resolution referring to this article and authorising, in accordance with section 80 of the Act, the board to exercise all the powers of the Company to allot relevant securities and:
(a) on the passing of the resolution the board shall be generally and unconditionally authorised to allot relevant securities (as defined for the purposes of that section) up to the nominal amount specified in the resolution; and
(b) unless previously revoked the authority shall expire on the day specified in the resolution (not being more than five years after the date on which the resolution is passed),
but any authority given under this article shall allow the Company, before the authority expires, to make an offer or agreement which would or might require relevant securities to be allotted after it expires.
7. Dis-application of pre-emption rights
(1) Subject to the board being generally authorised to allot relevant
securities in accordance with section 80 of the Act, the Company may from
time to time resolve, by a special resolution referring to this article,
that the board be given power to allot equity securities for cash and, on
the passing of the resolution, the board shall have power to allot
(pursuant to that authority) equity securities for cash as if section 89(1)
of the Act did not apply to the allotment but that power shall be limited:
(a) to the allotment of equity securities in connection with a rights issue; and
(b) to the allotment (other than in connection with a rights issue) of equity securities having a nominal amount not exceeding in aggregate the sum specified in the special resolution,
and unless previously revoked, that power shall (if so provided in the special resolution) expire on the date specified in the special resolution of the Company. The Company may before the power expires make an offer or agreement which would or might require equity securities to be allotted after it expires.
(2) For the purposes of this article:
(a) "equity security" and "relevant shares" have the meanings given to them in section 94 of the Act; and
(b) "rights issue" means an offer or issue to or in favour of holders of ordinary shares on the register on a date fixed by the board where the equity securities respectively attributable to the interests of all those holders are proportionate (as nearly as practicable) to the respective number of ordinary shares held by them on that date but the board may make such exclusions or other arrangements as the board considers expedient in relation to fractional entitlements or legal or practical problems under the laws in any territory or the requirements of any relevant regulatory body or stock exchange.
8. Power to pay commission and brokerage
The Company may in connection with the issue of any shares exercise all powers of paying commission and brokerage conferred or permitted by the Statutes.
9. Power to increase, consolidate, sub-divide and cancel shares
(1) The Company may by ordinary resolution:
(a) increase its share capital by the creation of new shares of such amount as the resolution prescribes;
(b) consolidate and divide all or any of its share capital into shares of a larger amount than its existing shares;
(c) sub-divide its shares, or any of them, into shares of smaller amount than is fixed by the memorandum of association or these articles, but so that the proportion between the amount paid up and the amount (if any) not paid up on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived; and
(d) cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person and diminish the amount of its share capital by the amount of the shares so cancelled.
(2) A resolution by which any share is sub-divided may determine that, as between the holders of the shares resulting from the sub-division, one or more of the shares may have such preferred or other special rights, or may have such qualified or deferred rights or be subject to such restrictions, as compared with the other or others, as the Company has power to attach to new shares.
(3) If as a result of any consolidation and division or sub-division of shares any members would become entitled to fractions of a share, the board may deal with the fractions as it thinks fit. In particular, the board may:
(a) (on behalf of those members) aggregate and sell the shares representing the fractions to any person (including, subject to the Statutes, the Company) and distribute the net proceeds of sale in due proportion among those members (except that any proceeds in respect of any holding less than a sum fixed by the board may be retained for the benefit of the Company); or
(b) subject to the Statutes, first, allot to a member credited as fully paid by way of capitalisation of any reserve account of the Company such number of shares as rounds up his holding to a number which, following consolidation and division or sub-division, leaves a whole number of shares.
(4) For the purpose of a sale under paragraph (3)(a) above, the board may authorise a person to transfer the shares to, or as directed by, the purchaser, who shall not be bound to see to the application of the purchase money and the title of the new holder to the shares shall not be affected by any irregularity in or invalidity of the proceedings relating to the sale.
10. Power to issue redeemable shares
Subject to the Statutes, any share may be issued on terms that it is to be redeemed or is liable to be redeemed at the option of the Company or the holder.
11. Power to purchase own shares
Subject to the Statutes, and to any rights conferred on the holders of any class of shares, the Company may purchase all or any of its shares of any class, including any redeemable shares.
12. Power to reduce capital
Subject to the Statutes and to any rights conferred on the holders of any class of shares, the Company may by special resolution reduce its share capital, any capital redemption reserve and any share premium account in any way.
13. Trusts not recognised
Except as required by law or these articles, no person shall be recognised by the Company as holding any share upon any trust and the Company shall not be bound by or required to recognise (even when having notice of it) any interest in or in respect of any share, except the holder's absolute right to the entirety of the share.
14. Conversion of shares into stock
(1) The Company may by ordinary resolution convert all or any of its paid up shares into stock and re-convert stock into paid up shares of any denomination.
(2) When any shares have been converted into stock, a holder of stock may transfer his interest in it, or any part of his interest, in the same manner and subject to the same regulations and restrictions as would have applied to the shares from which the stock arose if they had not been converted, or as nearly as circumstances permit except that the board shall have discretion to decide whether to apply to have the stock registered as a participating security for the purposes of a relevant system. The board may from time to time fix the minimum amount of stock transferable, provided that the minimum does not exceed the nominal amount of the shares from which the stock arose.
(3) A holder of stock shall, according to the amount of stock held by him, have the same rights, privileges and advantages in all respects as if he held the shares from which the stock arose but no such right, privilege or advantage (except participation in the dividends and profits of the Company and in the assets on a winding up) shall be conferred by an amount of stock which, if existing in shares, would not have conferred such right, privilege or advantage.
(4) Subject to the preceding paragraphs of this article, these articles applicable to paid up shares shall apply to stock and references to shares shall be construed accordingly.
15. Share warrants
(1) Subject to the Statutes and these articles, the Company may issue a share warrant with respect to any fully paid share.
(2) Every share warrant shall be issued under seal, or in such other manner as the board may authorise, and shall state that the bearer is entitled to the shares to which it relates and may provide by coupons or otherwise for the payment of future dividends or other moneys on the shares included in it.
(3) A share included in a share warrant may be transferred by the delivery of the share warrant without any written transfer and without registration and none of the other provisions of these articles relating to the transfer of shares shall apply to any such transfer.
(4) The board may determine and from time to time may vary the conditions upon which a new share warrant or coupon may be issued in the place of one defaced, worn out, lost or destroyed, but a new share warrant or coupon shall only be issued to replace one that is alleged to have been lost or destroyed if the board is satisfied beyond reasonable doubt that the original share warrant or coupon has been destroyed.
(5) The board may also determine and from time to time may vary the conditions upon which share warrants shall be issued and, in particular, all or any of the conditions upon which:
(a) the bearer of a share warrant shall be entitled to obtain payment of a dividend or other moneys payable in respect of the shares included in it;
(b) the bearer of a share warrant shall be entitled to attend and vote at any general meeting of the Company; and
(c) a share warrant may be surrendered for cancellation and the name of the bearer entered as a member in the register in respect of the shares included in the warrant.
(6) The bearer of a share warrant shall be subject to the conditions for the time being in force in relation to share warrants, whether made before or after the issue of the share warrant, and, subject to such conditions and to the Statutes, the bearer shall be deemed to be a member of the Company and shall be entitled to the same rights as if his name were entered in the register as the holder of the shares included in the share warrant.
(7) The Company shall not be bound to recognise (even when having notice of it) any interest in or in respect of any share represented by a share warrant, other than the bearer's absolute right to the warrant.
(8) The Company shall not be responsible for any loss or damage suffered by any person by reason of the Company entering in the register, upon the surrender of a share warrant, the name of any person who is not the true and lawful owner of that warrant.
UNCERTIFICATED SHARES - GENERAL POWERS
16. Uncertificated shares - general powers
(1) The board may permit any class of shares to be held in uncertificated form and to be transferred by means of a relevant system and may revoke any such permission.
(2) In relation to any share which is for the time being held in uncertificated form:
(a) the Company may utilise the relevant system in which it is held to the fullest extent available from time to time in the exercise of any of its powers or functions under the Statutes or these articles or otherwise in effecting any actions and the board may from time to time determine the manner in which such powers, functions and actions shall be so exercised or effected;
(b) any provision in these articles which is inconsistent with:
(i) the holding or transfer of that share in the manner prescribed or permitted by the Statutes;
(ii) any other provision of the Statutes relating to shares held in uncertificated form; or
(iii) the exercise of any powers or functions by the Company or the effecting by the Company of any actions by means of a relevant system,
shall not apply;
(c) the Company may, by notice to the holder of that share, require the holder to change the form of such share to certificated form within such period as may be specified in the notice; and
(d) the Company shall not issue a certificate.
(3) The Company may, by notice to the holder of any share in certificated form, direct that the form of such share may not be changed to uncertificated form for a period specified in such notice.
(4) For the purpose of effecting any action by the Company, the board may determine that shares held by a person in uncertificated form shall be treated as a separate holding from shares held by that person in certificated form but shares of a class held by a person in uncertificated from shall not be treated as a separate class from shares of that class held by that person in certificated form.
VARIATION OF RIGHTS
17. Variation of rights
(1) Whenever the capital of the Company is divided into different classes of shares, all or any of the rights for the time being attached to any class of shares in issue may from time to time (whether or not the Company is being wound up) be varied in such manner as those rights may provide or (if no such provision is made) either with the consent in writing of the holders of three-fourths in nominal value of the issued shares of that class or with the authority of an extraordinary resolution passed at a separate general meeting of the holders of those shares.
(2) The provisions of these articles relating to general meetings of the Company or to the proceedings at general meetings shall apply, mutatis mutandis, to every such separate general meeting, except that:
(a) the quorum at any such meeting (other than an adjourned meeting) shall be two persons holding or representing by proxy at least one-third in nominal amount of the issued shares of the class;
(b) at an adjourned meeting the quorum shall be one person holding shares of the class or his proxy;
(c) every holder of shares of the class shall, on a poll, have one vote in respect of every share of the class held by him; and
(d) a poll may be demanded by any one holder of shares of the class whether present in person or by proxy.
(3) Unless otherwise expressly provided by the rights attached to any class of shares those rights shall not be deemed to be varied by the creation or issue of further shares ranking pari passu with them or by the purchase or redemption by the Company of any of its own shares.
TRANSFERS OF SHARES
18. Right to transfer shares
Subject to the restrictions in these articles, a member may transfer all or any of his shares in any manner which is permitted by the Statutes and is from time to time approved by the board.
19. Transfers of uncertificated shares
(1) The Company shall register the transfer of any shares held in uncertificated form in accordance with the Statutes.
(2) The board may, in its absolute discretion and without giving any reason for its decision, refuse to register any transfer of an uncertificated share where permitted by the Statutes.
20. Transfers of certificated shares
(1) An instrument of transfer of a certificated share may be in any usual form or in any other form which the board may approve and shall be signed by or on behalf of the transferor and (except in the case of a fully paid share) by or on behalf of the transferee.
(2) The board may, in its absolute discretion and without giving any reason for its decision, refuse to register any instrument of transfer of a certificated share:
(a) which is not fully paid up but, in the case of a class of shares which has been admitted to official listing by the UKLA, not so as to prevent dealings in those shares from taking place on an open and proper basis; or
(b) on which the Company has a lien.
(3) The board may also refuse to register any instrument of transfer of a certificated share unless it is:
(a) left at the office, or at such other place as the board may decide, for registration; and
(b) accompanied by the certificate for the shares to be transferred and such other evidence (if any) as the board may reasonably require to prove the title of the intending transferor or his right to transfer the shares.
(4) All instruments of transfer which are registered may be retained by the Company, but any instrument of transfer which the board refuses to register shall (except in any case where fraud or any other crime involving dishonesty is suspected in relation to such transfer) be returned to the person presenting it.
21. Other provisions relating to transfers
(1) No fee shall be charged for registration of a transfer or other document or instruction relating to or affecting the title to any share.
(2) The transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the register in respect of the share.
(3) The board may refuse to register any transfer unless it is in respect of only one class of shares.
(4) Nothing in these articles shall preclude the board from recognising a renunciation of the allotment of any share by the allottee in favour of some other person.
(5) The registration of the transfer of any shares or of any class of shares may be suspended at such times and for such periods (not exceeding thirty days in any year) as the board may decide, except that the registration of the transfer of any shares or class of shares which are for the time being participating securities may only be suspended as permitted by the Statutes.
(6) Unless otherwise agreed by the board in any particular case, the maximum number of persons who may be entered on the register as joint holders of a share is four.
22. Notice of refusal
If the board refuses to register a transfer of a share it shall, within two months after the date on which the instrument of transfer was lodged or the Operator-instruction was received, give to the transferee notice of the refusal.
TRANSMISSION OF SHARES
23. Transmission on death
If a member dies, the survivor, where the deceased was a joint holder, and his personal representatives where he was a sole or the only surviving holder, shall be the only person or persons recognised by the Company as having any title to his shares; but nothing in these articles shall release the estate of a deceased holder from any liability in respect of any share held by him solely or jointly.
24. Election of person entitled by transmission
(1) A person becoming entitled to a share in consequence of the death or bankruptcy of a member or of any other event giving rise to a transmission by operation of law may, on producing such evidence as the board may require and subject as provided in this article, elect either to be registered himself as the holder of the share or to have some person nominated by him registered as the holder of the share.
(2) If he elects to be registered himself, he shall give notice to the Company to that effect. If he elects to have another person registered, he shall execute a transfer of the share to that person or shall execute such other document or take such other action as the board may require to enable that person to be registered.
(3) The provisions of these articles relating to the transfer of shares shall apply to the notice or instrument of transfer or other document or action as if it were a transfer effected by the person from whom the title by transmission is derived and the event giving rise to such transmission had not occurred.
25. Rights of person entitled by transmission
(1) A person becoming entitled to a share in consequence of a death or bankruptcy or of any other event giving rise to a transmission by operation of law shall have the right to receive and give a discharge for any dividends or other moneys payable in respect of the share and shall have the same rights in relation to the share as he would have if he were the holder except that, until he becomes the holder, he shall not be entitled to attend or vote at any general meeting of the Company.
(2) The board may at any time give notice requiring any such person to elect either to be registered himself or to transfer the share and, if after ninety days the notice has not been complied with, the board may withhold payment of all dividends or other moneys payable in respect of the share until the requirements of the notice have been complied with.
DISCLOSURE OF INTERESTS IN SHARES
26. Disclosure of interests in shares
(1) This article applies where the Company gives to the holder of a share or to any person appearing to be interested in a share a notice requiring any of the information mentioned in section 212 of the Act (a "section 212 notice").
(2) If a section 212 notice is given by the Company to a person appearing to be interested in any share, a copy shall at the same time be given to the holder, but the accidental omission to do so or the non-receipt of the copy by the holder shall not prejudice the operation of the following provisions of this article.
(3) If the holder of, or any person appearing to be interested in, any share has been given a section 212 notice and, in respect of that share (a "default share"), has been in default for a period of 14 days after the section 212 notice has been given in supplying to the Company the information required by the section 212 notice, the restrictions referred to below shall apply. Those restrictions shall continue for the period specified by the board, being not more than seven days after the earlier of:
(a) the Company being notified that the default shares have been sold pursuant to an exempt transfer; or
(b) due compliance, to the satisfaction of the board, with the section 212 notice.
The board may waive these restrictions, in whole or in part, at any time.
(4) The restrictions referred to above are as follows:
(a) if the default shares in which any one person is interested or appears to the Company to be interested represent less than 0.25 per cent. of the issued shares of the class, the holders of the default shares shall not be entitled, in respect of those shares, to attend or to vote, either personally or by proxy, at any general meeting of the Company; or
(b) if the default shares in which any one person is interested or appears to the Company to be interested represent at least 0.25 per cent. of the issued shares of the class, the holders of the default shares shall not be entitled, in respect of those shares:
(i) to attend or to vote, either personally or by proxy, at any general meeting of the Company; or
(ii) to receive any dividend or other distribution; or
(iii) to transfer or agree to transfer any of those shares or any rights in them.
The restrictions in subparagraphs (a) and (b) above shall not prejudice the right of either the member holding the default shares or, if different, any person having a power of sale over those shares to sell or agree to sell those shares under an exempt transfer.
(5) If any dividend or other distribution is withheld under paragraph (4)(b) above, the member shall be entitled to receive it as soon as practicable after the restriction ceases to apply.
(6) If, while any of the restrictions referred to above apply to a share, another share is allotted in right of it (or in right of any share to which this paragraph applies), the same restrictions shall apply to that other share as if it were a default share. For this purpose, shares which the Company allots, or procures to be offered, pro rata (disregarding fractional entitlements and shares not offered to certain members by reason of legal or practical problems associated with issuing or offering shares outside the United Kingdom) to holders of shares of the same class as the default share shall be treated as shares allotted in right of existing shares from the date on which the allotment is unconditional or, in the case of shares so offered, the date of the acceptance of the offer.
(7) For the purposes of this article:
(a) an "exempt transfer" in relation to any share is a transfer pursuant to:
(i) a sale of the share on a recognised investment exchange in the United Kingdom or on any stock exchange outside the United Kingdom on which shares of that class are listed or normally traded; or
(ii) a sale of the whole beneficial interest in the share to a person whom the board is satisfied is unconnected with the existing holder or with any other person appearing to be interested in the share; or
(iii) acceptance of a takeover offer (as defined for the purposes of
Part XIIIA of the Act);
(b) the percentage of the issued shares of a class represented by a particular holding shall be calculated by reference to the shares in issue at the time when the section 212 notice is given; and
(c) a person shall be treated as appearing to be interested in any share if the Company has given to the member holding such share a section 212 notice and either (i) the member has named the person as being interested in the share or (ii) (after taking into account any response to any section 212 notice and any other relevant information) the Company knows or has reasonable cause to believe that the person in question is or may be interested in the share.
(8) The provisions of this article are without prejudice to the provisions of section 216 of the Act and, in particular, the Company may apply to the court under section 216(1) whether or not these provisions apply or have been applied.
GENERAL MEETINGS
27. Annual general meetings
The board shall convene and the Company shall hold annual general meetings in accordance with the Statutes.
28. Extraordinary general meetings
All general meetings other than annual general meetings shall be called extraordinary general meetings.
29. Convening of extraordinary general meetings
(1) The board may convene an extraordinary general meeting whenever it thinks fit.
(2) An extraordinary general meeting may also be convened in accordance with article 78.
(3) An extraordinary general meeting shall also be convened by the board on the requisition of members under the Statutes or, in default, may be convened by such requisitionists, as provided by the Statutes.
(4) The board shall comply with the Statutes regarding the giving and the circulation, on the requisition of members, of notices of resolutions and of statements with respect to matters relating to any resolution to be proposed or business to be dealt with at any general meeting of the Company.
30. Separate general meetings
Subject to these articles and to any rights for the time being attached to any class of shares in the Company, the provisions of these articles relating to general meetings of the Company (including, for the avoidance of doubt, provisions relating to the proceedings at general meetings or to the rights of any person to attend or vote or be represented at general meetings or to any restrictions on these rights) shall apply, mutatis mutandis, in relation to every separate general meeting of the holders of any class of shares in the Company.
NOTICE OF GENERAL MEETINGS
31. Length and form of notice
(1) An annual general meeting and an extraordinary general meeting called for the passing of a special resolution or a resolution of which special notice is required by the Statutes or a resolution appointing any person (other than a retiring director) as a director shall be called by not less than twenty-one clear days' notice. All other extraordinary general meetings shall be called by not less than fourteen clear days' notice.
(2) The notice shall specify the place, day and time of the meeting, and the general nature of the business to be transacted. It shall also state in a reasonably prominent place that a member entitled to attend and vote can appoint one or more proxies (who need not be members) to attend, speak and vote instead of that member.
(3) Notice of every general meeting shall be given to all members other than any who, under these articles or the terms of issue of the shares they hold, are not entitled to receive such
notices from the Company, and also to the auditors (or, if more than one, each of them) and to each director.
32. Omission or non-receipt of notice
The accidental omission to give notice of a general meeting to, or the non- receipt of notice by, any person entitled to receive the notice shall not invalidate the proceedings of that meeting.
PROCEEDINGS AT GENERAL MEETINGS
33. Quorum
(1) No business shall be transacted at any general meeting unless the requisite quorum is present when the meeting proceeds to business.
(2) Except as otherwise provided by these articles two members present in person or by proxy and entitled to vote shall be a quorum.
(3) If within fifteen minutes from the time fixed for holding a general meeting a quorum is not present, the meeting, if convened on the requisition of members, shall be dissolved. In any other case, it shall stand adjourned to the same day in the next week (or, if that day is a holiday, to the next working day) and at the same time and place as the original meeting, or, subject to article 38(4), to such other day, and at such other time and place, as the board may decide.
(4) If at an adjourned meeting a quorum is not present within fifteen minutes from the time fixed for holding the meeting, the meeting shall be dissolved.
34. Security
The board may make any security arrangements which it considers appropriate relating to the holding of a general meeting of the Company including, without limitation, arranging for any person attending a meeting to be searched and for items of personal property which may be taken into a meeting to be restricted. A director or the secretary may:
(a) refuse entry to a meeting to any person who refuses to comply with any such arrangements; and
(b) eject from a meeting any person who causes the proceedings to become disorderly.
35. Chairman
At each general meeting, the chairman of the board (if any) or, if he is absent or unwilling, the deputy chairman (if any) of the board or (if more than one deputy chairman is present and willing) the deputy chairman who has been longest in such office shall preside as chairman of the meeting. If neither the chairman nor deputy chairman is present and willing, one of the other directors selected for the purpose by the directors present or, if only one director is present and willing, that director, shall preside as chairman of the meeting. If no director is present within fifteen minutes after the time fixed for holding the meeting or if none of the directors present is willing to preside as chairman of the meeting, the members present and entitled to vote shall choose one of their number to preside as chairman of the meeting.
36. Right to attend and speak
(1) A director shall be entitled to attend and speak at any general meeting of the Company whether or not he is a member.
(2) The chairman may invite any person to attend and speak at any general meeting of the Company if he considers that such person has the appropriate knowledge or experience of the Company's business to assist in the deliberations of the meeting.
37. Resolutions and amendments
(1) Subject to the Statutes, a resolution may only be put to the vote at a general meeting if the chairman of the meeting in his absolute discretion decides that the resolution may properly be regarded as within the scope of the meeting.
(2) In the case of a resolution to be proposed as a special or extraordinary resolution no amendment may be made, at or before the time at which the resolution is put to the vote, to the form of the resolution as set out in the notice of meeting, except to correct a patent error or as may otherwise be permitted by law.
(3) In the case of a resolution to be proposed as an ordinary resolution no amendment may be made, at or before the time at which the resolution is put to the vote, unless:
(a) in the case of an amendment to the form of the resolution as set out in the notice of meeting, notice of the intention to move the amendment is received at the office no later than 48 hours before the time fixed for the holding of the relevant meeting; or
(b) in any case, the chairman of the meeting in his absolute discretion otherwise decides that the amendment or amended resolution may properly be put to the vote.
The giving of notice under subparagraph (a) above shall not prejudice the power of the chairman of the meeting to rule the amendment out of order.
(4) With the consent of the chairman of the meeting, a person who proposes an amendment to a resolution may withdraw it before it is put to the vote.
(5) If the chairman of the meeting rules a resolution or an amendment to a resolution admissible or out of order (as the case may be), the proceedings of the meeting or on the resolution in question shall not be invalidated by any error in his ruling. Any ruling by the chairman of the meeting in relation to a resolution or an amendment to a resolution shall be final and conclusive.
38. Adjournment
(1) With the consent of any general meeting at which a quorum is present the chairman of the meeting may (and shall if so directed by the meeting) adjourn the meeting from time to time and from place to place.
(2) In addition, the chairman of the meeting may at any time without the consent of the meeting adjourn the meeting (whether or not it has commenced or a quorum is present) to another time and/or place if, in his opinion, it would facilitate the conduct of the business of the meeting to do so.
(3) Nothing in this article shall limit any other power vested in the chairman of the meeting to adjourn the meeting.
(4) Whenever a meeting is adjourned for thirty days or more or sine die, at least fourteen clear days' notice of the adjourned meeting shall be given in the same manner as in the case of the original meeting but otherwise no person shall be entitled to any notice of an adjourned meeting or of the business to be transacted at an adjourned meeting.
(5) No business shall be transacted at any adjourned meeting other than the business which might have been transacted at the meeting from which the adjournment took place.
39. Meeting at more than one place
(1) A general meeting may be held at more than one place if:
(a) the notice convening the meeting specifies that it shall be held at more than one place; or
(b) the board resolves, after the notice convening the meeting has been given, that the meeting shall be held at more than one place; or
(c) it appears to the chairman of the meeting that the place of the meeting specified in the notice convening the meeting is inadequate to accommodate all persons entitled and wishing to attend.
(2) A general meeting held at more than one place is duly constituted and its proceedings are valid if (in addition to the other provisions of these articles relating to general meetings being satisfied) the chairman of the meeting is satisfied that facilities (whether by electronic means or otherwise) are available to enable each person present at each place to participate in the business of the meeting.
(3) Each person present at each place in person or by proxy and entitled to vote shall be counted in the quorum for, and shall be entitled to vote at, the meeting. The meeting is deemed to take place at the place at which the chairman of the meeting is present.
40. Method of voting and demand for poll
(1) At a general meeting an ordinary resolution or any other question (other than a special or extraordinary resolution) put to the vote of the meeting shall be decided on a show of hands, unless (before, or immediately after the declaration of the result of, the show of hands or on the withdrawal of any other demand for a poll) a poll is demanded by:
(a) the chairman of the meeting; or
(b) at least five members present in person or by proxy having the right to vote on the resolution; or
(c) a member or members present in person or by proxy representing in aggregate not less than one-tenth of the total voting rights of all the members having the right to vote on the resolution; or
(d) a member or members present in person or by proxy holding shares conferring the right to vote on the resolution on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right;
and a demand for a poll by a person as proxy for a member shall be as valid as if the demand were made by the member himself.
(2) No poll may be demanded on the appointment of a chairman of the meeting.
(3) A demand for a poll may, before the poll is taken, be withdrawn but only with the consent of the chairman of the meeting and the demand so withdrawn shall not be taken to have invalidated the result of a show of hands declared before the demand was made. If a poll is demanded before the declaration of the result of a show of hands and the demand is duly withdrawn, the meeting shall continue as if the demand had not been made.
(4) Unless a poll is demanded (and the demand is not withdrawn), a declaration by the chairman of the meeting that a resolution has been carried, or carried unanimously, or has been carried by a particular majority, or lost, or not carried by a particular majority, shall be conclusive, and an entry to that effect in the minutes of the meeting shall be conclusive evidence of that fact, without proof of the number or proportion of the votes recorded in favour of or against the resolution.
(5) The demand for a poll shall not prevent the continuance of a meeting for the transaction of any business other than the question on which a poll has been demanded.
(6) All special resolutions and extraordinary resolutions shall be decided on a poll.
41. How poll is to be taken
(1) If a poll is demanded (and the demand is not withdrawn), it shall be taken at such time (either at the meeting at which the poll is demanded or within thirty days after the meeting), at such place and in such manner (including by electronic means) as the chairman of the meeting shall direct and he may appoint scrutineers (who need not be members).
(2) A poll demanded on a question of adjournment shall be taken at the meeting without adjournment.
(3) It shall not be necessary (unless the chairman of the meeting otherwise directs) for notice to be given of a poll whether taken at or after the meeting at which it was demanded.
(4) On a poll votes may be given either personally or by proxy and a member entitled to more than one vote need not use all his votes or cast all the votes he uses in the same way.
(5) The result of the poll shall be deemed to be a resolution of the meeting at which the poll was demanded.
42. Chairman's casting vote
In the case of an equality of votes, either on a show of hands or on a poll, the chairman of the meeting at which the show of hands takes place, or at which the poll is demanded, as the case may be, shall be entitled to a further or casting vote in addition to any other vote or votes to which he may be entitled.
