WPP plc (Form: 20-F, Received: 04/30/2014 11:38:08)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

(Mark One)

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

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

For the fiscal year ended 31 December 2013

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

For the transition period from to

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

Commission file number 0-16350

WPP plc

(Exact Name of Registrant as specified in its charter)

Jersey

(Jurisdiction of incorporation or organization)

27 Farm Street

London, United Kingdom, W1J 5RJ

(Address of principal executive offices)

Andrea Harris, Esq.

Group Chief Counsel

27 Farm Street, London, United Kingdom, W1J 5RJ

Telephone: +44(0) 20 7408 2204

Facsimile: +44(0) 20 7493 6819

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.


Title of each class		Name of each exchange on which registered
Not applicable		Not applicable

Securities registered or to be registered pursuant to Section 12(g) of the Act.

Ordinary Shares of 10p each

(Title of Class)

American Depositary Shares, each representing five Ordinary Shares (ADSs)

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

(Title of Class)

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.

At December 31, 2013, the number of outstanding ordinary shares was 1,348,733,317 which included at such date ordinary shares represented by 10,970,861 ADSs.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

YES x NO ¨

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

YES ¨ NO x

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES ¨ NO ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:


U.S. GAAP ¨		International Financial Reporting Standards issued by the International Accounting Standards Board x		Other ¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 ¨ Item 18 ¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES ¨ NO x

TABLE OF CONTENTS


			Page

FORWARD – LOOKING STATEMENTS				1
Part I				1

Item 1	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS			1

Item 2	OFFER STATISTICS AND EXPECTED TIMETABLE			1

Item 3	KEY INFORMATION			1
	A	Selected Financial Data		1
	B	Capitalization and Indebtedness		4
	C	Reasons for the Offer and Use of Proceeds		4
	D	Risk Factors		5

Item 4	INFORMATION ON THE COMPANY			7
	A	History and Development of the Company		7
	B	Business Overview		8
	C	Organizational Structure		12
	D	Property, Plants and Equipment		14

Item 4A	UNRESOLVED STAFF COMMENTS			14

Item 5	OPERATING AND FINANCIAL REVIEW AND PROSPECTS			15
	A	Operating Results		15
	B	Liquidity and Capital Resources		22
	C	Research and Development, Patents and Licenses, etc .		24
	D	Trend Information		24
	E	Off-Balance Sheet Arrangements		25
	F	Tabular Disclosure of Contractual Obligations		26

Item 6	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES			36
	A	Directors and Senior Management		36
	B	Compensation		39
	C	Board Practices		64
	D	Employees		75
	E	Share Ownership		76

Item 7	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS			78
	A	Major Shareholders		78
	B	Related Party Transactions		78
	C	Interests of Experts and Counsel		78

Item 8	FINANCIAL INFORMATION			79
	A	Consolidated Statements and Other Financial Information		79
	B	Significant Changes		79

Item 9	THE OFFER AND LISTING			80
	A	Offer and Listing Details		80
	B	Plan of Distribution		81
	C	Markets		81
	D	Selling Shareholders		81
	E	Dilution		81
	F	Expenses of the Issue		81


			Page

Item 10	ADDITIONAL INFORMATION			82
	A	Share Capital		82
	B	Memorandum and Articles of Association		82
	C	Material Contracts		90
	D	Exchange Controls		94
	E	Taxation		94
	F	Dividends and Paying Agents		99
	G	Statements by Experts		99
	H	Documents on Display		99
	I	Subsidiary Information		99

Item 11	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			100

Item 12	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES			100
	A	Debt Securities		100
	B	Warrants and Rights		100
	C	Other Securities		100
	D	American Depositary Shares		101

Part II				103

Item 13	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES			103

Item 14	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS			103

Item 15	CONTROLS AND PROCEDURES			103

Item 16A	AUDIT COMMITTEE FINANCIAL EXPERT			105

Item 16B	CODE OF ETHICS			105

Item 16C	PRINCIPAL ACCOUNTANT FEES AND SERVICES			106

Item 16D	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES			106

Item 16E	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS			106

Item 16F	CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT			107

Item 16G	CORPORATE GOVERNANCE			107

Item 16H	MINE SAFETY DISCLOSURE			108

Part III				109

Item 17	FINANCIAL STATEMENTS			109

Item 18	FINANCIAL STATEMENTS			109

Item 19	EXHIBITS			109

Forward-Looking Statements

In connection with the provisions of the Private Securities Litigation Reform Act of 1995 (the Reform Act), the Company (as defined below) 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 and anticipated future economic performance based on 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, regulatory compliance costs or litigation, natural disasters or acts of terrorism, the Company’s exposure to changes in the values of major currencies other than the UK pound sterling (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 addition, you should consider the risks described in Item 3D, captioned “Risk Factors,” which could also cause actual results to differ from forward-looking information. In light of these and other uncertainties, the forward-looking statements included in this document should not be regarded as a representation by the Company that the Company’s plans and objectives will be achieved.

The Company undertakes no obligation to update or revise any such forward-looking statements, whether as a result of new information, future events or otherwise.

PART I

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 plc and its subsidiaries (WPP) comprise one of the largest communications services businesses in the world. At 31 December 2013, the Group had 119,116 employees. Including all employees of associated companies, this figure was approximately 175,000. For the year ended 31 December 2013, the Group had revenue of £11,019 million and operating profit of £1,410 million.

Unless the context otherwise requires, the terms “Company”, “Group” and “Registrant” as used herein shall also mean WPP plc and its subsidiaries.

A. Selected Financial Data

The selected financial data should be read in conjunction with, and is qualified in its entirety by reference to, the Consolidated Financial Statements of the Company, including the notes thereto.

The selected income statement data for each of the three years ended 31 December 2013, 2012 and 2011 and the selected balance sheet data as at 31 December 2013 and 2012 are derived from the Consolidated Financial Statements of the Company that appear elsewhere in this Form 20-F. The selected financial data for prior periods

is derived from the Consolidated Financial Statements of the Company previously filed with the Securities and Exchange Commission (SEC) as part of the Company’s Annual Reports on Form 20-F. The Consolidated Financial Statements were prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

The reporting currency of the Group is the UK pound sterling and the selected financial data has been prepared on this basis.

Selected Consolidated Income Statement Data


	Year ended 31 December
	2013			2012			2011			2010			2009
	£m			£m			£m			£m			£m
Revenue		11,019.4			10,373.1			10,021.8			9,331.0			8,684.3
Operating profit		1,410.3			1,241.1			1,192.2			973.0			761.7
Profit for the year		1,012.1			894.7			916.5			661.0			506.9
Profit attributable to equity holders of the parent		936.5			822.7			840.1			586.0			437.7
Earnings per ordinary share:
Basic		72.4	p		66.2	p		67.6	p		47.5	p		35.9	p
Diluted		69.6	p		62.8	p		64.5	p		45.9	p		35.3	p
Earnings per ADS ¹ :
Basic		362.0	p		331.0	p		338.0	p		237.5	p		179.5	p
Diluted		348.0	p		314.0	p		322.5	p		229.5	p		176.5	p
Dividends per ordinary share		30.27	p		25.94	p		19.28	p		16.25	p		15.47	p
Dividends per ADS (US dollars) ²		238.8	¢		207.1	¢		151.2	¢		126.7	¢		135.9	¢
¹ Basic and diluted earnings per American Depositary Share (ADS) have been calculated using the same method as earnings per share, multiplied by a factor of five. ² These figures have been translated for convenience purposes only, using the approximate average rates shown in the exchange rate table on page 3. This conversion should not be construed as a representation that the pound sterling amounts actually represent, or could be converted into, US dollars at the rates indicated.

Selected Consolidated Balance Sheet Data


	At 31 December
	2013		2012		2011		2010		2009
	£m		£m		£m		£m		£m
Total assets		25,005.4		24,877.6		24,694.9		24,345.1		22,351.5
Net assets		7,846.5		7,060.6		6,894.3		6,647.9		6,075.7
Called-up share capital		134.9		126.5		126.6		126.4		125.6
Number of shares (in millions)		1,348.7		1,265.4		1,266.4		1,264.4		1,256.5

Dividends

Dividends on the Company’s ordinary shares, when paid, are paid to share owners as of a record date, which is fixed by the Company.

The table below sets forth the amounts of interim or first interim, final or second interim and total dividends paid on the Company’s ordinary shares in respect of each fiscal year indicated. In the United States, the Company’s ordinary shares are represented by ADSs, which are evidenced by American Depositary Receipts (ADRs) or held in book-entry form. The Group uses the terms ‘ADS’ and ‘ADR’ interchangeably. The dividends are also shown translated into US cents per ADS using the approximate average rates as shown in the exchange rate table below, for each year presented.


	Pence per ordinary share						US cents per ADS
In respect of the year ended 31 December:	Interim or First Interim		Final or Second Interim		Total		Interim or First Interim		Final or Second Interim		Total
2009		5.19		10.28		15.47		40.66		80.53		121.19
2010		5.97		11.82		17.79		46.15		91.37		137.52
2011		7.46		17.14		24.60		59.80		137.39		197.19
2012		8.80		19.71		28.51		69.75		156.22		225.97
2013		10.56		23.65		34.21		82.61		185.01		267.62

The 2013 interim dividend was paid on 11 November 2013 to share owners on the register at 11 October 2013. The 2013 final dividend will be paid on 7 July 2014 to share owners on the register at 6 June 2014.

Exchange rates

Fluctuations in the exchange rate between the pound sterling and the US dollar will affect the dollar equivalent of the pound sterling prices of the Company’s ordinary shares on The London Stock Exchange Limited (The London Stock Exchange) and, as a result, are likely to affect the market price of the ADSs in the United States. US dollar amounts paid to holders of ADSs also depend on the sterling/US dollar exchange rate at the time of payment.

The following table sets forth for each of the most recent six months, the high and low exchange rates between the pound sterling and the US dollar. As at 24 April 2014, the closing exchange rate was 1.6793.


Month ended	High		Low
31 October 2013		1.6240		1.5922
30 November 2013		1.6362		1.5915
31 December 2013		1.6566		1.6261
31 January 2014		1.6616		1.6344
28 February 2014		1.6733		1.6311
31 March 2014		1.6762		1.6496

The annual average exchange rates between the pound sterling and the US dollar for each of the five years ended 31 December were:


Year ended 31 December	Average
2009		1.5667
2010		1.5461
2011		1.6032
2012		1.5852
2013		1.5646

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

The Company is subject to a variety of possible risks that could adversely impact its revenues, results of operations or financial condition. Some of these risks relate to the industries in which the Company operates while others are more specific to the Company. The table below sets out principal risks the Company has identified that could adversely affect it. See also the discussion of Forward-Looking Statements preceding Item 1.


Risk		Potential impact
Clients
The Group competes for clients in a highly-competitive industry and client loss may have a material adverse effect on the Group’s market share and its business, revenues, results of operations, financial condition or prospects.		Competitors include large multinational advertising and marketing communication companies and regional and national marketing services companies, database marketing and modelling companies, telemarketers, social media and consulting internet companies. Service agreements with clients are generally terminable by the client on 90 days’ notice and many clients put their advertising and communications business up for competitive review from time to time. The ability to attract new clients and to retain or increase the amount of work from existing clients may also in some cases be limited by clients’ policies on conflicts of interest.
The Group receives a significant portion of its revenues from a limited number of large clients and the net loss of some of these clients could have a material adverse effect on the Group’s prospects, business, financial condition and results of operations.		A relatively small number of clients contribute a significant percentage of the Group’s consolidated revenues. The Group’s 10 largest clients accounted for 17.8% of revenues in the year ended 31 December 2013. Clients generally are able to reduce advertising and marketing spend or cancel projects on short notice. The loss of one or more of the Group’s largest clients, if not replaced by new client accounts or an increase in business from existing clients, would adversely affect the Group’s financial condition.
Data Security
The Group is subject to strict data protection and privacy legislation in the jurisdictions in which it operates and relies extensively on information technology systems. The Group operates on a largely decentralised basis with a large number of different agencies and operating entities and the resulting size and diversity of the operational systems increases the vulnerability of such systems to breakdown or malicious intrusion.		The Group may be subject to investigative or enforcement action or legal claims or incur fines, damages, or costs if the Group fails to adequately protect data or observe privacy legislation in every instance. A system breakdown or intrusion could have a material adverse effect on the Group’s business, revenues, results of operations, financial condition or prospects.
Economic
The Group’s businesses are subject to economic cycles. Many of the economies in which the Group operates currently have significant economic challenges.		Reduction in client spending or postponing spending on the services offered by the Group or switching of client expenditure to non-traditional media and renegotiation of contract terms can lead to reduced profitability and cash flow.
Financial
Currency exchange rate fluctuations could adversely impact the Group’s consolidated results.		The Company’s reporting currency is pounds sterling. Given the Group’s significant international operations, fluctuations in currency exchange rates can affect the Group’s consolidated results.
The interest rates and fees payable by the Group in respect of certain of its borrowings are, in part, influenced by the credit ratings issued by the international debt rating agencies.		If the Company’s financial performance and outlook materially deteriorate, a ratings downgrade could occur and the interest rates and fees payable on certain of the Company’s revolving credit facilities and certain of the Group’s bonds could be increased.
The Group is subject to credit risk through the default of a client or other counterparty.		The Group is generally paid in arrears for its services. Invoices are typically payable within 30 to 60 days. The Group commits to media and production purchases on behalf of some of its clients as principal or agent depending on the client and market circumstances. If a client is unable to pay sums due, media and production companies may look to the Group to pay such amounts to which it committed as an agent on behalf of those clients.


Risk		Potential impact
Mergers & Acquisitions
The Group may be unsuccessful in evaluating material risks involved in completed and future acquisitions and may be unsuccessful in integrating any acquired operations with its existing businesses.		The Group regularly reviews potential acquisitions of businesses that are complementary to its operations and clients’ needs. If material risks are not identified prior to acquisition or the Group experiences difficulties in integrating an acquired business, it may not realise the expected benefits from such an acquisition and the Group’s financial condition could be adversely affected.
Goodwill and other intangible assets recorded on the Group’s balance sheet with respect to acquired companies may become impaired.		The Group has a significant amount of goodwill and other intangible assets recorded on its balance sheet with respect to acquired companies. The Group annually tests the carrying value of goodwill and other intangibles for impairment. The estimates and assumptions about results of operations and cash flows made in connection with impairment testing could differ from future results of operations and cash flows. Future events could cause the Group to conclude that the asset values associated with a given operation have become impaired which could have a material impact on the Group’s financial condition.
Operational
The Group operates in 110 countries and is exposed to the risks of doing business internationally.		The Group’s international operations are subject to the following risk factors: (i) restrictions and/or changes in taxation on repatriation of earnings; (ii) economic, social or political instability within different countries, regions and markets; (iii) changes in foreign laws and regulatory requirements, such as those on foreign ownership of assets or data usage or business models; and (iv) uncertainty or potential ineffectiveness or lack of enforcement in relation to the Group’s client service agreements or other contractual rights.
People
The Group’s performance could be adversely affected if it were unable to attract and retain key talent or had inadequate talent management and succession planning for key management roles.		The Group is highly dependent on the talent, creative abilities and technical skills of our personnel as well as their relationships with clients. The Group is vulnerable to the loss of personnel to competitors and clients leading to disruption to the business.
Regulatory/Legal
The Group may be subject to regulations restricting its activities or effecting changes in taxation.		Governments, government agencies and industry self-regulatory bodies from time to time adopt statutes and regulations that directly or indirectly affect the form, content and scheduling of advertising, public relations and public affairs and market research or otherwise limit the scope of the activities of the Group and its clients which could have a material adverse impact on our financial position. Changes in tax laws and international tax treaties or their application may also adversely affect the Group’s reported results.
The Group may be exposed to liabilities from allegations that certain of its clients’ advertising claims may be false or misleading or that its clients’ products may be defective or harmful.		The Group works for a large number of clients across a broad spectrum of industries and end markets, some of which may become subject to litigation. As a consequence of providing services to such clients, the Group may itself become involved as a defendant in litigation brought against its clients by third parties, including its clients, competitors or consumers or governmental or regulatory authorities.
The Group is subject to strict anti-corruption and anti-bribery legislation and enforcement in the countries in which it operates.		The Group may be exposed to liabilities in the event of breaches of anti-corruption and anti-bribery legislation in all of the 110 countries in which it operates.
Civil liabilities or judgements against the Company or its directors or officers based on United States federal or state securities laws may not be enforceable in the United States or in England and Wales or in Jersey.		The Company is a public limited company incorporated under the laws of Jersey. Some of the Company’s directors and officers reside outside of the United States. In addition, a substantial portion of the directly owned assets of the Company are located outside of the United States. As a result, it may be difficult or impossible for investors to effect service of process within the United States against the Company or its directors and officers or to enforce against them any of the judgements, including those obtained in original actions or in actions to enforce judgements of the U.S. courts, predicated upon the civil liability provisions of the federal or state securities laws of the United States.

ITEM 4. INFORMATION ON THE COMPANY

The Company operates through a number of established global, multinational and national advertising and marketing services companies that are organised into four business segments. Our largest segment is Advertising and Media Investment Management where we operate the well-known advertising networks Ogilvy & Mather Advertising, JWT, Y&R, Grey, Bates CHI&Partners and the United Network, as well as Media Investment Management companies such as MediaCom, MEC, Mindshare, Maxus and tenthavenue. Our other segments are Data Investment Management (previously “Consumer Insight”), where our operations are conducted through Kantar; Public Relations & Public Affairs, where we operate through well-known companies such as Burson-Marsteller, Cohn & Wolfe, Hill+Knowlton Strategies and Ogilvy Public Relations; and Branding & Identity, Healthcare and Specialist Communications, where our operations are conducted by B to D Group, ghg, Wunderman, Sudler & Hennessey, OgilvyOne Worldwide, Ogilvy CommonHealth Worldwide, Geometry Global, Xaxis, POSSIBLE, AKQA and other companies.

The Company’s ordinary shares are admitted to the Official List of the UK Listing Authority and trade on The London Stock Exchange and American Depositary Shares (which are evidenced by ADRs or held in book-entry form) representing deposited ordinary shares are quoted on the NASDAQ Global Select Market (NASDAQ). At 24 April 2014 the Company had a market capitalisation of approximately £17.0 billion.

The Company’s executive office is located at 27 Farm Street, London, United Kingdom, W1J 5RJ, Tel:+44 (0)20 7408 2204 and its registered office is located at Queensway House, Hilgrove Street, St Helier, Jersey JE1 IES.

A. History and Development of the Company

WPP plc was incorporated in Jersey on 25 October 2012 under the name WPP 2012 plc.

On 2 January 2013, under a scheme of arrangement between WPP 2012 Limited (formerly known as WPP plc), (Old WPP), the former holding company of the Group, and its share owners pursuant to Article 125 of the Companies (Jersey) Law 1991, and as sanctioned by the Royal Court of Jersey (the Jersey Court), a Jersey incorporated and United Kingdom tax resident company, WPP 2012 plc became the new parent company of the WPP Group and adopted the name WPP plc. Under the scheme of arrangement, all the issued shares in Old WPP were cancelled and the same number of new shares were issued to WPP plc in consideration for the allotment to share owners of one share in WPP plc for each share in Old WPP held on the record date, 31 December 2012. Citibank, N.A., depositary for the ADSs representing Old WPP shares, cancelled Old WPP ADSs held in book-entry uncertificated form in the direct registration system maintained by it and issued ADSs representing shares of WPP plc in book entry uncertificated form in the direct registration system maintained by it to the holders. Holders of certificated ADSs, or ADRs, of Old WPP were entitled to receive ADSs of WPP plc upon surrender of the Old WPP ADSs, or ADRs, to the Depositary. Each Old WPP ADS represented five shares of Old WPP and each WPP plc ADS represents five shares of WPP plc.

Pursuant to Rule 12g-3 under the Securities Exchange Act of 1934, as amended (the Exchange Act), WPP plc succeeded to Old WPP’s registration and periodic reporting obligations under the Exchange Act.

Old WPP was incorporated in Jersey on 12 September 2008 and became the holding company of the WPP Group on 19 November 2008 when the company now known as WPP 2008 Limited, the prior holding company of the WPP Group which was incorporated in England and Wales, completed a reorganisation of its capital and corporate structure. WPP 2008 Limited had become the holding company of the Group on 25 October 2005 when the company now known as WPP 2005 Limited, the original holding company of the WPP Group, completed a reorganisation of its capital and corporate structure. WPP 2005 Limited was incorporated and registered in England and Wales in 1971 and is a private limited company under the Companies Act 1985, and until 1985 operated as a manufacturer and distributor of wire and plastic products. In 1985, new investors acquired a significant interest in WPP 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 organically and by the acquisition of companies, most significantly the acquisitions of JWT Group, Inc. in 1987, The Ogilvy Group, Inc. (now known as The Ogilvy Group, LLC) in 1989, Young & Rubicam Inc. (Young & Rubicam or Young & Rubicam Brands, as the group is now known) in 2000, Tempus Group plc (Tempus) in 2001, Cordiant Communications Group plc (Cordiant) in 2003, Grey Global Group, LLC (Grey) in 2005, 24/7 Real Media Inc (now known as Xaxis, Inc) in 2007, Taylor Nelson Sofres plc (TNS) in 2008 and AKQA Holdings, Inc. (AKQA) in 2012.

The Company spent £221.0 million, £586.6 million and £532.4 million for acquisitions and investments in 2013, 2012 and 2011, respectively, including payments in respect of loan note redemptions and earnout payments resulting from acquisitions in prior years, net of cash and cash equivalents acquired (net) and proceeds on disposal of investments. For the same periods, cash spent on purchases of property, plant and equipment and other intangible assets was £284.5 million, £330.1 million and £253.2 million, respectively, and cash spent on share repurchases and buy-backs was £197.0 million, £134.5 million and £182.2 million, respectively.

B. Business Overview

The Company’s business comprises the provision of communications services on a national, multinational and global basis. It operates from over 3,000 offices in 110 countries including associates. The Company organises its businesses in the following areas: Advertising and Media Investment Management; Data Investment Management; Public Relations & Public Affairs; and Branding & Identity, Healthcare and Specialist Communications (including direct, digital, promotion and relationship marketing).

Approximately 42% of the Company’s reported revenues in 2013 were from Advertising and Media Investment Management, with the remaining 58% of its revenues being derived from the business segments of Data Investment Management; Public Relations & Public Affairs; and Branding & Identity, Healthcare and Specialist Communications.

The following table shows, for the last three fiscal years, reported revenue attributable to each business segment in which the Company operates.


Revenue ¹	2013				2012				2011
	£m		% of total		£m		% of total		£m		% of total
Advertising and Media Investment Management		4,578.8		41.5		4,273.2		41.2		4,157.2		41.5
Data Investment Management ²		2,549.7		23.1		2,460.2		23.7		2,458.0		24.5
Public Relations & Public Affairs		920.7		8.4		917.1		8.8		885.4		8.8
Branding & Identity, Healthcare and Specialist Communications		2,970.2		27.0		2,722.6		26.3		2,521.2		25.2
Total		11,019.4		100.0		10,373.1		100.0		10,021.8		100.0

Intersegment sales have not been separately disclosed as they are not material.

Data Investment Management was previously reported as Consumer Insight.

The following table shows, for the last three fiscal years, reported revenue attributable to each geographic area in which the Company operates and demonstrates the Company’s regional diversity.


Revenue ¹	2013				2012				2011
	£m		% of total		£m		% of total		£m		% of total
North America ²		3,744.7		34.0		3,546.5		34.2		3,388.2		33.8
United Kingdom		1,414.0		12.8		1,275.2		12.3		1,183.5		11.8
Western Continental Europe		2,592.6		23.5		2,439.2		23.5		2,505.1		25.0
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe		3,268.1		29.7		3,112.2		30.0		2,945.0		29.4
Total		11,019.4		100.0		10,373.1		100.0		10,021.8		100.0

Intersegment sales have not been separately disclosed as they are not material.

North America includes the US with revenues of £3,498.1 million (2012: £3,309.4 million, 2011: £3,149.9 million).

The Company’s principal disciplines within each of its business segments are described below. Item 4C sets forth the Group brands operating within each discipline.

Advertising and Media Investment Management

Advertising – The principal functions of an advertising agency are the planning and creation of 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.

Media Investment Management – GroupM is WPP’s leading global media investment management operation. With its agencies, GroupM has capabilities in business science, consumer insight, communications and media planning implementation, interactions, content development, and sports and entertainment marketing. The primary purpose of GroupM is to maximise the performance of WPP’s media agencies, operating not only as a parent company but as a collaborator on performance-enhancing activities, such as trading, content creation, sports, digital, finance, tool development and other business-critical capabilities, in order to leverage the combination of GroupM’s core and talent resources. Our offering in this discipline also includes the network tenthavenue, which integrates some of the Group’s key specialist media offerings in online, mobile, experiential and out of home (OOH).

Data Investment Management (previously Consumer Insight)

To help optimise its worldwide research offering to clients, the Company’s separate global research and strategic marketing consultancy businesses are managed on a centralised basis under the umbrella of the Kantar Group. The Kantar Group offering includes: custom research in a wide range of business sectors and areas of marketplace information including strategic market studies; brand positioning; equity research; customer satisfaction surveys; product development; international research; advanced modeling; advertising research; pre-testing, tracking and sales modeling; and trends and futures research and consultancy.

Public Relations & Public Affairs

Public Relations & Public Affairs companies advise clients who are seeking to communicate with consumers, governments and/or the business and financial communities. Public Relations & Public Affairs activities include national and international corporate, financial and marketing communications, crisis management, reputation management, public affairs and government lobbying.

Branding & Identity, Healthcare and Specialist Communications

Branding & Identity – consumer, corporate and employee branding and design services, covering identity, packaging, literature, events, training and architecture.

Healthcare Communications – provide integrated healthcare marketing solutions from advertising to medical education and online marketing.

Direct, Digital, Promotion & Relationship Marketing – the full range of general and specialist customer, channel, direct, field, retail, promotional and point-of-sale services.

Specialist Communications – a comprehensive range of specialist services, from custom media and multicultural marketing to event, sports, youth and entertainment marketing; corporate and business-to-business; and media, technology and production services.

WPP Digital – Through WPP Digital, WPP makes acquisitions and strategic investments in companies that bolster the Group’s presence in digital marketing & media and provide access for WPP companies and their clients to a portfolio of digital experts. Services provided by WPP Digital full-service interactive agencies include: digital marketing solutions for advertisers and publishers; integrated digital marketing strategy services; mobile solutions for handset manufacturers and wireless operators; creating measurable interactive marketing; and proprietary platforms which enable advertisers to engage with global audiences across the universe of digital media.

WPP Head Office

WPP, the parent company, with its offices in London, New York, Tokyo, Hong Kong, Singapore, Shanghai and São Paulo 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 companies. The principal activity of the Group continues to be the provision of communications services worldwide. WPP acts only as a parent company and does not trade. The parent company complements the operating companies in three distinct ways.

•

First, the parent company relieves them of much administrative work. Financial matters (such as planning, budgeting, reporting, control, treasury, tax, mergers, acquisitions, investor relations, legal affairs and internal audit) are co-ordinated centrally.

•

Second, the parent company encourages and enables operating companies of different disciplines to work together for the benefit of clients. The parent company also plays an across-the-Group role in the management of talent, property, procurement, information technology (IT), knowledge sharing, practice development, and sustainability.

•

And, finally, the parent company itself can function as the 21st-century equivalent of the full-service agency. For some clients, predominantly those with a vast geographical spread and a need for a wide range of marketing services, WPP can act as a portal to provide a single point of contact and accountability.

The parent company operates with a limited group of approximately 400 people.

WPP Strategy

Our reason for being, the justification for WPP’s existence, continues to be to add value to our clients’ businesses and our people’s careers. Our goal remains to be the world’s most successful communications services advisor to multinational, regional and local companies.

The Group has four core strategic priorities.

•

Increase the combined geographic share of revenues from the faster-growing markets of Asia Pacific, Latin America, Africa and the Middle East, and Central and Eastern Europe to 40-45%.

•

Increase the share of revenues of new media to 40-45%.

•

Maintain the share of more measurable marketing services - such as Data Investment Management and direct, digital and interactive - at 50% of revenues, with a focus on the application of new technology, big data and digital.

•

Achieve ‘horizontality’ by ensuring our people work together for the benefit of clients, primarily through two horizontal integrators: Global Client Leaders and Country Managers.

If we implement this strategy effectively then our business will be geographically and functionally well positioned to compete successfully and to deliver on our long-term financial targets:

•

Revenue and gross profit growth greater than the industry average supplemented by acquisitions.

•

Annual improvement in headline PBIT margin on revenue and gross profit of 0.3 margin points or more, excluding the impact of currency, depending on revenue and gross profit growth, and staff cost to revenue ratio improvement of 0.2 margin points or more.

Sustainability

Our commitment to sustainability has a direct impact on our financial performance and our ability to achieve our business strategy. It is integral to our relationships with our clients, employees, investors and other stakeholders.

We focus on the following areas that are significant to WPP’s business strategy and reflect our stakeholders’ priorities:

•

The impact of our work for clients. Our companies help clients integrate sustainability into their business strategy and communications. Client business supported by our sustainability credentials was worth at least £1.26 billion out of total revenues of £11.02 billion to the Group in 2013.

•

Marketing standards. We strive for high ethical standards in our conduct and work for clients and we protect consumer data used for marketing purposes.

•

Employment practices. Our talent strategy includes competitive remuneration, high-quality training and a focus on diversity and inclusion.

•

Environmental performance. We have reduced our carbon footprint per person by 31% since 2006. Our target is a 47% reduction by 2020.

•

Supply chain. We monitor key supplier performance.

•

Social investment, including pro bono work. Our total social contribution (including the value of free media space) was worth £39.4 million in 2013.

Clients

The Group services 351 of the Fortune Global 500 companies, all 30 of the Dow Jones 30, 69 of the NASDAQ 100, 31 of the Fortune e-50, and some 770 national or multinational clients in three or more disciplines. Almost 490 clients are served in four disciplines and these clients account for 57.5% of Group revenues. The Group also works with nearly 400 clients in six or more countries.

The Company’s 10 largest clients accounted for 17.8% of the Company’s revenues in the year ended 31 December 2013. No client of the Company represented more than 5% of the Company’s aggregate revenues in 2013. The Group’s companies have maintained long-standing relationships with many of their clients, with an average length of relationship for the top 10 clients of approximately 50 years.

Government Regulation

From time to time, governments, government agencies and industry self-regulatory bodies in the United States, European Union and other countries in which the Company operates have adopted statutes, regulations, and rulings that directly or indirectly affect the form, content, and scheduling of advertising, public relations and public affairs, and market research, or otherwise limit the scope of the activities of the Company and its clients. Some of the foregoing relate to privacy and data protection and 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 trend towards expansion of specific rules, prohibitions, media restrictions, labeling disclosures 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 that could further restrict the activities of advertising, public relations and public affairs, and market research firms and their clients. Though the Company does not expect any existing or proposed regulations to have a material adverse impact on 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.

C. Organizational Structure

The Company’s business comprises the provision of communications services on a national, multinational and global basis. It operates out of over 3,000 offices in 110 countries including associates. For a list of the Company’s principal subsidiary undertakings and their country of incorporation see note 29 to the Consolidated Financial Statements.

The Company organises its businesses in the following segments: Advertising and Media Investment Management; Data Investment Management; Public Relations & Public Affairs; and Branding & Identity, Healthcare & Specialist Communications. These business segments are comprised of the following principal disciplines: Advertising; Media Investment Management; Data Investment Management; Public Relations & Public Affairs; Branding & Identity; Healthcare Communications; Direct, Digital, Promotion & Relationship Marketing; Specialist Communications; WPP Digital; WPP Digital partner companies; and WPP knowledge community. A listing of the Group brands operating within these disciplines as at April 2014 is set forth below.

Advertising

ADK ¹

Bates CHI&Partners

Berlin Cameron United

CHI&Partners ¹

Grey

HS Ad ¹

JWT

Ogilvy & Mather Advertising

Santo

Scangroup

Scholz & Friends

Señora Rushmore

Soho Square

TAXI ⁴

Team Detroit

The Jupiter Drawing Room ¹

United Network

Y&R ⁴

Media Investment Management

GroupM:

KR Media

Maxus

MediaCom

MEC

Mindshare

Ohal

Catalyst

Xaxis

Quisma

Other media agencies

M/Six ²

tenthavenue:

Forward

Joule

Kinetic Worldwide

Spafax

TMARC

Data Investment Management

Kantar:

Added Value

Benenson Strategy Group

Center Partners

IMRB International

Kantar Health

Kantar Japan

Kantar Media

Kantar Retail

Kantar Worldpanel

Lightspeed Research

Millward Brown

Data Investment Management (continued)

The Futures Company

TNS

Public Relations & Public Affairs

Blanc & Otus ⁷

Buchanan Communications

Burson-Marsteller ⁴

Clarion Communications

Cohn & Wolfe ⁴

Dewey Square Group

Glover Park Group

Hering Schuppener

Hill+Knowlton Strategies

Ogilvy Government Relations

Ogilvy Public Relations

Penn Schoen Berland ⁴

Prime Policy Group

QGA

RLM Finsbury

Wexler & Walker Public Policy Associates ⁷

Branding & Identity

Addison Group ⁶

BDG architecture + design

CBA

Coley Porter Bell

Dovetail

FITCH ⁶

Lambie-Nairn ⁶

Landor Associates ^{4, 6}

PeclersParis ⁶

Brand Union ⁶

The Partners ⁶

VBAT ⁶

Healthcare Communications

Feinstein Kean Healthcare ⁸

GCI Health

ghg

Ogilvy CommonHealth Worldwide

Sudler & Hennessey ⁴

Wunderman World Health ⁵

Direct, Digital, Promotion & Relationship Marketing

AdPeople Worldwide ⁵

A. Eicoff & Co

AKQA

Barrows ¹

Blast Radius ⁵

Brierley+Partners ¹

Cerebra

Deep Blue ⁹

Dialogue

Digit

EWA

FullSIX ³

Grass Roots ¹

Geometry Global

High Co ¹

iconmobile ⁴

KBM Group ⁵

Mando

Maxx Marketing

OgilvyOne Worldwide

RTC ⁴

SJR

Smollan Group ¹

Smollan/Headcount

VML ⁴

Wunderman ⁴

Specialist Communications

Corporate/B2B

Ogilvy Primary Contact

Demographic marketing

Bravo ⁴

UniWorld ¹

Wing

Employer branding/recruitment

JWT Inside

Event/face-to-face marketing

MJM

Metro

Richard Attias & Associates ¹

Foodservice marketing

The Food Group

Sports marketing

9ine Sports & Entertainment

Chime Communications PLC ¹

GroupM ESP

PRISM Group

Entertainment marketing

Alliance

Real estate marketing

Pace

Media & production services

The Farm Group

Imagina ³

United Visions ⁹

WPP Digital

Acceleration

Blue State Digital

Cognifide

The Data Alliance

Fabric Worldwide ¹

F.biz

Hogarth Worldwide

Interlude ¹

Johannes Leonardo ¹

Mutual Mobile ¹

POSSIBLE

Rockfish

Salmon

Syzygy ¹

Visible ¹

WPP Digital partner companies

Ace Metrix ³

eCommera ³

Fullscreen ³

Globant ¹

HDT Holdings Technology ³

In Game Ad Interactive ³

Invidi ³

mySupermarket ³

Moment Systems ³

Percolate ³

Proclivity Systems ³

Say Media ³

SFX Entertainment ³

Vice Media ³

The Weinstein Company ³

WildTangent ³

WPP knowledge communities

Government & Public Sector Practice

The Store

Notes

¹ Associate

² Joint venture

³ Investment

⁴ A Young & Rubicam Group company

⁵ Part of the Wunderman network

⁶ A member of BtoD Group

⁷ A Hill+Knowlton Strategies company

⁸ An Ogilvy company

⁹ A Commarco company

D. Property, Plants and Equipment

The majority of the Company’s properties are leased, although certain properties which are used mainly for office space are owned. In the United States owned properties include the 214,000 square foot Young & Rubicam office condominium for their new headquarters located at 3 Columbus Circle in New York, New York and the 152,000 square foot TNS property located near Toledo, Ohio. The Company also leases an additional 160,700 square feet of space for Young & Rubicam at the 3 Columbus Circle location. Other owned properties are in Latin America (principally in Argentina, Brazil, Chile, Mexico, Peru and Puerto Rico), Asia (India and China) and in Europe (Spain, France, UK and Italy). In Europe, owned properties include the 135,626 square foot TNS office located at 2 Rue Francis Pedron, Chambourcy, Paris, France and the 101,592 square foot TNS House at Westgate, Hangar Lane, London. Manufacturing facilities are owned in the United Kingdom. Principal leased properties, which are accounted for as operating leases, include office space at the following locations:


Location	Use	Approximate square footage
636 Eleventh Avenue, New York, NY	Ogilvy & Mather	554,800
498 Seventh Avenue, New York, NY	GroupM, Mindshare, Maxus, Mediacom	358,000
200 Fifth Avenue, New York, NY	Grey Global Group, Cohn & Wolfe	343,000
230 Park Avenue South, New York, NY	Burson-Marsteller, Landor, Sudler & Hennessey, Hogarth	305,000
222 Merchandise Mart / 350 N Orleans, Chicago IL	Ogilvy & Mather, JWT, Geometry, Millward Brown, GroupM, Burson Marsteller, TNS, H+K, The Futures Company, Kinetic, Kantar Media, Team Detroit	287,700
500/550 Town Center Drive, Dearborn, MI	Team Detroit, JWT, Ogilvy & Mather, Y&R Advertising, PRISM, Burrows, Possible	282,900
466 Lexington Avenue, New York, NY	JWT	270,300
Sea Containers House, Upper Ground, London SE1	Ogilvy & Mather, MEC	226,000

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. At 31 December 2013, the fixed asset value (cost less depreciation) representing land, freehold buildings and leasehold buildings as reflected in the Company’s consolidated financial statements was £491.5 million.

In 2013 the Company again reduced its core property portfolio, with absolute square footage falling by 0.6%, while revenues attributable to acquisitions added 2.2% and in total, revenues in constant currencies rose by 5.7%.

The average cost per square foot rose by 3.8% in 2013, largely due to the expiry of a number of below-market leases in the year, although this was still less than the increase in constant currency revenues. The combination of all these factors resulted in a reduction of the establishment cost-to-revenue ratio to 6.6% from 6.7% last year.

In 2014 the Company will continue to focus on consolidating the number of properties in the Group, further reducing square foot per head as the Company takes on new leases, and introducing more ‘agile working’ (enabling companies to run at less than one workspace per person) to further reduce the establishment cost-to-revenue ratio.

As part of this effort, WPP has signed a lease for 3 World Trade Center in New York, New York commencing in 2017. The lease is contingent upon the developer obtaining financing to construct the building. Assuming the relevant financing is obtained, offices in several existing properties will be consolidated into this new location.

See note 3 to the 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 at 31 December 2013, under non-cancelable operating leases of the Company.

ITEM 4A. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Introduction

Certain Non GAAP measures included in this operating and financial review and prospects have been derived from amounts calculated in accordance with IFRS but are not themselves IFRS measures. They should not be viewed in isolation as alternatives to the equivalent IFRS measure, rather they should be read in conjunction with the equivalent IFRS measure. These include constant currency, pro-forma (‘like-for-like’), headline PBIT (Profit Before Interest and Taxation), headline PBIT margin, headline PBIT margin on gross profit, headline PBT (Profit Before Taxation), headline EBITDA (Earnings before Interest, Taxation, Depreciation and Amortisation), billings, estimated net new billings, free cash flow and net and average net debt, which we define, explain the use of and reconcile to the nearest IFRS measure on pages 27 to 30.

A. Operating Results

Overview

The Company is one of the world’s most comprehensive marketing communications groups. It operates through a large number of established national, multinational and global advertising and marketing services companies. The Company offers services in four reportable segments:

•

Advertising and Media Investment Management;

•

Data Investment Management (previously Consumer Insight);

•

Public Relations & Public Affairs; and

•

Branding & Identity, Healthcare and Specialist Communications.

In 2013, approximately 42% of the Company’s consolidated revenues were derived from Advertising and Media Investment Management, with the remaining 58% of its revenues being derived from the remaining three segments.

The following objectives represent the Group’s key performance indicators.

First, to continue to improve operating margins. In 2013, we achieved a headline PBIT margin of 15.1%, a new high, and a headline PBIT margin on gross profit of 16.5%, the highest-reported level in the industry. We continue to believe a headline PBIT margin of around 18% or more, and a headline PBIT margin on gross profit of well over 19%, is a tough, but realistic, objective given that our best-performing companies in each services sector have already demonstrated they can perform at a combined Group headline PBIT margin of 17%. In the future, we will focus more on headline PBIT as a percentage of gross profit, given it is a more meaningful competitive comparison.

Second, to increase flexibility in the cost structure. In 2013, flexible staff costs (including incentives, freelance and consultants) returned to historical highs of around 7.5% of revenues and continue to position the Group extremely well should current market conditions deteriorate.

Third, to enhance share owner value and maximise the return on investment on the Company’s substantial free cash flow. As capital expenditure remains relatively stable, there are broadly three alternative uses of funds: acquisitions, share buy-backs and dividends. We have increasingly come to the view, based on co-operative research with leading investment institutions that, currently, the markets favour consistent increases in dividends and higher sustainable pay-out ratios, along with anti-dilutive progressive buy-backs and, of course, sensibly-priced strategic acquisitions.

Fourth, we will continue to develop the value added by the parent company and build unique integrated marketing approaches for clients. WPP is not just a holding company focused on planning, budgeting, reporting and financial issues, but a parent company that can add value to our clients and our people in the

areas of human resources, property, procurement, IT and practice development, including sustainability. This does not mean that we seek to diminish the strength of our operating brands, but rather to learn from one another. Our objective is to maximise the added value for our clients in their businesses and our people in their careers.

Fifth, to emphasise revenue and gross profit growth more as margins improve through our practice development activities, aimed at helping us position our portfolio in the faster-growing functional and geographic areas.

Sixth, to build on, still further, the impressive creative reputation WPP now enjoys globally. Training and development programs remain a key focus, as of course does the judicious use of our M&A skills to identify the best and most like-minded creative businesses to join us.

The following discussion is based on the Company’s audited Consolidated Financial Statements beginning on page F-1 of this report. The Group’s consolidated financial statements have been prepared in accordance with IFRS as issued by the IASB.

2013, our twenty-eighth year, was another record one, with revenue, profitability, headline margins and earnings per share all reaching new highs. For the third successive year, the Company was awarded a Cannes Lion for Creative Holding Company of the Year, in recognition of the Company’s collective creative excellence; and for the second consecutive year, WPP was ranked Most Effective Holding Company in the Effie Global Effectiveness Index. At the same time, the Company has responded to the changing competitive landscape by accelerating the implementation of its strategic goals. Sector targets for faster-growth markets and new media have been raised to 40-45% of revenues over the next five years.

The share price rose sharply in 2013 – an increase of over 55% to 1,380.0p at year end. Since then, however, the share price has fallen to 1,274.0p at 24 April 2014, reflecting the weakness in global stock markets over recent weeks. Dividends were increased by 20% to 34.21p, a record level.

Reported billings increased by over 4% to £46.2 billion and were up well over 3% in constant currencies, driven by a strong leadership position in all net new business league tables. Revenues were up over 6% to £11.0 billion and up well over 5% in constant currencies. Gross profit increased by almost 6% and over 5% in constant currencies.

Group revenues are more weighted to the second half of the year across all regions and functions, especially in the faster-growing markets of Asia Pacific and Latin America. The Group’s profitability and margins continue to be skewed to the second half and, in particular, the final quarter. The strengthening of sterling in the final quarter, particularly against the currencies of the faster-growing markets, therefore resulted in a reduction in the Group’s headline PBIT margins. This currency effect is exacerbated by the fact that disproportionate amounts of central overheads and incentive costs are paid in sterling and US dollars.

Reported profit before interest and taxation rose almost 13% to £1.478 billion from £1.311 billion. Headline PBIT was up well over 8% to £1.662 billion against £1.531 billion in 2012 and up 9% in constant currencies. Headline PBIT margins were up 0.3 margin points to a new historical high of 15.1%, compared to 14.8% in 2012. The impact of exchange rates reduced headline PBIT margins by 0.2 margin points, but on a constant currency basis margins increased by 0.5 margin points, and on a like-for-like basis by 0.6 margin points, more than in line with the Group’s margin target. The headline PBIT margin on gross profit was 16.5%, up 0.4 margin points on 2012 and up 0.5 margin points in constant currency.

Profit for the year increased by 13% to £1.012 billion. Headline EBITDA increased by 8% to £1.896 billion. Headline profit before tax was up well over 10% to £1.458 billion and reported profit before tax was up well over 18% to £1.296 billion. Diluted reported earnings per share rose by almost 11% to 69.6p.

Net cash inflow from operating activities strengthened to £1.374 billion in the year. Free cash flow strengthened to £1.220 billion in the year, over £1 billion for the third consecutive year. Net debt averaged £3.0 billion in 2013, a decrease of £0.2 billion at 2013 exchange rates, and net debt at 31 December 2013 was £2.2 billion, £0.6 billion less than 2012, reflecting improvements in working capital and the redemption of the £450 million Convertible Bond, reinforced by lower acquisition spending in 2013.

Estimated net new business billings of £6.1 billion (almost $10 billion) were won in 2013, up over 57% on 2012.

Segment performance

Performance of the Group’s businesses is reviewed by management based on headline PBIT. A table showing these amounts by operating sector and geographical area for each of the three years ended 31 December 2013, 2012 and 2011 is presented in note 2 to the Consolidated Financial Statements. To supplement the reportable currency segment information presented in note 2 to the Consolidated Financial Statements, the following tables give details of revenue growth by geographical area and operating sector on a reported, constant currency, and like-for-like basis.

Geographical area


	Reported revenue growth %+/(-)					Constant currency revenue growth %+/(-)				Like-for-like revenue growth %+/(-)
	2013		2012			2013		2012		2013		2012
North America		5.6		4.7			4.4		3.7		2.9		(0.1	)
United Kingdom		10.9		7.7			10.9		7.7		4.8		4.0
Western Continental Europe		6.3		(2.6	)		2.1		3.7		0.5		0.1
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe		5.0		5.7			7.9		9.3		6.1		8.3
Total Group		6.2		3.5			5.7		5.8		3.5		2.9

Like-for-like revenue growth in North America improved as the year progressed, from -1% in the first quarter to up over 5% in quarter four, with particularly strong growth in Advertising and Media Investment Management, Healthcare Communications and parts of the Group’s digital operations, especially AKQA. Data Investment Management also performed well, with like-for-like growth of 5% in the final quarter. In constant currencies, full year revenue growth in this region was over 4%, while like-for-like revenues were up almost 3%.

In the UK, full year revenue growth was almost 11% in constant currencies and almost 5% like-for-like. The rate of growth slowed in the final quarter to over 5% in constant currencies, and over 2% like-for-like, partly due to strong comparative rates of growth in the final quarter of 2012.

The Group’s Advertising and Media Investment Management, Public Relations & Public Affairs, direct, digital and interactive and Healthcare Communications operations all performed strongly, partly offset by lower revenue growth in Data Investment Management. However, overall gross profit in the final quarter increased by well over 5% on a like-for-like basis, with stronger gross profit growth in the custom research business. Full year gross profit in the UK increased by almost 7% on a like-for-like basis.

Western Continental Europe, like the UK, slowed slightly in the final quarter, with both constant currency and like-for-like growth of over 1%. For the year, Western Continental Europe revenues grew 0.5% like-for-like (almost 2% in the second half) compared with 0.1% in 2012. Italy, Turkey, the Netherlands and Germany all showed good growth in the final quarter, but Spain, Portugal, Belgium, Switzerland and Austria were tougher.

Our strongest regions in 2013 were again Asia Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe, with constant currency growth of almost 8% and like-for-like growth of over 6%. Growth in the fourth quarter was similar to the full year and driven principally by Latin America, Australia and New Zealand, Central and Eastern Europe and Africa. After a difficult first half, Central and Eastern Europe improved significantly, with like-for-like growth of over 10% in the second half (and over 12% in the fourth quarter), with strong growth in the Czech Republic, Russia and Poland. The Middle East slowed in the fourth quarter, while Africa grew by over 9% like-for-like. Latin America showed consistently strong growth for most of 2013, with like-for-like revenues up well over 8% in the final quarter and up 9% for the year.

Full year revenues for the BRICs ¹ , which account for almost $3 billion of revenues including associates, were up almost 7% on a like-for-like basis. In 2013, almost 30% of the Group’s reported revenues came from Asia Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe – slightly down compared with the previous year, as a result of the strength of sterling against the currencies of many of the markets in these regions. On a constant currency basis, 30.5% of the Group’s revenues came from these regions, up 0.7 percentage points compared with 2012 and against the Group’s strategic objective of 40-45% in the next five years. Markets outside North America now account for 66% of our revenues.

Operating Sector


	Reported revenue growth %+/(-)				Constant currency revenue growth %+/(-)					Like-for-like revenue growth %+/(-)
	2013		2012		2013			2012		2013			2012
Advertising and Media Investment Management		7.2		2.8		6.9			5.2		5.5			5.1
Data Investment Management*		3.6		0.1		3.0			2.8		1.6			0.8
Public Relations & Public Affairs		0.4		3.6		(0.7	)		4.2		(1.7	)		(1.0	)
Branding & Identity, Healthcare and Specialist Communications		9.1		8.0		8.4			10.2		3.9			2.6
Total Group		6.2		3.5		5.7			5.8		3.5			2.9
* Data Investment Management was previously reported as Consumer Insight.

Advertising and Media Investment Management revenues were up almost 7% for the year in constant currencies and well over 5% like-for-like, the strongest-performing sector on this basis. In the final quarter, constant currency revenues were up almost 8% and like-for-like revenues were up well over 6%, very similar to like-for-like growth in the third quarter.

Of the Group’s advertising networks, Ogilvy & Mather, JWT and Grey performed especially well in North America in the fourth quarter, with Y&R performing strongly in the UK. However, the Group’s advertising businesses in Western Continental Europe generally remained challenged, with like-for-like revenues under pressure. Growth in the Group’s Media Investment Management businesses has been very consistent throughout the year, with constant currency revenues up almost 11% for the year and like-for-like growth of almost 10%. tenthavenue, the ‘engagement’ network focused on out-of-home media, also performed strongly in the fourth quarter, with like-for-like revenue growth up over 16%. The strong revenue growth across most of the Group’s businesses, together with good cost control, resulted in the combined headline PBIT margin of this sector improving by 0.3 margin points to 18.0%.

In 2013, Ogilvy & Mather, JWT, Y&R, Grey and United generated estimated net new business billings of £2.3 billion ($3.7 billion). GroupM (the Group’s Media Investment Management arm, which includes Mindshare, MEC, MediaCom, Maxus, GroupM Search and Xaxis), together with tenthavenue, generated estimated net new business billings of £3.2 billion ($5.1 billion).

Brazil, Russia, India and China

Data Investment Management (formerly Consumer Insight) revenues grew 3% on a constant currency basis, with like-for-like revenues up well over 1%, and the second half much stronger than the first half. More significantly, gross profit was up over 2% like-for-like, a turnaround of the trend seen in 2012. In the fourth quarter, revenues grew by almost 4% on a constant currency basis, with gross profit up 4%. On a like-for-like basis, revenues were up over 1% and gross profit up almost 2%. North America, Asia Pacific, Latin America, Africa and the Middle East performed well above the average in the fourth quarter, as they did for the year as a whole. The UK and Western Continental Europe were more difficult. There seems to be a growing recognition of the value of ‘real’ data businesses, rather than those that depend on third-party data. Headline PBIT margins improved 0.3 margin points to 10.3%, while headline PBIT margins on gross profit also improved 0.3 margin points to 14.3%.

Although there has been marked improvement during 2013, the weakest sub-sector continues to be the custom businesses in mature markets (with North America maybe now an exception) where discretionary spending remains under review by clients. Custom businesses in faster-growth markets and syndicated and semi-syndicated businesses in all markets remain robust, with strong like-for-like revenue and gross profit growth.