VOTES OF MEMBERS
43. Voting rights
(1) Subject to these articles and to any special rights or restrictions as to voting for the time being attached to any class of shares in the Company:
(a) on a show of hands, every member who (being an individual) is present in person or (being a corporation) is present by a duly authorised representative, not being himself a member, shall have one vote and every person present who has been duly appointed as a proxy shall have one vote; and
(b) on a poll, every member who is present in person or by a duly appointed proxy (other than an Appointed Proxy (as defined in article 53(1))) shall have one vote for each share of which he is the holder and an Appointed Proxy shall have such number of votes as equals his Appointed Number of shares (as defined in article 53(2)).
(2) For the purposes of determining which persons are entitled to attend or vote at any general meeting, and how many votes such persons may cast, the Company may specify in the notice of the meeting a time, not more than 48 hours before the time fixed for the meeting, by which a person must be entered on the register in order to have the right to attend or vote at the meeting. Changes to entries on the register after the time so specified shall be disregarded in determining the rights of any person to attend or vote at the meeting, notwithstanding any provisions in the Statutes or these articles to the contrary.
44. Representation of corporations
Any corporation which is a member of the Company may, by resolution of its board or other governing body, authorise any person to act as its representative at any general meeting of the Company and the representative shall be entitled to exercise the same powers on behalf of the corporation which he represents as that corporation could exercise if it were an individual member present at the meeting in person, including (without limitation) power to vote on a show of hands or on a poll and to demand or concur in demanding a poll. The board or any director or the secretary may (but shall not be bound to) require evidence of the authority of any such representative.
45. Voting rights of joint holders
If more than one of the joint holders of a share tenders a vote on the same resolution, whether in person or by proxy, the vote of the senior who tenders a vote shall be accepted to the exclusion of the vote(s) of the other joint holder(s); and for this purpose seniority shall be determined by the order in which the names stand in the register in respect of the relevant share.
46. Voting rights of members incapable of managing their affairs
A member in respect of whom an order has been made by any court having jurisdiction (whether in the United Kingdom or elsewhere) in matters concerning mental disorder may vote, whether on a show of hands or on a poll, by his receiver, curator bonis or other person in the nature of a receiver or curator bonis appointed by that court, and the receiver, curator bonis or other person may, vote by proxy. Evidence to the satisfaction of the board of the authority of the person claiming the right to vote must be received at the office (or at such other address as may be specified for the receipt of proxy appointments) not later than the
last time by which a proxy appointment must be received in order to be valid for use at the meeting or adjourned meeting or on the holding of the poll at or on which that person proposes to vote and, in default, the right to vote shall not be exercisable.
47. Voting rights suspended where sums overdue
Unless the board otherwise decides, a member shall not be entitled to vote, either in person or by proxy, at any general meeting of the Company in respect of any share held by him unless all calls and other sums presently payable by him in respect of that share have been paid.
48. Objections to admissibility of votes
No objection shall be raised as to the admissibility of any vote except at the meeting or adjourned meeting or poll at which the vote objected to is or may be given or tendered, and every vote not disallowed at such meeting or poll shall be valid for all purposes. Any such objection made in due time shall be referred to the chairman of the meeting, whose decision shall be final and conclusive.
PROXIES
49. Proxies
(1) A proxy need not be a member of the Company and a member may appoint more than one proxy to attend on the same occasion.
(2) The appointment of a proxy shall not preclude a member from attending and voting in person at the meeting or on the poll concerned.
(3) The appointment of a proxy shall only be valid for the meeting mentioned in it and any adjournment of that meeting (including on any poll demanded at the meeting or any adjourned meeting).
(4) A proxy is entitled to speak at general meetings.
(5) Proxies may also be appointed to attend, speak and vote at general meetings in the circumstances and in the manner provided for in articles 53, 55, 56 and 58 and articles 49 to 52 should be read subject to the provisions of those articles.
50. Appointment of proxy
The appointment of a proxy may be in such form as is usual or common or in such other form as the board may from time to time approve and shall be signed by the appointor, or his duly authorised agent, or, if the appointor is a corporation, shall either be executed under its common seal or be signed by an agent or officer authorised for that purpose. The signature need not be witnessed.
51. Receipt of proxy
(1) A proxy appointment:
(a) must be received at such address as may be specified in the notice convening the meeting or in any other information issued by the Company in relation to the meeting (or if no such address is specified, at the office) at least 48 hours before the time fixed for holding the meeting at which the appointee proposes to vote; or
(b) in the case of a poll taken more than 48 hours after it is demanded or in the case of an adjourned meeting to be held more than 48 hours after the time fixed for holding the original meeting, must be received at such address as may be specified in the notice convening the meeting or in any other information issued by the Company in relation to the poll or meeting (or if no such address is specified, at the office) at least 24 hours before the time fixed for the taking of the poll or, as the case may be, the time fixed for holding the adjourned meeting; or
(c) in the case of a poll which is not taken at the meeting at which it is demanded but is taken 48 hours or less after it is demanded, or in the case of an adjourned meeting to be held 48 hours or less after the time fixed for holding the original meeting, must either be received by the chairman of the meeting or the secretary or any director at the meeting at which the poll is demanded or, as the case may be, at the original meeting, or be received at such address and by such time as the chairman of the meeting may direct at the meeting at which the poll is demanded.
(2) In the case of a proxy appointment signed by an agent of a member who is not a corporation, the authority under which the appointment is signed or a copy of it certified in such manner as shall be specified in the notice of the relevant meeting or in any other information issued by the Company in relation to the relevant meeting, or such other information as shall be so specified must also be received by the Company in the manner set out in paragraph (1) above.
(3) In the case of a proxy appointment signed by an officer or other agent of a corporation, the board may also require the receipt, in the manner set out in paragraph (1) above, of the authority under which the appointment is signed or a copy of it certified in such manner as shall be specified in the notice of the relevant meeting or in any other information issued by the Company in relation to the relevant meeting, or of such other authorities or information as shall be so specified.
(4) The board may, but shall not be bound to, require such further evidence as it thinks fit of the authenticity or integrity of any signature on a proxy appointment and, if the signatory is an agent or, where the appointor is a corporation, an officer, of his authority.
(5) The board may decide, either generally or in any particular case, to treat a proxy appointment as valid notwithstanding that the appointment or any of the information required under paragraphs (2), (3) or (4) above has not been received in accordance with the requirements of this article.
(6) Subject to paragraph (5) above, if the proxy appointment and any of the information required under paragraphs (2), (3) or (4) above are not received in the manner required above, the appointee shall not be entitled to vote in respect of the shares in question.
(7) If two or more valid but differing proxy appointments are received in respect of the same share for use at the same meeting or on the same poll, the one which is last received (regardless of its date or of the date of its execution) shall be treated as replacing and
revoking the others as regards that share and if the Company is unable to determine which was last received, none of them shall be treated as valid in respect of that share.
52. Notice of revocation of authority
A vote given or poll demanded by proxy or by a representative of a corporation shall be valid notwithstanding the previous termination of the authority of the person voting or demanding a poll or (until entered in the register) the transfer of the share in respect of which the appointment of the relevant person was made unless notice of the termination was received at the office (or at such other address at which the proxy appointment was duly received) at least six hours before the time fixed for holding the relevant meeting or adjourned meeting or, in the case of a poll not taken on the same day as the meeting or adjourned meeting, before the time fixed for taking the poll.
ADR DEPOSITARY ARRANGEMENTS
53. ADR Depositary can appoint multiple proxies
(1) The ADR Depositary can appoint more than one person to be its proxy (each person validly so appointed being referred to as an "Appointed Proxy") and the provisions of articles 49 to 52 shall apply to any such appointment(s).
(2) The appointment shall set out the number of shares in relation to which an Appointed Proxy is appointed (the "Appointed Number"). The Appointed Number of shares of all Appointed Proxies, when added together, must not be more than the total number of shares registered in the name of the ADR Depositary.
54. The ADR Depositary shall keep a Proxy Register
(1) The ADR Depositary shall keep a register of the names and addresses of all the Appointed Proxies (the "Proxy Register"). The Proxy Register shall set out the Appointed Number of shares of each Appointed Proxy. This may be shown by setting out the number of American Depositary Receipts which each Appointed Proxy holds and stating that the Appointed Number of shares can be ascertained by multiplying the said number of American Depositary Receipts by such number which for the time being is equal to the number of shares which any one American Depositary Receipt represents.
(2) The ADR Depositary shall allow anyone whom the board nominates to inspect the Proxy Register during usual business hours on any week day (Saturdays and public holidays excepted) at the registered office of the ADR Depositary. The ADR Depositary shall also provide, as soon as possible, any information contained in the Proxy Register which may be requested by the Company or its agents.
55. Appointed Proxies can only attend general meetings if properly appointed
An Appointed Proxy may only attend a general meeting if he provides the Company with written evidence of his appointment by the ADR Depositary for that general meeting. This shall be in a form agreed between the board and the ADR Depositary.
56. Rights of Appointed Proxies
Subject to the Statutes and providing the total number of shares registered in the name of the ADR Depositary is sufficient to include an Appointed Proxy's Appointed Number:
(a) at a general meeting which an Appointed Proxy is entitled to attend, he is entitled to the same rights and has the same obligations in relation to his Appointed Number of shares as if such shares were registered in his name; and
(b) an Appointed Proxy can himself appoint another person to be his proxy in relation to his Appointed Number of shares and the provisions of articles 49 to 52 shall apply to such appointment as if the Appointed Proxy was the registered holder of such shares and the appointment was made by him in that capacity.
57. Sending information to an Appointed Proxy
The Company may send to an Appointed Proxy at his address in the Proxy Register all or any of the documents which are sent to members.
58. The Proxy Register may be fixed at a certain date
(1) In order to determine which persons are entitled as Appointed Proxies to:
(a) exercise the rights conferred by article 56; and
(b) receive documents sent pursuant to article 57
and the Appointed Number of shares in respect of which a person is to be treated as Appointed Proxy for such purpose, the ADR Depositary may determine that the persons who are entitled are those persons entered in the Proxy Register at the close of business on a date (a "Record Date") determined by the ADR Depositary in consultation with the Company.
(2) When a Record Date is determined for a particular purpose:
(a) the Appointed Number of shares of an Appointed Proxy will be treated as the number appearing against his name in the Proxy Register as at the close of business on the Record Date (this may be shown by setting out the number of American Depositary Receipts which each Appointed Proxy holds and stating that the number of shares can be ascertained by multiplying the said number of American Depositary Receipts by such number which for the time being is equal to the number of shares which any one American Depositary Receipt represents); and
(b) changes to entries in the Proxy Register after the close of business on the Record Date will be ignored in determining the entitlement of any person for the purpose concerned.
59. The nature of an Appointed Proxy's interest
Except as required by the Statutes, no Appointed Proxy will be recognised by the Company as holding any interest in shares upon any trust. Except for recognising the rights given in relation to general meetings by appointments made by Appointed Proxies pursuant to Article 56, the Company is entitled to treat any person entered in the Proxy Register as an Appointed Proxy as the only person (other than the ADR Depositary) who has any interest in the shares in respect of which the Appointed Proxy has been appointed.
60. Validity of the appointment of Appointed Proxies
(1) If any question arises at or in relation to a general meeting as to whether any particular person has been validly appointed as or by an Appointed Proxy to vote (or exercise any other right) in respect of any shares, the question will be determined by the chairman of the general meeting. His decision (which may include declining to recognise a particular appointment as valid) will, if made in good faith, be final and binding on all persons interested.
(2) If a question of the type described in paragraph (1) above arises in any circumstances other than at or in relation to a general meeting, the question will be determined by the board. Its decision (which can include declining to recognise a particular appointment as valid) will also, if made in good faith, be final and binding on all persons interested.
DIRECTORS
61. Number of directors
The directors (other than alternate directors) shall not, unless otherwise determined by an ordinary resolution of the Company, be less than 6 in number.
62. Directors need not be members
A director need not be a member of the Company.
63. Age of directors
No person shall be disqualified from being appointed a director, and no director shall be required to vacate that office, by reason only of the fact that he has attained the age of seventy years or any other age nor shall it be necessary by reason of his age to give special notice of any resolution.
APPOINTMENT, RETIREMENT AND REMOVAL OF DIRECTORS
64. Appointment of directors by the Company
(1) Subject to these articles, the Company may by ordinary resolution appoint any person who is willing to act to be a director, either to fill a vacancy or as an additional director, but so that the total number of directors shall not exceed any maximum number fixed by or in accordance with these articles.
(2) No person (other than a director retiring in accordance with these articles) shall be appointed or re-appointed a director at any general meeting unless:
(a) he is recommended by the board; or
(b) not less than seven nor more than forty-two days before the date appointed for the meeting there has been given to the Company, by a member (other than the person to be proposed) entitled to vote at the meeting, notice of his intention to propose a resolution for the appointment of that person, stating the particulars which would, if he were so appointed, be required to be included in the Company's register of directors and a notice executed by that person of his willingness to be appointed.
65. Separate resolutions for appointment of each director
Every resolution of a general meeting for the appointment of a director shall relate to one named person and a single resolution for the appointment of two or more persons shall be void, unless a resolution that it shall be so proposed has been first agreed to by the meeting without any vote being cast against it.
66. The board's power to appoint directors
The board may appoint any person who is willing to act to be a director, either to fill a vacancy or by way of addition to their number, but so that the total number of directors shall not exceed any maximum number fixed by or in accordance with these articles.
67. Retirement of directors
(1) At each annual general meeting any director then in office who:
(a) has been appointed by the board since the previous annual general meeting; or
(b) at the date of the notice convening the annual general meeting had held office for more than 30 months since he was appointed or last re- appointed by the Company in general meeting,
shall retire from office but shall be eligible for re-appointment.
(2) A retiring director shall (unless he is removed from office or his office is vacated in accordance with these articles) retain office until the close of the meeting at which he retires or (if earlier) when a resolution is passed at that meeting not to fill the vacancy or to appoint another person in his place or the resolution to re-appoint him is put to the meeting and lost.
(3) If the Company, at any meeting at which a director retires in accordance with these articles, does not fill the office vacated by such director, the retiring director, if willing to act, shall be deemed to be re-appointed, unless at the meeting a resolution is passed not to fill the vacancy or to appoint another person in his place or unless the resolution to re-appoint him is put to the meeting and lost.
68. Removal of directors
(1) The Company may by extraordinary resolution, or by ordinary resolution of which special notice has been given in accordance with the Statutes, remove any director before his period of office has expired notwithstanding anything in these articles or in any agreement between him and the Company.
(2) A director may also be removed from office by giving him notice to that effect signed by or on behalf of all the other directors.
(3) Any removal of a director under this article shall be without prejudice to any claim which such director may have for damages for breach of any agreement between him and the Company.
69. Vacation of office of director
Without prejudice to the provisions of these articles for retirement or removal the office of a director shall be vacated if:
(a) he is prohibited by law from being a director; or
(b) he becomes bankrupt or he makes any arrangement or composition with his creditors generally; or
(c) he is, or may be, suffering from mental disorder and in relation to that disorder either he is admitted to hospital for treatment or an order is made by a court (whether in the United Kingdom or elsewhere) for his detention or for the appointment of some person to exercise powers with respect to his property or affairs and, in either case, the board resolves that his office be vacated; or
(d) if for more than six months he is absent (whether or not an alternate director attends in his place), without special leave of absence from the board, from board meetings held during that period and the board resolves that his office be vacated; or
(e) he gives to the Company notice of his wish to resign, in which event he shall vacate that office on the receipt of that notice by the Company or at such later time as is specified in the notice.
70. Executive directors
(1) The board may appoint one or more directors to hold any executive office under the Company (including that of chairman, chief executive or managing director) for such period (subject to the Statutes) and on such terms as it may decide and may revoke or terminate any appointment so made without prejudice to any claim for damages for breach of any contract of service between the director and the Company.
(2) The remuneration of a director appointed to any executive office shall be fixed by the board and may be by way of salary, commission, participation in profits or otherwise and either in addition to or inclusive of his remuneration as a director.
(3) A director appointed as executive chairman, chief executive or managing director shall automatically cease to hold that office if he ceases to be a director but without prejudice to any claim for damages for breach of any contract of service between him and the Company.
ALTERNATE DIRECTORS
71. Power to appoint alternate directors
(1) Each director may appoint another director or any other person who is willing to act as his alternate and may remove him from that office. The appointment as an alternate director of any person who is not himself a director shall be subject to the approval of a majority of the directors or a resolution of the board.
(2) An alternate director shall be entitled to receive notice of all board meetings and of all meetings of committees of which the director appointing him is a member, to attend and vote at any such meeting at which the director appointing him is not personally present and at the meeting to exercise and discharge all the functions, powers and duties of his appointor as a director and for the purposes of the proceedings at the meeting these articles shall apply as if he were a director.
(3) Every person acting as an alternate director shall (except as regards power to appoint an alternate and remuneration) be subject in all respects to these articles relating to directors and
shall alone be responsible to the Company for his acts and defaults and shall not be deemed to be the agent of the director appointing him. An alternate director may be paid expenses and shall be entitled to be indemnified by the Company to the same extent as if he were a director but shall not be entitled to receive from the Company any fee in his capacity as an alternate director.
(4) Every person acting as an alternate director shall have one vote for each director for whom he acts as alternate, in addition to his own vote if he is also a director, but he shall count as only one for the purpose of determining whether a quorum is present.
(5) Any person appointed as an alternate director shall vacate his office as alternate director if the director by whom he has been appointed vacates his office as director (otherwise than by retirement at a general meeting of the Company at which he is re-appointed) or removes him by notice to the Company or on the happening of any event which, if he is or were a director, causes or would cause him to vacate that office.
(6) Every appointment or removal of an alternate director shall be made by notice and shall be effective (subject to paragraph (1) above) on receipt by the secretary of the notice.
ASSOCIATE DIRECTORS
72. Power to appoint associate directors
The directors may at any time and from time to time appoint any person (not being a director) to be an associate director, and the following provisions with regard to associate directors shall have effect:
(a) a person so appointed shall not be required to be a member of the Company and shall hold office until removed by resolution of the directors.
(b) the number of associate directors shall not at any time exceed six.
(c) the remuneration of the associate directors shall be such as from time to time be determined by the directors and may be of any description.
(d) associate directors shall not have any right to attend or vote at meetings of the directors, and they shall not be directors within the meaning of that word as used in the Company's regulations. If invited to attend and express their views at meetings of the directors, they shall do so only on the same footing as other officials and members of the staff of the Company.
REMUNERATION, EXPENSES AND PENSIONS
73. Remuneration of directors
(1) The directors (other than any director who for the time being holds an executive office or employment with the Company or a subsidiary of the Company) shall be paid out of the funds of the Company by way of remuneration for their services as directors such fees not exceeding in aggregate (Pounds)450,000 per annum (or such larger sum as the Company may, by ordinary resolution, determine) as the directors may decide to be divided among them in such proportion and manner as they may agree or, failing agreement, equally. Any fee payable
under this article shall be distinct from any remuneration or other amounts payable to a director under other provisions of these articles and shall accrue from day to day.
(2) The board (or any duly authorised committee of the board) may make arrangements for such proportion of the fees payable to any director under the provisions of this article as the board or such committee may from time to time decide, to be provided in the form of fully paid ordinary shares in the capital of the Company by applying the relevant amount in the purchase or subscription of such share on behalf of such director. In the case of a subscription of shares, for the purposes of this article, the subscription price for such shares shall be deemed to be the closing middle market price as published in the London Stock Exchange Daily Official List on the day of such subscription.
74. Special remuneration
(1) The board may grant special remuneration to any director who performs any special or extra services to or at the request of the Company.
(2) Such special remuneration may be paid by way of lump sum, salary, commission, participation in profits or otherwise as the board may decide in addition to any remuneration payable under or pursuant to any other of these articles.
75. Expenses
A director shall be paid out of the funds of the Company all travelling, hotel and other expenses properly incurred by him in and about the discharge of his duties, including his expenses of travelling to and from board meetings, committee meetings, general meetings and separate general meetings of the holders of any class shares in the Company. Subject to any guidelines and procedures established from time to time by the board, a director may also be paid out of the funds of the Company all expenses incurred by him in obtaining professional advice in connection with the affairs of the Company or the discharge of his duties as a director.
76. Pensions and other benefits
The board may exercise all the powers of the Company to pay, provide or procure the grant of pensions or other retirement or superannuation benefits and death, disability or other benefits, allowances or gratuities to any person who is or has been at any time a director of the Company or in the employment or service of the Company or of any company which is or was a subsidiary of or associated with the Company or of the predecessors in business of the Company or any such subsidiary or associated company or the relatives or dependants of any such person. For that purpose the board may procure the establishment and maintenance of, or participate in, or contribute to, any non-contributory or contributory pension or superannuation fund, scheme or arrangement and pay any insurance premiums.
POWERS OF THE BOARD
77. General powers of the board to manage the Company's business
(1) The business of the Company shall be managed by the board which may exercise all the powers of the Company, subject to the Statutes, the memorandum, these articles and any ordinary resolution of the Company. No ordinary resolution or alteration of the memorandum or these articles shall invalidate any prior act of the board which would have been valid if the resolution had not been passed or the alteration had not been made.
(2) The powers given by this article shall not be limited by any special authority or power given to the board by any other article or any resolution of the Company.
78. Power to act notwithstanding vacancy
The continuing directors or the sole continuing director at any time may act notwithstanding any vacancy in their number; but, if the number of directors is less than the minimum number fixed by or in accordance with these articles, they or he may act for the purpose of filling up vacancies or calling a general meeting of the Company, but not for any other purpose. If no director is able or willing to act, then any two members may summon a general meeting for the purpose of appointing directors.
79. Provisions for employees
The board may exercise any of the powers conferred by the Statutes to make provision for the benefit of any persons employed or formerly employed by the Company or any of its subsidiaries in connection with the cessation or the transfer to any person of the whole or part of the undertaking of the Company or any of its subsidiaries.
80. Power to borrow money
(1) The board may exercise all the powers of the Company to borrow money and to mortgage or charge all or any part of its undertaking, property and assets (both present and future) and uncalled capital and to issue debentures and other securities, whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party.
(2) The board shall restrict the borrowings of the Company and exercise all voting and other rights or powers of control exercisable by the Company in relation to its subsidiary undertakings (if any) so as to secure (but as regards subsidiary undertakings only so far as by such exercise it can secure) that the aggregate principal amount outstanding at any time in respect of all borrowings by the Group (exclusive of any borrowings which are owed by one Group company to another Group company) after deducting the amount of cash deposited will not, without the previous authority of the Company in general meeting, exceed:
(a) an amount equal to 2.5 times adjusted capital and reserves; or
(b) any higher limit fixed by ordinary resolution of the Company which is applicable at the relevant time.
(3) In this article:
(a) "adjusted capital and reserves" means the aggregate of:
(i) the amount paid up on the allotted share capital of the Company; and
(ii) the amounts standing to the credit of the reserves of the Group (including share premium account and capital redemption reserve, but excluding any currency translation reserve), after adding or deducting any balance standing to the credit or debit of the Group's profit and loss account,
all as shown in the relevant balance sheet but unless the directors determine otherwise, after:
(i) making such adjustments as may be appropriate in respect of:
(A) any variation in the amount of the paid up share capital, the share premium account or capital redemption reserve since the date of the relevant balance sheet and so that for this purpose if any proposed allotment of shares by the Company for cash has been underwritten or agreed to be subscribed then these shares shall be deemed to have been allotted and the amount (including any premium) of the subscription moneys payable (not being moneys payable later than six months after the date of allotment) shall be deemed to have been paid up on the date when the issue of the shares was underwritten or agreed to be subscribed (or if the underwriting or subscription agreement was conditional, the date on which it became unconditional);
(B) any undertaking which was not a subsidiary undertaking at the date of the relevant balance sheet but which would be a subsidiary undertaking if group accounts were prepared as at the relevant time (and as if such time were the end of the Company's financial year) or any undertaking which was a subsidiary undertaking but which would no longer be so if group accounts were to be so prepared at the relevant time; and
(C) any variation in the interest of the Company in another Group company since the date of the relevant balance sheet;
(ii) excluding (so far as not already excluded) minority and other outside interests in any subsidiary undertaking;
(iii) deducting to the extent included in the above:
(A) the book values of intangible assets except goodwill shown in the relevant balance sheet (as adjusted pursuant to the above provisions of this paragraph); and
(B) the amount of any distribution declared, recommended or made by any Group company to a person other than another Group company out of profits accrued up to and including the date of (and to the extent not provided for in) the relevant balance sheet;
(iv) adding a sum equal to the amount of goodwill arising on the acquisition of any undertaking or business after 1st January, 1996 and remaining part of the
Group to the extent that it has been written off against reserves and not reinstated;
(v) making such other adjustments (if any) as the board may consider appropriate or necessary and as are approved by the auditors;
(b) "borrowings" include the following except in so far as otherwise taken into account:
(i) the principal amount of any debenture (whether secured or unsecured) of a Group company;
(ii) the outstanding amount raised by acceptances under an acceptance credit or bills facility opened by a bank or acceptance house on behalf of or in favour of a Group company, excluding acceptances of trade bills relating to goods purchased in the ordinary course of trading;
(iii) the nominal amount of any share capital and the principal amount of any debenture or borrowing, the beneficial interest in which is not owned by a Group company, to the extent that their payment or repayment is the subject of a guarantee or indemnity by a Group company;
(iv) any fixed or minimum premium payable on final repayment of any borrowing or deemed borrowing; and
(v) any fixed amount in respect of a finance lease payable by any Group company which would be shown at the relevant time as an obligation in a balance sheet and prepared in accordance with the accounting principles used in the preparation of the relevant balance sheet and for this purpose "finance lease" means a contract between a lessor and a Group company as lessee or sub-lessee where substantially all the risks and rewards of the ownership of the asset leased or sub-leased are to be borne by the lessee or sub-lessee,
but exclude the following:
(i) borrowings incurred by a Group company for the purpose of repaying within six months of the borrowing all or part of any borrowings made by it or another Group company, pending their application for that purpose during that period;
(ii) borrowing incurred by a Group company to finance a contract where a part of the price receivable under the contract by that or another Group company is guaranteed or insured by any government, governmental agency or body or by a person (not being a Group Company) carrying on the business of providing credit insurance up to an amount equal to that part of the price which is guaranteed or insured;
(iii) a proportionate amount of the borrowings of a Group company which is not a wholly-owned subsidiary of the Company corresponding to the minority or outside interest in it;
(iv) borrowings of an undertaking which was not a subsidiary undertaking at the date of the relevant balance sheet, to the extent that those borrowings do not exceed its borrowings outstanding on the date when it became a Group
company but only until six months after the date on which the undertaking became a subsidiary undertaking; and
(v) amounts payable under any hire-purchase agreement, credit sale agreement, operating lease or similar agreement which is not a finance lease for the purposes of paragraph (b)(v) above;
(c) "cash deposited" means an amount equal to the aggregate for the time being of all cash deposits with any bank or other person (not being a Group company), (whether on current account or otherwise), the realisable value of certificates of governments and companies or other readily realisable deposits owned by any Group company except that in the case of any such items owned by a Group company which is not a wholly-owned subsidiary of the Company, there shall be excluded a proportionate amount of those items corresponding to the minority or outside interests in it;
(d) "Group" means the Company and its subsidiary undertakings from time to time;
(e) "Group company" means any undertaking in the Group; and
(f) "relevant balance sheet" means the audited consolidated balance sheet dealing with the state of affairs of the Company and its subsidiary undertakings comprised in the latest group accounts; and if the Company should prepare its audited consolidated balance sheet on the basis of one accounting convention and a supplementary balance sheet on the basis of another, the audited consolidated balance sheet shall be taken as the relevant balance sheet.