The Group’s Public Relations & Public Affairs businesses had a difficult year, particularly in North America, Continental Europe, Latin America and the Middle East. However, although revenues for the year fell by almost 1% on a constant currency basis and by almost 2% like-for-like, top-line growth returned in the fourth quarter with constant currency revenues up over 2% and like-for-like growth of over 1%. Despite careful cost management, headline PBIT margins fell by 0.4 margin points to 14.5%.

At the Group’s Branding & Identity, Healthcare and Specialist Communications businesses (including direct, digital and interactive), constant currency revenues grew strongly at over 8% with like-for-like growth of almost 4%. Like-for-like revenue growth slipped slightly in quarter four, due primarily to slower growth in parts of the Group’s Branding & Identity and Specialist Communications businesses, but overall the second half was much stronger than the first half on a like-for-like basis. AKQA, the leading digital agency acquired in July 2012, performed particularly well with full year like-for-like revenues up over 20%, with the fourth quarter even stronger. For the sector as a whole, headline PBIT margins improved by 0.4 margin points to 14.8%.

Almost 35% of the Group’s 2013 revenues came from direct, digital and interactive, up over two percentage points from the previous year and growing well over 7% like-for-like. Marketing services comprised almost 60% of our revenues in 2013, a similar proportion to 2012.

2013 compared with 2012

Revenues

Reported revenue growth for the year was 6.2%, and on a constant currency basis, which excludes the impact of currency movements, revenues were up 5.7%. Changes in exchange rates increased revenue growth by 0.5%, chiefly reflecting the weakness of the pound sterling against the US dollar and euro in the first nine months, largely offset by the strength of the pound sterling, particularly against the US dollar, Japanese yen, Australian dollar and Indian rupee in the final quarter.

On a like-for-like basis, which excludes the impact of currency and acquisitions, revenues were up 3.5%, with gross profit up 3.4%. In the fourth quarter, like-for-like revenues were up over 4%, following like-for-like growth in the third quarter of 5%, reflecting stronger growth in North America and Asia Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe, offset by lower growth in the UK. Like-for-like growth in the second half was therefore well over 4% compared with over 2% in the first.

Operating costs

Operating costs increased by 4.7% in 2013 to £8,665.8 million from £8,273.7 million in 2012 on a reported basis and by 4.2% on a constant currency basis. During 2013, the Group continued to manage operating costs effectively,

with improvements across most cost categories, particularly staff, property, commercial and office costs. On a like-for-like basis, total operating and direct costs rose by 2.9%, a slower rate of growth than for revenue.

On a like-for-like basis, the average number of people in the Group decreased by 0.1% in 2013. On the same basis, the number of people in the Group at 31 December 2013 increased by 0.7% compared with the end of 2012. These average and point-to-point figures reflect the continuing sound management of headcount and staff costs in 2013 to balance revenues and costs. Also on a like-for like basis, revenues increased by 3.5% and gross profit was up 3.4%.

Reported staff costs, excluding incentives, rose by well over 5% and by over 5% in constant currency. Staff costs included £27 million ($43 million) of severance costs compared with £51 million ($82 million) in 2012. Incentive costs amounted to £328 million ($521 million) which was over 17% of headline operating profit before incentives and income from associates, compared with £291 million ($462 million) or well over 16% in 2012.

Performance in parts of the Group’s Data Investment Management custom businesses, Public Relations & Public Affairs, Healthcare Communications and direct, digital and interactive businesses fell short of the target performance objectives agreed for 2013, as the like-for-like revenue growth rate was slower in the first nine months of the year, although most improved in the final quarter. Headline PBIT margins, before all incentives and income from associates, were 17.3%, up 0.4 margin points, compared with 16.9% last year. The Group’s staff cost to revenue ratio, including incentives, decreased by 0.1 margin point to 58.8% compared with 58.9% in 2012, indicating an improvement in productivity.

In 2013, the ratio of variable staff costs (incentives, freelance and consultants costs) to total staff costs was 12.7%, compared with 11.4% in 2012. As a proportion of revenue, variable staff costs were 7.5% in 2013 compared with 6.7% in 2012.

In 2013, the Group incurred restructuring costs of £5.0 million as a result of the continuing rationalisation of its IT infrastructure, a project initiated in 2012. Restructuring costs in 2012 of £93.4 million include £62.9 million of severance costs arising from a structural reassessment of certain of the Group’s operations, primarily in Western Continental Europe; and £30.5 million of other costs, primarily accelerated depreciation of IT assets in the US and Europe, arising from an overhaul of its centralised IT infrastructure.

Profit before interest and taxation

As a result of the above, reported PBIT rose almost 13% to £1.478 billion from £1.311 billion, up well over 13% in constant currencies, in part due to gains of £36 million arising on the disposal of minority investments and the re-measurement of certain of our equity interests where we have acquired a majority stake. Headline PBIT rose by well over 8% to £1.662 billion from £1.531 billion, up 9% in constant currencies.

Finance income, finance costs and revaluation of financial instruments

Finance income increased to £64.3 million in 2013 from £55.9 million in 2012. Finance costs decreased to £267.9 million in 2013 from £269.8 million in 2012. Therefore, net finance costs were £203.6 million, down from £213.9 million last year, reflecting the beneficial impact of lower net debt funding costs and higher income from investments, partially offset by the cost of higher average gross debt, due to pre-funding of 2014 debt maturities. Revaluation of financial instruments resulted in a gain of £21.0 million in 2013 and a charge of £4.7 million in 2012.

Taxation

The Company’s effective tax rate on reported profit before tax in 2013 was 21.9%, compared to 18.1% in 2012. The difference in the reported tax rate is primarily due to significant deferred tax credits arising in the prior year in relation to acquired intangibles that were non-recurring items.

Profit for the year

Profit for the year increased by 13.1% to £1,012.1 million in 2013 from £894.7 million in 2012 on a reported basis and increased by 13.0% in constant currency. In 2013, £936.5 million of profit for the year was attributable to equity holders of the parent and £75.6 million attributable to non-controlling interests. Diluted earnings per share increased by almost 11% (well over 10% in constant currencies) to 69.6p.

2012 compared with 2011

Revenues

Reported revenue growth for the year of 3.5% was impacted by the strength of sterling, primarily against the Euro. On a constant currency basis, which excludes the impact of currency movements, revenues were up almost 6%. On a like-for-like basis, which excludes the impact of currency and acquisitions, revenues were up 2.9%, with like- for-like gross profit up 2.4%, reflecting pressure on gross profit in the Group’s Consumer Insight custom businesses in the mature markets of North America, the UK and Western Continental Europe. In the fourth quarter, like-for-like revenues were up 2.5%, an improvement on the third quarter of 1.9%, due to stronger growth in all regions except North America. This reflects a reversal of the declining quarterly like-for-like revenue growth trend which went from 4% in quarter one, to 3% in quarter two and to 2% in quarter three.

Operating costs

Operating costs increased by 2.8% in 2012 to £8,273.7 million from £8,046.3 million in 2011 on a reported basis and by 4.7% on a constant currency basis. During 2012, the Group continued to reap the benefits of containing operating costs, with improvements across most cost categories, particularly property, commercial and office costs.

On a like-for-like basis the average number of people in the Group increased by 1.6% in 2012. On the same basis, the number of people in the Group at 31 December 2012 was 0.4% lower than at the end of 2011. This point-to-point decrease reflects the adjustments in staff costs made in the second half of 2012, following the slowdown in revenue growth after the first quarter of the year. Also on a like-for-like basis, revenues increased by 2.9% and gross profit 2.4%.

Reported staff costs, excluding incentives, rose by over 5% and by over 7% in constant currency. Incentive payments amounted to £291 million (or over $465 million) which was well over 16% of headline PBIT before incentives and income from associates compared with £338 million or almost 20% in 2011. Performance in parts of the Group’s custom research, public relations and public affairs, healthcare and direct, digital and interactive businesses fell short of the maximum performance objectives agreed for 2012, as the like-for-like revenue growth rate slowed in quarters two and three in 2012. This followed the record profit and margin performance in 2011, when most of the Group’s operating companies achieved maximum incentive levels. Headline PBIT margins, before all incentives and income from associates, were 16.9%, down 0.1 margin points, compared with 17.0% last year. The Group’s staff cost to revenue ratio, including incentives, increased by 0.3 margin points to 58.9% compared with 58.6% in 2011. Following intentional reductions in 2009 and 2010 after the Lehman crisis, the Group increased its investment in people, particularly in the latter part of 2011 and in early 2012, mainly in the faster-growing geographic and functional markets (such as media investment management and digital) as like-for-like revenues and gross profit increased.

In 2012, the ratio of variable staff costs (incentives, freelance and consultants costs) to total staff costs was 11.4%, compared with 12.2% in 2011. As a proportion of revenue, variable staff costs were 6.7% in 2012 compared with 7.2% in 2011.

In the second half of 2012, the Group received the proceeds from the sale of the stake in Buddy Media and also completed the sale of the freehold of 285 Madison Avenue, the New York headquarters of Young & Rubicam Inc. These two transactions combined resulted in a gain of £102 million. Offsetting this gain, are restructuring

costs of £93.4 million which include £62.9 million of severance cost arising from a structural reassessment of certain of the Group’s operations, primarily in Western Continental Europe; and £30.5 million of other costs, primarily accelerated depreciation of IT assets in the US and Europe, arising from an overhaul of its centralised IT infrastructure.

Profit before interest and taxation

As a result of the above, reported PBIT rose over 4% to £1.311 billion from £1.258 billion, up over 8% in constant currencies. Headline PBIT rose over 7% to £1.531 billion from £1.429 billion, up over 11% in constant currencies.

Finance income, finance costs and revaluation of financial instruments

Finance income decreased to £55.9 million in 2012 from £64.7 million in 2011. Finance costs increased to £269.8 million in 2012 from £264.6 million in 2011. Therefore, net finance costs were £213.9 million, up from £199.9 million last year, reflecting higher average net debt, offset by lower funding costs. Revaluation of financial instruments resulted in a charge of £4.7 million in 2012 and a charge of £50.0 million in 2011.

Taxation

The Company’s effective tax rate on reported profit before tax in 2012 was 18.1%, compared to 9.1% in 2011. The difference in the reported tax rate is primarily due to the release in 2011 of prior year corporate tax provisions following the resolution of a number of open tax matters.

Profit for the year

Profit for the year decreased by 2.4% to £894.7 million in 2012 from £916.5 million in 2011 on a reported basis and increased by 2.4% in constant currency, reflecting a higher effective tax rate, which is only partially offset by the higher revenue and lower charges for revaluation of financial instruments. In 2012, £822.7 million of profit for the year was attributable to equity holders of the parent and £72.0 million attributable to non-controlling interests. Diluted earnings per share decreased by over 2% (increased by almost 2% in constant currencies) to 62.8p, again reflecting the release of prior year tax provisions in 2011.

Inflation

As in 2012, in management’s opinion inflation did not have a material impact on the Company’s results for the year or financial position at 31 December 2013.

Foreign currency fluctuations

See Item 11 for a discussion of the impact of currency exchange rate fluctuations on the Group’s consolidated results.

B. Liquidity and Capital Resources

General —The primary sources of funds for the Group are cash generated from operations and funds available under its credit facilities. The primary uses of cash funds in recent years have been for debt service and repayment, capital expenditures, acquisitions, share repurchases and cancellations and dividends. For a breakdown of the Company’s sources and uses of cash and for the Company’s liquidity risk management see the “Consolidated Cash Flow Statement” and note 24, which are included as part of the Company’s Consolidated Financial Statements in Item 18 of this Report.

As capital expenditure remains relatively stable, there are broadly three alternative uses of funds:

•

Mergers and acquisitions. There is a very significant pipeline of reasonably priced small- and medium-sized potential acquisitions, with the exception of Brazil and India and digital in the US, where prices

seem to have got ahead of themselves because of pressure on our competitors to catch up. This is clearly reflected in some of the operational and governance issues that are starting to surface elsewhere in the industry, particularly in faster-growing markets like Brazil, India and China.

Our acquisition focus in 2013 was again on the triple play of faster-growing geographic markets, new media and Data Investment Management, including the application of new technology and big data, totally consistent with our strategic priorities in the areas of geography, new communication services and measurability. In 2013, the Group spent almost £200 million on initial acquisition payments, net of cash acquired and disposal proceeds. Net acquisition spend is currently targeted at around £300-£400 million per annum and we will continue to seize opportunities in line with our strategy, as in the first quarter of 2014.

•

Dividends. Following the strong first-half results in 2013, the Board raised the interim dividend by 20%. The final dividend has also been increased by 20%, bringing the total dividend for the year to 34.21p per share, up 20%. Dividends paid in respect of 2013 will total almost £460 million for the year.

•

Share buy-backs will continue to be targeted to absorb any share dilution from issues of options or restricted stock. However, given the reduced operating and headline PBIT margins on gross profit targets of 0.3 margin points improvement, the targeted level of share buy-backs will be increased from around 1% of the outstanding share capital to 2-3% in order to enhance earnings per share. In addition, the Company does also have considerable free cash flow to take advantage of any anomalies in market values, particularly as the average 2013 net debt to EBITDA ratio is 1.6 times, at the low end of our market guidance of 1.5-2.0 times, and should come down further in 2014. Share buy-backs in 2013 cost £197 million, representing 1.4% of issued share capital.

The Group’s liquidity is affected primarily by the working capital flows associated with its media buying activities on behalf of clients. The working capital movements relate primarily to the Group’s billings. Billings comprise the gross amounts billed to clients in respect of commission-based/fee-based income together with the total of other fees earned. In 2013, billings were £46.2 billion, or 4.2 times the revenue of the Group. The inflows and outflows associated with media buying activity therefore represent significant cash flow within each month of the year and are forecast and re-forecast on a regular basis throughout the year by the Group’s treasury staff so as to ensure that there is continuing coverage of peak requirements through committed borrowing facilities from the Group’s bankers and other sources.

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 peak net borrowing levels and debt maturities are closely monitored. Targets for debt and cash position are set on an annual basis and, to assist in meeting this, working capital targets are set for all the Group’s major operations. See additional discussion on liquidity risk in note 24 to the consolidated financial statements.

Debt

The Company’s borrowings consist of bonds and revolving credit facilities, details on the Company’s borrowings are provided in note 10 to the consolidated financial statements.

The Group has a five-year Revolving Credit Facility of $1.2 billion and £475 million due November 2016. Borrowings under the Revolving Credit Facility are governed by certain financial covenants based on the results and financial position of the Group, including requirements that (i) the interest coverage ratio for each financial period equal or exceed 5.0 to 1 and (ii) the ratio of borrowed funds to earnings before interest, taxes, depreciation and amortisation at 30 June and 31 December in each year shall not exceed 3.5 to 1, both covenants as defined in the relevant agreement. The Group is in compliance with both covenants.

Hedging of financial instruments —The Group’s policy on interest rate and foreign exchange rate management sets out the instruments and methods available to hedge interest and currency risk exposures and the control

procedures in place to ensure effectiveness. The Group uses derivative financial instruments to reduce exposure to foreign exchange risk and interest rate movements. The Group does not hold or issue derivative financial instruments for speculative purposes.

In 2013, net cash inflow from operating activities was £1,374.2 million. Free cash flow available for debt repayment, acquisitions, share buy-backs and dividends was £1,219.6 million. This free cash flow was partially absorbed by £221.0 million in net acquisitions and disposals, by £197.0 million in share repurchases and buy-backs and by £397.3 million in dividends, leaving £404.3 million.

In November 2013, the Group issued $500 million of 30-year bonds at a coupon of 5.625%, together with € 750 million of 10-year bonds at 3.0%.

At 31 December 2013, the Group’s net debt was £2.2 billion, £0.6 billion less than 2012, reflecting improvements in working capital and the redemption of the £450 million Convertible Bond, reinforced by lower acquisition spending in 2013. Net debt averaged £3.0 billion in 2013, a decrease of £0.2 billion at 2013 exchange rates. The Group’s average net debt was around 1.6 times headline EBITDA in 2013 compared with 1.8 times in 2012, and well within the Group’s current target range of 1.5-2.0 times.

Interest (finance cost net of finance income, excluding revaluation of financial instruments) cover based on headline PBIT in 2013 was 8.2 times. Average net debt in the first quarter of 2014 was £2.454 billion, compared to £3.056 billion in 2013, at 2014 exchange rates.

With an equity market capitalisation of approximately £17.0 billion at 24 April 2014, the total enterprise value of the Company is approximately £19.5 billion, a multiple of 10.3 times 2013 headline EBITDA.

Given the strong cash generation of the business, its debt maturity profile and available facilities, the directors believe the Company has sufficient liquidity to match its requirements for the foreseeable future.

Refer to Item 5F for details on the Company’s material commitments for capital expenditures at 31 December 2013.

C. Research and Development, Patents and Licenses, etc.

Not applicable.

D. Trend Information

The discussion below and in the rest of this Item 5 includes forward-looking statements regarding plans, objectives, projections and anticipated future performance based on assumptions that are subject to risks and uncertainties. As such, actual results or outcomes may differ materially from those discussed in the forward-looking statements. See “Forward-Looking Statements” preceding Item 1 in this annual report.

In the first quarter of 2014, reported revenues were up 1.5%, with like-for-like growth of 7.0%, 2.6% growth from acquisitions and -8.1% from currency, reflecting the continuing strength of sterling against many currencies, particularly in the faster growth markets, as in the final quarter of 2013. Revenues in constant currency were up 9.6%. Reported gross profit was down 1.8%, but up 6.1% in constant currency and up 3.8% like-for-like. Due to the increasing scale of digital media purchases within the Group’s media investment management businesses and of data investment management, gross profit is the more meaningful and accurate reflection of top-line growth. As a result the commentary below relates primarily to gross profit data.