(4) For the purposes of any calculation under this article:
(a) a borrowing denominated or repayable or any cash deposited, in a currency other than sterling shall be translated into sterling:
(i) at the London exchange rate for the date as at which the calculation is being made; or
(ii) if it would result in a lower figure, at the London exchange rate on the date of the relevant balance sheet, and for this purpose the "London exchange rate" for any date is the spot rate of exchange, quoted at or about 11.00 a.m. on the business day before that date by a bank in London selected by the board; and
(b) where under the terms of any borrowing the amount of money that would be required to discharge its principal amount in full if it fell to be repaid (at the option of the borrower or by reason of default) on the date as at which the calculation is being made is less than the amount that would otherwise be taken into account in respect of that borrowing for the purpose of this article, the amount of the borrowing to be taken into account shall be the lesser amount.
(5) The limit imposed under paragraph (2) above shall be deemed not to have been breached until the amount of borrowings has exceeded that limit for 30 consecutive days. This paragraph overrides all other provisions of this article.
(6) A certificate or report by the Company's auditors:
(a) as to the amount of adjusted capital and reserves or the amount of borrowings; or
(b) to the effect that the limit imposed under this article was not exceeded or breached at a particular date, shall be conclusive evidence as to that amount or fact.
(7) If the Company has joint auditors, references in this article to the Company's auditors are to any of the joint auditors.
(8) No lender or other person dealing with any Group company need enquire whether the limit imposed under paragraph (2) above has been or will be complied with.
(9) A borrowing or security resulting in a breach of the limit shall not be void nor shall it be voidable at the instance of the Company or any other Group company.
DELEGATION OF BOARD'S POWERS
81. Delegation to individual directors
The board may entrust to and confer upon any director any of its powers, authorities and discretions (with power to sub-delegate) on such terms and conditions as it thinks fit and may revoke or vary all or any of them, but no person dealing in good faith shall be affected by any revocation or variation.
82. Committees
(1) The board may delegate any of its powers, authorities and discretions (with power to sub-delegate) to any committee consisting of such person or persons (whether directors or not) as it thinks fit, provided that the majority of the members of the committee are directors and that no meeting of the committee shall be quorate for the purpose of exercising any of its powers, authorities or discretions unless a majority of those present are directors. The board may make any such delegation on such terms and conditions as it thinks fit and may revoke or vary any such delegation and discharge any committee wholly or in part, but no person dealing in good faith shall be affected by any revocation or variation. Any committee so formed shall, in the exercise of the powers, authorities and discretions so delegated, conform to any regulations that may be imposed on it by the board.
(2) The proceedings of a committee with two or more members shall be governed by any regulations imposed on it by the board and (subject to such regulations) by these articles regulating the proceedings of the board so far as they are capable of applying.
83. Local boards
(1) The board may establish any local or divisional board or agency for managing any of the affairs of the Company whether in the United Kingdom or elsewhere and may appoint any persons to be members of a local or divisional board, or to be managers or agents, and may fix their remuneration.
(2) The board may delegate to any local or divisional board, manager or agent any of its powers, authorities and discretions (with power to sub-delegate) and may authorise the members of any local or divisional board or any of them to fill any vacancies and to act notwithstanding vacancies.
(3) Any appointment or delegation under this article may be made on such terms and subject to such conditions as the board thinks fit and the board may remove any person so appointed, and may revoke or vary any delegation, but no person dealing in good faith shall be affected by the revocation or variation.
84. Powers of attorney
The board may by power of attorney or otherwise appoint any person to be the agent of the Company on such terms (including terms as to remuneration) as it may decide and may delegate to any person so appointed any of its powers, authorities and discretions (with power to sub-delegate). The board may remove any person appointed under this article and may revoke or vary the delegation, but no person dealing in good faith shall be affected by the revocation or variation.
DIRECTORS' INTERESTS
85. Directors' interests and voting
(1) Subject to the Statutes, a director shall not be disqualified by his office from entering into any contract with the Company, either with regard to his tenure of any office or position in the management, administration or conduct of the business of the Company or as vendor, purchaser or otherwise. Subject to the interest of the director being duly declared, a contract entered into by or on behalf of the Company in which any director is in any way interested shall not be liable to be avoided, nor shall any director so interested be liable to account to the Company for any benefit resulting from the contract, by reason of the director holding that office or of the fiduciary relationship established by his holding that office.
(2) A director may hold any other office or place of profit with the Company (except that of auditor) in conjunction with his office of director for such period (subject to the Statutes) and upon such terms as the board may decide and may be paid such extra remuneration for so doing (whether by way of salary, commission, participation in profits or otherwise) as the board may decide, either in addition to or in lieu of any remuneration under any other provision of these articles.
(3) A director may be or become a member or director of, or hold any other office or place of profit under, or otherwise be interested in, any other company in which the Company may be interested and shall not be liable to account to the Company for any benefit received by him as a member or director of, or holder of any other office or place of profit under, or his other interest in, that company.
(4) The board may cause the voting rights conferred by the shares in any other company held or owned by the Company or exercisable by them as directors of that other company to be exercised in such manner in all respects as it thinks fit (including the exercise of voting rights in favour of any resolution appointing the directors or any of them as directors or officers of the other company or voting or providing for the payment of any benefit to the directors or officers of the other company).
(5) A director may act by himself or his firm in a professional capacity for the Company (except as auditor) and he or his firm shall be entitled to remuneration for professional services as if he were not a director.
(6) The board may purchase and maintain for or for the benefit of any person who holds or has at any time held a relevant office insurance against any liability incurred by him in respect of
any act or omission in the actual or purported discharge of his duties or in the exercise or purported exercise of his powers or otherwise in relation to his holding of a relevant office; and for this purpose "relevant office" means that of director, officer or employee in relation to the Company or any company which is or was a subsidiary undertaking of or associated with the Company or any predecessor in business of the Company or any such subsidiary undertaking or associated company, or that of trustee of any pension fund or retirement, death or disability scheme for the benefit of any employee of the Company or any such subsidiary undertaking or associated company.
(7) A director who to his knowledge is in any way, whether directly or indirectly, interested in a contract with the Company shall declare the nature of his interest at the board meeting at which the question of entering into the contract is first taken into consideration, if he knows his interest then exists, or in any other case at the first board meeting after he knows that he is or has become so interested. For the purposes of this article, a general notice given to the board by a director to the effect that:
(a) he is a member of a specified company or firm and is to be regarded as interested in any other contract which may after the date of the notice be made with that company or firm; or
(b) he is to be regarded as interested in any contract which may after the date of the notice be made with a specified person who is connected with him,
shall be deemed to be a sufficient declaration of interest under this article in relation to any such contract but no such notice shall be effective unless either it is given at a board meeting or the director takes reasonable steps to secure that it is brought up and read at the next board meeting after it is given.
(8) A director shall not vote (or be counted in the quorum at a meeting) in respect of any resolution concerning his own appointment (including fixing or varying its terms), or the termination of his own appointment, as the holder of any office or place of profit with the Company or any other company in which the Company is interested but, where proposals are under consideration concerning the appointment (including fixing or varying its terms), or the termination of the appointment, of two or more directors to offices or places of profit with the Company or any other company in which the Company is interested, those proposals may be divided and a separate resolution may be put in relation to each director and in that case each of the directors concerned (if not otherwise debarred from voting under this article) shall be entitled to vote (and be counted in the quorum) in respect of each resolution unless it concerns his own appointment or the termination of his own appointment.
(9) A director shall also not vote (or be counted in the quorum at a meeting) in relation to any resolution relating to any contract or arrangement or other proposal in which he has an interest which (together with any interest of any connected person of his) is to his knowledge a material interest and, if he purports to do so, his vote shall not be counted, but this prohibition shall not apply and a director may vote (and be counted in the quorum) in respect of any resolution concerning any one or more of the following matters:
(a) any contract in which he is interested by virtue of an interest in shares, debentures or other securities of the Company or otherwise in or through the Company;
(b) the giving of any guarantee, security or indemnity in respect of:
(i) money lent or obligations incurred by him or by any other person at the request of, or for the benefit of, the Company or any of its subsidiary undertakings; or
(ii) a debt or obligation of the Company or any of its subsidiary undertakings for which he himself has assumed responsibility in whole or in part (either alone or jointly with others) under a guarantee or indemnity or by the giving of security;
(c) any issue or offer of shares, debentures or other securities of the Company or any of its subsidiary undertakings in respect of which he is or may be entitled to participate in his capacity as a holder of any such securities or as an underwriter or sub-underwriter;
(d) any contract concerning any other company in which he and any connected persons do not to his knowledge hold an interest in shares (within the meaning of sections 198 to 211 of the Act) representing one per cent. or more of any class of the equity share capital of that company or of the voting rights available to members of that company;
(e) any arrangement for the benefit of employees of the Company or any of its subsidiary undertakings which does not accord to him any privilege or benefit not generally accorded to the employees to whom the arrangement relates; and
(f) the purchase or maintenance of insurance for the benefit of directors or for the benefit of persons including directors.
For the purposes of this paragraph a person is a "connected person" in relation to a director if that person is deemed to be connected with that director within the meaning of section 346 of the Act.
(10) In the case of an alternate director, an interest of his appointor shall be treated as an interest of the alternate in addition to any interest which the alternate otherwise has.
(11) If any question arises at any meeting as to the materiality of an interest of a director (other than the chairman of the meeting) or as to the entitlement of any director (other than the chairman of the meeting) to vote and the question is not resolved by his voluntarily agreeing to abstain from voting, the question shall be referred to the chairman of the meeting and his ruling in relation to the director concerned shall be final and conclusive except in a case where the nature or extent of the interest of the director concerned, so far as known to him, has not been fairly disclosed. If any question shall arise in respect of the chairman of the meeting and is not resolved by his voluntarily agreeing to abstain from voting, the question shall be decided by a resolution of the board (for which purpose the chairman shall be counted in the quorum but shall not vote on the matter) and the resolution shall be final and conclusive except in a case where the nature or extent of the interest of the chairman, so far as known to him, has not been fairly disclosed.
(12) In this article references to a contract include references to any proposed contract and to any transaction or arrangement whether or not constituting a contract.
(13) The Company may by ordinary resolution suspend or relax the provisions of this article to any extent or ratify any contract not duly authorised by reason of a contravention of this article.
PROCEEDINGS OF THE BOARD
86. Board meetings
The board may meet for the despatch of business, adjourn and otherwise regulate its meetings as it thinks fit. A director at any time may, and the secretary at the request of a director at any time shall, summon a board meeting.
87. Notice of board meetings
Notice of a board meeting may be given to a director personally or by word of mouth or given in writing or by electronic means to him at such address as he may from time to time specify for this purpose (or if he does not specify an address, at his last known address). A director may waive notice of any meeting either prospectively or retrospectively.
88. Quorum
The quorum necessary for the transaction of the business of the board may be fixed by the board and, unless so fixed at any other number, shall be two.
89. Chairman or deputy chairman to preside
(1) The board may appoint a chairman and one or more deputy chairman or chairmen and may at any time revoke any such appointment.
(2) The chairman, or failing him any deputy chairman (the longest in office taking precedence, if more than one is present), shall, if present and willing, preside at all board meetings but, if no chairman or deputy chairman has been appointed, or if he is not present within five minutes after the time fixed for holding the meeting or is unwilling to act as chairman of the meeting, the directors present shall choose one of their number to act as chairman of the meeting.
90. Competence of board meetings
A board meeting at which a quorum is present shall be competent to exercise all the powers, authorities and discretions for the time being vested in or exercisable by the board.
91. Voting
Questions arising at any board meeting shall be determined by a majority of votes. In the case of an equality of votes the chairman of the meeting shall have a second or casting vote.
92. Telephone board meeting
(1) A board meeting may consist of a conference between directors some or all of whom are in different places provided that each director may participate in the business of the meeting whether directly, by telephone or by any other electronic means which enables him:
(a) to hear each of the other participating directors addressing the meeting; and
(b) if he so wishes, to address all of the other participating directors simultaneously.
(2) A quorum is deemed to be present if at least the number of directors required to form a quorum, subject to the provisions of article 78, may participate in the manner specified above in the business of the meeting.
(3) A board meeting held in this way is deemed to take place at the place where the largest group of participating directors is assembled or, if no such group is readily identifiable, at the place from where the chairman of the meeting participates.
93. Resolutions without meetings
A resolution which is signed or approved by all the directors entitled to vote on that resolution shall be as valid and effectual as if it had been passed at a board meeting duly called and constituted. The resolution may be contained in one document or electronic communication or in several documents or electronic communications in like form, each signed or approved by one or more of the directors concerned. For the purpose of this article:
(a) the signature or approval of an alternate director (if any) shall suffice in place of the signature of the director appointing him; and
(b) the approval of a director or alternate director shall be given in writing or by electronic means.
94. Validity of acts of directors in spite of formal defect
All acts bona fide done by a meeting of the board, or of a committee, or by any person acting as a director or a member of a committee, shall, notwithstanding that it is afterwards discovered that there was some defect in the appointment of any member of the board or committee or of the person so acting, or that they or any of them were disqualified or had vacated office or were not entitled to vote, be as valid as if every such person had been duly appointed and qualified to be a director and had continued to be a director or member of the committee and had been entitled to vote.
95. Minutes
The board shall cause minutes to be made in books kept for the purpose:
(a) of all appointments of officers made by the board;
(b) of the names of all the directors present at each meeting of the board and of any committee; and
(c) of all resolutions and proceedings of all meetings of the Company and of any class of members, and of the board and of any committee.
SECRETARY
96. Secretary
The secretary shall be appointed by the board for such term, at such remuneration and on such conditions as it thinks fit, and the board may remove from office any person so appointed (without prejudice to any claim for damages for breach of any contract between him and the Company).
SHARE CERTIFICATES
97. Issue of certificates
(1) A person whose name is entered in the register as the holder of any certificated shares shall be entitled (unless the conditions of issue otherwise provide) to receive one certificate for those shares, or one certificate for each class of those shares and, if he transfers part of the shares represented by a certificate in his name, or elects to hold part in uncertificated form, to receive a new certificate for the balance of those shares.
(2) In the case of joint holders, the Company shall not be bound to issue more than one certificate for all the shares in any particular class registered in their joint names, and delivery of a certificate for a share to any one of the joint holders shall be sufficient delivery to all.
(3) A share certificate may be issued under seal (by affixing the seal to, or printing the seal or a representation of it on, the certificate) or executed or authenticated in such manner as the board may from time to time determine, either generally or in any particular case (which may include any signature being applied mechanically or electronically). A share certificate shall specify the number and class of the shares to which it relates and the amount or respective amounts paid up on the shares. Any certificate so issued shall, as against the Company, be prima facie evidence of the title of the person named in that certificate to the shares comprised in it.
(4) A share certificate may be given to a member in accordance with the provisions of these articles on notices.
98. Charges for and replacement of certificates
(1) Except as expressly provided to the contrary in these articles, no fee shall be charged for the issue of a share certificate.
(2) Any two or more certificates representing shares of any one class held by any member may at his request be cancelled and a single new certificate issued.
(3) If any member surrenders for cancellation a certificate representing shares held by him and requests the Company to issue two or more certificates representing those shares in such proportions as he may specify, the board may, if it thinks fit, comply with the request on payment of such fee (if any) as the board may decide.
(4) If a certificate is damaged or defaced or alleged to have been lost, stolen or destroyed, a new certificate representing the same shares may be issued on compliance with such conditions as to evidence, indemnity and security for such indemnity as the board may think fit and on payment of any exceptional expenses of the Company incidental to its investigation of the evidence and preparation of the indemnity and security and, if damaged or defaced, on delivery up of the old certificate.
(5) In the case of joint holders of a share a request for a new certificate under any of the preceding paragraphs of this article may be made by any one of the joint holders unless the certificate is alleged to have been lost, stolen or destroyed.
LIEN ON SHARES
99. Lien on partly paid shares
(1) The Company shall have a first and paramount lien on every share (not being a fully paid share) for all amounts payable (whether or not due) in respect of that share. The lien shall extend to every amount payable in respect of that share.
(2) The board may at any time either generally or in any particular case declare any share to be wholly or partly exempt from this article. Unless otherwise agreed, the registration of a transfer of a share shall operate as a waiver of the Company's lien (if any) on that share.
100. Enforcement of lien
(1) The Company may sell any share subject to a lien in such manner as the board may decide if an amount payable on the share is due and is not paid within fourteen clear days after a notice has been given to the holder or any person entitled by transmission to the share demanding payment of that amount and giving notice of intention to sell in default.
(2) To give effect to any sale under this article, the board may authorise some person to transfer the share sold to, or as directed by, the purchaser. The purchaser shall not be bound to see to the application of the purchase money nor shall the title of the new holder to the share be affected by any irregularity in or invalidity of the proceedings relating to the sale.
(3) The net proceeds of the sale, after payment of the costs, shall be applied in or towards satisfaction of the amount due and any residue shall (subject to a like lien for any amounts not presently due as existed on the share before the sale), on surrender of the certificate for the shares sold, be paid to the holder or person entitled by transmission to the share immediately before the sale.
CALLS ON SHARES
101. Calls
(1) Subject to the terms of allotment, the board may make calls on the members in respect of any moneys unpaid on their shares (whether in respect of nominal amount or premium) and each member shall (subject to his receiving at least fourteen clear days' notice specifying when and where payment is to be made) pay to the Company as required by the notice the amount called on his shares. A call may be revoked or postponed as the board may decide.
(2) Any call may be made payable in one sum or by instalments and shall be deemed to be made at the time when the resolution of the board authorising that call is passed.
(3) A person on whom a call is made shall remain liable for it notwithstanding the subsequent transfer of the share in respect of which the call is made.
(4) The joint holders of a share shall be jointly and severally liable for the payment of all calls in respect of that share.
102. Interest on calls
If a call is not paid before or on the due date for payment, the person from whom it is due shall pay interest on the amount unpaid, from the due date for payment to the date of actual
payment, at such rate as the board may decide, but the board may waive payment of the interest, wholly or in part.
103. Sums treated as calls
A sum which by the terms of allotment of a share is payable on allotment, or at a fixed time, or by instalments at fixed times, shall for all purposes of these articles be deemed to be a call duly made and payable on the date or dates fixed for payment and, in case of non-payment, these articles shall apply as if that sum had become payable by virtue of a call.
104. Power to differentiate
On any issue of shares the board may make arrangements for a difference between the allottees or holders of the shares in the amounts and times of payment of calls on their shares.
105. Payment of calls in advance
The board may, if it thinks fit, receive all or any part of the moneys payable on a share beyond the sum actually called up on it if the holder is willing to make payment in advance and, on any moneys so paid in advance, may (until they would otherwise be due) pay interest at such rate as may be agreed between the board and the member paying the sum in advance.
FORFEITURE OF SHARES
106. Notice of unpaid calls
(1) If the whole or any part of any call or instalment remains unpaid on any share after the due date for payment, the board may give a notice to the holder requiring him to pay so much of the call or instalment as remains unpaid, together with any accrued interest.
(2) The notice shall state a further day, being not less than fourteen clear days from the date of the notice, on or before which, and the place where, payment is to be made and shall state that, in the event of non-payment on or before the day and at the place appointed, the share in respect of which the call was made or instalment is payable will be liable to be forfeited.
(3) The board may accept a surrender of any share liable to be forfeited.
107. Forfeiture on non-compliance with notice
(1) If the requirements of a notice given under the preceding article are not complied with, any share in respect of which it was given may (before the payment required by the notice is made) be forfeited by a resolution of the board. The forfeiture shall include all dividends declared and other moneys payable in respect of the forfeited share and not actually paid before the forfeiture.
(2) If a share is forfeited, notice of the forfeiture shall be given to the person who was the holder of the share or (as the case may be) the person entitled to the share by transmission, and an entry that notice of the forfeiture has been given, with the relevant date, shall be made in the register; but no forfeiture shall be invalidated by any omission to give such notice or to make such entry.
108. Power to annul forfeiture or surrender
The board may, at any time before the forfeited or surrendered share has been sold, re-allotted or otherwise disposed of, annul the forfeiture or surrender upon payment of all calls and interest due on or incurred in respect of the share and on such further conditions (if any) as it thinks fit.
109. Disposal of forfeited or surrendered shares
(1) Every share which is forfeited or surrendered shall become the property of the Company and (subject to the Statutes) may be sold, re-allotted or otherwise disposed of, upon such terms and in such manner as the board shall decide either to the person who was before the forfeiture the holder of the share or to any other person and whether with or without all or any part of the amount previously paid up on the share being credited as so paid up. The board may for the purposes of a disposal authorise some person to transfer the forfeited or surrendered share to, or in accordance with the directions of, any person to whom the same has been disposed of.
(2) A statutory declaration by a director or the secretary that a share has been forfeited or surrendered on a specified date shall, as against all persons claiming to be entitled to the share, be conclusive evidence of the facts stated in it and shall (subject to the execution of any necessary transfer) constitute a good title to the share. The person to whom the share has been disposed of shall not be bound to see to the application of the consideration for the disposal (if any) nor shall his title to the share be affected by any irregularity in or invalidity of the proceedings connected with the forfeiture, surrender, sale, re-allotment or disposal of the share.
110. Arrears to be paid notwithstanding forfeiture or surrender
A person any of whose shares have been forfeited or surrendered shall cease to be a member in respect of the forfeited or surrendered share and shall surrender to the Company for cancellation any certificate for the share forfeited or surrendered, but shall remain liable (unless payment is waived in whole or in part by the board) to pay to the Company all moneys payable by him on or in respect of that share at the time of forfeiture or surrender, together with interest from the time of forfeiture or surrender until payment at such rate as the board shall decide, in the same manner as if the share had not been forfeited or surrendered. He shall also be liable to satisfy all the claims and demands (if any) which the Company might have enforced in respect of the share at the time of forfeiture or surrender. No deduction or allowance shall be made for the value of the share at the time of forfeiture or surrender or for any consideration received on its disposal.
SEAL
111. Seal
(1) The Company may exercise the powers conferred by the Statutes with regard to having official seals and those powers shall be vested in the board.
(2) The board shall provide for the safe custody of every seal of the Company.
(3) A seal shall be used only by the authority of the board or a duly authorised committee but that authority may consist of an instruction or approval given in writing or by electronic means by a majority of the directors or of the members of a duly authorised committee.
(4) The board may determine who shall sign any instrument to which a seal is applied, either generally or in relation to a particular instrument or type of instrument, and may also determine, either generally or in any particular case, that such signatures shall be dispensed with.
(5) Unless otherwise decided by the board:
(a) certificates for shares, debentures or other securities of the Company issued under seal need not be signed; and
(b) every other instrument to which a seal is applied shall be signed by at least one director and the secretary or by at least two directors.
DIVIDENDS
112. Declaration of dividends by the Company
The Company may, by ordinary resolution, declare a dividend to be paid to the members, according to their respective rights and interests in the profits, and may fix the time for payment of such dividend, but no dividend shall exceed the amount recommended by the board.
113. Fixed and interim dividends
The board may pay such interim dividends as appear to the board to be justified by the financial position of the Company and may also pay any dividend payable at a fixed rate at intervals settled by the board whenever the financial position of the Company, in the opinion of the board, justifies its payment. If the board acts in good faith, none of the directors shall incur any liability to the holders of shares conferring preferred rights for any loss such holders may suffer in consequence of the payment of an interim dividend on any shares having non-preferred or deferred rights.
114. Calculation and currency of dividends
(1) Except insofar as the rights attaching to, or the terms of issue of, any share otherwise provide:
(a) all dividends shall be declared and paid according to the amounts paid up on the shares in respect of which the dividend is paid, but no amount paid up on a share in advance of calls shall be treated for the purposes of this article as paid up on the share;
(b) all dividends shall be apportioned and paid pro rata according to the amounts paid up on the shares during any portion or portions of the period in respect of which the dividend is paid; and
(c) dividends may be declared or paid in any currency.
(2) The board may agree with any member that dividends which may at any time or from time to time be declared or become due on his shares in one currency shall be paid or satisfied in another, and may agree the basis of conversion to be applied and how and when the amount to be paid in the other currency shall be calculated and paid and for the Company or any other person to bear any costs involved.
115. Method of payment
(1) The Company may pay any dividend or other sum payable in respect of a share:
(a) by cheque or dividend warrant payable to the holder (or, in the case of joint holders, the holder whose name stands first in the register in respect of the relevant share) or to such other person as the holder (or, in the case of joint holders, all the joint holders) may notify to the Company for the purpose; or
(b) by a bank or other funds transfer system or by such other electronic means (including, in the case of an uncertificated share, a relevant system) to such account as the holder (or, in the case of joint holders, all the joint holders) may notify to the Company for the purpose; or
(c) in such other way as may be agreed between the Company and the holder (or, in the case of joint holders, all such holders).
(2) Any such cheque or dividend warrant may be sent by post to the registered address of the holder (or, in the case of joint holders, to the registered address of that person whose name stands first in the register in respect of the relevant share) or to such other address as the holder (or, in the case of joint holders, all the joint holders) may notify to the Company for the purpose.
(3) Every cheque or warrant is sent, and payment in any other way is made, at the risk of the person or persons entitled to it and the Company will not be responsible for any sum lost or delayed when it has sent or transmitted the sum in accordance with these articles. Clearance of a cheque or warrant or transmission of funds through a bank or other funds transfer system or by such other electronic means as is permitted by these articles shall be a good discharge to the Company.
(4) Any joint holder or other person jointly entitled to any share may give an effective receipt for any dividend or other sum paid in respect of the share.
(5) Any dividend or other sum payable in respect of any share may be paid to a person or persons entitled by transmission to that share as if he or they were the holder or joint holders of that share and his address (or the address of the first named of two or more persons jointly entitled) noted in the register were the registered address.
116. Dividends not to bear interest
No dividend or other moneys payable by the Company on or in respect of any share shall bear interest as against the Company unless otherwise provided by the rights attached to the share.
117. Calls or debts may be deducted from dividends
The board may deduct from any dividend or other moneys payable to any person (either alone or jointly with another) on or in respect of a share all such sums as may be due from him (either alone or jointly with another) to the Company on account of calls or otherwise in relation to shares of the Company.
118. Unclaimed dividends etc
All unclaimed dividends, interest or other sums payable may be invested or otherwise made use of by the board for the benefit of the Company until claimed. All dividends unclaimed for a period of twelve years after having become due for payment shall be forfeited and cease to remain owing by the Company. The payment of any unclaimed dividend, interest or other sum payable by the Company on or in respect of any share into a separate account shall not constitute the Company a trustee in respect of it.
119. Uncashed dividends
If:
(a) a payment for a dividend or other sum payable in respect of a share sent by the Company to the person entitled to it in accordance with these articles is left uncashed or is returned to the Company and, after reasonable enquiries, the Company is unable to establish any new address or, with respect to a payment to be made by a funds transfer system, a new account, for that person; or
(b) such a payment is left uncashed or returned to the Company on two consecutive occasions,
the Company shall not be obliged to send any dividends or other sums payable in respect of that share to that person until he notifies the Company of an address or, where the payment is to be made by a funds transfer system, details of the account, to be used for the purpose.
120. Dividends in specie
(1) With the authority of an ordinary resolution of the Company and on the recommendation of the board, payment of any dividend may be satisfied wholly or in part by the distribution of specific assets and in particular of paid up shares or debentures of any other company.
(2) Where any difficulty arises with the distribution, the board may settle the difficulty as it thinks fit and, in particular, may issue fractional certificates (or ignore fractions), fix the value for distribution of the specific assets or any part of them, determine that cash payments be made to any members on the basis of the value so fixed in order to secure equality of distribution and vest any of the specific assets in trustees on such trusts for the persons entitled to the dividend as the board may think fit.
121. Scrip dividends
(1) The board may, with the authority of an ordinary resolution of the Company, offer any holders of ordinary shares the right to elect to receive further shares (whether or not of that class), credited as fully paid, instead of cash in respect of all (or some part) of any dividend specified by the ordinary resolution (a "scrip dividend") in accordance with the following provisions of this article.
(2) The ordinary resolution may specify a particular dividend (whether or not already declared) or may specify all or any dividends declared within a specified period, but such period may not end later than five years after the date of the meeting at which the ordinary resolution is passed.
(3) The basis of allotment shall be decided by the board so that, as nearly as may be considered convenient, the value of the further shares, including any fractional entitlement, is equal to the amount of the cash dividend which would otherwise have been paid (disregarding the amount of any associated tax credit).
(4) For the purposes of paragraph (3) above the value of the further shares shall be:
(a) equal to the average middle-market quotation for a fully paid share of the relevant class, adjusted if necessary for the proposed dividend, as shown in the London Stock Exchange Daily Official List or as established from such other source as the board considers appropriate for the five business days immediately preceding or following the announcement of the cash dividend to which the scrip dividend relates, as the board may decide; or
(b) calculated in such manner as may be determined by or in accordance with the ordinary resolution.
(5) The board shall give notice to the holders of ordinary shares of their rights of election in respect of the scrip dividend and shall specify the procedure to be followed in order to make an election.
(6) The dividend or that part of it in respect of which an election for the scrip dividend is made shall not be paid and instead further shares shall be allotted in accordance with elections duly made and the board shall capitalise a sum equal to the aggregate nominal amount of the shares to be allotted out of such sums available for the purpose as the board may consider appropriate.
(7) The further shares so allotted shall rank pari passu in all respects with the fully paid shares of the same class then in issue except as regards participation in the relevant dividend.
(8) The board may decide that the right to elect for any scrip dividend shall not be made available to members resident in any territory where, in the opinion of the board, compliance with local laws or regulations would be unduly onerous.
(9) The board may do all acts and things as it considers necessary or expedient to give effect to the provisions of a scrip dividend election and the issue of any shares in accordance with the provisions of this article, and may make such provisions as it thinks fit for the case of shares becoming distributable in fractions (including provisions under which, in whole or in part, the benefit of fractional entitlements accrues to the Company rather than to the members concerned). To the extent that the entitlement of any holder of ordinary shares in respect of any dividend is less than the value of one new share (as determined for the basis of any scrip dividend) the board may also from time to time establish or vary a procedure for such entitlement to be accrued and aggregated with any similar entitlement for the purposes of any subsequent scrip dividend.
(10) The board may from time to time establish or vary a procedure for election mandates, under which a holder of ordinary shares may, in respect of any future dividends for which a right of election pursuant to this article is offered, elect to receive shares in lieu of such dividend on the terms of such mandate.
(11) The board shall not make a scrip dividend available unless the Company has sufficient unissued shares and undistributed profits or reserves to give effect to elections which could be made to receive that scrip dividend.
CAPITALISATION OF RESERVES
122. Capitalisation of reserves
(1) The board may, with the authority of an ordinary resolution of the Company:
(a) resolve to capitalise any sum standing to the credit of any reserve account of the Company (including share premium account and capital redemption reserve) or any sum standing to the credit of profit and loss account not required for the payment of any preferential dividend (whether or not it is available for distribution); and
(b) appropriate that sum as capital to the holders of ordinary shares in proportion to the nominal amount of the ordinary share capital held by them respectively and apply that sum on their behalf in paying up in full any unissued shares or debentures of the Company of a nominal amount equal to that sum and allot the shares or debentures credited as fully paid to those members, or as they may direct, in those proportions or in paying up the whole or part of any amounts which are unpaid in respect of any issued shares in the Company held by them respectively, or otherwise deal with such sum as directed by the resolution provided that the share premium account and the capital redemption reserve and any sum not available for distribution in accordance with the Statutes may only be applied in paying up unissued shares to be allotted credited as fully paid up.
(2) Where any difficulty arises in respect of any distribution of any capitalised reserve or other sum, the board may settle the difficulty as it thinks fit and in particular may make such provisions as it thinks fit in the case of shares or debentures becoming distributable in fractions (including provisions under which, in whole or in part, the benefit of fractional entitlements accrues to the Company rather than the members concerned) or ignore fractions and may fix the value for distribution of any fully paid up shares or debentures and may determine that cash payments be made to any members on the basis of the value so fixed in order to secure equality of distribution, and may vest any shares or debentures in trustees upon such trusts for the persons entitled to share in the distribution as the board may think fit.
(3) The board may also authorise any person to sign on behalf of the persons entitled to share in the distribution a contract for the acceptance by those persons of the shares or debentures to be allotted to them credited as fully paid under a capitalisation and any such contract shall be binding on all those persons.
123. Capitalisation of reserves - employees' share schemes
(1) This article (which is without prejudice to the generality of the provisions of the immediately preceding article) applies:
(a) where a person is granted pursuant to an employees' share scheme a right to subscribe for shares in the Company in cash at a subscription price less than their nominal value; and
(b) where, pursuant to an employees' share scheme, the terms on which any person is entitled to subscribe in cash for shares in the Company are adjusted as a result of a capitalisation issue, rights issue or other variation of capital so that the subscription price is less than their nominal value.
(2) In any such case the board:
(a) shall transfer to a reserve account a sum equal to the deficiency between the subscription price and the nominal value of the shares (the "cash deficiency") from the profits or reserves of the Company which are available for distribution and not required for the payment of any preferential dividend; and
(b) (subject to paragraph (4) below) shall not apply that reserve account for any purpose other than paying up the cash deficiency upon the allotment of those shares.
(3) Whenever the Company is required to allot shares pursuant to such a right to subscribe, the board shall (subject to the Statutes) appropriate to capital out of the reserve account an amount equal to the cash deficiency applicable to those shares, apply that amount in paying up the deficiency on the nominal value of those shares and allot those shares credited as fully paid to the person entitled to them.
(4) If any person ceases to be entitled to subscribe for shares as described above, the restrictions on the reserve account shall cease to apply in relation to such part of the account as is equal to the amount of the cash deficiency applicable to those shares.
(5) No right shall be granted under any employees' share scheme under paragraph
(1)(a) above and no adjustment shall be made as mentioned in paragraph
(1)(b) above unless there are sufficient profits or reserves of the Company
available for distribution and not required for the payment of any
preferential dividend to permit the transfer to a reserve account in
accordance with this article of an amount sufficient to pay up the cash
deficiency applicable to the shares concerned.
RECORD DATES
124. Fixing of record dates
(1) Notwithstanding any other of these articles, but without prejudice to any rights attached to any shares, the Company or the board may fix a date as the record date by reference to which a dividend will be declared or paid or a distribution, allotment or issue made, and that date may be before, on or after the date on which the dividend, distribution, allotment or issue is declared, paid or made.
(2) In the absence of a record date being fixed, entitlement to any dividend, distribution, allotment or issue shall be determined by reference to the date on which the dividend is declared or the distribution, allotment or issue is made.
ACCOUNTS
125. Accounting records
(1) The board shall cause accounting records of the Company to be kept in accordance with the Statutes.
(2) No member (as such) shall have any right of inspecting any account, book or document of the Company, except as conferred by law or authorised by the board or by any ordinary resolution of the Company.
NOTICES
126. Form of notices
(1) Except where otherwise expressly stated, any notice to be given to or by any person under these articles shall be in writing or, to the extent permitted by the Statutes and subject to paragraph (2), contained in an electronic communication.
(2) The board may from time to time specify the form and manner in which a notice may be given to the Company by electronic means, including one or more addresses for the receipt of an electronic communication, and may prescribe such procedures as it thinks fit for verifying the authenticity or integrity of any such electronic communication. A notice may be given to the Company by electronic means only if it is given in accordance with the requirements specified by the board.
127. Manner of giving notices
(1) A notice in writing, document or other communication may be given or served by the Company to any member either personally or by sending it through the post addressed to the member at his registered address or by leaving it at that address.
(2) Subject to the Statutes, a notice, document or other communication may be given by the Company to any member by electronic means to such address as may from time to time be authorised by the member concerned or by publishing it on a web site and notifying the member concerned, in such manner as he may from time to time authorise, that it has been so published.
(3) In the case of joint holders of a share, any notice, document or other communication given or served by the Company in any manner permitted by these articles to the joint holder who is named first in the register in respect of the joint holding shall be deemed to be given to all other holders of the share.
(4) A member whose registered address is not within the United Kingdom and who gives to the Company an address within the United Kingdom at which notices may be given to him shall be entitled to have notices given to him at that address but, unless he does so, shall not be entitled to receive any notice from the Company.
128. Notice by advertisement
If at any time by reason of the suspension or curtailment of postal services within the United Kingdom the Company is unable effectively to convene a general meeting by notices sent through the post, a general meeting may be convened by a notice advertised in at least one national newspaper. In any such case the Company shall send confirmatory copies of the notice by post to those members to whom notice cannot be given by electronic means if at least six clear days before the meeting the posting of notices to addresses throughout the United Kingdom again becomes practicable.
129. When notice is deemed given
(1) Any notice in writing, document or other communication, if sent by first class post, shall be deemed to have been given on the day following that on which the envelope containing it is put into the post, or, if sent by second class post, shall be deemed to have been given on the second day following that on which the envelope containing it is put into the post and
in
proving that a notice, document or other communication has been given it shall be sufficient to prove that the letter, envelope or wrapper containing the notice, document or other communication was properly addressed, prepaid and put into the post.
(2) Any notice in writing, document or other communication not sent by post but left at a registered address or address at which a notice, document or other communication may be given shall be deemed to have been given on the day it was so left.
(3) Any notice, document or other communication, if sent by electronic means (including through any relevant system), shall be deemed to have been given on the day following that on which the electronic communication was sent by or on behalf of the Company.
(4) Where notice is given by way of newspaper advertisement, such notice shall be deemed to have been given to each member or person entitled to receive it at noon on the day when the advertisement appears or, if it appears on different days, at noon on the first of the days when it appears.
(5) A member present, either in person or by proxy, at any meeting of the Company or class of members of the Company shall be deemed to have received notice of the meeting and, where requisite, of the purposes for which the meeting was convened.
(6) Every person who becomes entitled to a share shall be bound by every notice (other than a notice in accordance with section 212 of the Act) in respect of that share which before his name is entered in the register was given to the person from whom he derives his title to the share.
130. Record date for giving notices
(1) For the purposes of giving notices of meetings, documents or other communications, whether under section 370(2) of the Act, any other Statute, a provision in these articles or any other instrument, the Company may determine that persons entitled to receive such notices, documents or other communications are those persons entered on the register at the close of business on a day determined by it.
(2) The day determined by the Company under paragraph (1) above may not be more than 21 days before the day that the notice of the meeting, document or other communication is given.
131. Notice to person entitled by transmission
Where a person is entitled by transmission to a share, any notice or other communication shall be given to him, as if he were the holder of that share and his address noted in the register were his registered address. In any other case, any notice or other communication given to any member pursuant to these articles shall, notwithstanding that the member is then dead or bankrupt or that any other event giving rise to the transmission of the share by operation of law has occurred and whether or not the Company has notice of the death, bankruptcy or other event, be deemed to have been properly given in respect of any share registered in the name of that member as sole or joint holder.
UNTRACED MEMBERS
132. Sale of shares of untraced members
(1) The Company may sell, in such manner as the board may decide and at the best price it considers to be reasonably obtainable at that time, any share of a member, or any share to which a person is entitled by transmission if:
(a) during a period of twelve years at least three cash dividends have become payable in respect of the share to be sold and have been sent by the Company in accordance with these articles;
(b) during that period of twelve years no cash dividend payable in respect of the share has been claimed, no cheque, warrant, order or other payment for a dividend has been cashed, no dividend sent by means of a funds transfer system has been paid and no communication has been received by the Company from the member or the person entitled by transmission to the share;
(c) on or after the expiry of that period of twelve years the Company has published advertisements both in a national newspaper and in a newspaper circulating in the area in which the last known address of the member or person entitled by transmission to the share or the address at which notices may be given in accordance with these articles is located, in each case giving notice of its intention to sell the share; and
(d) during the period of three months following the publication of those advertisements and after that period until the exercise of the power to sell the share, the Company has not received any communication from the member or the person entitled by transmission to the share.
(2) The Company's power of sale shall extend to any further share which, on or before the date of publication of the first of any advertisement pursuant to subparagraph (1)(c) above, is issued in right of a share to which paragraph (1) applies (or in right of any share to which this paragraph applies) if the conditions set out in subparagraphs (1)(b) to (d) are satisfied in relation to the further share (but as if the references to a period of twelve years were references to a period beginning on the date of allotment of the further share and ending on the date of publication of the first of the advertisements referred to above).
(3) To give effect to any sale, the board may authorise some person to transfer the share to, or as directed by, the purchaser, who shall not be bound to see to the application of the purchase money; nor shall the title of the new holder to the share be affected by any irregularity in, or invalidity of, the proceedings relating to the sale.
133. Application of proceeds of sale
(1) The Company shall account to the person entitled to the share at the date of sale for a sum equal to the net proceeds of sale and shall be deemed to be his debtor, and not a trustee for him, in respect of them.
(2) Pending payment of the net proceeds of sale to such person, the proceeds may either be employed in the business of the Company or invested in such investments (other than shares of the Company or its holding company, if any) as the board may from time to time decide.
(3) No interest shall be payable in respect of the net proceeds and the Company shall not be required to account for any moneys earned on the net proceeds.
DESTRUCTION OF DOCUMENTS
134. Destruction of documents
(1) The board may authorise or arrange the destruction of documents held by the Company as follows:
(a) at any time after the expiration of six years from the date of registration, all instruments of transfer of shares and all other documents transferring or purporting to transfer shares or representing or purporting to represent the right to be registered as the holder of shares on the faith of which entries have been made in the register;
(b) at any time after the expiration of one year from the date of cancellation, all registered share certificates which have been cancelled;
(c) at any time after the expiration of two years from the date of recording them, all dividend mandates and notifications of change of address; and
(d) at any time after the expiration of one year from the date of actual payment, all paid dividend warrants and cheques.
(2) It shall conclusively be presumed in favour of the Company that:
(a) every entry in the register purporting to have been made on the basis of an instrument of transfer or other document so destroyed was duly and properly made;
(b) every instrument of transfer so destroyed was a valid and effective instrument duly and properly registered;
(c) every share certificate so destroyed was a valid certificate duly and properly cancelled;
(d) every other document mentioned in paragraph (1) above so destroyed was a valid and effective document in accordance with the particulars of it recorded in the books and records of the Company; and
(e) every paid dividend warrant and cheque so destroyed was duly paid.
(3) The provisions of paragraph (2) above shall apply only to the destruction of a document in good faith and without notice of any claim (regardless of the parties to it) to which the document might be relevant.
(4) Nothing in this article shall be construed as imposing on the Company or the board any liability in respect of the destruction of any document earlier than as stated in paragraph (1) above or in any other circumstances in which liability would not attach to the Company or the board in the absence of this article.
(5) References in this article to the destruction of any document include references to its disposal in any manner.
WINDING UP
135. Powers to distribute in specie
If the Company is in liquidation, the liquidator may, with the authority of an extraordinary resolution of the Company and any other authority required by the Statutes:
(a) divide among the members in specie the whole or any part of the assets of the Company and, for that purpose, value any assets and determine how the division shall be carried out as between the members or different classes of members; or
(b) vest the whole or any part of the assets in trustees upon such trusts for the benefit of members as the liquidator, with the like sanction, shall think fit but no member shall be compelled to accept any assets upon which there is any liability.
INDEMNITY
136. Indemnity of officers
Subject to the Statutes, every director or other officer (excluding an auditor) of the Company shall be indemnified out of the assets of the Company against all liabilities incurred by him in the actual or purported execution or discharge of his duties or the exercise or purported exercise of his powers or otherwise in relation to or in connection with his duties, powers or office but:
(a) this indemnity shall not apply to any liability to the extent that it is recovered from any other person; and
(b) the indemnity is subject to such officer taking all reasonable steps to effect such recovery, to the intent that the indemnity shall not apply where an alternative right of recovery is available and capable
of being enforced.
Exhibit 2.12
WPP Group plc
27 Farm Street
London W1X6RD
England
June 27, 2001
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20037
Dear Sir or Madam:
In June 2001, WPP Group plc (the "Company") issued Euro 1 billion of bonds, consisting of Euro 650 million at 6% due June 2008 and Euro 350 million at 5.125% due June 2004 (collectively, the "Euro Bonds").
The Company hereby agrees, pursuant to instruction 2(b)(i) to the Exhibits to Form 20-F, to furnish the Securities and Exchange Commission with a copy of the instruments relating to the Euro Bonds upon request.
Very truly yours,
WPP GROUP PLC
By: /s/ Paul Richardson
-----------------------
Paul Richardson
Group Finance Director
|
Exhibit 4.5
WPP GROUP PLC
Approved by the Company in General Meeting on 2 September, 1999
(Adopted by the Compensation Committee
on 22nd September, 1999 and as amended by
the Compensation Committee on 8th December, 1999
and on . [Appendices 1 and 2] and on [2nd May, 2001]
[Appendix 3])
ALLEN & OVERY
London
CONTENTS
Clause Page 1. Purpose........................................................ 1 2. Interpretation................................................. 1 3. Eligibility.................................................... 4 4. Acquisition of Investment Shares............................... 4 5. Awards......................................................... 5 6. Commitment of Investment Shares................................ 7 7. Performance Condition.......................................... 7 8. Exceptional Financial Circumstances............................ 8 9. Special Situations............................................. 8 10. Variation of Capital........................................... 9 11. Change of Control.............................................. 10 12. Discharge of Awards............................................ 11 13. Miscellaneous.................................................. 11 14. Amendment...................................................... 14 15. Duration....................................................... 14 Appendix 1.............................................................. 15 Appendix 2.............................................................. 16 Appendix 3.............................................................. 17 |
1. PURPOSE
The purpose of the Plan is to strengthen the Company's long term financial performance and its ability to attract and retain key senior executives by ensuring that participants receive competitive incentives which are linked to the success of both the Company and individual businesses and which align the interests of senior executives with the interests of the Company's share owners.
2. INTERPRETATION
(1) The following words and expressions have the following meanings:
"ADS" means an American Depository Share in the Company held under, or to be transferred or issued to, any depository approved by the Company.
"Annual Earnings" means an Eligible Person's annual earnings at any time comprising his basic pay and bonus (which may be a bonus target or such percentage of a participant's bonus target as the Compensation Committee shall specify), included on a basis the Compensation Committee decides. It excludes remuneration attributable to long-term incentive schemes and other benefits.
"Award" means an award or grant made to an Eligible Person subject to and on the terms of the Plan.
"Award Period" means the period of 42 days commencing on any day on which the Company releases its results for any financial period.
"Change of Control Date" means the date on which a person or persons obtains Control of the Company as described in Rule 11(1)(A) or (B).
"Company" means WPP Group plc.
"Comparator Group" means those companies which the Compensation Committee select from time to time , and includes the Company.
"Compensation Committee" means the compensation committee of the board of directors of the Company.
"Control" has the same meaning as in section 840 of the Income and Corporation Taxes Act 1988.
"Eligible Person" means any employee (including an executive director) of a Group Company and JMS.
"Employment" means employment as a director or employee of any Group Company.
"ESOP" means the WPP Group plc Grantor Trust, the WPP Group plc ROW ESOP, the WPP Group plc UK ESOP and any other employee benefit trust nominated by the Compensation Committee to operate in conjunction with the Plan, or any one or more of them.
"Financial Year" means a financial year of the Company within the meaning of section 223 of the Companies Act 1985.
"Group" means the Company and all of its subsidiaries (as defined in section 736 of the Companies Act 1985).
"Group Company" means any member of the Group. A transfer of a Participant's Employment from one Group Company to another shall be disregarded.
"Interested" means, in relation both to "Investment Shares" and to Shares which are not Investment Shares, that the Eligible Person or Participant is interested in those Shares (and has committed them to the Plan, if appropriate) if they are held by:
(i) the Eligible Person or Participant beneficially;
(ii) a member of the Eligible Person's or Participant's close family beneficially;
(iii) a family trust or pension trust in which the Eligible Person or Participant is interested;
(iv) a private company in which the Eligible Person or Participant is substantially interested; or
(v) a nominee for any of the above;
or are in the form of Shares which vest under any of the operating company long term incentive plans or restricted share plans of the Company or the Company's performance share plan, in accordance with awards made to that Eligible Person or Participant which have matured in or by reference to a Financial Year prior to that in which the Eligible Person or Participant has agreed to participate in the Plan.
"Investment Period" means, in relation to an Award, a period of 5 years commencing on a date specified by the Compensation Committee, not being earlier than the date on which an Eligible Person is invited to participate in the Plan in relation to that Award.
"Investment Shares" means the Shares committed to the Plan by an Eligible Person to qualify for an Award in accordance with Rule 6.
"JMS" means JMS Financial Services Limited.
"Matching Shares" means Shares which are comprised in an Award.
"Participant" means a person who holds an Award including, if relevant, his legal personal representatives.
"Performance Condition" means the condition set out in Rule 7.
"Performance Period" means, in relation to an Award, a period of 5 years commencing with the beginning of the Financial Year in which the Award is made.
"Plan" means the WPP Group plc Leadership Equity Acquisition Plan as from time to time amended in accordance with the provisions of these Rules.
"Relevant Event" means cessation of Employment for any reason other than Voluntary Resignation or Termination for Cause.
"Relevant Proportion" means the proportion that the length of the period from the start of an Investment Period to the occurrence of the Relevant Event bears to the length of that Investment Period (calculated in days).
"Share" means an ordinary share in the capital of the Company and includes ADSs.
"Termination for Cause" means cessation of Employment in circumstances where the Participant is dismissed (with or without notice), or resigns to avoid such dismissal, because
(i) he has committed a serious or persistent breach, or failure to observe, any of the terms or conditions of the Employment;
(ii) he is guilty of any act of dishonesty or serious misconduct or any conduct which the Compensation Committee considers may bring any Group Company into disrepute;
(iii) he is convicted of a criminal offence carrying a term of imprisonment (other than an offence under road traffic legislation for which a non-custodial penalty is imposed);
(iv) he is disqualified by a competent court from being a director or officer of any body corporate.
"TSR" means the total shareholder return of a company (or a group of companies) measured on the assumption that dividends are reinvested and on such other assumptions and basis and averaged over such period as the Compensation Committee decides.
"Vested Matching Shares" means the number of Matching Shares comprised in an Award which is determined as at the end of the Performance Period as being the number in respect of which the Performance Condition has been satisfied, and subject to Rule 8.
"Voluntary Resignation" means cessation of Employment in circumstances where the Participant resigns of his own volition other than:
(i) on account of serious ill-health, retirement at normal or contractual retirement age or early retirement agreed by the Company; and
(ii) where he resigns in circumstances which entitle him to terminate the Employment without notice on account of a breach of contract by the Group Member by which he is employed.
(2) Words importing the singular shall include the plural and vice versa and words importing the masculine shall include the feminine.
(3) Any reference, express or implied, to an enactment includes references to:
(a) that enactment as amended, extended or applied by or under any other enactment; and
(b) any enactment which that enactment re-enacts (with or without modification).
3. ELIGIBILITY
(1) No person is entitled as of right to participate in the Plan.
(2) The Compensation Committee may decide from time to time which Eligible Persons may participate, and the extent of their participation, in the Plan through the receipt of an Award or Awards.
(3) An Eligible Person who is within three years of the date on which he is bound to retire from Employment is not eligible to receive an Award unless the Compensation Committee otherwise decides in exceptional circumstances.
4. ACQUISITION OF INVESTMENT SHARES
(1) In order to participate in the Plan through the receipt of an Award an Eligible Person must agree to participate in the Plan by making an investment in Shares and committing to the Plan Shares in which he is Interested.
(2) The minimum number of Shares which an Eligible Person may commit to the Plan must represent a minimum value of Shares in which an Eligible Person is Interested for the purpose of participating in the Plan. Except in the case of Mr Sorrell and JMS, in respect of any Award that minimum value shall be an amount equal to the Eligible Person's Annual Earnings at the time he agrees to participate in the Plan.
(3) The maximum value of Shares which an Eligible Person may commit during the life of the Plan must represent a maximum value of Shares in which an Eligible Person is Interested. That maximum value shall be three times the Eligible Person's Annual Earnings (or $10m in aggregate in the case of Mr Sorrell and JMS). The Compensation Committee may decide a lower maximum value of Shares for an Eligible Person in relation to any Award.
(4) The Compensation Committee shall establish arrangements for inviting Eligible Persons whom they have invited to participate in the Plan to acquire their Investment Shares over such period and by such instalments as they decide.
(5) Investment Shares must be obtained and/or held in accordance with an investment policy determined from time to time by the Compensation Committee. At least one third of such Shares must normally be obtained by purchase or, in the case of Shares acquired under any of the Company's share option schemes, by subscription or otherwise, or may be capable of being acquired:
. by applying the after tax proceeds of any short term incentive scheme applicable to the Financial Year in which the Participant agrees to participate in the acquisition of Shares; and/or
. in the form of Shares which vest under any of the operating company long term incentive plans or restricted share plans of the Company or the Company's performance share plan
("LTIPs"), in accordance with awards which mature in or by reference to the Financial Year in which the Participant agrees to participate in the Plan; and/or
. by applying the after tax cash proceeds of any awards made under any of the LTIPs which mature in the Financial Year in which the Participant agrees to participate in the Plan in the acquisition of Shares.
If the after tax cash proceeds of any LTIP award and, where applicable, the number of Shares which vest under any LTIP award are insufficient to acquire the balance of the number of Shares (when taken with any Shares in which the Participant is Interested at the time when the Eligible Person is invited to participate in the Plan and committed to the Plan under (6) below) which the Participant agreed to commit to the Plan, the Compensation Committee may allow the Participant to acquire the balance within a further period they specify. If the Participant fails to acquire the balance within the specified period and to commit them to the Plan, the Award shall, subject to the last paragraph of Rule 5(4), lapse, if the number of Shares committed in respect of that Award falls short of the minimum number applicable under (2) above, and shall be scaled down appropriately, if the number of Shares committed in respect of that Award exceeds that minimum number but is less than the number which the Participant agreed to commit.
(6) The investment policy of the Compensation Committee may allow a proportion, not exceeding two thirds, of the Investment Shares which the Eligible Person has agreed to contribute to the Plan to be satisfied by the commitment to the Plan of Shares in which the Eligible Person is Interested at the time when the Eligible Person is invited to participate in the Plan (without the need for acquisition by him). The Compensation Committee shall determine the value to be attributed to any existing holding.
5. AWARDS
(1) By agreeing to participate in the Plan and by agreeing to commit Investment Shares in accordance with Rule 4 in the Financial Year in which he is invited to participate an Eligible Person shall be entitled to receive an Award granted by the Compensation Committee. Awards will normally be made during an Award Period, but exceptionally may be made at other times.
(2) The Compensation Committee decides by when the Investment Shares must be committed in a Financial Year to qualify for an Award.
(3) An Award shall relate to a number of Matching Shares the Compensation Committee determines not exceeding five Matching Shares for every Investment Share contributed. The number of Matching Shares which a Participant may become entitled to acquire under an Award shall be determined at the end of the Performance Period.
(4) The Compensation Committee shall determine the form in which the Award is made and its full terms. In particular, the Award may take the form of any one or more of the following, provided that the terms of the Award are consistent with the Plan:
(i) as two separate awards, including either or both of:
(a) a bonus award payable at the end of the Investment Period, for an amount equal to the fair market value of the Matching Shares subject to the Award at
the time the Award is made (as determined by the Compensation Committee); and
(b) an award of an option to acquire the Matching Shares subject to the Award, exercisable, subject to the other provisions of the Rules, at the earlier of the Change of Control Date and a date no sooner than one month after the end of the Investment Period, for a consideration equal to the fair market value of the Matching Shares subject to the Award at the time the Award is made (as determined by the Compensation Committee);
(ii) an option to acquire the Matching Shares exercisable for a nil or a nominal consideration;
(iii) an award of Matching Shares, subject to restrictions, or a promise to receive Matching Shares; and
(iv) such other form which the Compensation Committee considers has a substantially similar purpose or effect.
In the case of an Award consisting of or including an option element granted in accordance with the requirements of fixed plan accounting under US generally accepted accounting principles, the option so granted so far as it relates to the acquisition of Shares (but not any cash amount) shall be exercisable, with no restriction other than that the Participant is in Employment, for a short period determined by the Compensation Committee immediately prior to the expiry of the option by effluxion of time, notwithstanding that the Performance Condition and/or the requirement to remain Interested in Investment Shares has not been met.