The pattern of gross profit growth in 2014 has started similarly to the final quarter of 2013, with both constant currency and like-for-like growth showing continuing improvement across all geographies and sectors. On a like-for-like basis, Advertising and Media Investment Management and Branding & Identity, Healthcare and

Specialist Communications (including direct, digital and interactive), were the strongest sectors, with Data Investment Management slower than the final quarter of 2013 and Public Relations & Public Affairs up even more strongly than the final quarter of 2013, which was the strongest quarter last year for this sector. Our budgets for 2014 indicated like-for-like revenue growth well over 3% and gross profit growth of over 3% against last year. For the first three months actual performance was well ahead of those projections, due to the stronger than budgeted digital media purchases in Media Investment Management, with gross profit growth also up strongly. A preliminary look at our quarter one revised forecasts for the full year also indicates revenue growth up strongly and gross profit growth up over 3%. On a constant currency basis headline PBIT is above budget and well ahead of last year and the increase in the headline PBIT margin on gross profit is in line with the Group’s full year target of a 0.3 margin point improvement.

The Group gained a total of £797 million ($1.275 billion) in net new business wins (including all losses) in the first quarter, compared to £940 million ($1.504 billion) in the same period last year. April has proven to be a particularly strong month with net new business billings of over £0.9 billion ($1.5 billion) as at 24 April 2014.

Concerns remain globally over the fragility of the Eurozone, although probably less so than last year, the prospects for the Middle East, although probably again, better now than a year ago, a Chinese or BRICs hard or soft landing, with most, if not all suffering a slowdown in 2013, and which continued into 2014 and, probably still most importantly, dealing with the US deficit and a record $16 trillion of debt in the most effective way. In addition, the political decisions in the United Kingdom on Scottish devolution and Britain’s membership of the European Union, add further uncertainty to the United Kingdom economy. All in all, whilst clients may be more confident than they were in September 2008, they broadly remain unwilling to take further risks. They remain focused on a strategy of adding capacity and brand building in both fast growth geographic and functional markets, like digital and containing or reducing capacity, perhaps with brand building to maintain or increase market share, in the mature, slow growth markets. They also remain focused, in a sub-trend pre-Lehman growth environment, on achieving their profitability objectives by cutting costs, rather than by growing the top-line.

The pattern for 2014 looks very similar to 2013, perhaps with slightly increased client confidence, enhanced by slightly stronger global GDP growth forecasts and the mini-quadrennial events of the Winter Olympics at Sochi, the FIFA World Cup in Brazil and the mid-term Congressional Elections in the United States. Forecasts of worldwide real GDP growth still hover around 3.6%, with inflation of 2.1% giving nominal GDP growth of around 5.7% for 2014, a half a percent or so increase on 2013, although they have been reduced recently and may be reduced further in due course. Advertising as a proportion of GDP should at least remain constant overall, although it is still at relatively depressed historical levels, particularly in mature markets, post-Lehman and advertising should grow at least at a similar rate as GDP. Although both consumers and corporates seem to be increasingly cautious and risk averse, they should continue to purchase or invest in brands in both fast and slow growth markets to stimulate top line sales growth. Merger and acquisition activity may be regarded as an alternative way of doing this but clients may regard this as a more risky way than investing in marketing and brand and hence growing market share.

E. Off-Balance Sheet Arrangements

None.

F. Tabular Disclosure of Contractual Obligations

The following summarises the Company’s estimated contractual obligations at 31 December 2013, and the effect such obligations are expected to have on its liquidity and cash flows in the future periods. Certain obligations presented below held by one subsidiary of the Company may be guaranteed by another subsidiary in the ordinary course of business.


			Payments due in
(£m)	Total		2014		2015		2016		2017		2018		Beyond 2018
Debt financing under the Revolving Credit Facility and in relation to unsecured loan notes ¹
Eurobonds		1,664.8		—		416.2		624.3		—		—		624.3
Sterling bonds		600.0		—		—		—		400.0		—		200.0
US$ bonds		1,859.8		584.7		—		—		—		—		1,275.1
Other		15.1		15.1		—		—		—		—		—
Subtotal		4,139.7		599.8		416.2		624.3		400.0		—		2,099.4
Interest payable		1,561.2		208.0		159.1		133.2		100.0		92.0		868.9
Total		5,700.9		807.8		575.3		757.5		500.0		92.0		2,968.3
Operating leases ²		2,523.7		372.0		305.8		254.2		207.5		197.2		1,187.0
Capital commitments ³		31.6		31.6		—		—		—		—		—
Investment commitments ³		27.3		27.3		—		—		—		—		—
Estimated obligations under acquisition earnouts and put option agreements		332.6		103.2		74.4		47.3		80.6		19.0		8.1
Total contractual obligations		8,616.1		1,341.9		955.5		1,059.0		788.1		308.2		4,163.4

In addition to debt financing under the Revolving Credit Facility and in relation to unsecured loan notes, the Company had short-term overdrafts at 31 December 2013 of £338.4 million. The Group’s net debt at 31 December 2013 was £2,240.4 million and is analysed in Item 5B.

Operating leases are net of sub-let rentals of £17.5 million.

Capital and investment commitments include commitments contracted, but not provided for in respect of property, plant and equipment and in respect of interests in associates and other investments, respectively.

The Company expects to make annual contributions to its funded defined benefit plans, as determined in line with local conditions and practices. Contributions in respect of unfunded plans are paid as they fall due. The total contributions (for funded plans) and benefit payments (for unfunded plans) paid for 2013 amounted to £47.8 million (2012: £56.5 million, 2011: £66.8 million). Employer contributions and benefit payments in 2014 are expected to be approximately £80 million. Projections for years after 2014 are subject to a number of factors, including future asset performance and changes in assumptions which mean the Company is unable to make sufficiently reliable estimations of future contributions.

Non-GAAP Information

Constant currency

The Company’s reporting currency is the UK pound sterling. However, the Company’s significant international operations give rise to fluctuations in foreign exchange rates. To neutralise foreign exchange impact and to better illustrate the underlying change in revenue and profit from one year to the next, the Company has adopted the practice of discussing results in both reportable currency (local currency results translated into pounds sterling at the prevailing foreign exchange rate) and constant currency.

The Group uses US dollar-based, constant currency models to measure performance. These are calculated by applying budgeted 2013 exchange rates to local currency reported results for the current and prior year. This gives a US-dollar denominated income statement and balance sheet which exclude any variances attributable to foreign exchange rate movements.

Pro-forma (‘like-for-like’)

Management believes that discussing like-for-like provides a better understanding of the Company’s performance and trends because it allows for more meaningful comparisons of current period to that of prior periods.

Pro-forma comparisons are calculated as follows: current year, constant currency actual results (which include acquisitions from the relevant date of completion) are compared with prior year, constant currency actual results, adjusted to include the results of acquisitions for the commensurate year in the prior year. The Group uses the terms ‘pro-forma’ and ‘like-for-like’ interchangeably.

The following table reconciles reported revenue and gross profit growth for 2013 and 2012 to like-for-like revenue and gross profit growth for the same period.


	Revenue				Gross profit
	£m				£m
2011 Reportable		10,022				9,239
Impact of exchange rate changes		(231	)	(2.3%)		(203)	(2.2%)
Changes in scope of consolidation		291		2.9%		258	2.8%
Like-for-like growth		291		2.9%		221	2.4%
2012 Reportable		10,373		3.5%		9,515	3.0%
Impact of exchange rate changes		53		0.5%		48	0.5%
Changes in scope of consolidation		229		2.2%		190	2.0%
Like-for-like growth		364		3.5%		323	3.4%
2013 Reportable		11,019		6.2%		10,076	5.9%

Headline PBIT

Headline PBIT is one of the metrics that management uses to assess the performance of the business. Management believes that it is both useful and necessary to report headline PBIT because this measure is used by management for internal performance analysis; the presentation of this measure facilitates comparability with other companies who may use similar titled measures, although management’s measure may not be calculated in the same way as similarly titled profit measures reported by other companies; and it is useful in connection with discussion with the investment community.

Headline PBIT is calculated as profit before finance income/costs and revaluation of financial instruments, taxation, investment gains/losses and write-downs, goodwill impairment and other goodwill write-downs, amortisation and impairment of acquired intangible assets, share of exceptional gains/losses of associates and

gains/losses on remeasurement of equity interest on acquisition of controlling interest and Group restructuring costs; and, in 2012, the gain on sale of freehold property in New York, and costs incurred in changing the corporate structure of the Company.

A tabular reconciliation of profit before interest and taxation to headline PBIT is provided in note 31 to the consolidated financial statements.

Headline PBIT margin

Calculated as headline PBIT (defined above) as a percentage of revenue.

Headline PBIT margin on gross profit

Given the significance of Data Investment Management revenues to the Group, with none of the direct competitors present in that sector, gross profit and headline PBIT margin on gross profit are a more meaningful measure of comparative, competitive revenue growth and margin performance. This is because Data Investment Management revenues include pass-through costs, principally for data collection, on which no margin is charged.

Calculated as headline PBIT (defined above) as a percentage of gross profit.

Headline PBT

Headline PBT is one of the metrics that management uses to assess the performance of the business. Management believes that it is both useful and necessary to report headline PBT because this measure is used by management for internal performance analysis; the presentation of this measure facilitates comparability with other companies who may use similar titled measures, although management’s measure may not be calculated in the same way as similarly titled profit measures reported by other companies; and it is useful in connection with discussion with the investment community.

Headline PBT is calculated as profit before taxation, investment gains/losses and write-downs, goodwill impairment and other goodwill write-downs, amortisation and impairment of acquired intangible assets, share of exceptional losses/gains of associates, gains/losses arising from the revaluation of financial instruments, and gains/losses on remeasurement of equity interest on acquisition of controlling interest and Group restructuring costs; and, in 2012, the gain on sale of freehold property in New York, and costs incurred in changing the corporate structure of the Company.

A tabular reconciliation of profit before taxation to headline PBT is shown below.


	Year ended 31 December
	2013 £m			2012 £m			2011 £m
Profit before taxation		1,295.8			1,091.9			1,008.4
Amortisation and impairment of acquired intangible assets		179.8			171.9			172.0
Goodwill impairment		23.3			32.0			—
Gains on disposal of investments		(6.0	)		(26.8	)		(0.4	)
Gains on re-measurement of equity on acquisition of controlling interest		(30.0	)		(5.3	)		(31.6	)
Investment write-downs		0.4			19.6			32.8
Cost of changes to corporate structure		—			4.1			—
Gain on sale of freehold property in New York		—			(71.4	)		—
Restructuring costs		5.0			93.4			—
Share of exceptional losses/(gains) of associates		10.7			3.0			(2.1	)
Revaluation of financial instruments		(21.0	)		4.7			50.0
Headline PBT		1,458.0			1,317.1			1,229.1

Headline EBITDA

Headline EBITDA is a key metric that private equity firms, for example, use for valuing companies.

Headline EBITDA is calculated as profit before finance income/costs and revaluation of financial instruments, taxation, investment gains/losses and write-downs, goodwill impairment and other goodwill write-downs, amortisation and impairment of intangible assets, share of exceptional losses/gains of associates, depreciation of property, plant and equipment and gains/losses on remeasurement of equity interest on acquisition of controlling interest and Group restructuring costs; and, in 2012, the gain on sale of freehold property in New York, and costs incurred in changing the corporate structure of the Group.

A tabular reconciliation of profit for the year to headline EBITDA is shown below.


	Year ended 31 December
	2013 £m			2012 £m			2011 £m
Profit for the year		1,012.1			894.7			916.5
Taxation		283.7			197.2			91.9
Finance income, finance cost and revaluation of financial instruments, net		182.6			218.6			249.9
Amortisation and impairment of acquired intangible assets		179.8			171.9			172.0
Depreciation of property, plant and equipment		202.0			191.0			185.8
Amortisation of other intangible assets		32.7			33.7			25.7
Goodwill impairment		23.3			32.0			—
Gains on disposal of investments		(6.0	)		(26.8	)		(0.4	)
Gains on re-measurement of equity on acquisition of controlling interest		(30.0	)		(5.3	)		(31.6	)
Investment write-downs		0.4			19.6			32.8
Cost of changes to corporate structure		—			4.1			—
Gain on sale of freehold property in New York		—			(71.4	)		—
Restructuring costs		5.0			93.4			—
Share of exceptional losses/(gains) of associates		10.7			3.0			(2.1	)
Headline EBITDA		1,896.3			1,755.7			1,640.5

Billings

Billings is one of the metrics that management uses to assess the performance of the business.

Billings comprise the gross amounts billed to clients in respect of commission-based/fee-based income together with the total of other fees earned.

Estimated net new billings

Estimated net new billings is one of the metrics that management uses to assess the performance of the business.

Estimated net new billings represent the estimated annualised impact on billings of new business gained from both existing and new clients, net of existing client business lost. The estimated impact is based upon initial assessments of the clients’ marketing budgets, which may not necessarily result in actual billings of the same amount.

Free cash flow

The Group bases its internal cash flow objectives on free cash flow. Management believes free cash flow is meaningful to investors because it is the measure of the Company’s funds available for acquisition related payments, dividends to shareowners, share repurchases and debt repayment. The purpose of presenting free cash flow is to indicate the ongoing cash generation within the control of the Group after taking account of the necessary cash expenditures of maintaining the capital and operating structure of the Group (in the form of payments of interest, corporate taxation and capital expenditure). Net working capital movements are excluded from this measure since these are principally associated with our media buying activities on behalf of clients and are not necessarily within the control of the Group. This computation may not be comparable to that of similarly titled measures presented by other companies.

A tabular reconciliation of net cash inflow from operating activities to free cash flow is shown below.


	Year ended 31 December
	2013 £m			2012 £m			2011 £m
Net cash inflow from operating activities		1,374.2			908.3			665.2
Share option proceeds		42.4			56.0			28.8
Proceeds on disposal of property, plant and equipment		7.3			123.5			13.2
Movement in working capital and provisions		133.4			388.2			620.9
Purchases of property, plant and equipment		(240.7	)		(290.3	)		(216.1	)
Purchase of other intangible assets (including capitalised computer software)		(43.8	)		(39.8	)		(37.1	)
Dividends paid to non-controlling interests in subsidiary undertakings		(53.2	)		(51.9	)		(62.2	)
Free cash flow		1,219.6			1,094.0			1,012.7

Net debt and average net debt

Management believes that net debt and average net debt are appropriate and meaningful measures of the debt levels within the Group. This is because of the seasonal swings in our working capital generally, and those resulting from our media buying activities on behalf of our clients in particular, together with the fact that we choose for commercial reasons to locate the debt of the Group in particular countries and leave cash resources in others—though our cash resources could be used to repay the debt concerned.

Average net debt is calculated as the average daily net bank borrowings of the Group, derived from the Group’s automated banking system. Net debt at a period end is calculated as the sum of the net bank borrowings of the Group, derived from the cash ledgers and accounts in the balance sheet.

The following table is an analysis of net debt:


	2013 £m			2012 £m			2011 £m
Debt financing		(4,462.0	)		(4,766.5	)		(4,411.4	)
Cash and short-term deposits		2,221.6			1,945.3			1,946.6
Net debt		(2,240.4	)		(2,821.2	)		(2,464.8	)

Use of Estimates

The preparation of financial statements requires management to make estimates, judgements and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingencies at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.

Critical Accounting Policies

The Company’s financial statements have been prepared in accordance with IFRS as issued by the IASB. A summary of the Group’s principal accounting policies is provided in the Accounting Policies section of the Financial Statements. The Company believes certain of these accounting policies are particularly critical to understanding the more significant judgements and estimates used in the preparation of its consolidated financial statements. Therefore, we have prepared the following supplemental discussion of critical accounting policies, which should be read together with our financial statements and notes thereto.

Goodwill and other intangibles

The Company has a significant amount of goodwill and other intangible assets. In accordance with the Group’s accounting policy, the carrying values of goodwill and intangible assets with indefinite useful lives are reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired.

The carrying values of brands with an indefinite useful life are assessed for impairment purposes by using the royalty and loyalty methods of valuation, both of which utilise the net present value of future cash flows associated with the brands.

The goodwill impairment review is undertaken annually on 30 September. Under IFRS, an impairment charge is required for both goodwill and other indefinite lived assets when the carrying amount exceeds the ‘recoverable amount’, defined as the higher of fair value less costs to sell and value in use. Our approach in determining the recoverable amount utilises a discounted cash flow methodology, which necessarily involves making numerous estimates and assumptions regarding revenue growth, operating margins, appropriate discount rates and working capital requirements. These estimates will likely differ from future actual results of operations and cash flows, and it is possible that these differences could be material. In addition, judgements are applied in determining the level of cash-generating unit identified for impairment testing and the criteria used to determine which assets should be aggregated. A difference in testing levels could affect whether an impairment is recorded and the extent of impairment loss. Changes in our business activities or structure may also result in changes to the level of testing in future periods. Further, future events could cause the Company to conclude that impairment indicators exist and that the asset values associated with a given operation have become impaired. Any resulting impairment loss could have a material impact on the Company’s financial condition and results of operations.

Historically our impairment losses have resulted from a specific event, condition or circumstance in one of our companies, such as the loss of a significant client. As a result, changes in the assumptions used in our impairment model have not had a significant effect on the impairment charges recognised. The carrying value of goodwill and other intangible assets will continue to be reviewed at least annually for impairment and adjusted to the recoverable amount if required.