(5) A Participant shall become entitled to acquire the number of Vested Matching Shares comprised in an Award or, as the case may be, the bonus award referred to in Rule 5(4)(1)(a) above and subject to and in accordance with the form of the Award under, and the last paragraph of, (4) above, only:
(i) if the Participant remains Interested in the Investment Shares throughout the Investment Period;
(ii) subject to and in accordance with the Performance Condition in Rule 7 and subject to 8, and
(iii) subject to Rules 9 and 11, if the Participant continues in Employment throughout the Investment Period.
(6) If a Participant ceases to be Interested in any of the Investment Shares during the Investment Period the Award will lapse in respect of all the Matching Shares to which it relates.
(7) During the Investment Period a Participant shall not be entitled to any dividends or other rights in respect of Matching Shares comprised in an Award nor shall he be entitled to vote in respect of the Matching Shares.
(8) The Participant shall cease to have any rights in respect of the number of Matching Shares comprised in an Award which are not Vested Matching Shares with effect from the end of the Performance Period, and shall cease to have any rights in respect of all the Matching Shares
comprised in an Award with effect from the earliest of (i) subject to Rule 9, the cessation of Employment, (ii) his failure to remain Interested in the Investment Shares or to acquire and commit the minimum number of Investment Shares required under Rule 4, (iii) the date on which Rule 5(9) applies and (iv) the date on which Rule 13(13) applies.
(9) An Award is personal to a Participant and cannot be transferred, assigned, used as security or otherwise charged or turned to account except that the Award may be transferred if, immediately after the transfer, the Participant would be Interested in the Award if the Award consisted of Shares. An Award shall lapse if the Participant does or attempts to do any such thing or if he is adjudged bankrupt or enters into any arrangement with his creditors under any formal insolvency procedure or, if the Award is not held by the Participant, if an event occurs as a result of which he would cease to be Interested in the Award, if the Award consisted of Shares.
(10) The receipt of an Award shall not confer on the Participant (unless otherwise provided in the terms of the Award) any right to the allotment of a specified number of Shares by the Company or to the transfer of a specified number of Shares from any particular transferor. The discharge of the Award shall be in accordance with Rule 12.
6. COMMITMENT OF INVESTMENT SHARES
(1) Any Shares in which an Eligible Person is or becomes Interested under Rule 4 shall be committed to the Plan and held under arrangements approved by the Compensation Committee so as to constitute the Investment Shares of the Participant.
(2) The Compensation Committee shall be entitled to rely on a declaration in a form satisfactory to it that an Eligible Person is or continues to be Interested in the Investment Shares.
(3) A Participant shall forthwith notify the Compensation Committee if he ceases to be Interested in the Investment Shares or any of them.
(4) The commitment of Shares to the Plan as Investment Shares shall not of itself affect any right of the Eligible Person to dividends or other rights attaching to those Shares.
(5) Shares shall cease to be Investment Shares at the end of the Investment Period or when the Award lapses under Rule 5(8).
7. PERFORMANCE CONDITION
(1) The number of Matching Shares comprised in an Award which are Vested Matching Shares shall be determined at the end of the Performance Period. That number will depend subject to Rule 8 on the ranking of the TSR of the Company over the Performance Period within the Comparator Group in accordance with the following table.
The Company's rank within Comparator No. of Matching Shares for each Investment
Group Share
--------------------------------------------------------------------------------------
1st 5
2nd 5
3rd 4.5
4th 4
5th 3.5
6th 3
7th 2.5
8th 2
9th or lower 0.5
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The rankings set out in the above table are based on a Comparator Group consisting of fifteen companies including the Company. If the number of companies in the Comparator Group is different the Compensation Committee shall adjust the rankings in the above table on a basis which it considers to be fair and reasonable.
(2) TSR shall be averaged over a proper period before the start and the end of the relevant Performance Period on such basis as the Compensation Committee decides from time to time.
(3) The Compensation Committee may, in appropriate circumstances, amend the Performance Condition in relation to any Award if an event has occurred in consequence of which the Compensation Committee considers that the Performance Condition should be amended for the purpose of ensuring that either the criteria against which the performance of the Company will be measured will be no less demanding and will be a fairer measure of that performance or will provide a more effective incentive to Participants.
8. EXCEPTIONAL FINANCIAL CIRCUMSTANCES
(1) If the Compensation Committee determines that exceptional financial circumstances have occurred or have prevailed during the Performance Period applicable to an Award, the Compensation Committee shall have power to determine that the number of Matching Shares which may become Vested Matching Shares at the end of a Performance Period, in respect of all Awards having the same Performance Period, shall be changed at the end of the Performance Period.
(2) In exercising its discretion under this Rule to adjust the number of Matching Shares which may become Vested Matching Shares at the end of a Performance Period the Compensation Committee shall have regard to all factors which they consider appropriate and shall treat all Participants whose Awards relate to the same Performance Period on a like basis.
(3) This Rule shall not operate to reduce Vested Matching Shares to less than 0.5 of a Matching Share for each Investment Share.
9. SPECIAL SITUATIONS
(1) If a Participant ceases to be in Employment during, but not earlier than one year after, the start of the Investment Period for any reason, other than Voluntary Resignation or Termination for Cause, Rule 5 shall apply as if the number of Matching Shares which the Participant could become entitled to acquire at the end of the Investment Period, depending
on the Company's ranking within the Comparator Group at the end of the Performance Period under Rule 7 and subject to Rule 8, were reduced to the Relevant Proportion of the number of Matching Shares to which the Participant would have been entitled if his Employment had not terminated. However, if the Company's ranking is 9th or lower (meaning below the median of the Comparator Group) the Participant shall not be entitled to acquire any Matching Shares at the end of the Investment Period, except to the extent (if any) that the Compensation Committee decides. This applies whether the cessation of Employment occurs during or after the end of the Performance Period.
In consequence:
(i) Rule 5(5)(iii) shall cease to apply; and
(ii) the Participant shall become entitled to acquire a number of Matching Shares at the end of the Investment Period (subject to Rule 9(2) and the reduction by reference to the Relevant Proportion), and dependent on the ranking of the Company within the Comparator Group under Rule 7(1) at or above the median at the end of the Performance Period and subject to Rule 8.
(2) If a Participant ceases to be in Employment:
(i) during the first year of an Investment Period in any circumstances, or
(ii) during an Investment Period after the expiry of the first year of that period in any circumstances other than those set out in Rule 9(1)
the Award applicable to that Investment Period shall lapse, in respect of the Investment Period referred to in paragraph (i) above and shall lapse, except to the extent that the Compensation Committee otherwise decide, in respect of the Investment Period referred to in paragraph (ii) above.
(3) Subject to any relevant legal or regulatory requirements prevailing in any jurisdiction, for the purposes of this rule a woman who ceases to be in Employment due to pregnancy or confinement will be regarded as having ceased Employment on the date on which she indicates that she does not intend to return to work. In the absence of such indication she will be regarded as having ceased Employment on the last day on which she is entitled to return to work. A woman who exercises her statutory right or any equivalent contractual right to return to work following pregnancy or confinement shall not be treated as having ceased to be in employment.
10. VARIATION OF CAPITAL
(1) In the event of any increase or variation in the capital of the Company arising out of or in connection with a capitalisation issue, an offer to the holders of Shares, a rights issue, a subdivision, consolidation or reduction of capital, special dividend, demerger, or other variation of capital, the terms of outstanding Awards and the terms on which Investment Shares have been contributed to the Plan may be adjusted in such manner as the Compensation Committee considers appropriate. An adjustment shall not have effect unless the auditors or other financial advisers appointed by the Compensation Committee acting as experts and not arbitrators confirm that in their opinion the adjustment is fair and reasonable and such confirmation shall be final and binding.
(2) Participants shall be notified of any adjustment made under this Rule.
11. CHANGE OF CONTROL
(1) If:
(A) any person (and/or persons acting in concert) obtains Control of the Company as a result or in consequence of making a general offer to acquire the whole of the issued share capital of the Company which is made subject to a condition such that if satisfied the person making the offer will have Control of the Company, or
(B) if any person (and/or persons acting in concert) obtains Control of the Company other than as a result of or in consequence of making such general offer but the offeror is bound by Rule 9 of the City Code on Takeovers and Mergers to make a general offer for the minority,
then:
(i) in relation to all outstanding Awards the Investment Period shall be deemed to end on the Change of Control Date and the Performance Period shall, if it has not already ended, be shortened and deemed to end on the Change of Control Date;
(ii) the number of Vested Matching Shares which a Participant may become
entitled to acquire shall be determined as at the Change of Control
Date dependent on the Company's ranking within the Comparator Group
under Rule 7 at that date, having regard to paragraph (2) below and
subject to Rule 8; provided that the Company is not applying
Accounting Principles Board Opinion 25 of the Financial Accounting
Standards Board of the United States, to the extent that the value of
any Vested Matching Shares for US tax purposes exceeds three times
the "base amount" applicable to the Participant, as defined in
Section 280G(b)(3) of the United States' Internal Revenue Code, by 20
per cent. or less, the number of Vested Matching Shares will be
reduced by such number as shall be necessary to avoid the imposition
of the excise tax imposed by Section 4999 of the Internal Revenue
Code (or any similar tax that may hereafter be enacted); and
(iii) on the Change of Control Date the Participant shall cease to have any rights in respect of outstanding Awards except in relation to the Vested Matching Shares under (ii) above.
(2) For the purpose of paragraph (1) above in determining the Company's TSR the price of Shares for each of the 60 Dealing Days up to and including the Change of Control Date shall be deemed to be the higher of the closing price on the Change of Control Date, as derived from the Stock Exchange Daily Official List, and the price which would otherwise have been taken into account in determining the TSR of the Company on each of those Dealing Days.
(3) If:
(i) under section 425 of the Companies Act 1985 the Court sanctions a compromise or arrangement for the purposes of or in connection with a scheme for the
reconstruction of the Company or its amalgamation with any other company or companies, or
(ii) a resolution is passed for the voluntary winding up of the Company for the purposes of or in connection with a reconstruction or division of the Company or its business
the terms of outstanding Awards and the terms on which Investment Shares have been contributed to the Plan will be varied in such manner as the Compensation Committee considers appropriate. A variation shall not have effect unless the auditors or other financial advisers appointed by the Compensation Committee acting as experts and not as arbitrators confirm that in their opinion the variation is fair and reasonable and such confirmation shall be final and binding.
12. DISCHARGE OF AWARDS
(1) The manner in which an Award shall be satisfied at the end of the Investment Period shall depend on the form of the Award determined by the Compensation Committee under Rule 5(4).
(2) Awards will normally be satisfied by the transfer of the number of Vested Matching Shares to the Participant, or as he may direct, or to a depository in the case of ADSs, from the ESOP.
(3) Awards will normally be satisfied within 30 days after the Compensation Committee has determined the ranking of the Company for the purposes of Rule 7 subject to Rule 8 or, if later, within 30 days after the end of the Investment Period or, if the Award is in the form of a right to acquire Shares, within 30 days after the Participant gives notice of exercise of that right to the Company.
(4) Any transfer of Shares is subject to the Compensation Committee being satisfied that the transfer would be lawful in the relevant jurisdiction.
(5) The transfer of Shares under the Plan is subject to obtaining any approval or consent required under the provisions of the document "Admission of Securities to Listing" published by the London Stock Exchange, or under the City Code on Take-overs and Mergers, or of any applicable regulations or enactment (whether in the United Kingdom or overseas). The Participant shall do all things necessary to obtain or obviate the need for such consent.
13. MISCELLANEOUS
(1) The Plan shall be administered by the Compensation Committee whose decision on any matter concerning the Plan shall be final and binding unless it is a matter on which the decision of the auditors or any other financial adviser is final and binding.
(2) The Compensation Committee shall approve all documents required in connection with Awards.
(3) The Compensation Committee may establish arrangements under which the cash value of an Award may be paid to an Eligible Person in lieu of the discharge of the Award under Rule 12.
(4) The cost of establishing and operating the Plan (including but not limited to stamp duty and stamp duty reserve tax) shall be borne by the Company. The costs relating to the transfer of Shares may be borne by the relevant Group Companies pro rata to the number of their employees participating or eligible to participate under the Plan.
(5) All notices under the Plan shall be in writing. Any notice or other document to be served under the Plan may be delivered or sent by first class post, recorded delivery post or telex or facsimile process, and if to a Group Company to their respective registered offices for the time being, and if to a Participant, to the Participant at the address which he shall give to the Company for the purpose, or failing any such address to his last known place of abode.
(6) Any notice or document shall be deemed to have been served:
(a) if delivered, at the time of delivery; or
(b) if posted, at 10.00 a.m. on the second business day after it was put into the post; or
(c) if sent by telex or facsimile process, at the time of despatch.
(7) In proving service of a notice or document it shall be sufficient to prove that delivery was made or that the envelope containing the notice or document was properly addressed, prepaid and posted or that the telex or facsimile message was properly addressed and despatched as the case may be.
(8) Participation in the Plan is a matter separate from any contract of employment or other agreement and any benefit conferred by the Plan shall not be counted for pension or any other purpose.
(9) A Participant shall have no entitlement by way of compensation or damages resulting from the termination of the office or employment by virtue of which he is or may be eligible to participate in the Plan for the loss of any right or benefit or prospective right or benefit under the Plan which he might otherwise have enjoyed whether the compensation is claimed for wrongful dismissal or otherwise.
(10) The Plan is intended to operate on a worldwide basis and, accordingly, the Compensation Committee may adopt any rate of exchange for converting any currency into any other currency as they decide at any time and from time to time for any purpose in connection with the Plan.
(11) No obligation to transfer or procure the transfer of Shares shall arise, nor shall there be any obligation to do any other thing in relation to a Participant under or in connection with the Plan or the making or Vesting of any Award unless and until the Compensation Committee is satisfied in its discretion that either:
(i) the Participant has made payment or has made arrangements satisfactory to the Company for the payment to it and/or to any Group Member or other person of such sum as is, in the sole discretion of the Compensation Committee, sufficient to settle any liability for any tax and/or, unless the Compensation Committee otherwise determines, social security contributions or the like (in any jurisdiction) which are or would be recoverable from such person in connection with the Plan or any Award
and in respect of which the Group Member or other person is or may be liable to account (in any jurisdiction); or
(ii) the Participant has entered into an agreement satisfactory to the Compensation Committee to ensure that such a payment will be made by the Participant.
(12) Receipt of an Award shall authorise the Company or any person nominated by the Company at its sole discretion to sell such number of Shares from the number to which the Award relates as it may estimate as being necessary to produce a cash sum sufficient to meet the liabilities referred to in sub- rule (11) and account to any Group Member or other person and/or the relevant authorities in respect of such tax and/or social security liabilities (in any jurisdiction at the appropriate time).
(13) If a Participant owes a debt or other monetary obligation to a Group Company, the Company, or any Group Company, as appropriate, has a charge over the Participant's interest in the Plan (but not over his Investment Shares). Satisfaction of an Award may be withheld until the Participant has discharged to the satisfaction of the Committee the debt or other monetary obligation. Without prejudice to the generality of the foregoing if a Participant who has ceased to be in Employment breaches any contractual obligation owed to any Group Company relating to restrictions on that Participant following the termination of his Employment the Participant's Award shall be forfeited.
(14) The Plan and any Award shall be governed by and construed in accordance with the laws of England and Wales.
(15) The Plan shall apply to JMS with all modifications that the Compensation Committee considers necessary or desirable.
(16) Two or more Eligible Persons who have been invited to participate in the Plan or two or more Participants ("Joint Participants") may together apply to the Compensation Committee to treat Awards respectively made or to be made to them pursuant to offers of participation made at the same time as joint Awards ("Joint Awards") in accordance with this sub-rule. Such an application may be made at any time during the Investment Period applicable to those Awards or offers of participation. The Compensation Committee may accept or reject such an application. If it accepts an application:
(i) the Joint Awards shall relate to a number of Matching Shares the Compensation Committee determines, provided that the number of Matching Shares subject to the Joint Awards may not exceed five Matching Shares for each of the Investment Shares contributed in aggregate by the Joint Participants;
(ii) The Compensation Committee may alter the form of Award made to any of the Joint Participants;
(iii) the Compensation Committee may limit the value or amount of the Award made to any of the Joint Participants in such manner as it considers appropriate, consistent with the form of Award made in accordance with Rule 5(4)(i), where appropriate;
(iv) the Compensation Committee may allocate the aggregate of the Matching Shares under the Joint Awards amongst the Joint Participants and decouple any of the Joint
Awards from the Investment Shares in such manner as the Compensation Committee considers appropriate.
14. AMENDMENT
(1) Subject to sub-rules (2) and (3) below, the Compensation Committee may at any time alter or add to all or any provisions of the Plan, or the terms of all Awards made under it, in any respect.
(2) No alteration or addition to the advantage of Eligible Persons or Participants shall be made under sub-rule (1) without the prior approval of the Company in general meeting, other than a minor amendment to benefit the administration of the Plan, to take account of a change in legislation or to obtain or maintain favourable tax, exchange control or regulatory treatment for Eligible Persons, Participants or Group Companies.
(3) No alteration or addition shall be made to the terms of any Award made prior to the date of the alteration or addition which would adversely affect the Participant's interest in that Award in any material respect without the consent of the Participant.
15. DURATION
No Award may be made later than 2 September, 2004.
APPENDIX 1
PARTICIPATION CONSEQUENT ON THE MERGER OF THE
COMPANY AND YOUNG & RUBICAM, INC
This Appendix constitutes the Young & Rubicam part of the WPP Leadership Equity Acquisition Plan ("Y & R Part") applicable to those employees of Young & Rubicam, Inc and its subsidiaries ("Y & R Participants") who are offered the opportunity to participate in the Plan as a result of the merger of the Company and Young & Rubicam, Inc. The terms of the Y & R Part are identical to those of the Plan to which the Y & R Part is appended except as set out below:
1. The definition of "Investment Period" in Rule 2(1), shall apply as if Y & R Participants had been offered participation in the Plan on 22 September 1999.
2. The definition of "Performance Period" in Rule 2(1), shall apply as if Y & R Participants had been invited to participate in the Plan on 22 September 1999.
3. Rule 3.3 shall apply as if Awards were received by Y & R Participants in 1999.
4. Rules 5(1) shall apply as if Y & R Participants were invited to participate on 22 September 1999.
5. The number of Matching Shares which the Compensation Committee determines that a Participant may become entitled to acquire under Rule 5(3) shall be reduced in the proportion that the period from the date on which the Participant was invited to participate in the Plan to 22nd September, 2004 (being the end of the Investment Period) bears to 5 years (being the Investment Period from 22nd September, 1999 to 22nd September, 2004). That proportion is settled being four fifths of the number of Matching Shares otherwise available for invitations issued following shareholder approval in September 2000. Rule 7(1) shall be applied accordingly.
6. In Rule 5(5), delete the words "throughout the Investment Period" wherever they appear and replace those words with the words "from the date the Investment Shares are acquired until the end of the Investment Period".
7. Rules 9(1) and 9(2) shall be modified.
(i) The references to "one year" in Rules 9(1) and 9(2) shall be taken to be a proportion of one year and that period shall commence on the date on which the Participant is invited to participate in the Plan (and not at the start of the Investment Period which is deemed to have commenced on 22nd September, 1999). The proportion shall be the same proportion as is calculated under paragraph 5 above for the purpose of determining the number of Matching Shares to which the Participant may become entitled.
(ii) The "Relevant Proportion" shall be taken as the proportion that the length of the period from the date on which the Participant is invited to participate in the Plan to the occurrence of the Relevant Event bears to the length of the period from the date on which the Participant is invited to participate in the Plan to 22nd September, 2004, being the end of the Investment Period (calculated in days).
APPENDIX 2
MR M DOLAN
This Appendix applies solely to Mr M. Dolan whose participation in the Plan is proposed in unusual circumstances. Mr Dolan, as a Y& R Participant, will participate in the Plan on the basis as modified by Appendix 1.
APPENDIX 3
PARTICIPATION ON OR AFTER 1ST JANUARY, 2001
(other than for directors of WPP Group plc)
This Appendix shall be treated as a separate long-term incentive plan which does not involve the issue of new shares in WPP Group plc and in which directors of WPP Group plc shall not be eligible to participate. It shall also form part of the Leadership Equity Acquisition Plan (the "Plan") and constitute all of the terms of the Plan for Participants joining on or after 1st January, 2001 (other than directors of WPP Group plc). Accordingly the terms of the Plan for such Participants shall be identical to those set out above (that is as adopted on 22nd September, 1999 and as amended on 8th December, 1999 in both cases by the Compensation Committee but without Appendices 1 and 2 which relate to the merger of the Company and Young & Rubicam, Inc) and shall be as notified in the following manner.
1. Rule 2 (Interpretation)
Definition of "Eligible Person" excludes a director of the Company.
Definition of "Interested". The Compensation Committee may decide on different or extended arrangements to determine whether an Eligible Person or Participant is interested in Shares (and has committed them to the Plan) than the circumstances set out in this definition.
Definitions of "Investment Period" and "Performance Period". The Compensation Committee may decide on periods of a different length and/or periods commencing with effect from any date it selects for the purpose of these definitions.
2. Rule 4 (Acquisition of Investment Shares)
The minimum and maximum numbers/values of Shares which an Eligible Person may commit to Plan shall not be as set out in sub-rules (2) and (3) but shall be determined by the Compensation Committee.
The after tax proceeds of any short term incentive scheme, and/or Shares which vest under any LTIPs and/or the after tax cash proceeds of awards made under any LTIPs may relate under Rule 4(5) to a year other than the year in which the Participant agrees to participate in the Plan.
The Compensation Committee may further modify Rule 4 in respect of any Award.
3. Rule 5 (Awards)
Rule 5(3). The Compensation Committee may determine a different proportion of Matching Shares to Investment Shares than the ratio of 5 to 1.
4. Rule 7 (Performance Condition)
The Compensation Committee may determine a different table of rankings and numbers of Matching Shares.
5. Rule 9 (Special Situations)
The period of one year adopted for vesting purposes in this Rule may be a different period chosen by the Compensation Committee.
6. Rule 12 (Discharge of Awards)
An award cannot be satisfied by the allotment of new Shares.
Exhibit 4.6
WPP GROUP PLC
PERFORMANCE SHARE PLAN
(as amended by Resolutions of the
Compensation Committee passed on
21 July 1995, 17 January 1996
and 9th December 1999)
WPP GROUP PLC
Performance Share Plan
(As amended by Resolutions of the Compensation Committee passed on 21 July 1995, 17 January 1996 and 9th December 1999)
1. PURPOSE
The Performance Share Plan (the "Plan") of WPP Group plc (the "Company"), is part of a continuing program of key executive incentive compensation authorised by the Directors of the Company on 21st June, 1993. The Plan is intended to benefit the Company by motivating senior executives who are materially important to the development of the Company's businesses by creating an incentive for them to remain in the employment of the Company and/or as Directors and to work the best of their abilities for the achievement of the Company's strategic growth objectives. This purpose is intended to be accomplished under the Plan by notionally allocating Performance Shares representing shares or bonus units under the Plan to such key personnel (in addition to their annual cash compensation and share options) which, if performance objectives and service requirements with the Company are achieved, will permit them to share in the Company's success.
2. PARTICIPANTS
Participants in the Plan shall be executive directors or full-time employees of the Company or its subsidiary companies (or any company which is contracted to provide the services of an executive director to any such company) who are determined by the Compensation Committee (the "Committee") of the Board of Directors (the "Board") of the Company, in its discretion, to be senior management personnel important to the growth of the Company, and to whom the Committee shall make any award in writing under the Plan.
3. PERFORMANCE PERIOD
Except as provided in Section 5, the Performance Period over which the achievement of any performance objectives shall be determined, shall not be less than three years.
4. PERFORMANCE SHARE AWARDS
Performance Share Awards shall be made pursuant to the following guidelines:
(a) Initial Grants. After the approval of this Plan by the Board, the Committee shall establish a specified performance period over which a specified performance objective is targeted for achievement. Initial awards shall be made to such number of Participants as then determined by the Committee. In making its determination of who shall be Participants the Committee shall take into account such factors as the Participants level of responsibility, potential to the impact the achievement of the performance objective(s), job performance, level and types of compensation and such other factors as the Committee deems relevant;
(b) Notwithstanding the provisions of paragraph (a) the Committee in its discretion may establish at the time it established the targeted performance objective a minimum performance target and may provide for payment on a reduced scale if the targeted performance objective is not achieved but the minimum performance target is met or
exceeded. Similarly, the Committee in its discretion may allow a greater payment if any targeted objective is exceeded;
(c) Subsequent Awards. During the term of the Plan additional Performance Shares may be awarded in the discretion of the Committee, either (i) to new participants in the Plan or (ii) to any one or more of the initial Participants in the Plan in respect of Subsequent Performance Periods;
(d) Notice of Awards. Upon the making of any award by the Committee the Participant shall be advised of the number of Performance Shares awarded to him or (or her) and of the terms of the award;
(e) Form of Awards. The Committee may, at its absolute discretion, determine that an Award be made in the following forms:
(i) as two separate awards, including either or both of:
(a) a bonus award payable at the end of the Performance Period, for an amount equal to the fair market value of the Performance Shares subject to the award at the time the award is made (as determined by the Compensation Committee); and
(b) an award of an option to acquire Shares in the Company equivalent to the Performance Shares subject to the award, normally exercisable ,subject to the other provisions of the Rules, no sooner than one month after the end of the Performance Period, for a consideration equal to the fair market value of the Performance Shares subject to the award at the time the award is made (as determined by the Compensation Committee);
(ii) an option to acquire the Performance Shares exercisable for a nil or a nominal consideration;
(iii) an award of Performance Shares, subject to restrictions, or a promise to receive Performance Shares; and
(iv] such other form which the Compensation Committee considers has a substantially similar purpose or effect.
In the case of an award consisting of or including an option element granted in accordance with the requirements of fixed plan accounting under US generally accepted accounting principles, the option so granted so far as it relates to the acquisition of Shares (but not any cash amount) shall be exercisable, with no restriction other than that the Participant is in employment with the Company or its subsidiary companies, for a short period determined by the Committee immediately prior to the expiry of the option by effluxion of time, notwithstanding that the performance objective has not been met.
5. PERFORMANCE SHARES
For the purposes of this Plan, the term Performance Shares shall be a reference to units of bonus or Shares and the award thereof shall represent the contingent right to received a sum of money per unit held or a transfer of Shares, subject to the form of the award under section 4(e) if specified performance objectives are achieved. The amount of money contingently payable
per Performance Share or the number of Shares to be transferred shall be determined in accordance with Section 7 or otherwise as the Company may choose. The performance objectives will be established for each Performance Period by the Committee. Performance Objectives need not be the same in respect of all Participants and may be established separately for the Company as a whole [or for its various groups, divisions and subsidiaries], all as the Committee may determine, in its discretion. The performance objectives may be defined in terms of the comparative total shareholder return performance within a comparator group selected by the Committee.
Awards of Performance Shares may be conditional on the Participants' continued employment in the Group, or continuing to be a Director of the Company or a Subsidiary (or contracted to provide the services of any executive director to the Group) over the Performance Period or in any other manner the Committee may determine. In the event of a public tender for all or any part of the ordinary shares of the Company or in the event of any proposal to merge or consolidate the Company with another company or to liquidate or sell substantially all of the assets for the Company, the Committee may, in its discretion, change or eliminate any Performance Period relating to any performance objective.
6. PERFORMANCE MEASUREMENT
The determination of Performance Share Payments shall be made for the Committee on the basis of performance over the applicable Performance Period.
7. PERFORMANCE SHARE PAYMENT
(a) The payment amount which a holder of Performance Shares shall be entitled to receive if the applicable targeted performance objective is met shall be an amount equal to the market value of one ordinary share of the Company's stock on the date of the expiration of the applicable Performance Period multiplied by the number of Performance Shares held;
(b) For the purposes hereof market value as of any date shall be the value as of said date as reasonably determined by the Committee;
(c) Following the determination by the Committee of the level of payment to which a holder of Performance Shares has become entitled, the Committee may in its absolute discretion decide to procure the transfer to the individual of a number of ordinary shares of the Company's stock in lieu of such payment save that where the individuals are directors of WWP Group plc, the Committee may only exercise this discretion on or after 1 January 1996. Subject to section 7(d) below, the number of shares transferred would be the largest whole number being not greater than the number calculated by the equation:
A Divided By B
--------------
Where A = the payment amount calculated under Section 7(a)
B = the market value of one ordinary share of the Company's
stock on the date of the expiration of the applicable
Performance Period
|
(d) As an alternative to the calculation set out in section 7(c) above the Committee may decide that the number of shares transferred shall be determined by the actual acquisition of shares using an amount of cash equivalent in the value to the relevant level of
Performance Share value (as calculated under section 7 (a)), such acquisition being made at the best price reasonably available at the date.
8. PERFORMANCE THRESHOLD
Notwithstanding Sections 3, 4 and 5 above, the Committee may set a performance threshold for any Performance Period. If the performance threshold is not satisfied for any Performance Period no payments or transfer of shares will be made to any participant on account of that Performance Period.
9. OPTIONAL DEFERRED PAYMENTS
Subject to the provisions of the following paragraphs of this Section, distribution of amounts or transfer of shares to which a Participant is entitled in respect of the Performance Shares shall be made as soon as practicable after the holder of such Performance Shares becomes entitled thereto.
Prior to the end of the performance Period the Participant may make an election to have distribution of any amount he may be entitled to receive in respect to such Performance Shares (whether in cash, in ordinary shares if the Company decides, or a combination thereof as determined by the Company) deferred until such year as he may elect, effect, after the year in which the amount would otherwise be paid or shares transferred to him, up to and including the year of his retirement, and at the same time (prior to the time the award is made to him and prior to the date he becomes entitled to such award) may elect to have such amount paid to him in such deferred annual instalments over such years as he shall then specify. If a Participant elects any such deferral the following rules shall apply to the deferred payment;
(a) Such election shall be irrevocable;
(b) The right to such deferred payment shall be nonassignable, and any attempted transfer or assignment, or any pledge or other hypothecation of such right, shall be void and of no effect;
(c) Except in the case of a Participant who also participates in the Company's Leadership Equity Acquisition Plan ("LEAP"), in the event of death during the deferral period of a Participant who has elected a deferred payment the unpaid balance of the deferred amount owing to him at the time of his death shall be distributed to his estate within six months of the date of his death, irrespective of whether or not the deferral period elected has expired. In the case of a Participant who also participates in LEAP and whose unpaid balance is represented by Shares and being used towards the Participant's Investment Shares in LEAP, the unpaid balance shall be retained until the end of the relevant investment period in LEAP;
(d) Until payment is made to a Participant of the full deferred payment (or transfer of shares) to which he is entitled the Company will accrue for the account of the Participant during the period of deferral an amount equal to the dividends paid on the Company's ordinary shares during such period adjusted by the change in the capital value of the shares multiplied by the number of Performance Shares still unpaid and held for his account in accordance with his deferred payment election. At the time the Participant is entitled to receive any amount due him under the Plan, in accordance with his election, there shall also be paid to such participant the accrued dividend equivalent amount, plus or minus the adjusted capital value of the shares, either in lump sum or in deferred annual instalments as specified by him at the time of this original election.
Notwithstanding any election of any Participant to receive payment under the Plan on a deferred basis as provided above, the Committee in its sole discretion may, at any time, in respect of all or any one or more Participants who have made such election, terminate such election and make immediate distribution of the amount to which the Participant is then entitled; and the Committee, in its discretion, may amend the forgoing provisions hereof relating to the election of deferred payments and the rules applicable thereto if, in its judgement, the tax benefits intended by such provisions and rules will not be adversely affected. An election may not be terminated or amended by the Committee in the case of a Participant who also participates in LEAP in respect of any deferral if the shares underlying the deferral are committed to LEAP (unless the Participant gives his consent to the termination or amendment).
10. CONDITIONS TO PAYMENTS
Except as otherwise herein provided or determined by the Committee, a Participant, in order to be entitled to receive any payment or the transfer of Company shares in respect of Performance Shares awarded to him must be a Director of the Company or in the employ of the Company or a subsidiary of the Company (or any company which is contracted to provide the services of an executive director to any such company) on the expiration of the relevant performance period and must have been such continuously from the time of the award of the Performance Shares except for leaves of absence which may be approved by the Committee. No vested interest in any payment under the Plan shall accrue during the term of the Performance Period and no payment nor transfer of Company shares in respect of Performance Shares shall be required to be made to any Participant whose employment with the Company or a subsidiary is terminated (or the relevant services contract is terminated), with or without cause, prior to the time he is entitled to receive a distribution hereunder; provided, however, (a) that if a participant in the Plan retires upon the attainment of age 55 prior to the time he is entitled to receive distribution of any Performance Shares awarded to him, the amount of payment to him shall be pro-rated in such manner as the Committee shall reasonably determine, and (b) that the Committee, in its absolute discretion, may make such pro-rate or other payment (or no payment), as it may determine, to a Participant whose employment terminates (on account of death, disability or otherwise) prior to the time he is entitled to receive distribution on his Performance Shares and prior to his retirement at age 55. If termination is on account of death the Committee may make payment of any distribution it authorises to the Participant's surviving spouse, heirs or estate, as the Committee may determine. If a participant elects under section 9 to defer distribution of the amount to which he may be entitled until a later year and the deferring participant's employment with the Company or another WWP group company terminates for any reason other than Voluntary Resignation or Termination for Cause prior to the end of the deferral period but after the end of the performance period, then at the end of the deferral period the participant will be entitled to receive the full distribution of the amount (or transfer of shares) to which he would have otherwise been entitled had his employment not terminated. If a participant so elects and his employment with the Company or another WPP group company terminates by reason of Voluntary Resignation or Termination for Cause prior to the end of the deferral period but after the end of the performance period, then distribution to which the participant would otherwise have been entitled had his employment not terminated shall be forfeited. In this section "Voluntary Resignation" and "Termination for Cause" have the same meanings as in LEAP. The foregoing provisions of this section shall apply on a like basis to a Participant which is a company supplying the services of an executive director to the Group as the Committee reasonably determines, except that any transfer of shares shall be subject to compliance with applicable law.
11. COMMITTEE MEMBERSHIP; AUTHORITY
The Plan shall be administered by the members of the Compensation of the Board so long as it shall consist solely of members of the Board who are not Participants who are not Participants in the Plan and who shall not be, and have not been at any time during the prior year, eligible to become Participants therein, and who have not been at any time during the prior year eligible for selection as a person to whom shares may be allocated or to whom share options may be granted pursuant to any other plan of the Company or any of its affiliates entitling the participants therein to acquire shares or share option of the Company or any of its affiliates. In the event said Committee, by reason of changes in its membership, shall no longer be so qualified, the Board shall appoint a new Committee to administer the Plan, which shall consist solely of not less than three (3) members of the Board who are so qualified. The said Committee shall have plenary authority to interpret the Plan, to establish any rules or regulations relating to the Plan which it determines to be appropriate, and to make any other determination which it believes necessary or advisable for the proper administration of the Plan. Its decisions in matters relating to the Plan shall be final and conclusive on the Company and all Participants.
12. DETERMINATION OF ACHIEVEMENT OF OBJECTIVES
Not in limitation of its authority as provided for in the preceding section, the Committee in regard to any performance award authorised by it, may thereafter change or modify the terms of the award and the Committee may determine reasonably whether any performance objective of any award has been met.
13. PAYMENTS IN ORDINARY SHARES; SOURCE OF SHARES
It is anticipated that if the Company chooses to exercise its discretion contained within Section 7(c) or 7(d) any Company shares delivered pursuant to the terms of the Plan will be ordinary shares or American Depository Receipts representing an interest in the Company's ordinary shares acquired by the WPP Group plc UK ESOP or the WPP Group plc ROW ESOP or the WPP Group plc Grantor Trust (as appropriate) prior to or during the term of the Plan. Shares delivered to Participants hereunder in satisfaction of Performance Share rights after release of any conditions applicable thereto may nonetheless thereafter be restricted stock under the Securities Act of 1933, as presently amended, and the certificates for such Shares may have a legend imprinted thereon restricting the resale of said shares except in a registered offering or pursuant to an available exemption from registration.
14. AMENDMENT OF PLAN
The Committee shall have the authority to make amendments and revisions to this Plan.
15. ADDITIONAL PROVISIONS
The following additional terms and provisions apply to the Plan:
(a) The award of Performance Shares to a Participant in the Plan shall create no rights in such participant as a shareholder of the Company;
(b) No adjustment shall be made in the number of Performance Shares awarded on account of cash dividends which may be paid, or other rights which may be issued to, the Company's ordinary shareholders during the term of the Plan except as stated in subparagraph (c) below;
(c) In the event of stock dividends, stock splits or reverse stock splits, affecting the number of Company shares during the term of the Plan, appropriate revision shall be made by the Committee (i) in the targeted performance objectives, and (ii) in the number of Performance Shares awarded to reflect the effect of such stock dividend, stock split or reverse stock split on the interests of the Participants in the Plan;
(d) No Participant in the Plan shall have any right because he is a Participant in the Plan to continue in the employ of the Company or of any of its subsidiaries for any period of time, or any right to a continuation of his present or any other rate of compensation, and such rights and powers as the Company or any of such subsidiaries now has or which it may have in the future to dismiss or discharge any Participant from his employment or to change the assignments of any Participant are expressly reserved to the Company nor shall he have any right to claim compensation for the cancellation of his Performance Shares as a result of termination of his employment for any reason;
(e) The Company at the time any payment is made under the Plan is authorised to withhold from such payment any amount necessary to satisfy income tax withholding requirements in respect of such payment. Alternatively, and if the Company chooses to exercise its discretion contained within Section 7(c) or 7(d) if the Participant shall pay to the Company such cash amount or additional cash amount as may be necessary to satisfy withholding requirements he shall be entitled to receive delivery of all shares due to him hereunder if the Company elects to satisfy his entitlement in Company shares.
16. NON-ASSIGNABILITY
Rights under the Plan and in respect of Shares granted under the Plan are not transferable and may not be assigned or pledged by any Participant at any time, and no recognition shall be required to be given by the Company to any attempted assignment of Performance Shares. This non-assignability shall not apply to any shares of the Company delivered to Participants hereunder after such Performance Shares shall be fully vested in the holder thereof.
17. PLAN A PART OF CONTINUING COMPENSATION PROGRAM
This Plan is part of a continuing program of incentive compensation for senior management of the Company and is expected to be supplemented or continued in effect after the term hereof by an additional plan or plans as approved by the Board of Directors.
WPP Group plc
INCENTIVE PLAN
Ogilvy & Mather
2001-2002 Long-Term Incentive Plan:
Participant Guide
Objectives
The Long Term Incentive Plan (LTIP) is an important part of your total compensation, so you need to fully understand how it works and its value to you. This booklet describes the details of the Plan.
The LTIP has the following objectives:
. Incentivise our executives to achieve outstanding long-term financial performance.
. Allow our executives to participate directly in the profitable growth of Ogilvy.
. Reinforce the importance of the goals which are established as part of Ogilvy's three-year strategic business plan.
. Increase our executives' ownership of WPP Group stock.
. Ensure that our executives have the opportunity to earn competitive total compensation.
Please note:
This booklet is for eligible executives working in those companies that are
members of the Ogilvy group of companies.
Overview
The Long Term Incentive Plan (LTIP) rewards executives for exceptional financial performance against Ogilvy's three-year business plan. The plan pays rewards in the form of cash and WPP Group restricted stock. Plan terms beginning with capitals are defined in the glossary.
Key facts
. Three-year plan. The LTIP is a three-year rolling plan -this means each year a new three-year plan begins. Under the LTIP- members are awarded Performance Shares. The value of the shares is determined by the financial performance of Ogilvy over a three-year period.
. Performance Shares. Each year, you receive a fixed number of Performance Shares based largely on your role and past contribution. Each share has a target value of $100. The size of your grant defines your LTIP earnings opportunity.
. Payouts based on financial performance. For each three-year plan, LTIP financial performance targets are set that define how the performance Shares will be valued.
. Payouts in cash and restricted stock. Your LTIP payout is made half in cash and half in WPP Group restricted stock which vests over the two years following the end of the performance period (50% each year).
. If you leave Ogilvy. Generally, if you retire from Ogilvy, become disabled, die or take another position within the WPP Group, you keep a pro-rated portion of your LTIP Performance Shares. Otherwise, you forfeit all Performance Shares and non-vested restricted stock if you leave Ogilvy.
LTIP: timeline
Year 1 Year 4 Year 5 Year 6
x x x x
--------------------------------------------------------------------
Performance Period
--------------------------------------------------------------------
x x
Performance LTIP Payout Date:
Shares granted
------------
Half as cash
------------
-----------------------------------------
Half as WPP Group
x 50% vest x 50% vest
resticted stock
-----------------------------------------
|
Plan details |
Rolling three-year plan
The LTIP is a rolling three-year plan. This means that Ogilvy announces a new
plan every year that pays out after the third year, providing performance
targets are met. So, starting with your fourth year at Ogilvy, you can receive
an annual payout based on performance over the prior three-year
[GRAPH APPEARS HERE]
Performance Period as shown below.
Payout Schedule
Targets based on Ogilvy profitability
For each three-year plan, Ogilvy sets targets that determine how performance
will be measured.
These targets are based on two measures:
. Ogilvy's average Operating Profit, which means revenue minus operating costs (see the glossary for a full definition).
. Ogilvy's average Operating Profit Margin is calculated as operating profit divided by gross revenue and based on a three-year plan cycle (see the glossary for a full definition).
Grant based on your role and contribution At the start of each three-year plan, you will receive a grant of Performance Shares that defines your individual stake in the plan. Grants are made in January each year.* The size of your grant is based on you ability to influence the profitable growth of Ogilvy, your current performance and your potential to contribute to the firm's long-term success. LTIP grants are discretionary and there is no guarantee that you will receive a grant every year. You should also be aware that Performance Shares do not constitute equity ownership in Ogilvy or WPP Group.
Performance Shares
The terms of each award of Performance Shares are described to you in an award
letter from the Chief Executive of Ogilvy, which sets out the financial
performance targets which will determine the value of Performance Shares.
[GRAPH APPEARS HERE]
*Grants are made in January but participants are generally notified of their
award in Q2.
Each Performance Share has a target value of $100 at the time of grant. This establishes what each Performance Share will be worth if Ogilvy meets its three- year financial performance targets. The ultimate value of each share can range from $0 to $150 depending on actual performance against targets, as shown below.
Value of I Performance Share
For example, if you were granted 500 Performance Shares, your LTIP target for that three-year plan would be $50,000 ($100 x 500). Your actual payout could range from $0 to $75,000 ($50,000 x 150%), depending on Ogilvy's three-year performance against targets. Ogilvy completes a valuation at the end of each three-year plan to determine the Performance Share value.
Payouts in cash and restricted stock
LTIP payouts are usually made in March of each year, following the Valuation Date as of 31 December for the prior three-year performance period. Your payout is made as follows:
. 50% cash.
. 50% as WPP Group restricted stock, half of which vests (i.e. you earn the right to keep) one year from the Payout Date, and half vests two years from the Payout Date.
During this restricted period, dividends on your shares will be automatically reinvested in WPP Group stock.
As explained above, LTIP payouts are made in cash and WPP Group restricted stock. Starting with the 2000 plan, you will receive a grant of restricted stock at the beginning of the three-year plan cycle, equalling half the value of your Performance Shares at target. For example, let's say your LTIP grant is 500 Performance Shares with a target value of $50,000 (500 x $100). You would receive $25,000 in restricted WPP stock at the time of grant, representing half of the target value of your Performance Shares.
Although this restricted WPP stock still vests over a two-year period after the Payout Date, receiving the restricted stock portion of your grant at the beginning of the plan cycle gives you the opportunity to gain from increases in the value of WPP Group stock. In the example above, if WPP Group stock increases in value over three years by 20%, your $25,000 grant would have a value of $30,000 at the end of the three-year plan cycle, or $5,000 more than the initial grant. And, the value of your shares may increase further over the two-year vesting period.
Of course, your actual payout is based on Ogilvy performance, which means you may receive more or less than the LTIP target. And, there is the possibility that the value of WPP Group stock will decrease over the three-year plan cycle.
Taxation
In terms of paying taxes on your LTIP payouts, current UK and US tax laws hold that:
. There are no taxes payable at the time you receive your LTIP grant (i.e. at the beginning of the three-year Performance Period).
. The cash portion of your LTIP payout is taxable in the year you receive it.
. Your restricted stock becomes taxable as it vests. This means that for a given grant, 50% of your restricted stock would be taxable one year from the Payout Date, and the remaining 50% would be taxable two years from the Payout Date.
This situation is subject to change and you should consult your own accountant or qualified financial advisor. You are responsible for paying all taxes that arise from your LTIP payouts.
If you change jobs or leave Ogilvy
If you move to a new job within Ogilvy & Mather or another WPP Group company, you keep your Performance Shares and receive an LTIP payout at the end of the three-year plan. As with any LTIP grant, any new Performance Shares you receive under later plans will depend on your performance, contribution and role.
If you retire from Ogilvy, your LTIP payout will be pro-rated to reflect your
service through the date you left Ogilvy. You will receive this pro-rated payout
at the end of the three-year LTIP cycle, at the same time as other plan members.
(You generally don't receive a payout at the time you leave Ogilvy.)
If you become disabled or die, you or your estate will receive a pro-rated LTIP payout reflecting your service through the date of your death or disability. This pro-rated payout is made at the end of the three-year LTIP.
If you leave Ogilvy for any other reason - for example, you leave to take another position outside of the WPP Group or you are dismissed from Ogilvy, you forfeit all outstanding LTIP Performance Shares and any other non-vested WPP Group restricted stock.
Your questions answered
Do Ogilvy's performance targets remain unchanged for the three-year plan cycle,
or can they change midway through?
Once the targets are set at the start of the LTIP cycle, they do not change.
Keep in mind that the plan measures results over a three-year period, which is
designed to balance ups and downs in performance from year to year.
Does the LTIP include any performance measures linked to overall WPP Group
results?
The performance measures are based solely on Ogilvy's performance. However,
since your LTIP payout includes WPP Group restricted stock, the ultimate value
of your payout is also influenced by the value of WPP Group stock.
What if I take on a broader leadership role - will my number of Performance
Shares increase?
The number of Performance Shares you receive under a particular Long Term
Incentive Plan remains fixed. However, keep in mind that new LTIP grants are
made each year. So, if Ogilvy leadership determines that you have assumed a role
with a broader scope and greater impact on profitable growth, you may receive a
greater number of Performance Shares under the next plan.
Is the valuation of Performance Shares at the end of the LTIP cycle strictly
formula-driven, or is there room for adjustment based on special business or
market conditions?
The valuation is driven solely by financial performance against the targets
established at the start of the three-year LTIP cycle. There's little room for
subjectivity or interpretation.
What are my choices after my restricted stock vests? When your restricted stock vests, the WPP Group plan administrator will send you a form to complete that gives you three choices:
1. WPP Group can sell enough stock to cover the required income tax
withholding, and send you certificates for the remaining stock.
2. You can send Ogilvy a cheque to cover the required tax withholding, in which
case you will receive certificates for the full amount of your stock.
3. You can sell all of your stock and receive cash less any amount required to
cover income tax withholding.
Once you have your WPP Group shares, you are free to hold or sell them.
Can I take out loans against the value of my LTIP Performance Shares? There is no loan feature under the Long Term Incentive Plan.
Am I at financial risk by being a participant of the LTIP? No. The LTIP does not require you to make a personal financial investment, therefore, you will not lose money. However, the value of your Performance Shares is variable, as is the market value of WPP Group Stock.
For more answers, please direct your questions about the Long Term Incentive Plan to:
Inside North America
Joe Panetta
Partner, Director of Compensation
Ogilvy & Mather
212.237.4886
joe.panetta@ogilvy.com
Outside North America
Steve Goldstein
Chief Financial Officer
Ogilvy & Mather
212.237.7860
steve.goldstein@ogilvy.com
Glossary of terms
Grant Date
Performance Shares are granted effective 1 January of any year. The Grant Date
is the first day of the three-year performance period of the LTIP.
Operating Profit
Revenue less operating costs, plus depreciation, less capital expenditures not
related to the refurbishment of certain specified buildings under long-term
leases. Includes annual and long-term incentives and equity income. Excludes
foreign and exchange losses and gains, interest income and expense, loss or gain
of fixed assets, cash discounts and miscellaneous income expense and goodwill.
Financial exchange rates will be used to calculate the average operating profit over the three-year performance period based on the monthly average actual exchange rates.
Operating Profit Margin
This is arrived at by dividing the average operating profit by the average
revenue including the relevant revenue from associates over the three-year
performance period. Margin percentage calculations will be rounded to one
decimal place.
Payout Date
Following the Valuation Date, usually in March each year.
Performance Period
A three-year period beginning on the Grant Date.
(1 January each year).
Performance Share
A unit of value which is granted to LTIP members.
Performance shares do not constitute an equity interest in Ogilvy or the WPP
Group.
Qualifying Retirement
You are able to receive a benefit under an Ogilvy-sponsored retirement plan
and/or the company confirms in writing that you are considered retired.
Valuation Date
The 31 December which is three years after each Grant Date.
WPP Group restricted stock
WPP Group ordinary shares which are held in trust on your behalf. You do not
have ownership rights to the stock until the end of the restriction period, when
the restricted stock vests. 50% of your stock is subject to a restriction period
of one year after the Valuation Date, and 50% of your stock is subject to a
restriction period of two years.
WPP Group plc
J. Walter Thompson Company
2001-2003 LongTerm Incentive Plan:
Participant Guide [Arrow Logo appears here]
The Long Term Incentive Plan ((LTIP)) is an important part of your remuneration, so you need to fully understand how it works and its value to you. This booklet describes the detail of the Plan.
The LTIP has the following objectives:
. Incentivise our executives to achieve outstanding long-term financial performance.
. Provide our executives with an opportunity to participate directly in the profitable growth of J. Walter Thompson.
. Reinforce the importance of the goals which are established as part of the J. Walter Thompson three-year strategic business plan.
. Provide the opportunity to increase our executives' ownership of WPP Group stock.
. Ensure that our executives have the opportunity to earn competitive total remuneration.
Please note:
This booklet is for eligible executives working in those companies
that are members of the J. Walter Thompson group of companies.
Overview
The Long Term Incentive Plan (LTIP) rewards executives for exceptional financial performance against J. Walter Thompson's three-year business plan. The plan pays rewards in the form of cash and WPP Group restricted stock. Plan terms beginning with capitals are defined in the glossary.
Key facts
. Three-year plan. The LTIP is a three-year rolling plan - this means each year a new three-year plan begins. Under the LTIP, Performance Shares are awarded to members. Their value is defined by the financial performance of J. Walter Thompson over a three-year period.
. Performance Shares. Each year, you receive a fixed number of Performance Shares based largely on your role and past contribution. Each share has a target value of $100. The size of your grant defines your LTIP earnings opportunity.
. Payouts based on financial performance. For each three-year plan, LTIP financial performance targets are set that define how the Performance Shares will be valued.
. Payouts in cash and restricted stock. Your LTIP payout is made half in cash and half in WPP Group restricted stock which vests over two years (50% each year).
. Taxation. At the time of writing, it is our understanding that there are no taxes payable at the time you receive your LTIP Performance Share grant. Your tax liability occurs at the time you receive the cash portion of your LTIP payout and when your restricted stock vests.
. If you leave J. Walter Thompson. Generally, if you take another position within the WPP Group, retire, become disabled or die, you keep a pro-rated portion of your LTIP Performance Shares. Otherwise, if you leave J. Walter Thompson, you forfeit all Performance Shares and non-vested restricted stock.
LTIP: timeline
Year 1 Year 4 Year 5 Year 6
x x x x
----------------------------------------------------------------------
Performance Period
----------------------------------------------------------------------
x x
Performance LTIP Payout Date:
Shares granted
-----------------
Half as cash
-----------------
----------------------------------------
Half as WPP Group
x 50% vest x 50% vest
restricted stock
----------------------------------------
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Plan details |
Rolling three-year plan
The LTIP is a rolling three-year plan. This means that J. Walter Thompson
announces a new plan every year that pays out after the third year providing
performance targets are met. So, starting with your fourth year as a
participant, you may receive an annual LTIP payout based on performance over the
prior three-year Performance Period, as shown below.
Payout Schedule
[GRAPH APPEARS HERE]
Payouts based on J. Walter Thompson's profitability For each three-year plan, J. Walter Thompson sets targets that determine how performance will be measured. These targets are based on two measures:
. J. Walter Thompson's average Operating Profit as defined in the glossary.
. J. Walter Thompson's average Operating Profit Margin as defined in the glossary.
We measure results over a three-year period so that the LTIP rewards long-term performance. The size of your payout depends on J. Walter Thompson's performance over that period.
Grant based on your role and contribution At the start of each three-year plan, you will receive a grant of Performance Shares that defines your individual stake in the plan. Grants are made in January each year.
The size of your grant is based on your ability to influence the profitable growth of J. Walter Thompson, your current performance and your potential to contribute to the firm's long-term success. LTIP grants are discretionary and there is no guarantee that you will receive a grant every year. Your should be aware that Performance Shares do not constitute equity ownership in J. Walter Thompson or WPP Group.
Performance Shares
The terms of each award of Performance Shares are described to you in an annual
letter from the Chief Executive of J. Walter Thompson, which sets out the
financial performance targets which will determine the value of each award of
Performance Shares.
Each Performance Share has a target value of $100 at the time of grant. This establishes what each Performance Share will be worth to you if J. Walter Thompson meets its three-year financial performance targets. The ultimate value of each share can range from $0 to $150 depending on actual performance against targets, as shown below.
Value of 1 Performance Share
[GRAPH APPEARS HERE]
For example, if you were granted 500 Performance Shares, your target LTIP award for that three-year plan would be $50,000 ($100 x 500).
Your actual payout could range from $0 to $75,000 ($50,000 x 150%), depending on J. Walter Thompson's three-year performance against targets.
At the end of each three-year plan, J. Walter Thompson completes a valuation to assign the value of a Performance Share.
Payments in cash and restricted stock
LTIP payouts are usually made in March of each year, following the Valuation
Date in January. At this time, your Performance Shares will be `cashed in' as
follows:
. 50% cash.
. 50% as WPP Group restricted stock, half of which vests (i.e. you earn the right to keep) one year from the Payout Date, and half vests two years from the Payout Date. During this restriction period, the stock is held in a trust and dividends will be automatically reinvested in WPP Group stock on your behalf.
When your restricted stock vests, you will have all the rights of stock ownership, including the right to sell.
Taxation
In terms of paying tax on your LTIP payouts, J. Walter Thompson's understanding
of UK and US current tax law is that:
. There are no taxes payable when you receive your LTIP grant (i.e. at the beginning of the three-year Performance Period).
. The cash portion of your LTIP payout is taxable in the year you receive it.
. Your restricted stock becomes taxable as it vests. This means that for a given grant, 50% of your restricted stock would be taxable one year from the Payout Date, and the remaining 50% would be taxable two years from the Payout Date.
This situation is subject to change and you should consult your own accountant or qualified financial advisor. You are responsible for paying all taxes that arise from your LTIP payouts.
If you change jobs or leave J. Walter Thompson If you move to a new job within J. Walter Thompson, you keep your Performance Shares and receive an LTIP payout at the end of the three-year plan. As with any LTIP grant, any new Performance Shares you receive under later plans will depend on your contribution and role.