The most significant assumptions employed by the Company in determining recoverable amounts are as follows:

•

Future cash flows derived from each cash-generating unit are based on a projection period of up to five years. These projections utilise the latest budget information available for each cash-generating unit covering one or more twelve month periods from the balance sheet date. These budgets have been prepared by management;

•

After the projection period, there is an assumed annual long-term growth rate of 3.0% (2012: 3.0%), with no improvements in operating margins. Management have made the judgement that this long-term growth rate does not exceed the long-term growth rate for the industry; and

•

The net present value of the future cash flows was calculated using a pre-tax discount rate of 9.5% (2012: 9.5%).

Acquisition accounting

The Group accounts for acquisitions in accordance with IFRS 3 ‘Business Combinations’. IFRS 3 requires the acquiree’s identifiable assets, liabilities and contingent liabilities (other than non-current assets or disposal groups held for sale) to be recognised at fair value at acquisition date. In assessing fair value at acquisition date, management make their best estimate of the likely outcome where the fair value of an asset or liability may be contingent on a future event. In certain instances, the underlying transaction giving rise to an estimate may not be resolved until some years after the acquisition date. IFRS 3 requires the release to profit of any acquisition reserves which subsequently become excess in the same way as any excess costs over those provided at acquisition date are charged to profit. At each period end management assess provisions and other balances established in respect of acquisitions for their continued probability of occurrence and amend the relevant value accordingly through the consolidated income statement or as an adjustment to goodwill as appropriate under IFRS 3. In 2013, operating profit includes credits totaling £19.9 million (2012: £19.8 million, 2011: £14.0 million) relating to the release of excess provisions and other balances established in respect of acquisitions completed prior to 2012.

Future anticipated payments to vendors in respect of contingent consideration (earnout agreements) are initially recorded at fair value which is the present value of the expected cash outflows of the obligations. The obligations are dependent on the future financial performance of the interests acquired (typically over a four- to five-year period following the year of acquisition) and assume the operating companies improve profits in line with directors’ estimates. The directors derive their estimates from internal business plans together with financial due diligence performed in connection with the acquisition. Subsequent adjustments to the fair value are recorded in the consolidated income statement within revaluation of financial instruments. For acquisitions completed prior to 1 January 2010, such adjustments are recorded in the consolidated balance sheet within goodwill. A summary of earnout related obligations included in creditors is shown in note 19 to the Consolidated Financial Statements.

WPP has also entered into option agreements that allow the Group’s equity partners to require the Group to purchase the non-controlling interest. These agreements are treated as derivatives over equity instruments and are recorded in the consolidated balance sheet at fair value and the valuation is remeasured at each period end. Fair value is based on the present value of expected cash outflows and the movement in the fair value is recognised as income or expense within revaluation of financial instruments in the consolidated income statement.

Actual performance may differ from the assumptions used resulting in amounts ultimately paid out with respect to these earnout and option agreements at more or less than the recorded liabilities.

Revenue recognition

Advertising and Media Investment Management revenue is typically derived from commissions on media placements and fees for advertising services. Revenue may consist of various arrangements involving commissions, fees, incentive-based revenue 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 revenue 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 or receivable.

The Group receives volume rebates from certain suppliers for transactions entered into on behalf of clients that, based on the terms of the relevant contracts and local law, are either remitted to clients or retained by the Group. If amounts are passed on to clients they are recorded as liabilities until settled or, if retained by the Group, are recorded as revenue when earned.

In applying the proportional performance method of revenue recognition for both market research and other long-term contracts, management is required to make significant judgements, estimates and assumptions. In assessing contract performance, both input and output criteria are reviewed. Costs incurred are used as an objective input measure of performance. The primary input of all work performed under these arrangements is labour. As a result of the relationship between labour and cost, there is normally a direct relationship between costs incurred and the proportion of the contract performed to date. Costs incurred as a proportion of expected total costs is used as an initial proportional performance measure. This indicative proportional performance measure is subsequently validated against other more subjective criteria (i.e. relevant output measures) such as the percentage of interviews completed, percentage of reports delivered to a client and the achievement of any project milestones stipulated in the contract. In the event of divergence between the objective and more subjective measures, the more subjective measures take precedence since these are output measures.

Since project costs can vary from initial estimates, the reliance on total project cost estimate represents an uncertainty inherent in the revenue recognition process. Individual project budgets are reviewed regularly with project leaders to ensure that cost estimates are based upon up to date and as accurate information as possible, and take into account any relevant historic performance experience. Also, the majority of contracted services subject to proportional performance method revenue recognition are in relation to short term projects, averaging approximately 3 months. Due to this close and frequent monitoring of budgeted costs and the preponderance of short term projects, the impact of variances between actual and budgeted project costs has historically been minimal. The Company does not believe that the effect of these uncertainties, taken as a whole, will significantly impact their results of operations in the future.

Pension costs

Pension costs are assessed in accordance with the advice of local independent qualified actuaries. The latest full actuarial valuations for the various plans were carried out at various dates in the last three years. These valuations have been updated by the local actuaries to 31 December 2013.

The Group’s policy is to close existing defined benefit plans to new members. This has been implemented across a significant number of pension plans. As a result, these plans generally have an ageing membership population. In accordance with IAS 19 (amended), the actuarial calculations have been carried out using the projected unit credit method. In these circumstances, use of this method implies that the contribution rate implicit in the current service cost will increase in future years.

The Group’s pension deficit was £246.6 million at 31 December 2013, compared to £334.3 million at 31 December 2012. The decrease in the deficit is primarily due to higher discount rates as a result of an increase in high-quality corporate bond yields and actions taken by WPP to curtail and settle plans.

There are a number of areas in the pension accounting that involve judgements made by management. These include establishing the discount rates, rate of increase in salaries and pensions in payment, inflation and mortality assumptions.

Most of the Group’s pension plan assets are held by its plans in the UK and North America. Management considers the types of investment classes in which the pension plan assets are invested. The types of investment classes are determined by economic and market conditions and in consideration of specific asset class risk.

Management periodically commission detailed asset and liability studies performed by third-party professional investment advisors and actuaries that generate probability-adjusted expected future returns on those assets. These studies also project the estimated future pension payments and evaluate the efficiency of the allocation of the pension plan assets into various investment categories.

At 31 December 2013, the life expectancies underlying the value of the accrued liabilities for the main defined benefit pension plans operated by the Group were as follows:


Years life expectancy after age 65	All Plans		North America		UK		Western Continental Europe		Other ¹
Current pensioners (at age 65) – male		21.9		20.5		24.1		20.6		19.3
Current pensioners (at age 65) – female		23.9		22.7		25.4		23.6		24.7
Future pensioners (current age 45) – male		24.1		22.6		26.2		23.0		19.3
Future pensioners (current age 45) – female		25.9		24.6		27.6		25.5		24.7
¹ Includes Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe.

In the determination of mortality assumptions, management uses the most up-to-date mortality tables available in each country.

For a 0.25% increase or decrease in the discount rate at 31 December 2013, the effect on the year-end 2013 plan liabilities would be a decrease or increase of approximately £28 million and £30 million, respectively. A sensitivity analysis for each significant actuarial assumption is shown in note 23 on page F-30.

Taxation

Corporate taxes are payable on taxable profits at current rates. The tax expense represents the sum of the tax currently payable and deferred tax.

The Group is subject to corporate taxes in a number of different jurisdictions and judgement is required in determining the appropriate provision for transactions where the ultimate tax determination is uncertain. In such circumstances, the Group recognises liabilities for anticipated taxes based on the best information available and where the anticipated liability is both probable and estimable. Such liabilities are classified as current when the Group expects to settle the liability within 12 months and the remainder as non-current. Any interest and penalties accrued are included in income taxes both in the consolidated income statement and balance sheet. Where the final outcome of such matters differs from the amount recorded, any differences may impact the income tax and deferred tax provisions in the period in which the final determination is made.

We record deferred tax assets and liabilities using tax rates that are expected to apply in the period when the liability is settled or the asset is realised based on enacted, or substantively enacted legislation, for the effect of temporary differences between book and tax bases of assets and liabilities. Currently we have deferred tax assets resulting from operating loss carryforwards and deductible temporary differences, all of which could reduce taxable income in the future. Based on available evidence, both positive and negative, we determine whether it is probable that all or a portion of the deferred tax assets will be realised. The main factors that we consider include:

•

future earnings potential determined through the use of internal forecasts;

•

cumulative losses in recent years;

•

the various jurisdictions in which the potential deferred tax assets arise;

•

history of loss carryforwards and other tax assets expiring;

•

the timing of future reversal of taxable temporary differences;

•

the expiry period associated with the deferred tax assets; and

•

the nature of the income that can be used to realise the deferred tax asset.

If it is our belief that it is probable that some portion of these assets will not be realised, then no asset is recognised in relation to the portion not considered to be realisable. At 31 December 2013 no deferred tax asset has been recognised in respect of gross tax losses and other temporary differences of £4,680.2 million.

If market conditions improve and future results of operations exceed our current expectations, our existing recognised deferred tax assets may be adjusted, resulting in future tax benefits. Alternatively, if market conditions deteriorate further or future results of operations are less than expected, future assessments may result in a determination that some or all of the deferred tax assets are not realisable. As a result, we may need to reverse all or a portion of the deferred tax assets, which may have a significant effect on our results of operations and financial condition.

New IFRS Accounting Pronouncements

See page F-7 of the consolidated financial statements for a description of new IFRS accounting pronouncements.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Directors and Senior Management

The directors and executive officers of the Company are as follows:

Philip Lader, Age 68: Non-executive chairman. Philip Lader was appointed chairman of WPP in 2001. The US Ambassador to the Court of St James’s from 1997 to 2001, he previously served as a member of the US President’s Cabinet, White House Deputy Chief of Staff and Deputy Director of the Office of Management & Budget. Before entering government service, he was executive vice president of the late Sir James Goldsmith’s US holdings and president of both a prominent American real estate company and universities in the US and Australia. A lawyer, he is also a senior advisor to Morgan Stanley, a director of Marathon Oil, Rusal and AES Corporations, a trustee of RAND Corporation, the Smithsonian Museum of American History and the Atlantic Council, and a member of the Council on Foreign Relations.

Sir Martin Sorrell, Age 69: Chief executive. Sir Martin Sorrell joined WPP in 1986 as a director, becoming Group chief executive in the same year. He is a non-executive director of Formula One and Alcoa Inc.

Paul Richardson, Age 56: Finance director. Paul Richardson became Group finance director of WPP in 1996 after four years with the Company as director of treasury. He is responsible for the Group’s worldwide functions in finance, information technology, procurement, property, treasury, taxation, internal audit and sustainability.

He is a chartered accountant and fellow of the Association of Corporate Treasurers. He is a non-executive director of STW Communications Group Limited in Australia, which is a company associated with the Group.

Mark Read, Age 47: Chief executive, WPP Digital. Mark Read was appointed a director in March 2005. He is chief executive of WPP Digital and was WPP’s director of strategy from 2002 to 2011. He is a director of CHI&Partners. He worked at WPP between 1989 and 1995 in both parent company and operating company roles. Prior to rejoining WPP in 2002, he was a principal at the consultancy firm of Booz-Allen & Hamilton and founded and developed the company WebRewards in the UK. He is a trustee of the Natural History Museum Development Trust.

Roger Agnelli, Age 54: Non-executive director. Roger Agnelli was appointed a non-executive director of WPP on 13 May 2013. He is the founding partner and CEO of AGN Holding, a Brazilian company focused on mining, logistics and bioenergy in Brazil, Latin America and Africa. He is also the chairman of B&A, a joint venture between BTG Pactual and AGN, focused on the exploration and development of fertilizer, iron ore and copper assets. He was CEO and president of VALE from July 2001 to May 2011. He was vice president of ANBID (Brazil’s National Association of Investment Banks) and member of the International Advisory Committee of the New York Stock Exchange (NYSE). He has served on the board of directors of CPFL, Rio Grande Energia, Serra da Mesa Energia and VCB Energia in Brazil and Duke Energy in the US; in oil and gas, Petrobras and Suzano Petroquímica in Brazil and Spectra Energy in the US; in steel, CSN and LATASA; in automotive and auto parts, Mahle Metal Leve; in home appliances, Brasmotor and in cable TV, UGB Participações. In September 2010, he joined the International Business Leaders Advisory Council (IBLAC) to the Mayor of Shanghai. He has served on the International Advisory Council of South Africa to the President Thabo Mbeki. He has been a member of the board of directors of ABB Ltd since 2002 and of the International Advisory Council to the President of Mozambique, Dr Armando Guebuza. In addition, he is a member of Anadarko’s Global Advisory Board and McKinsey International Advisory Council. He is a member of the International Expert Advisory Board of the Sultanate of Oman. In Brazil, he is a member of the Strategic Advisory Council of FIESP (Federation of Industries of the State of São Paulo) and honorary director of ACRJ (Commercial Association of Rio de Janeiro).

Jacques Aigrain, Age 59: Non-executive director. Dr. Jacques Aigrain was appointed a non-executive director of WPP on 13 May 2013. He is currently chairman of LCH.Clearnet Group Limited. He was CEO of Swiss Re from 2006 to 2009, and prior to that, he spent 20 years with JP Morgan Chase in New York, London and Paris. In

addition, he is a non-executive director of London Stock Exchange Group Plc and a Supervisory Board Member of Lyondell Bassell NV, Deutsche Lufthansa AG and its subsidiary, Swiss International Airlines AG. He is also an advisory director of the Qatar Financial Centre Authority and a Senior Advisor to Warburg Pincus. He is a dual French and Swiss citizen. He holds a PhD in Economics from Sorbonne University, and a MA degree in Economics from Paris Dauphine University.

Charlene Begley, Age 47: Non-executive director. Charlene T Begley was appointed a non-executive director of WPP on 1 December 2013. Most recently, Ms Begley served as a Senior Vice President of General Electric Company and the Chief Executive Officer and President of GE Home & Business Solutions at General Electric Company. In this role, she had responsibility for $9 billion of revenue with the GE Appliances, Lighting and Intelligent Platforms businesses, as well as served as the company’s Chief Information Officer and led the Sourcing Council and Corporate Leadership Staff. As CIO, she managed a budget of $3.7 billion and led 10,000 IT professionals with a strong focus on business process excellence, simplification, collaboration and security and compliance. Over her career at GE, she served as President and Chief Executive Officer of GE Enterprise Solutions, GE Plastics, and GE Transportation. In addition, she led GE’s Corporate Audit Staff and served as the Chief Financial Officer for GE Transportation and GE Plastics Europe and India. Ms Begley currently serves as a non-executive director of NASDAQ OMX. Ms Begley was a director of Morpho Detection, Inc. and GE Fanuc JV. She also served on the board of the National Association of Manufacturers and the Business Advisory Council at the University of Vermont. She was recognized as a Young Global leader on the World Economic Forum and Fortune’s “Most Powerful Women in Business.” Ms Begley graduated Magna Cum Laude from the University of Vermont in 1988 with a B.S. Degree in Business Administration.

Colin Day, Age 59: Non-executive director. Colin Day was appointed a non-executive director of WPP in July 2005. He is the Chief Executive of Essentra plc and a non-executive director of Amec and FM Global. He was the group finance director of Reckitt Benckiser plc until April 2011, having been appointed to its board in September 2000. Previously he has been group finance director of Aegis Group plc and held a number of senior finance positions with the ABB Group plc and De La Rue Group plc. He was a non-executive director of Vero Group plc until 1998, Bell Group plc until 2004, Imperial Tobacco plc until February 2007, easyJet plc until September 2005 and Cadbury plc until 2010.

Esther Dyson, Age 62: Non-executive director. Esther Dyson was appointed a director of WPP in 1999. She is the founder of HICCup (Health Initiative Coordinating Council, hiccup.co), a non-profit dedicated to the production of health as opposed to care for the unhealthy. In 2004, she sold her business, EDventure Holdings, to CNET Networks, the US-based interactive media company now owned by CBS. She left CNET at the end of 2006 and now operates as an independent investor and writer, again under the name EDventure. She has been highly influential for the past 30 years on the basis of her insights into online/information technology markets and their commercial/social impact worldwide, including the emerging markets of Central & Eastern Europe, Asia and Africa. An active investor as well as an analyst/observer, she participated in the sale of Flickr to Yahoo!, of Medstory and Powerset to Microsoft, and of Vizu to Nielsen, among others. She sits on the boards of Russia’s leading search company Yandex (YNDX) and outsourcing company Luxoft (LXFT), and also of non-listed start-ups including 23andMe, Eventful.com, Meetup, NewspaperDirect (Canada), PA Consulting (UK), Voxiva (US) and XCOR Aerospace (US). Her current investments include Evernote, Gridpoint, LinkedIn, Nomanini, Omada Health, Space Adventures and Square. She is also active in public affairs and was founding chairman of ICANN, the domain name policy agency, from 1998 to 2000. She currently sits on the board of the Sunlight Foundation, which advocates transparency in government, and writes a monthly column for Project Syndicate (http://www.project-syndicate.org/contributor/esther-dyson) which is distributed worldwide.

Orit Gadiesh, Age 63: Non-executive director. Orit Gadiesh was appointed a director in April 2004. She is chairman of Bain & Company Inc., and a world-renowned expert on management and corporate strategy. She holds an MBA from Harvard Business School, was a Baker Scholar and was also presented the Brown Award. Ms Gadiesh is a member of the Foundation Board for the World Economic Forum as well as a member of the International Business Council of the World Economic Forum. She is on the Board of Directors of The Peres Institute for Peace, sits on the International

Advisory Board of The Atlantic Council of the United States, and the Advisory Board for the British-American Business Council. She is the Chairman of the International Business Leaders’ Advisory Council for the Mayor of Shanghai (IBLAC) and sits on the International Advisory Board at HEC School of Management in France.