If you transfer to another WPP Group company, your LTIP payout will be pro-rated to reflect your service to the date you left J. Walter Thompson. You will receive this pro-rated payout at the end of the three-year LTIP cycle, at the same time as other Plan members.
If you retire (and J. Walter Thompson considers this to be a Qualifying Retirement), your LTIP payout will be pro-rated to reflect your service to the date you left J. Walter Thompson. You will receive this pro-rated payout at the end of the three-year LTIP cycle, at the same time as other Plan members.
If you become disabled or die, you or your estate will receive a pro-rated LTIP payout reflecting your service to the date of your disability or death. You or your estate will receive this pro-rated payout at the end of the three-year LTIP cycle, at the same time as other Plan members.
If you leave J. Walter Thompson for any other reason prior to payout, including dismissal by J. Walter Thompson, all outstanding Performance Shares and any unvested WPP Group restricted stock will be forfeited.
Your questions answered
How often will I receive a grant of Performance Shares?
We expect to make a grant each year during the life of the LTIP. However, all grants are discretionary and we do not guarantee you will receive a new grant each year.
Am I at financial risk by being a participant of the LTIP?
No. The LTIP does not require you to make a personal financial investment, therefore you will not lose money. However, the value of your Performance Shares is variable, as is the market value of WPP Group stock.
Does the LTIP include any performance measures linked to WPP Group results?
The performance measures are based solely on J. Walter Thompson's performance. However, since your LTIP payout includes WPP Group restricted stock, the ultimate value of your payout is also influenced by the value of WPP Group stock.
Do J. Walter Thompson's performance targets remain unchanged for the three-year plan cycle, or can they change midway through?
Once the targets are set at the start of the LTIP cycle, they do not change. Keep in mind that the Plan measures results over a three-year period, which is designed to balance ups and downs in performance from year to year.
The valuation of your Performance Shares is driven solely by financial performance against the targets established at the start of the three-year LTIP cycle.
What if I take on a broader leadership role - will my number of Performance Shares increase?
The number of Performance Shares you receive under each LTIP is fixed. However, keep in mind that new LTIP grants are made each year, the size of which reflects your role and contribution at that time.
What are my choices after my restricted stock vests?
When your WPP Group restricted stock vests, the WPP Group plan administrator will send you a form to complete that gives you three choices:
1. You can sell enough of your stock to cover the required income tax withholding, and receive a certificate for the remaining stock.
2. You can send J. Walter Thompson the payment to cover the required tax withholding, in which case you will receive certificates for the full amount of your stock.
3. You can sell all of your stock and receive cash less any amount required to cover income tax withholding.
Once you have your WPP Group stock, you are free to hold or sell them.
For more answers please contact:
Lew Trencher (1 212 210 7397) or
Adrian Jackson, WPP Worldwide
Compensation and Benefits Director
(+44 20 7318 0062/ajackson@wpp.com)
Glossary of terms
Grant Date
Performance Shares are granted effective 1 January of any year. The Grant Date
is the first day of the three-year performance period of the LTIP.
Operating Profit
Revenue less operating costs, including annual and long-term incentives. This excludes foreign exchange losses and gains, interest income and expense, loss or gain on sale of fixed assets, cash discounts and miscellaneous income/expense and goodwill. In addition excess capital expenditure over the approved WPP capital budget will be deducted to arrive at operating profit.
Operating Profit Margin
This is defined using the average operating profit over the three-year plan period. Margin percentage calculations will be rounded to one decimal place. This will be calculated as operating profit divided by gross revenue.
Payout Date
Following the Valuation Date, usually in March each year.
Performance Period
A three-year period beginning on the Grant Date (1 January each year).
Performance Share
A unit of value which is granted to LTIP members. Performance Shares do not constitute an equity interest in J. Walter Thompson or the WPP Group.
Qualifying Retirement
You are able to receive a benefit under a J. Walter Thompson-sponsored retirement plan and/or the company confirms in writing that you are considered retired.
Valuation Date
The 1 January which is three years after each Grant Date.
WPP Group restricted stock
WPP Group ordinary shares which are held in trust on your behalf. You do not have ownership rights to the stock until the end of the restriction period, when the restricted stock vests. 50% of your stock is subject to a restriction period of one year after the Valuation Date, and 50% of your stock is subject to a
restriction period of two years.
Exhibit 4.9
J. WALTER THOMPSON COMPANY
RETAINED BENEFIT
SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN
***
ARTICLE I
Establishment of the Plan.......................................... 1
1.1 Adoption of Plan; Purposes.............................. 1
1.2 Effective Date.......................................... 1
1.3 Name.................................................... 1
1.4 Affiliates as Participating Employers................... 1
ARTICLE II
Definitions........................................................ 3
2.1 Affiliate............................................... 3
2.2 Beneficiary............................................. 3
2.3 Committee............................................... 4
2.4 Company................................................. 4
2.5 Effective Date.......................................... 4
2.6 Employee................................................ 4
2.7 Participant............................................. 4
2.8 Participant Account..................................... 4
2.9 Participating Employer.................................. 4
2.10 Plan.................................................... 4
2.11 Plan Year............................................... 4
2.12 Profit Sharing Plan..................................... 5
2.13 Termination of Employment............................... 5
ARTICLE III
Participation...................................................... 6
3.1 Selection............................................... 6
3.2 Reinstatement........................................... 6
3.3 Removal................................................. 6
ARTICLE IV
Benefits........................................................... 8
4.1 Amount of Benefits...................................... 8
4.2 Limitation on Benefits Credited......................... 8
4.3 Timing.................................................. 9
4.4 Accounts................................................ 9
4.5 Earnings................................................ 10
4.6 Payment of Benefits..................................... 10
4.7 Alternative Form of Benefit............................. 11
4.8 Transfers............................................... 11
4.9 Transfers to Foreign Affiliates......................... 12
4.10 Benefit Offset.......................................... 12
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ARTICLE V
Forfeitures............................................................... 13
5.1 Forfeitures...................................................... 13
5.2 Determination of Forfeitures..................................... 13
5.3 Disposal of Forfeitures.......................................... 14
ARTICLE VI
Administration............................................................ 15
6.1 Committee as Administrator....................................... 15
6.2 Exercise of Authority............................................ 15
6.3 Finality of Decisions............................................ 16
ARTICLE VII
Amendment and Termination................................................. 17
7.1 Amendment and Termination........................................ 17
7.2 Corporate Successors............................................. 17
ARTICLE VIII
Miscellaneous............................................................. 19
8.1 No Rights Created................................................ 19
8.2 Not "Compensation" For Other Purposes............................ 19
8.3 General Creditor................................................. 19
8.4 Prohibition Against Funding...................................... 20
8.5 Nonalienation.................................................... 20
8.6 Income Tax Withholding........................................... 20
8.7 Governing Law.................................................... 21
8.8 Counterpart Originals............................................ 21
8.9 Construction..................................................... 21
ADDENDUM A
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RETAINED BENEFIT SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN
***
ARTICLE I
Employer, the Participant Accounts under this Plan shall be held or distributed, transferred or otherwise disposed of as is appropriate under the circumstances, as determined by the Company.
ARTICLE II
When used herein, the words and phrases defined hereinafter shall have the following meaning unless a different meaning is clearly required by the context of the Plan.
2.1 Affiliate.
(a) WPP Group, USA Inc.;
(b) any corporation at least twenty percent (20%) of whose voting stock is or prior to November 30, 1988, was, owned directly or indirectly by the Company. The Owl Group Inc. or WPP Group USA, Inc., provided that at least twenty percent (20%) of the voting stock of said previously owned corporation is and continues to be owned directly or indirectly, by WPP Group plc;
(c) any corporation that is licensed to use the name "Thompson" in its corporate name by the Company, WPP Group USA, Inc., or any corporation described in subsection (b), above; or
(d) any partnership, joint venture or other similar business entity in which the Company, WPP Group USA, Inc. or any corporation described in subsection (b) above has at least a fifty percent (50%) ownership interest.
ARTICLE III
his or her removal from the Plan, or to freeze such individual's Participation Account until an actual Termination of Employment, in which case all provisions of the Plan shall continue to apply to the former Participant except for the allocation of benefits pursuant to section 4.1.
ARTICLE IV
(a) The Company shall maintain a bookkeeping account to be credited with amounts under section 4.1 and section 4.5(b) for each Participant, referred to herein as the "Participant Account". In addition, the Company shall maintain an "Accumulated Earnings Account" to record earnings or losses pursuant to section 4.5(a) and forfeitures pursuant to section 5.3, which sums accumulated therein to be allocated to Participant Accounts pursuant to section 4.5(b). At any given time, the sum of the Participant Accounts and the Accumulated Earnings Account shall be referred to as the "Deferred Compensation Account". The Company may use any reasonable method of accounting that the Company, in its sole discretion, selects in maintaining the Participant Accounts, on the books and records of each Participating Employer. Each Participating Employer shall be liable, and reimburse the Company to the extent necessary, for that portion of the Deferred Compensation Account which is paid or payable to a Participant (or beneficiary thereof) as a result of or that is attributable to, employment of the Participant by each such Participating Employer. The Deferred Compensation Account shall be segregated from other accounts on the books and records of the Participating Employer, to the extent of its liability of each pursuant to the preceding sentence, as a contingent liability of the Participating Employer to the Participants.
(b) Amounts to be credited to the Participant Accounts under section 4.1 shall be credited as of the last date Company contributions are made to the Profit Sharing Plan for such Plan Year.
(a) The Accumulated Earnings Account referred 4.4(a) shall be credited as of the end of each calendar quarter to reflect the equivalent of earnings or losses on the Participant Accounts, and earnings or losses on such Accumulated Earnings Account since the end of the previous calendar quarter, at a rate equal to the rate of return realized by the Profit Sharing Plan on assets held by such plan's "General Fund" investment fund during such quarter.
(b) Amounts accumulated in the Accumulated Earnings Account each Plan Year shall be allocated to the Participant Accounts as of the end of the Plan Year in the ratio that the balance in each such Participant Account bears to the balances in all Participant Accounts as of such date.
administratively feasible) the twelve (12) calendar month period after the Participant's Termination of Employment. Notwithstanding the foregoing, the amount of any balance remaining from time to time in the Participant Account shall continue to be adjusted in the manner prescribed in section 4.5(b). If the Participant should die before any or all of the payments to which the Participant is entitled are made, any unpaid balance will be paid to his or her Beneficiary.
(a) A Participant who transfers employment from one Participating Employer to another Participating Employer during a Plan Year shall continue to participate in the Plan and shall, for purposes of section 4.1, be treated as if all "Compensation" during that Plan Year were paid by the Participating Employer employing such Participant at the end of that Plan Year. Each such Participating Employer's liability for the amount credited under section 4.1 on behalf of such Participant, however, shall be determined by reference to the "Compensation" actually paid by such Participating Employer.
(b) In the event a Participant is transferred to an Affiliate that is not a Participating Employer, no further amounts shall be credited to such individual's Participant Account, except that such Participant Account shall continue to be adjusted to reflect earnings as provided in section 4.5. Notwithstanding the foregoing, the Committee may, in its sole discretion, determine to allow an individual employed by an Affiliate that is not a Participating Employer to be credited with amounts under section 4.1 for the portion of the Plan Year during which the individual was employed by a Participating Employer and/or to continue to be credited with any new amounts under section 4.1 as if he or she were employed by a Participating Employer.
ARTICLE V
(a) the Participant's Termination of Employment occurs under circumstances involving malfeasance or gross negligence on the part of the Participant as determined pursuant to section 5.2; or
(b) it is determined pursuant to section 5.2 subsequent to the Participant's Termination of Employment that the Participant had engaged in malfeasance or gross negligence; or
(C) the Participant directly or indirectly enters into, or in any manner takes part in, any business, profession, or other endeavor, either as an employee, agent, independent contractor, owner (except as owner of less than five percent (5%) of the outstanding equity or debt securities of a publicly held entity), partner or otherwise which shall then be in competition with the business of the Participating Employer or any Affiliates, as determined pursuant to section 5.2.
the nature of any acts on the part of the Participant or the determination of whether any endeavor is in competition with the business of the Participating Employer or its Affiliates.
ARTICLE VI
ARTICLE VII
portion of the Plan with respect to that Participating Employer shall be considered terminated pursuant to section 7.1, unless the Board of Directors of the Company or the Committee resolve to make arrangements to continue the operation of such portion of the Plan.
ARTICLE VIII
Participant or Beneficiary shall have any property interest whatsoever in any specific assets of the Participating Employer as a result of this Plan.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed in its name and behalf by its duly authorized officer this 29th day of June, 1994.
J. WALTER THOMPSON COMPANY
By: /s/ Lewis Trencher
-----------------------------
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The undersigned, being all of the members of the Administrative Committee of the Board of Directors of J. Walter Thompson Company (the "Corporation"), do hereby severally consent to and adopt the following resolutions:
WHEREAS, the Corporation sponsors and maintains the J. Walter Thompson Company U.S. Employees' Profit Sharing and Profit Sharing Matched Savings Plans (the "Profit Sharing Plans"), tax-qualified retirement plans established pursuant to Section 401(a) of the Internal Revenue Code (the "Code"); and
WHEREAS, pursuant to Section 401(a)(17) of the Code, contributions allocated under the Profit Sharing Plans each year may be based upon compensation which does not exceed $200,000, as adjusted annually for cost-of-living increases: and
WHEREAS, as a result of cost-of-living increases the Section 401(a)(17) compensation limit for 1993 was $235,840; and
WHEREAS, pursuant to the Omnibus Budget Reconciliation Act of 1993 ("OBRA '93"), the Code Section 401(a)(17) compensation limit was, effective January 1, 1994, reduced to $150,000 (to be adjusted in subsequent years for cost-of-living increases); and
WHEREAS, the Corporation desires to supplement the retirement benefits available under the Profit Sharing Plans, to provide the benefits which participants otherwise would have been entitled to had Section 401(a)(17) of the Code not been amended by OBRA '93, and to attract, retain and motivate qualified management personnel by establishing a non-qualified retirement plan for these participants: now therefore it is
RESOLVED, that the plan presented herewith, and incorporated herein by reference, entitled the Retained Benefit Supplemental Employee Retirement Plan (the "Plan") be, and hereby is, adopted effective as of January 1, 1994; and it is
FURTHER RESOLVED, that the appropriate officers of the Corporation be, and they hereby are, and each of them with full authority to act without the others hereby is, authorized and directed to take, or cause to be taken, any and all such action as any such officer shall, upon the advice of counsel, deem necessary or advisable to effectuate the preceding resolution, including without limitation adopting such clarifying and administrative modifications to the Plan as any such officer deems appropriate.
Dated: June 29, 1994 /s/ Burt Manning /s/ William C. Thompson, Jr. ------------------------------ ------------------------------- Burt Manning William C. Thompson, Jr. /s/ Peter A. Schweitzer /s/ Lewis J. Trencher ------------------------------ ------------------------------- Peter A. Schweitzer Lewis J. Trencher |
Exhibit 4.19
YNRewards
Executive Income
Deferral Program
Young & Rubicam Inc.
The Executive Income Deferral Program provides an opportunity for you to defer some of all of your annual cash compensation (base salary and/or annual bonus) to a future date, lower your current taxable income, and accumulate earnings on a tax-deferred basis.
ELIGIBILITY
All active U.S.-based executives who participate in Y&R Inc.'s Key Corporate Manager's (KCM) executive plans are eligible to participate in the Executive Income Deferral Program. KCM executives on international assignment who are paid out of the United States are also eligible to participate in the program.
Participation in the Executive Income Deferral Program among eligible executives is entirely voluntary.
DEFFERAL OPPORTUNITY
You can elect to defer up to 100% of your annual cash compensation, except for the required withholding for federal, state and FICA taxes, and for payroll deductions you have authorized for such things as benefits and contributions to the 401(k) Plan. Deferrals must be made in increments of 10%, up to 100% of the balance of your annual cash compensation.
For the purpose of the Executive Income Deferral Program, cash compensation includes your base salary and the cash portion of your annual incentive bonus, less required tax withholdings and authorized payroll deductions.
ELECTIONS
Base Salary Deferral
You must make your base salary deferral by completing and submitting your election form by December 1 of the taxable year prior to the year in which the salary will be paid. For example, to defer some or all of your 2001 salary, you must submit your completed election by November 30, 2000.
Annual Bonus Deferral
Elections to defer some or all of your annual bonus must be made by June 30 of the calendar year in which the bonus is earned. For example, to defer some or all of your 2000 bonus, you must submit your completed election by June 30, 2000.
DEFERRAL TERMS AND WITHDRAWALS
Deferrals may be made in increments of 10% of either base salary or annual bonus. All deferrals must be made for a period of at least one year. You may elect to receive your deferred amounts when you leave the Company for any reason. If you become disabled or die, you or your beneficiary will receive your deferred income in a lump sum as soon as administratively possible.
You must select the form of payment you prefer--a lump sum or installments--when you make your deferral election.
Installments may vary in duration subject to the following:
. Payments will be made annually on the first business day following the end of the first quarter.
. Payments can be selected for a period of up to 10 years
. Payments must be completed by your 80th birthday
. In the event of voluntary termination or termination for cause the employee will receive a lump sum payment as soon as administratively possible.
EFFECT ON OTHER BENEFITS
Participation in the Executive Income Deferral Program does not affect your accrual of benefits under the life insurance plans. Bonus deferrals under the Executive Income Deferral program will not affect your benefits under the Pension Plan or the Savings and Investment Plan. Salary deferrals which reduce your salary below the plan thresholds for the Pension and Savings and Investment Plans ($150,000 and $170,000 respectively) will affect your contributions under those programs.
INVESTING DEFERRED INCOME
Young & Rubicam's Executive Income Deferral Program offers two investment options:
Option 1: Option 2: Interest-Bearing Phantom Stock Cash Account Account |
You may allocate the amounts you have deferred between these two options in increments of 10%, up to 100% of your annual cash compensation, less required tax withholdings and authorized payroll deductions. You will have no opportunity to reallocate among these options once they are chosen. All deferred amounts will be paid in cash upon withdrawal.
DEFERRAL OPTIONS
Option 1: Interest-Bearing Cash Account
An interest-bearing cash account is similar to a savings account that the Company sets up in your name to accommodate your deferred income. The amount you have elected to defer will bear interest at the Prime Rate in effect on the first day of the calendar quarter in which the income is deferred. Interest is accrued quarterly thereafter and compounded annually.
The Prime Rate is the publicly announced base rate of Citibank. N.A.
Option 2: Phantom Stock
If you elect this option, your deferred amounts will increase or decrease based on the performance of Y&R stock. Your deferred amount is translated into a hypothetical number of shares of Y&R stock based on the price per share on the date the compensation would otherwise would have been paid. This creates a number of phantom shares between the date of deferral and the date of withdrawal, though no stock is actually purchased.
For Example:
------------
1. You 2. In March 3. On 4. Your
elect to defer 2001, your the date the deferred annual
100% of your annual bonus for annual bonus bonus will be
annual bonus in the year 2000 is would ordinarily converted to
June of 2000 determined to be be paid (March 2,000 phantom
$100,000 2001), the price shares
of Y&R stock (100,000
is $50 per divided by
share 50 = 2,000).
|
Any fractional amounts remaining after this conversion will be credited to your dividend account.
Your deferral account will be credited with dividends on your phantom shares in the same amount and at the same time dividends are paid on Young & Rubicam Common Stock. These dividends will be placed in your dividend account, which earns interest at the Prime Rate as described under "Option 1: Interest- Bearing Cash Account."
Your deferral will be paid to you in cash upon withdrawal and will be treated as ordinary income at that point. The final value of your phantom shares will depend on the value of Y&R Common Stock on the date of withdrawal. If the price of Y&R stock goes up during the deferral period, the value of your phantom shares will increase. Dividends will increase in value based on interest rates.
As with all investments, the Phantom Stock Account involves some risk. So conversely, if the price of Y&R stock decreases during the deferral period, the value of your phantom shares and your final distribution may decrease.
ACCELERATED DEFERRALS
Generally, you will receive payment of your deferred income after you leave the Company. However, under certain circumstances, the Y&R Compensation Committee or its designee may authorize a "hardship" withdrawal. Hardship withdrawals may be available if you encounter a severe financial hardship resulting from extraordinary and unforeseeable events beyond your control, and you have no other funds available that could be used to satisfy the financial hardship, including exhausting loan and withdrawal features from the Young & Rubicam qualified plans. Hardship withdrawals will be permitted only to the extent the Compensation Committee determines, at its discretion, that such a withdrawal is reasonable and necessary to satisfy the emergency.
Note: Expenses such as college eduction or the purchase of a home do not constitute severe financial hardship.
The Executive Income Deferral Program is authorized pursuant to Young & Rubicam's Deferred Compensation Plan. A copy of the Plan is available from the Senior Vice President of Compensation and Benefits, Young & Rubicam Inc. Questions concerning the Executive Income Deferral Program should be addressed to the Senior Vice President of Compensation and Benefits, Young & Rubicam Inc., 285 Madison Avenue, New York, NY 10017-6486.
Like all investment plans, the Executive Income Deferral Program involves some risk. The funds in the Income Deferral Plan are not secured or insured. In the unlikely event that the Company declares bankruptcy or is insolvent, the program funds may be subject to the claims of creditors.
When you defer 100% of your Bonus, FICA and Medicare taxes attributable to your Bonus will be deducted from the next available paycheck.
This document is for general guidance only and is not legally binding. In the event of a conflict or inconsistency between this document and the Plan documents, the Plan documents will govern.
While Young & Rubicam intends to continue the Executive Income Deferral Program indefinitely, the Company reserves the right to modify or terminate the program at any time. Termination of the program will not affect outstanding deferrals or interest accruals thereon.
Exhibit 4.20
/s/ Ogilvy |
OGILVY & MATHER ERISA EXCESS PLAN
SUMMARY PLAN DESCRIPTION
APRIL 2001
OGILVY & MATHER ERISA EXCESS PLAN
SUMMARY PLAN DESCRIPTION
This booklet is your Summary Plan Description ("SPD") for the Ogilvy & Mather's ERISA Excess Plan (the "ERISA Excess Plan"). The ERISA Excess Plan was established by Ogilvy & Mather to provide "make whole" benefits to employees whose benefits under the Account Balance Plan are limited by law.
You should read this booklet carefully and refer here first when you have any questions about the ERISA Excess Plan. If this SPD does not answer your questions, or if you need further information, you may contact the Corporate Human Resources Department at Ogilvy & Mather, 309 West 49/th/ Street, New York, NY 10019, 212-237-4000.
April 2001
OGILVY & MATHER ERISA EXCESS PLAN
SUMMARY PLAN DESCRIPTION
Internal Revenue Code Section 401(a)(17) imposes limits on the amount of benefits that can be provided under an employer's "qualified plan." For example, under the Ogilvy & Mather (the "Company") Account Balance Plan (a qualified plan), eligible employees receive a contribution from the Company of 10% of their annual base salary; however, by law, only salary up to a designated maximum per year ($170,000 for 2001) can be taken into account when making the contribution. So, the maximum contribution any employee can receive under the Account Balance Plan in 2001 is $17,000 (10% of $170,000).
The ERISA Excess Plan provides employees who earn more than $170,000 per year with a "make whole" contribution from the Company of 10% of base salary that is above $170,000. (If you are not eligible to participate in the Account Balance Plan, you are not eligible to receive a contribution under the ERISA Excess Plan.)
It should be noted that the ERISA Excess Plan is a form of "non-qualified plan," which is a promise by an employer to participants to pay income, at some future date, for services performed currently. The contributions the Company makes on your behalf to the ERISA Excess Plan are sheltered from immediate taxes, by deferring the payment of taxes until you receive a distribution from the Plan (which is when you leave employ with the Company, or when you retire, whichever comes first). All future deferred income payments are subject to income tax withholding.
It is important to note that contributions to this ERISA Excess Plan will not begin until you have earned $170,000 (or the maximum salary limit designated by the IRS for the plan year).
All employees who earn in excess of the maximum salary limit (for 2001, $170,000) and who are eligible to participate in the Account Balance Plan are automatically enrolled in the ERISA Excess Plan.
Under the ERISA Excess Plan, the Company will record a contribution for you at the end of each plan year equal to 10% of your annual base salary above the maximum salary limit for that plan year ($170,000 for 2001). Interest is credited on amounts recorded at the prime rate (as determined on the last day of the previous plan year,
compounded monthly). If you cannot participate in any year, your account balance will continue to be credited with a fixed rate of interest until it is distributed to you.
The ERISA Excess Plan is intended to be an unfunded unsecured plan maintained by the Company primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees pursuant to ERISA Sections 201(2), 301(a)(3) and 401(a)(1). An entry is made in a Company ledger showing that you were owed contributions by the Company to be paid at a later date. The interest earnings are recorded in the same ledger.
Benefits under the ERISA Excess Plan are paid out of the Company's general assets and are therefore not protected from claims by the Company's creditors. There is no trust and nothing contained in this ERISA Excess Plan or any action taken with respect to the plan provisions is intended to create a trust of any kind. You are relying on the Company's promise to pay the ERISA Excess Plan's benefits in the future. Should the Company become insolvent or bankrupt, you would have no greater rights to your ERISA Excess Plan benefits than a general unsecured creditor.
You must have five (5) years of continuous employment with the Company in order to be entitled to a benefit from this ERISA Excess Plan. If you leave before you have five (5) years of continuous employment, you will forfeit your benefit under the ERISA Excess Plan.
You will receive a distribution of your ERISA Excess Plan benefits when you terminate employment with the Company (regardless of whether or not you transfer to another WPP Company) or when you retire, whichever comes first.
The distributed benefits are included in your gross income in the year in which they are received and are subject to income tax withholding.
No withdrawals are permitted from the ERISA Excess Plan while you are still an active Company employee and no loans are permitted at any time. If you leave the Company for any reason, and you have five (5) years of continuous employment with the Company, your benefit will be paid to you in the manner you indicated on your election form (subject to income tax withholding). You are given the opportunity to elect a form of payment as follows at the time and in the manner determined by the Company:
. A lump sum to be paid within 60 days following your termination or retirement date; or
. In equal installments over 10 years (120 monthly payments).
(Please note that accounts under $10,000 will be paid out in one lump sum.)
For payments commencing after December 31, 2001, if you chose to be paid out in 120 equal installments, you will be credited with a fixed rate of interest of 5% on the declining balance until all your benefits are paid out.
If you die before receiving your entire benefit from the ERISA Excess Plan, your entire benefit (or the remaining benefits if you die while receiving installments) will be paid to the Beneficiary you have designated to receive your Account Balance Plan benefit. The payment will be paid to your designated Beneficiary in one lump sum. You may, from time to time, revoke or change your Beneficiary designation by filing a new designation with the Company.
The last Beneficiary designation received by the Company will be controlling. No designation, change or revocation of a Beneficiary designation will be effective unless received by the Company prior to your death. If no such Beneficiary designation is in effect at the time of your death, or if no designated Beneficiary survives you, the payment of any ERISA Excess Plan benefits, upon your death, will be made to your surviving spouse, or if you have no surviving spouse, to your children, or if you have no children, to the legal representative of your estate.
If anyone entitled to a benefit becomes legally incapacitated or is otherwise unable to manage his financial affairs, the Company may pay his benefit to someone else (such as a named Beneficiary or duly appointed representative or guardian) for the benefit of that person.
Participation in the ERISA Excess Plan neither gives an employee the right to be retained in the employ of the Company, nor guarantees his rights or claim to any benefit except as specified in the Plan.
The Company shall have full power and authority to interpret and administer the ERISA Excess Plan. The Company's interpretation and construction of any provision or action
taken under the ERISA Excess Plan shall be binding and conclusive on all persons for all purposes.
If you or your Beneficiary do not receive a benefit to which you believe you are entitled, you or your Beneficiary can file a written claim with the Company. The Company will provide you or your Beneficiary with the necessary information and make all determinations as to the right of any person to a disputed benefit. Your claim will be processed within 90 days (in special circumstances, this period may be extended for an additional 90 days by written notice to you). If your claim has been denied, you will be notified in writing and such notification will include the reasons for the denial, specific references to pertinent Plan provisions, and a description of any additional material or information regarding your claim.