Dr John Hood, Age 62: Non-executive director. Dr John Hood was appointed a director on 1 January 2014. An international education and business leader, he was formerly Vice-Chancellor of the University of Oxford and of the University of Auckland. In his native New Zealand, he served as Chairman of Tonkin & Taylor Ltd and as non-executive director of Fonterra Co-operative Group, ASB Bank Ltd, and other companies. He currently serves as Chairman of URENCO Ltd and of Study Group Ltd, as a non-executive director of BG Group plc, as President of the Robertson Foundation and as Chairman of Rhodes Trust. Dr Hood earned his PhD in Civil Engineering from the University of Auckland and then won a Rhodes Scholarship to Oxford, where he was awarded an MPhil in Management Studies.

Ruigang Li, Age 44: Non-executive director. Ruigang Li was appointed a director of WPP in October 2010. He is Founding Chairman of CMC Capital Partners (CMC), China’s first and most prestigious Media and Entertainment dedicated private equity fund. Through Li’s chairmanship, CMC acquired the controlling stake of former News Corporation’s China assets – Star China, together with the management team. CMC has also invested in Oriental DreamWorks – a joint venture with DreamWorks Animation; TVBC – a joint venture with leading Chinese language TV content provider and broadcaster TVB, and China’s largest TV shopping company OCJ, all of which are of profound significance in China and beyond. CMC also leads China’s highly eye-catching urban leisure and entertainment destination – the Dream Center in Shanghai through a multi-party international partnership. Li is also the Chairman of Shanghai Media Group (SMG), which he led as the CEO for 10 years and grew it into China’s second largest media conglomerate with the most diversified media assets of national reach.

Daniela Riccardi, Age 54: Non-executive director. Daniela Riccardi was appointed a director on 12 September 2013. A prominent FMCG, retail-and-fashion products executive, she is Chief Executive Officer of Baccarat, the international luxury goods company, and was Chief Executive Officer of Diesel Group, the innovative fashion business. She was an executive at Procter & Gamble for 25 years, including service as President of Procter & Gamble Greater China, with 7,000 employees, and Vice President-General Manager for Eastern Europe & Russia. Ms Riccardi is a Magna Cum Laude graduate in Political Science and International Studies at Sapienza University of Rome and completed a Fellowship in Marketing at Yale University.

Jeffrey A. Rosen, Age 66: Non-executive director. Jeffrey Rosen was appointed a director of WPP in December 2004. He is a deputy chairman and managing director of Lazard with over 40 years’ experience in international investment banking and corporate finance. He is a member of the Council on Foreign Relations and is President of the Board of Trustees of the International Center of Photography in New York.

Nicole Seligman, Age 58: Non-executive director. Nicole Seligman was appointed a director on 1 January 2014. A senior Sony executive since 2001, she is Executive Vice President and General Counsel of Sony Corporation and President of Sony Corporation of America. Previously, as a partner in the Washington law firm of Williams & Connolly, she counselled a wide range of clients, including major media companies, on complex litigation and commercial matters. She was a law clerk for US Supreme Court Justice Thurgood Marshall and was associate editorial page editor for the Asian Wall Street Journal. She was a Magna Cum Laude graduate of both Harvard College and Harvard Law School.

Hugo Shong, Age 58: Non-executive director. Hugo Shong was appointed a director on 13 May 2013. He is the executive vice president of International Data Group (IDG), a private technology media, research and events company, and president of IDG Asia/China. He joined IDG in 1991 as an associate to IDG’s founder and chairman, Patrick J. McGovern, for Asian business development after working for three years as a reporter and editor at Electronic Business and Electronic Business Asia magazine, where he launched over 40 magazines and newspapers in Asian countries, such as PC World Vietnam, the Chinese editions of NetworkWorld, Electronic Products, Cosmopolitan, Harper’s Bazaar, National Geographic, FHM and Men’s Health. In 1993, he helped IDG to set up the first technology

venture fund in China, IDG Capital Partners, which now has $3.8 billion under management and an investment portfolio including Baidu, Tencent (QQ), Sohu, Ctrip and Soufun. He currently serves on the boards of China Jiuhao Health Industry Corp, which focuses on health maintenance and retirement community projects in China, and Mei Ah Entertainment Group, an entertainment company with interests in television, film and theatre listed on the Hong Kong Stock Exchange. Hugo has been a member of the board of trustees of Boston University since 2005. After completing his undergraduate studies at Hunan University, he attended the Chinese Academy of Social Sciences and earned a Master of Science from Boston University in 1987. He conducted graduate studies at the Fletcher School of Law and Diplomacy and has also completed the Advanced Management Program at Harvard Business School.

Timothy A. Shriver, Age 54: Non-executive director. Tim Shriver was appointed a director of WPP in August 2007. He is a social leader, educator, activist, film producer and business entrepreneur. As Chairman and CEO of Special Olympics, he serves nearly four million Special Olympic athletes in 180 countries all working to promote health, education, and unity through the joy of sports. Before joining Special Olympics in 1995, he was (and remains) a leading educator focusing on the social and emotional factors in learning. He co-founded and currently chairs the Collaborative for Academic, Social and Emotional Learning (CASEL), the leading research organisation in the field of social and emotional learning. He is a member of the Council on Foreign Relations. He chairs the board of Lovin’ Scoopful a cause-related consumer products brand specialising in ice cream that ‘loves you as much as you love it’.

Sally Susman, Age 52: Non-executive director. Sally Susman was appointed a director on 13 May 2013. She is currently executive vice president, Corporate Affairs for Pfizer, the world’s largest biopharmaceutical company. Sally also heads the firm’s corporate responsibility group and plays a key role in shaping policy initiatives. Before joining Pfizer in 2007, she was EVP of Global Communications at Estée Lauder, where she directed global corporate affairs strategy and served as a member of the Executive Committee. She also held several senior corporate affairs posts at American Express, working in both London and the US. She started her career in government service focused on international trade issues and her positions included Deputy Assistant Secretary for Legislative and Intergovernmental Affairs in the US Department of Commerce. She serves on the board of the International Rescue Committee and the US Department of State’s International Council on Women’s Business Leadership. Sally holds a BA in Government from Connecticut College in the US and has studied at the London School of Economics.

Sol Trujillo, Age 62: Non-executive director. Sol Trujillo was appointed a director of WPP in October 2010. He is an international business executive with three decades’ experience as CEO of large market cap global companies in the US, the EU and Asia Pacific, including US West (now CenturyLink), Orange (now France Telecom) and Telstra, the Australian communications company. A digital pioneer operating in the telecommunications, technology, and media space, he has been a long-time champion of high-speed broadband and a pioneer and innovator of smartphone and the mobile internet to stimulate productivity and innovation across all sectors of the economy. He has managed operations in more than 25 countries – including developed and emerging markets from the EU and North America to China, South Asia, Africa and the Middle East. He currently sits on corporate boards in the US, EU and China – including Western Union and ProAmerica Bank in the US and in Asia, Silk Road Technologies in China, where he is Board chairman. In the public sector, Mr Trujillo served as trade policy advisor to the Clinton and Bush administrations and remains active on public policy issues related to immigration, trade, productivity and fiscal affairs.

The board of directors has determined that all of the non-executive directors are independent under NASDAQ Rule 5605(a)(2).

B. Compensation

Review of Compensation

This year’s Compensation Committee Report has been drafted with the new UK remuneration reporting regulations in mind. The Report therefore comprises three parts: this summary of the key events that occurred in 2013, the Executive Remuneration Policy, and an Implementation Report. The latter two will be put to share owners at the forthcoming Annual General Meeting (AGM) for approval.

Summary of key events in 2013

Key changes in 2013

Following an extensive consultation program with share owners during 2012 and 2013, the Compensation Committee implemented a revised remuneration package for the Group chief executive, partly in 2012 and fully in 2013. At the beginning of 2013, the base salary and pension allowance of the Group chief executive were reduced in line with the amended policy, as was advised to share owners in the last Annual Report. A new long-term incentive plan, the Executive Performance Share Plan (EPSP), was approved by share owners at the 2013 AGM. The first awards under that plan were made in June 2013. These awards have a five-year performance period, with performance being assessed using stretching targets over Total Share Owner Return (TSR), Earnings Per Share (EPS) and Return On Equity (ROE) measures. These substantial revisions to WPP’s remuneration policy resulted in a materially increased level of support from our share owners and the advisory bodies, as demonstrated by the share owner vote in favour of the Compensation Committee report at the 2013 AGM.

In July 2013, the Compensation Committee undertook the review of the pay packages of the Group financial director and the Chief executive of WPP Digital, whose pay packages were previously reviewed in January 2011. These 2013 reviews resulted in modest increases to base salary and fees of 1.8% and 3.5% respectively and in the case of the Chief executive of WPP Digital, a modest increase in his pension allowance to 15% of base salary and fees in order to align his position with that of other UK executives. Employees across the Group who were subject to a salary review received an average annual salary increase of approximately 3%.

In drafting the Executive Remuneration Policy, the Compensation Committee has maintained the structure of compensation as discussed extensively with share owners in 2012 and 2013 and implemented in 2013. An addition for 2014 is the inclusion of a recruitment policy, as set out in the new UK remuneration reporting regulations. This recruitment policy, found in Item 6C, has been drafted while taking into consideration input received from share owners last year. The policy represents a lower level of incentive opportunity than that provided to the incumbent Group chief executive, while seeking to retain the flexibility required to recruit talent of the level necessary to run such a complex global group.

Pay for performance in 2013

In 2013, the operational performance of the Group was strong, with like-for-like revenue growth of 3.5% and headline PBT growth of almost 11%. In addition, the last year has seen very strong share price growth and a considerable increase in TSR. The share price increased 55% from 888p at the end of 2012 to 1,380p at the end of 2013, versus a 14% gain in the FTSE 100 from 5,898 to 6,749, reflecting a high level of investor confidence in the Group’s future prospects.

The annual bonuses awarded to the executive directors for 2013, of which 70% is based on financial performance, take into account not only the impressive performance of the Group but also the stretching targets set by the committee. The executive directors’ bonus awards average 143% of target. Half of the annual bonus is paid in cash and half in deferred shares which vest in 2016, thereby reinforcing the alignment of the executive directors’ interests with those of share owners.

WPP was an early adopter of long-term incentives that measure performance over the longer five-year period. Each of the three Leadership Equity Acquisition Plan (LEAP) plans and the replacement plan, the EPSP, are based upon a five-year performance period. In addition, participation in the LEAP plans has required executives to commit shares that could be matched, up to five times, dependent upon the Group’s performance over the five-year period. The long-term incentive awards that were granted in 2009 under LEAP III vested in February 2014. The share price and relative TSR performance over the performance period of the 2009 LEAP award cycle has resulted in awards vesting at 87% of maximum. While the level of vesting will undoubtedly attract public attention, the close relationship between WPP’s pay and performance is again demonstrated by the considerable value that has been created for share owners during that period. Indeed, over the five years from 1 January 2009 to 31 December 2013, the share price increased by 243%, which translates to 28% per annum on a compound basis. WPP’s TSR of more than 241%, averaged over six months at the start and end of the investment and performance period in accordance with the plan rules, ranks the Company in the top decile of the FTSE 100 over the same period.

Compensation and policy issues for 2014

There are no planned changes to the way in which the Executive Remuneration Policy will be implemented in 2014. For the executive directors, base salaries and fees will be unchanged as will annual bonus opportunity and EPSP award levels. The committee has undertaken its regular review of measures and has set new targets for the 2014 annual bonus. The impact of the proposed merger between Publicis and Omnicom on the LEAP and EPSP TSR peer groups will be considered on completion of the transaction (a date for which is yet to be confirmed); details of the impact on the LEAP and EPSP comparator group and TSR calculation approach will be confirmed in next year’s Compensation Committee Report. The nature of benefits provided in 2014 will also be unchanged, although the value may be higher or lower depending upon individual circumstances during the year. The fees for the current chairman and non-executive directors will also be unchanged.

How we have performed

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The calculation of headline PBIT is set out in note 31 of the financial statements

Growth in the value of a hypothetical £100 holding over 20 years. TSR calculated using a three-month rolling average in common currency. Source: DataStream

The above graphs compare WPP’s 20-year TSR performance relative to our primary peers and the major indices in both the US and Europe. Over this period, a £100 investment in January 1994 in WPP ADRs would be worth £1,940 in January 2014 and a £100 investment in January 1994 in WPP ordinary shares would be worth £1,898 in January 2014, with both investments out-performing our competitors and the local indices. An identical investment in either the S&P 500 or the FTSE 100 would be worth £518 or £413 respectively.

How much the executive directors earned in 2013

2013 executive directors total remuneration received

LOGO

Executive Remuneration Policy

The Compensation Committee presents the Executive Remuneration Policy, which will be put to share owners for approval at the Annual General Meeting (Resolution 4). This policy is intended to comply with the UK Companies Act 2006 despite the fact WPP plc is a Jersey incorporated company and therefore not subject to that legislation (or the associated regulations). The policy will take effect immediately following the AGM and is consistent with the arrangements in place from the start of the 2014 financial year. It is the intention of the committee that this policy will be in effect for three years from the date of approval and subject to periodic review during its operation to ensure it continues to align with the Company’s mission statement and business objectives.

The report that follows is split into a number of sections, which in summary are as follows:

•

Details of the contextual information that the committee considers when setting, reviewing and implementing the directors’ pay policy Pages 42-43

•

An Executive Remuneration Policy table for the executive directors Pages 43-49

•

A summary of other executive director policies that relate to compensation; Pages 51-52, 67-70

•

An Executive Remuneration Policy table for the chairman and non-executive directors; Page 52

•

A summary of other non-executive director policies that relate to compensation Page 70

WPP’s compensation philosophy

Our mission statement and our six business objectives shape our compensation philosophy. Broadly, our Executive Remuneration Policy is determined by three guiding principles:

•

performance driven reward;

•

competitiveness; and

•

alignment with share owner interests.

Specifically, our six business objectives (as set out on pages 15-16) are reflected in the design of our compensation plans as set out below:


WPP’s six business objectives		Alignment with compensation structure
1	Continue to improve operating margins on revenue and gross profit	Short-term incentive measure for the Group chief executive and Group finance director
2	Increase flexibility in the cost structure	Short-term incentive measure for the Group finance director
3	Use free cash flow to enhance share owner value and improve return on capital	TSR, EPS growth and average ROE are long-term incentive measures for the executive directors
4	Continue to develop the value added by the parent company	Short-term incentive measures (parent company-led efficiency projects) for the Group finance director
5	Emphasise revenue growth more as margins improve	Short-term incentive measures for the Group chief executive and Group finance director (Group) and Chief executive, WPP Digital (Digital)
6	Improve still further the creative capabilities and reputation of all our businesses	Short-term incentive measure for the Group chief executive

The Executive Remuneration Policy is designed to attract and retain the best-in-class talent. The policy looks to incentivise the directors to develop the skills of the Group’s employees in order to consistently exceed our clients’ expectations. The policy’s objective is to drive and reward sustainable and exceptional performance, thereby producing long-term value for share owners. In applying this policy, the committee takes into account the pay and conditions elsewhere in the Group, which in turn are informed by general market conditions and internal factors such as the performance of the Group or relevant business unit.

Considerations taken into account when setting our Executive Remuneration Policy

Employment conditions at WPP

When reviewing changes to the compensation levels for the directors, the committee considers any changes in light of the increases awarded across the Group over a relevant period of time, in conjunction with the other factors set out in the policy table. The committee did not consult employees when drawing up this Executive Remuneration Policy.

Share owner views

WPP continues to engage openly with share owners and institutional investors to discuss matters relating to compensation. The feedback received during these conversations is valuable and is among the factors that inform the decisions made by the committee.

During 2013, the committee consulted with share owners on the design of the EPSP. The selection of performance measures took account of the feedback received (as detailed on page 40). More generally, formal and informal share owner feedback has been used by the committee when drafting this Executive Remuneration Policy.

Glossary

The following are acronyms used throughout the policy:


Acronym		Definition
DEPs		Dividend Equivalent Payments
DSUs		Deferred Stock Units
EPSP		Executive Performance Share Plan – long-term incentive plan introduced in 2013
ESA		Executive Share Award – the part of the STIP that is deferred into shares
ExSOP		Executive Stock Option Plan
Good Leaver		Broadly, when an individual is dismissed other than for cause (the particular meaning applicable to each share plan can be found in the relevant rules)
LEAP		Leadership Equity Acquisition Plan – long-term incentive plan used to grant awards until the end of 2012
RSP		Restricted Stock Plan
STIP		Short-term Incentive Plan – the annual incentive plan comprising a cash bonus and an ESA

Executive Remuneration Policy table — executive directors

The following table sets out details of the on-going compensation elements for WPP’s executive directors.


Component and Purpose	Operation	Performance	Maximum Annual Opportunity
Fixed elements of compensation
Base salary and fees To maintain package competitiveness and reflect skills and experience.	Base salary and fee levels are reviewed every two years or following a significant change in the scope of a role. Levels are determined by taking a number of relevant factors into account including individual and business performance, level of experience, scope of responsibility, compensation practices across the Group and the competitiveness of total compensation against both our competitors and companies of a similar size and complexity.	Company and personal performance will be taken into account during the review process.	Under normal circumstances base salary and fees will increase by no more than the local rate of inflation over the period since last review. In the event of a promotion or a significant change in the scope of a role, or changes in sector competitive pay or the need to counter a competitive external offer, the committee may exceed this limit.