If notification of approval of a claim is not received within the time limits set forth above, the claim will automatically be considered denied.
If you are dissatisfied with any decision on your claim, you have the right to request, in writing, a review of the decision. You also have the right to review pertinent documents and to submit issues and comments in writing. A request for review, giving the reason the decision is believed to be in error, must be made not later than 60 days after a decision on a claim is received.
All requests for review of determinations under the ERISA Excess Plan should be addressed to the Company at the address specified in the Introduction to this SPD.
Within 60 days of receipt of a request for review of the disputed claim (in special circumstances, 120 days, by written notice to you), the Company will review the claim and advise you or your Beneficiary, in writing, of its determination. The Company's decision on appeal will be final.
If notification of determination of a claim is not received within the time limits set forth above, the claim will automatically be considered denied.
The right of any participant or any other person to the payment of benefits under the ERISA Excess Plan shall not be assigned, transferred, pledged or otherwise encumbered.
The Company reserved the right to amend, modify or terminate ERISA Excess Plan at anytime. Any such action by the Company shall not reduce the benefits you have accrued to the date of such action.
To the extent not preempted by ERISA, the ERISA Excess Plan shall be governed by the laws of the State of New York.
Exhibit 4.21
[LOGO]
OGILVY & MATHER EXECUTIVE SAVINGS PLAN
SUMMARY PLAN DESCRIPTION
APRIL 2001
25%
OGILVY & MATHER EXECUTIVE SAVINGS PLAN
SUMMARY PLAN DESCRIPTION
This booklet is your Summary Plan Description ("SPD") for the Ogilvy & Mather Executive Savings Plan (the "Executive Savings Plan"). The Executive Savings Plan is designed to recognize your individual contribution to Ogilvy & Mather's overall team effort by giving you an opportunity to defer receipt of a portion of your income, thereby deferring taxes and by giving you a 25% matching contribution of your deferral. The Executive Savings Plan helps you to supplement your retirement benefits.
You should read this booklet carefully and refer here first when you have any questions about the Executive Savings Plan. If this SPD does not answer your questions, or if you need further information, you may contact the Corporate Human Resources Department at Ogilvy & Mather, 309 West 49/th/ Street, New York, NY 10019, 212-237-4000.
April 2001
OGILVY & MATHER EXECUTIVE SAVINGS PLAN SUMMARY PLAN DESCRIPTION
The Executive Savings Plan is a "non-qualified plan," which is a promise by an employer to participants to pay income, at some future date, for services performed currently. By deferring income into the Executive Savings Plan, amounts are sheltered from immediate income taxes (but not FICA taxes), by deferring the payment of income taxes until you receive a distribution from the Plan (which is when you leave employ with Ogilvy & Mather (the "Company"), or when you retire, whichever comes first). All future deferred income payments are subject to income tax withholding.
It is important to note that once you choose to participate in this Executive Savings Plan, you cannot stop deferrals during the calendar year; however, you do have the option not to participate the following year.
Participation in the Executive Savings Plan is limited to key employees and is by personal invitation only. Membership is highly selective to ensure a meaningful financial opportunity for all participants. You are invited to participate during the Annual Plan Offering, which is held in November or December of each year for the following year, or when you are first hired (you must elect to participate within 30 days of your hire date). Participation is totally voluntary.
One of the requirements of this kind of plan is that you must elect to defer income before you receive it - therefore, should you not elect to participate in the Executive Savings Plan during the designated entry periods as described above, you will have to wait until the next Annual Plan Offering. Please note that invitations are given each year - participation for one year does not guarantee an invitation to participate the following year. In addition, you must elect to defer income in order to receive the Company match.
You can defer up to 10% of your annual base salary. Under the Executive Savings Plan, your deferrals earn interest at the prime rate determined as of the first of each month compounded monthly. The earnings also accumulate tax-deferred. If you do not participate in any year, your account balance will continue to be credited with interest until it is distributed to you.
The Company will automatically match 25% of your deferrals each year. The match is credited to you monthly.
Please note that if you choose not to defer into the Executive Savings Plan, you will not receive any Company match - the match is contingent upon you participating in the Plan.
Because of IRS rules and regulations, income that you defer into the Executive Savings Plan is not considered eligible compensation for the purpose of calculating The Company's contribution to your Account Balance Defined Benefit Plan or your contributions to the 401(k) Plan. In order to keep you from being penalized by these rules and regulations, The Company will credit your account with 10% of the amount you are deferring to the Executive Savings Plan. So, if you are deferring $1,000 per month, The Company will credit you with 10% of the deferral ($100) as a "pension make-up."
You will receive this pension make-up when you begin deferring into the Executive Savings Plan, regardless of whether or not you are eligible to participate in the Account Balance Plan at that time.
Your other group benefits (such as life insurance and long term disability) are not affected by your decision to defer income.
The Executive Savings Plan is intended to be an unfunded unsecured plan maintained by the Company primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees pursuant to ERISA Sections 201(2), 301(a)(3) and 401(a)(1). When you defer income, an entry is made in a ledger showing that you were owed income by the Company and that you chose to defer receipt until a later date. The interest and Company credits are recorded in the same ledger.
Benefits under the Executive Savings Plan are paid out of the Company's general assets and are therefore not protected from claims by the Company's creditors. There is no trust and nothing contained in this Executive Savings Plan or any action taken with respect to the provisions herein is intended to create a trust of any kind. You are relying on the Company's promise to pay the Executive Savings Plan's benefits in the future. Should the Company become insolvent or bankrupt, you will have no greater rights to your Executive Savings Plan benefits than a general unsecured creditor.
You may purchase a surety bond from a surety company or a letter of credit from a bank to secure your deferred compensation payments should the Company default on those payments. A surety bond is a type of performance bond issued by a surety insurance company. You would pay the premium to the surety insurance company for the bond coverage. The Company cannot be involved, either directly or indirectly, in the purchase of the surety bond or letter of credit as this will be viewed by the IRS as creating a funded non-qualified plan that will be currently taxable to you. If you wish to purchase a surety bond or letter of credit, we strongly advise that you consult the services of a tax professional.
You will receive quarterly statements showing your deferrals, the Company match, pension make-up, and interest so you can monitor the growth of your benefit.
You will receive a distribution of your Executive Savings Plan benefits when you terminate employment with the Company (regardless of whether or not you transfer to another WPP Company) or when you retire, whichever comes first.
The distributed benefits are included in your gross income in the year in which they are received by you and are subject to income taxes. Since FICA taxes were paid at the time of deferral, no FICA taxes will be withheld at the time of distribution.
No withdrawals are permitted from the Executive Savings Plan while you are still an active Company employee and no loans are permitted at any time. If you leave the Company for any reason, your benefit will be paid to you in a lump sum within 60 days following your termination or retirement date (subject to income tax withholding).
If you die before receiving your benefit from the Executive Savings Plan, the benefits will be paid to your designated Beneficiary in one lump sum. When you are given the opportunity to participate in the Plan, you will receive a Beneficiary Designation form. You may designate of one or more persons as the Beneficiary or Beneficiaries who will be entitled to receive the amount payable under from the Executive Savings Plan upon your death. You may, from time to time, revoke or change your Beneficiary designation by filing a new designation with the Company.
The last Beneficiary designation received by the Company will be controlling. No designation, change or revocation of a Beneficiary designation will be effective unless received by the Company prior to your death. If no such Beneficiary designation is in effect at the time of your death, or if no designated Beneficiary survives you, the
payment of any Executive Savings Plan benefits upon your death will be made to your surviving spouse, or if you have no surviving spouse, to your children, or if you have no children, to the legal representative of your estate.
If anyone entitled to a benefit becomes legally incapacitated or is otherwise unable to manage his financial affairs, the Company may pay his benefit to someone else (such as a named Beneficiary or duly appointed representative or guardian) for the benefit of that person.
Participation in the Executive Savings Plan neither gives an Employee the right to be retained in the employ of the Company, nor guarantees his rights or claim to any benefit except as specified in the Executive Savings Plan.
The Company shall have full power and authority to interpret and administer the Executive Savings Plan. The Company's interpretation and construction of any provision or action taken under the Executive Savings Plan shall be binding and conclusive on all persons for all purposes.
If you or your Beneficiary do not receive a benefit to which you believe you are entitled, you or your Beneficiary must file a written claim with the Company. The Company will provide you or your Beneficiary with the necessary information and make all determinations as to the right of any person to a disputed benefit. Your claim will be processed within 90 days (in special circumstances, this period may be extended for an additional 90 days by written notice to you). If your claim has been denied, you will be notified in writing and such notification will include the reasons for the denial, specific references to pertinent plan provisions, and a description of any additional material or information regarding your claim.
If notification of approval of a claim is not received within the time limits set forth above, the claim will automatically be considered denied.
If you are dissatisfied with any decision on your claim, you have the right to request, in writing, a review of the decision. You also have the right to review pertinent documents
and to submit issues and comments in writing. A request for review, giving the reason the decision is believed to be in error, must be made not later than 60 days after a decision on a claim is received.
All requests for review of determinations under the Executive Savings Plan should be addressed to the Company at the address specified in the Introduction to this SPD.
Within 60 days of receipt of a request for review of the disputed claim (in special circumstances, 120 days, by written notice to you), the Company will review the claim and advise you or your Beneficiary, in writing, of its determination. The Company's decision on appeal will be final.
If notification of determination of a claim is not received within the time limits set forth above, the claim will automatically be considered denied.
The right of any participant or any other person to the payment of benefits under the Executive Savings Plan shall not be assigned, transferred, pledged or otherwise encumbered.
The Company reserved the right to amend, modify or terminate the Executive Savings Plan at anytime. Any such action by the Company shall not reduce the benefits you have accrued to the date of such action.
To the extent not preempted by ERISA, the Executive Savings Plan shall be governed by the laws of the State of New York.
Exhibit 4.22
/s/ Ogilvy |
OGILVY & MATHER EXECUTIVE SAVINGS PLAN
SUMMARY PLAN DESCRIPTION
APRIL 2001
50%
OGILVY & MATHER EXECUTIVE SAVINGS PLAN
SUMMARY PLAN DESCRIPTION
This booklet is your Summary Plan Description ("SPD") for the Ogilvy & Mather Executive Savings Plan (the "Executive Savings Plan"). The Executive Savings Plan is designed to recognize your individual contribution to Ogilvy & Mather's overall team effort by giving you an opportunity to defer receipt of a portion of your income, thereby deferring taxes and by giving you a 50% matching contribution of your deferral. The Executive Savings Plan helps you to supplement your retirement benefits.
You should read this booklet carefully and refer here first when you have any questions about the Executive Savings Plan. If this SPD does not answer your questions, or if you need further information, you may contact the Corporate Human Resources Department at Ogilvy & Mather, 309 West 49/th/ Street, New York, NY 10019, 212-237-4000.
April 2001
OGILVY & MATHER EXECUTIVE SAVINGS PLAN SUMMARY
PLAN DESCRIPTION
The Executive Savings Plan is a form of "non-qualified plan," which is a promise by an employer to participants to pay income, at some future date, for services performed currently. By deferring income into the Executive Savings Plan, amounts are sheltered from immediate income taxes (but not FICA taxes), by deferring the payment of income taxes until you receive a distribution from the Plan (which is when you leave employ with Ogilvy & Mather, (the "Company") or when you retire, whichever comes first). All future deferred income payments are subject to income tax withholding.
It is important to note that once you choose to participate in this Executive Savings Plan, you cannot stop deferrals during the calendar year; however, you do have the option not to participate the following year.
Participation in the Executive Savings Plan is limited to key employees and is by personal invitation only. Membership is highly selective to ensure a meaningful financial opportunity for all participants. You are invited to participate during the Annual Plan Offering, which is held in November or December of each year for the following year, or when you are first hired (you must elect to participate within 30 days of your hire date). Participation is totally voluntary.
One of the requirements of this kind of plan is that you must elect to defer income before you receive it - therefore, should you not elect to participate in the Executive Savings Plan during the designated entry periods as described above, you will have to wait until the next Annual Plan Offering. Please note that invitations are given each year - participation for one year does not guarantee an invitation to participate the following year. In addition, you must elect to defer income in order to receive the Company match.
You can defer up to 10% of your base salary. Under the Executive Savings Plan, your deferrals earn interest at the prime rate determined as of the first of each month, compounded monthly. The earnings also accumulate tax-deferred. If you do not participate in any year, your account balance will continue to be credited with interest until it is distributed to you.
The Company will automatically match 50% of your deferrals each year. The match is credited to you monthly.
Please note that if you choose not to defer into the Executive Savings Plan, you will not receive any Company match - the match is contingent upon you participating in the Plan.
Because of IRS rules and regulations, income that you defer into the Executive Savings Plan is not considered eligible compensation for the purpose of calculating the Company's contribution to your Account Balance Defined Benefit Plan or your contributions to the 401(k) Plan. In order to keep you from being penalized by these rules and regulations, the Company will credit your account with 10% of the amount you are deferring to the Executive Savings Plan. So, if you are deferring $1,000 per month, the Company will credit you with 10% of the deferral ($100) as a "pension make-up."
You will receive this pension make-up when you begin deferring into the Executive Savings Plan, regardless of whether or not you are eligible to participate in the Account Balance Plan at that time.
Your other group benefits (such as life insurance and long term disability) are not affected by your decision to defer income.
The Executive Savings Plan is intended to be an unfunded unsecured plan maintained by the Company primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees pursuant to ERISA Sections 201(2), 301(a)(3) and 401(a)(1). When you defer income, an entry is made in a ledger showing that you were owed income by the Company and that you chose to defer receipt until a later date. The interest and Company credits are recorded in the same ledger.
Benefits under the Executive Savings Plan are paid out of the Company's general assets and are therefore not protected from claims by the Company's creditors. There is no trust and nothing contained in this Executive Savings Plan or any action taken with respect to the provisions herein is intended to create a trust of any kind. You are relying on the Company's promise to pay the Executive Savings Plan's benefits in the future. Should the Company become insolvent or bankrupt, you will have no greater rights to your Executive Savings Plan benefits than a general unsecured creditor.
You may purchase a surety bond from a surety company or a letter of credit from a bank to secure your deferred compensation payments should the Company default on those payments. A surety bond is a type of performance bond issued by a surety insurance company. You would pay the premium to the surety insurance company for the bond coverage. The Company cannot be involved, either directly or indirectly, in the purchase of the surety bond or letter of credit as this will be viewed by the IRS as creating a funded non-qualified plan that will be currently taxable to you. If you wish to purchase a surety bond or letter of credit, we strongly advise that you consult the services of a tax professional.
You will receive quarterly statements showing your deferrals, the Company match, pension make-up, and interest so you can monitor the growth of your benefit.
You will receive a distribution of your Executive Savings Plan benefits when you terminate employment with the Company (regardless of whether or not you transfer to another WPP Company) or when you retire, whichever comes first.
The distributed benefits are included in your gross income in the year in which they are received by you and are subject to income taxes. Since FICA taxes were paid at the time of deferral, no FICA taxes will be withheld at the time of distribution.
No withdrawals are permitted from the Executive Savings Plan while you are still an active Company employee and no loans are permitted at any time. If you leave the Company for any reason, your benefit will be paid to you in a lump sum within 60 days following your termination or retirement date (subject to income tax withholding).
If you die before receiving your benefit from the Executive Savings Plan, the benefits will be paid to your designated Beneficiary in one lump sum. When you are given the opportunity to participate in the Executive Savings Plan, you will receive a Beneficiary Designation form. You may designate of one or more persons as the Beneficiary or Beneficiaries who will be entitled to receive the amount payable under from the Plan upon your death. You may, from time to time, revoke or change your Beneficiary designation by filing a new designation with the Company.
The last Beneficiary designation received by the Company will be controlling. No designation, change or revocation of a Beneficiary designation will be effective unless received by the Company prior to your death. If no such Beneficiary designation is in effect at the time of your death, or if no designated Beneficiary survives you, the
payment of any Executive Savings Plan benefits upon your death will be made to your surviving spouse, or if you have no surviving spouse, to your children, or if you have no children, to the legal representative of your estate.
If anyone entitled to a benefit becomes legally incapacitated or is otherwise unable to manage his financial affairs, the Company may pay his benefit to someone else (such as a named Beneficiary or duly appointed representative or guardian) for the benefit of that person.
Participation in the Executive Savings Plan neither gives an Employee the right to be retained in the employ of the Company, nor guarantees his rights or claim to any benefit except as specified in the Executive Savings Plan.
The Company shall have full power and authority to interpret and administer the Executive Savings Plan. The Company's interpretation and construction of any provision or action taken under the Executive Savings Plan shall be binding and conclusive on all persons for all purposes.
If you or your Beneficiary do not receive a benefit to which you believe you are entitled, you or your Beneficiary must file a written claim with the Company. The Company will provide you or your Beneficiary with the necessary information and make all determinations as to the right of any person to a disputed benefit. Your claim will be processed within 90 days (in special circumstances, this period may be extended for an additional 90 days by written notice to you). If your claim has been denied, you will be notified in writing and such notification will include the reasons for the denial, specific references to pertinent plan provisions, and a description of any additional material or information regarding your claim.
If notification of approval of a claim is not received within the time limits set forth above, the claim will automatically be considered denied.
If you are dissatisfied with any decision on your claim, you have the right to request, in writing, a review of the decision. You also have the right to review pertinent documents
and to submit issues and comments in writing. A request for review, giving the reason the decision is believed to be in error, must be made not later than 60 days after a decision on a claim is received.
All requests for review of determinations under the Executive Savings Plan should be addressed to the Company at the address specified in the Introduction to this SPD.
Within 60 days of receipt of a request for review of the disputed claim (in special circumstances, 120 days, by written notice to you), the Company will review the claim and advise you or your Beneficiary, in writing, of its determination. The Company's decision on appeal will be final.
If notification of determination of a claim is not received within the time limits set forth above, the claim will automatically be considered denied.
The right of any participant or any other person to the payment of benefits under the Executive Savings Plan shall not be assigned, transferred, pledged or otherwise encumbered.
The Company reserved the right to amend, modify or terminate the Executive Savings Plan at anytime. Any such action by the Company shall not reduce the benefits you have accrued to the date of such action.
Exhibit 4.23
/s/ Ogilvy |
OGILVY & MATHER DEFERRED COMPENSATION PLAN
SUMMARY PLAN DESCRIPTION
APRIL 2001
OGILVY & MATHER DEFERRED COMPENSATION PLAN
SUMMARY PLAN DESCRIPTION
This booklet is your Summary Plan Description ("SPD") for the Ogilvy & Mather Deferred Compensation Plan (the "Deferred Compensation Plan"). The Deferred Compensation Plan is designed to give you an opportunity to defer receipt of a portion of your income, thereby deferring taxes. The Deferred Compensation Plan helps you to supplement your retirement benefits.
You should read this booklet carefully and refer here first when you have any questions about the Deferred Compensation Plan. If this SPD does not answer your questions, or if you need further information, you may contact the Corporate Human Resources Department at Ogilvy & Mather, 309 West 49/th/ Street, New York, NY 10019, 212-237-4000.
April 2001
OGILVY & MATHER DEFERRED COMPENSATION PLAN
SUMMARY PLAN DESCRIPTION
The Deferred Compensation Plan is a "non-qualified plan," which is a promise by an employer to participants to pay income, at some future date, for services performed currently. By deferring income into the Deferred Compensation Plan, amounts are sheltered from immediate taxes (but not FICA taxes), by deferring the payment of taxes until you receive a distribution from the Deferred Compensation Plan (which is when you leave employ with Ogilvy & Mather (the "Company"), or when you retire, whichever comes first). All future deferred income payments are subject to income tax withholding.
It is important to note that once you choose to participate in the Deferred Compensation Plan, you cannot stop deferrals during the calendar year; however, you do have the option not to participate the following year.
All Partners of the Company are eligible to participate in the Deferred Compensation Plan. You are given the opportunity to participate within 30 days from when you are first hired (or when you are promoted to Partner level) and during the Annual Plan Offering, which is held in November of each year for the following year. One of the requirements of this kind of plan is that you must elect to defer income before you receive it - therefore, should you not elect to participate in the Deferred Compensation Plan during the designated entry periods as described above, you will have to wait until the next Annual Plan Offering.
Under the Deferred Compensation Plan, you can defer:
. up to 75% of your annual base salary, or a designated dollar amount not to exceed 75% of your annual base salary, and/or
. a percentage (up to 100%) or designated dollar amount of your annual bonus.
Your deferrals earn interest at the prime rate (as determined on the first day of each month and is compounded monthly. The earnings also accumulate tax- deferred. If you choose not to participate in any year, your account balance will continue to be credited with interest until it is distributed to you.
Because of IRS rules and regulations, income that you defer into the Deferred Compensation Plan is not considered eligible compensation for the purpose of calculating the Company's contribution to your Account Balance Defined Benefit Plan or your contributions to the 401(k) Plan. In order to keep you from being penalized by these rules and regulations, the Company will credit your account with 10% of the amount you are deferring to the Deferred Compensation Plan. So, if you are deferring $1,000 per month, The Company will credit you with 10% of the deferral ($100) as a "pension make-up."
You will receive this pension make-up when you begin deferring into the Deferred Compensation Plan, regardless of whether or not you are eligible to participate in the Account Balance Plan at that time.
Your other group benefits (such as life insurance and long term disability) are not affected by your decision to defer income.
The Deferred Compensation Plan is intended to be an unfunded unsecured plan maintained by the Company primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees pursuant to ERISA Sections 201(2), 301(a)(3) and 401(a)(1). When you defer income, an entry is made in a ledger showing that you were owed income by the Company and that you chose to defer receipt until a later date. The interest and Company credits are recorded in the same ledger.
Benefits under the Deferred Compensation Plan are paid out of the Company's general assets and are therefore not protected from claims by the Company's creditors. There is no trust and nothing contained in this Deferred Compensation Plan or any action taken with respect to the provisions herein is intended to create a trust of any kind. You are relying on the Company's promise to pay the Deferred Compensation Plan's benefits in the future. Should the Company become insolvent or bankrupt, you will have no greater rights to your Deferred Compensation Plan benefits than a general unsecured creditor.
You may purchase a surety bond from a surety company or a letter of credit from a bank to secure your deferred compensation payments should the Company default on those payments. A surety bond is a type of performance bond issued by a surety insurance company. You would pay the premium to the surety insurance company for the bond coverage. The Company cannot be involved, either directly or indirectly, in the purchase of the surety bond or letter of credit as this will be viewed by the IRS as creating a funded non-qualified plan that will be currently taxable to you. If you wish to purchase a surety bond or letter of credit, we strongly advise that you consult the services of a tax professional.
You will receive quarterly statements showing your deferrals, pension make-up, and account earnings so you can monitor the growth of your benefit.
You will receive a distribution of your Deferred Compensation Plan benefits when you terminate employment with the Company (regardless of whether or not you transfer to another WPP Company) or when you retire, whichever comes first.
The distributed benefits are included in your gross income in the year in which they are received by you and are subject to income taxes. Since FICA taxes were paid at the time of deferral, no FICA taxes will be withheld at the time of distribution.
No withdrawals are permitted from the Deferred Compensation Plan while you are still an active Company employee and no loans are permitted at any time. If you leave the Company for any reason, your benefit will be paid to you in the manner you indicated on your election form (subject to income tax withholding). You are given the opportunity to elect a form of payment each year as follows:
. A lump sum to be paid within 60 days following your termination or retirement date;
. In equal installments over 10 years (120 monthly payments); or
. In equal installments over a period equal to the number of months in which you deferred compensation (this form of payment will no longer be available for plan years beginning after December 31, 2001).
(Please note that accounts under $10,000 will be paid out in one lump sum.)
The form of payment you elect applies only to that plan year, not to any previous years or to any future years. Therefore, if you chose a lump sum payment for 2000, but choose 120 payments in 2001, your 2000 year benefit will be paid in a lump sum, but your 2001 year benefit will be paid out to you over 120 monthly payments.
For payments commencing after December 31, 2001, if you chose to be paid out in equal installments, you will be credited with a fixed rate of interest of 5% on the declining balance until all your benefits are paid out.
If you die before receiving your entire benefit from the Deferred Compensation Plan, the benefits (or the remaining benefits if you die while receiving installments) will be paid to
your designated Beneficiary in one lump sum. When you are given the opportunity to participate in the Deferred Compensation Plan, you will receive a Beneficiary Designation form. You may designate one or more persons as the Beneficiary or Beneficiaries who will be entitled to receive the amount payable under the Deferred Compensation Plan upon your death. You may, from time to time, revoke or change your Beneficiary designation by filing a new designation with the Company.
The last Beneficiary designation received by the Company will be controlling. No designation, change or revocation of a Beneficiary designation will be effective unless received by the Company prior to your death. If no such Beneficiary designation is in effect at the time of your death, or if no designated Beneficiary survives you, the payment of any Deferred Compensation Plan benefits upon your death will be made to your surviving spouse, if any, or if you have no surviving spouse, to your children, or if you have no children, to the legal representative of your estate.
If anyone entitled to a benefit becomes legally incapacitated or is otherwise unable to manage his financial affairs, the Company may pay his benefit to someone else (such as a named Beneficiary or duly appointed representative or guardian) for the benefit of that person.
Participation in the Deferred Compensation Plan neither gives an employee the right to be retained in the employ of the Company, nor guarantees his rights or claim to any benefit except as specified in the Deferred Compensation Plan.
The Company shall have full power and authority to interpret and administer the Plan. The Company's interpretation and construction of any provision or action taken under the Deferred Compensation Plan shall be binding and conclusive on all persons for all purposes.
If you or your Beneficiary do not receive a benefit to which you believe you are entitled, you or your Beneficiary can file a written claim with the Company. The Company will provide you or your Beneficiary with the necessary information and make all determinations as to the right of any person to a disputed benefit. Your claim will be processed within 90 days (in special circumstances, this period may be extended for an additional 90 days by written notice to you). If your claim has been denied, you will be
notified in writing and such notification will include the reasons for the denial, specific references to pertinent plan provisions, and a description of any additional material or information regarding your claim.
If notification of approval of a claim is not received within the time limits set forth above, the claim will automatically be considered denied.
If you are dissatisfied with any decision on your claim, you have the right to request, in writing, a review of the decision. You also have the right to review pertinent documents and to submit issues and comments in writing. A request for review, giving the reason the decision is believed to be in error, must be made not later than 60 days after a decision on a claim is received.
All requests for review of determinations under the Deferred Compensation Plan should be addressed to the Company at the address specified in the Introduction to this SPD.
Within 60 days of receipt of a request for review of the disputed claim (in special circumstances, 120 days, by written notice to you), the Company will review the claim and advise you or your Beneficiary, in writing, of its determination. The Company's decision on appeal will be final.
If notification of determination of a claim is not received within the time limits set forth above, the claim will automatically be considered denied.
The right of any participant or any other person to the payment of benefits under the Deferred Compensation Plan shall not be assigned, transferred, pledged or otherwise encumbered.
The Company reserved the right to amend, modify or terminate Deferred Compensation Plan at anytime. Any such action by the Company shall not reduce the benefits you have accrued to the date of such action.
To the extent not preempted by ERISA, the Deferred Compensation Plan shall be governed by the laws of the State of New York.
Exhibit 8.1
WPP GROUP PLC
LIST OF SIGNIFICANT SUBSIDIARIES
AS AT DECEMBER 31, 2000
Name Country of Incorporation/Residence ----------------------------------------------------------------------------- J. Walter Thompson Company, Inc. U.S.A. The Ogilvy Group, Inc. U.S.A. Young & Rubicam Inc. U.S.A |
Exhibit 10.1
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
As independent chartered accountants, we hereby consent to the incorporation of our report included in this Form 20-F, into the Company's previously filed Registration Statements on File No.33-33906, File No. 333-4302, File No. 333-5368 and File No. 333-6378 on Form S-8.
London, England Arthur Andersen June ___, 2001