Component and Purpose	Operation	Performance			Maximum Annual Opportunity
Short-term incentives (details of how performance measures and targets are set are included in the notes to this table on page 48)
Cash bonus, Executive Share Awards (‘ESA’) To drive the achievement of business priorities for the financial year and to motivate, retain and reward executives over the medium term, while maximising alignment with share owner interests.	Overview The committee may invite executives to participate in the STIP under which a bonus can be made subject to performance measured over the financial year. Bonus opportunity is determined as a percentage of salary and fees. Performance measures and targets are reviewed and set annually to ensure continuing strategic alignment. Achievement levels are determined following year-end by the committee, based on performance against targets. Executive directors’ bonuses are delivered in the form of a cash award and a deferred share award (ESA), the latter constituting at least 50% of the total bonus achieved. The ESA will vest after a minimum of two years subject to continued employment, together with additional shares in respect of accrued dividends. Judgement The committee will use its judgement to set the performance measures and targets annually. Malus provisions (ESA) The committee has the ability to reduce any unvested ESA in certain situations, including when fraud or a material misstatement has affected the level of any performance-related remuneration.	70% subject to financial performance, either at a Group and/or divisional level depending on the role. 30% subject to personal objectives linked to the strategy of WPP or the relevant business area. The committee will use its judgement in assessing performance relative to targets and expectations communicated at the start of the year and will consider unforeseen factors that may have impacted performance during the period. Vesting schedule The following table sets out the level of bonus payable for threshold and target performance as a percentage of maximum. Vesting operates on a straight-line basis between these points.			Group chief executive: 435% of base salary and fees. Other executive directors: 300% of base salary and fees. The value of any accrued dividends will vary depending on the size of the ESA awarded, dividends declared and share price over the deferral period.

			Threshold	Target (as percentage of maximum)

		Sir Martin Sorrell	0%	50%

		Other executive directors	0%	67%


Component and Purpose	Operation	Performance	Maximum Annual Opportunity
Long-term incentives (details of how performance measures and targets are set are included in the notes to this table on page 48)
Executive Performance Share Plan (‘EPSP’) To incentivise long-term performance and to focus on long-term retention and strategic priorities, while maximising alignment with share owner interests.	Overview Executives may receive an annual conditional award expressed as a percentage of base salary and fees. Executives may also receive an award in respect of the number of reinvested dividends proportionate to the amount of the award vesting, the dividends declared during the performance period and the share price at the time the dividend is declared. Awards will vest subject to performance, measured over a period of five consecutive financial years. In respect of merger and acquisition activity within the peer group, the committee has an established and operated policy that TSR outcomes should not be impacted by the speculation or actuality of takeovers of peer group companies (including WPP). This policy includes a minimum listing requirement, an approach for the reinvestment of proceeds from shares of companies that delist during the performance period and parameters for companies subject to bid speculation. Details of how this policy is implemented will be disclosed each year in the relevant Annual Report. Discretions In accordance with the EPSP rules that were approved by share owners at the 2013 AGM, if the committee considers that there has been an exceptional event or that there have been exceptional circumstances during a performance period that have made it materially easier or harder for the Company to achieve a performance measure, the committee may adjust the extent to which an award vests to mitigate the effect of the exceptional event or circumstances. Malus provisions The committee has the ability to reduce any unvested EPSP award in certain situations, including when fraud or a material misstatement has affected the level of any performance-related remuneration.	One-third relative TSR One-third headline EPS growth One-third average ROE All measures are assessed independently of each other. TSR is measured on a market-capitalisation weighted basis against a peer group of business competitors that are selected according to size and relevance. This peer group is reviewed annually at the start of each cycle to ensure it remains robust, appropriate and relevant in light of WPP’s business mix. Half of the TSR element is measured on a local currency basis, half on a common currency basis. EPS is defined as WPP’s headline, fully diluted, earnings per share. The EPS performance is calculated by taking the aggregate EPS over the performance period and calculating the compound annual growth from the financial year preceding the start of the period. ROE is calculated as fully diluted EPS divided by the average balance sheet per share value of share owners’ equity during the year. Vesting schedule Awards will vest on a straight-line basis from 20% for threshold performance and 100% for maximum performance.	Conditional awards: Plan maximum: 9.75 times base salary and fees. Group chief executive: 9.75 times base salary and fees. Other directors: four times base salary and fees. The value of accrued dividends will vary depending on the level of vesting, dividends declared and share price over the performance period.

Component and Purpose

Operation

Performance

Maximum Annual Opportunity

Long-term incentives (legacy plans with unvested awards)

Leadership Equity

Acquisition Plan III

(‘LEAP III’)

To incentivise long-term performance and to focus on long-term retention and strategic priorities, while maximising alignment with share owner interests.

Overview

Executives were invited to participate in the plan annually by the committee. In order to participate, individuals must have committed to hold an investment level in WPP shares which is determined by the committee, subject to an overall maximum, and must be held for the full five-year performance period. Investment levels were determined by the committee, subject to an overall maximum. A final number of matching shares will be awarded, proportionate to the investment, dependent on the performance of WPP. Executives may also receive an award in respect of the number of reinvested dividends proportionate to the amount of the award vesting, the dividends declared during the performance period and the share price at the time the dividend is declared. The Plan was closed to the grant of new awards at 31 December 2012.

Discretions

Following the end of the performance period, the committee undertakes a ‘fairness review’ to determine whether any exceptional events have impacted the outcome and that the resulting match is in line with financial performance relative to the comparator group and the underlying financial performance of the Group. Merger and acquisition activity will be treated in accordance with the policy set out under the EPSP above.

Malus provisions

The committee has the ability to reduce any unvested LEAP III award in certain situations, including when fraud or a material misstatement has affected the level of any performance-related remuneration.

100% relative TSR measured on a market-capitalisation weighted, common currency basis.

Vesting schedule

The following table sets out the level of award that will vest for threshold and target performance as a percentage of maximum.

The following maximum levels applied at the time of grant. No further awards can be granted under LEAP III, and none have been made since 2012.

Investment: one times an executive director’s total target earnings (base salary and fees plus target bonus).

Award: Five times an executive director’s investment.

The value of accrued dividends will vary depending on the level of vesting, dividends declared and share price over the investment and performance period.

Threshold

Maximum

All executive

directors

30%

100%

To achieve threshold vesting WPP must outperform at least 50% of the market-cap weighted peer group; to achieve maximum vesting WPP must outperform at least 90% of the market-cap weighted peer group.


Component and Purpose	Operation	Performance	Maximum Annual Opportunity
Other items in the nature of compensation
Dividend Equivalent Payments (‘DEPs’) on the DSUs To ensure that Sir Martin Sorrell receives an amount equal to the dividends that would be payable if he had taken receipt of and retained the shares underlying the DSUs.	The Company has previously received share owner approval to allow Sir Martin Sorrell to defer receipt of the DSUs. The Company makes a cash payment to Sir Martin Sorrell of an amount equal to the dividends that would have been due on the shares comprising the DSUs.	No longer subject to a performance requirement as this was assessed at the point of vesting in 1999.	The value of any accrued dividends will vary depending on the dividends declared during the deferral period.
Benefits To enable the executive to undertake their role by ensuring their well-being and security.	The following benefits are payable in relation to travel and the dual headquarter split between the UK and the US to some/all of the executive directors. The provision of these benefits reflects external competitive practice, the complex nature of the Group and the significant amount of time spent travelling by the executives. The typical benefits that executive directors receive may include a car and/or car allowance plus the use of a driver as required; medical, life and disability insurance; accommodation allowance in lieu of hotel expenses; tax and legal advice; home office support; club memberships deemed necessary for the role; and spousal travel. Other benefits, such as those linked to the relocation of an executive, may be provided depending on the prevailing circumstances.	Not applicable.	Set at a level that the committee feels is required in order for the executive to carry out their role. The maximum payable will not significantly exceed the payments made in 2013, although the committee may pay more than this if the cost of providing the same benefits increases, or if the executive relocates.
Pension To enable provision for personal and dependant retirement benefits.	Pension is provided by way of contribution to a defined contribution arrangement, or a cash allowance, determined as a percentage of base salary and fees.	Not applicable.	Group chief executive: 40% of base salary and fees. Other executive directors: 30% of base salary and fees.

Notes to the policy table

Plan rules

Copies of the various plan rules are available for inspection at the Company’s registered office and head office. The Executive Remuneration Policy table provides a summary of the key provisions relating to their ongoing operation. The committee has the authority to ensure that any awards being granted, vested or lapsed are treated in accordance with the plan rules which are more extensive than the summary set out in the table.

Selection of performance measures

STIP

Performance measures are selected by the committee on the basis of their alignment to Group strategy and are the key measures to oversee the operation of the business. Measures are reviewed annually by the committee taking into account business performance and priorities.

EPSP

EPS growth is a measure that is important for both management and our share owners, capturing growth in revenue and earnings. ROE is similarly important, and provides a positive counterbalance and risk management mechanism through the focus on both growth and capital efficiencies. With the inclusion of relative TSR, the plan also takes account of share owner views of how WPP has performed relative to the companies in the peer group.

Calibration of performance targets

STIP

The performance targets for the STIP are set to incentivise year-on-year growth and to reward strong, sustainable performance. Strategic targets are based upon the annual business priorities. The committee is of the view that the targets for the STIP are commercially sensitive and it would be detrimental to the Company to disclose them in advance of or during the relevant performance period. The committee will disclose those targets at the end of the relevant performance period in that year’s Annual Report, if those targets are no longer commercially sensitive.

EPSP

Operational targets under the EPSP are set taking into account a combination of factors, but primarily internal forecasts, analysts’ expectations (albeit, the period over which analysts forecast is generally shorter than the five year performance period) and historical performance relative to budgets.

Relative TSR targets are set to ensure they are more stretching than UK norms and require out-performance of our peers at median before any reward is triggered.

Cascade to WPP Group pay policy

As well as setting the policy for the executive directors, the Compensation Committee is also responsible for reviewing the policy for the most senior people at WPP outside the Board.

Compensation packages for these individuals are normally reviewed every 18-24 months. As with the Executive Remuneration Policy, the WPP Group pay policy ensures a clear and direct link between the performance of the Group or relevant operating company and compensation. Substantial use of performance-driven compensation not only ensures the continued alignment of the interests of share owners and senior individuals within the Group, but also enables the Group to attract, retain and motivate the talented people upon whom our success depends.

WPP is committed to encouraging strong performance through a reward system that aligns management’s interests with those of share owners. From a compensation perspective, this is encouraged in a number of ways:

•

senior executives participate in the same long-term incentive plan as the executive directors which is designed to incentivise growth, capital efficiency and share price appreciation; and

•

share ownership is encouraged for the WPP Leaders (approximately the top 240 executives), all of whom have stretching ownership goals.

Across the workforce more broadly, many employees participate in bonus and commission plans based on the performance of their employing company. In addition, where locally competitive, employees are provided with company-sponsored pension plans and life assurance plans and a range of other benefits. In addition to these compensation elements, the Company also uses share-based compensation across the workforce to incentivise, retain and recruit talent which encourages a strong ownership culture among employees. The main share plans are described below.

Restricted Stock Plan

The RSP is used to satisfy awards under the short-term incentive plans (including ESAs) as well as to grant awards to management under the WPP Leaders, Partners and High Potential program. In the program, awards are made to participants that vest three years after grant, provided the participant is still employed within the Group. Executive directors are eligible to receive ESAs under the RSP but ineligible to participate in any other aspect of the management share award program.

Executive Stock Option Plan

The ExSOP is used to make special grants of options in order to attract or retain key talent. Awards are made infrequently and executive directors are ineligible to participate, other than in a recruitment situation (see page 68).

All-employee plan

The Worldwide Ownership Plan is an all-employee plan that makes annual grants of stock options to employees with two years of service who work in wholly-owned subsidiaries. Executive directors and management in receipt of other share awards are ineligible to participate in this plan.

How do these pay policies affect potential compensation packages?

These graphs seek to demonstrate how pay varies with performance. The graphs are reflective of the current pay policy as summarised in the Executive Remuneration Policy table set out on pages 43 to 47.

LOGO

The graphs are informed by three performance scenarios and these, along with the assumptions used, are summarised on page 51.



Fixed elements	Consists of base salary and fees, benefits (including DEPs) and pension
	Base salary and fees reflect current levels (which are unchanged from FY2013)
	Benefits and DEPs are consistent with the single figure table for FY2013
	Pension reflects current levels (which are unchanged from FY2013)
	£000	Base salary & fees		Benefits (inc. DEPs)		Pension		Total fixed

	Sir Martin Sorrell		1,150		1,451		40%		3,061

	Paul Richardson		704		107		30%		1,022

	Mark Read		440		11		15%		517

Short-term incentives	On-plan scenario assumes target bonus is paid
Short-term incentives	Maximum scenario assumes the full bonus is paid
	% of salary and fees	Below threshold		On-plan				Maximum

	Sir Martin Sorrell		0%		217.5%				435%

	Paul Richardson		0%		200%				300%

	Mark Read		0%		134%				200%

Long-term incentives	On-plan scenario assumes threshold vesting of an award at the current policy level
Long-term incentives	Maximum scenario assumes full vesting of an award at the current policy level
	% of salary and fees	Below threshold		On-plan				Maximum

	Sir Martin Sorrell		0%		195%				974%

	Paul Richardson		0%		80%				400%

	Mark Read		0%		40%				200%

Other executive director policies

Legacy share awards and obligations

Under the Executive Remuneration Policy, outstanding awards under LEAP III, the long-term incentive plan that pre-dated the EPSP, and Sir Martin Sorrell’s deferred awards will be paid in accordance with the terms agreed at the time and set out in previous Compensation Committee reports. The key terms of Sir Martin’s deferred awards are summarised below.

Deferred awards (Sir Martin Sorrell only)

The Company has previously received share owner approval to allow Sir Martin Sorrell to defer receipt of his UK and US 2004, 2005 and 2007 LEAP awards and the UK part of his 2006 and 2009 LEAP awards. The UK awards are options that can be exercised at any time until November 2017. The US awards will vest on the earlier of the end of Sir Martin’s employment with the Company, a change in control of the Company and 30 November 2017. Additional shares will continue to accrue in respect of dividends paid up to the point of exercise (UK) or vesting (US).

The Company has also previously received share owner approval to allow Sir Martin Sorrell to defer receipt of the UK and the US Deferred Stock Units Awards Agreements (‘DSUs’). These are the awards that originally vested in 1999, having been granted in 1995 under the Capital Investment Plan. The UK DSU is an option that can be exercised at any time until November 2017. The US DSU will vest on the earlier of the end of Sir Martin’s employment with the Company, a change in control of the Company and 30 November 2017. In accordance with share owner approval, Sir Martin Sorrell receives cash dividend equivalent payments (‘DEPs’) in respect of these deferred awards as noted in the policy table.

Share ownership guidelines

With effect from 2013, executive directors and other members of the senior management team are subject to share ownership guidelines. The implementation of these guidelines seeks to reinforce the WPP principle of alignment of management’s interests with those of share owners.

The following levels of ownership are required to be achieved by the executive directors:


	% of base salary & fees
Group chief executive		600%
Group finance director		300%
Chief executive, WPP Digital and minimum for any other new executive appointed to the Board		200%

Executive directors will be permitted a period of seven years from the date of their appointment to achieve the guideline level.

In the event that an executive director fails to achieve the required levels of share ownership, the committee will decide what remedial action or penalty is appropriate. This may involve a reduction in future share awards or requiring the director to purchase shares in the market to meet the ownership guidelines.

Executive Remuneration Policy table – chairman and non-executive directors

The following table sets out details of the on-going compensation elements for WPP’s chairman and non-executive directors. No element of pay is performance-linked.


Component and Purpose	Operation	Maximum Annual Opportunity
Base fees To reflect the skills and experience and time required to undertake the role.	Fees are reviewed at least every two years and take into account the skills, experience and time required to undertake the role, as well as fee levels in similarly-sized UK companies. The chairman and non-executive directors receive a ‘base fee’ in connection with their appointment to the Board.	An overall cap on all non-executive fees, excluding consultancy fees will apply consistent with the prevailing and share owner approved limit in the Articles of Association (which, subject to share owner approval at the AGM, will be £3m from June 2014).
Additional fees To reflect the additional time required in any additional duties for the Company.	Non-executive directors are eligible to receive additional fees in respect of serving as: • Senior independent director • Chairman of a Board Committee • Member of a Board Committee • Consultancy fees in respect of other work that falls outside the remit of their role for the Company.	An overall cap on all non-executive fees, excluding consultancy fees will apply consistent with the prevailing and share owner approved limit in the Articles of Association (which, subject to share owner approval at the AGM, will be £3m from June 2014). Consultancy fees will be set on a discretionary basis, taking account of the nature of the role and time required.
Benefits and allowances To enable the chairman and non-executive directors to undertake their roles.	The Company will reimburse the chairman and non-executive directors for all reasonable and properly documented expenses incurred in performing their duties of office. In the event that the reimbursement of these expenses gives rise to a personal tax liability for the chairman or non-executive director, the Company retains the discretion to meet this cost (including, where appropriate, costs in relation to tax advice and filing). While not currently offered, the Company retains the discretion to pay additional benefits to the chairman including, but not limited to, use of car, office space and secretarial support.	Benefits and allowances for the chairman will be set at a level that the committee feels is required for the performance of the role.

Implementation Report

Statement of share owner voting

The 2013 AGM was preceded by an extensive share owner consultation process that addressed matters of concern raised by share owners in 2012. As a result of the consultation, significant changes were made to the Group chief executive’s compensation package and a new long-term incentive plan was introduced. Whilst some share owners continued to express dissatisfaction with the remuneration structure and the levels of incentive opportunity, a significant majority felt that the committee had listened to, and addressed, the concerns that had been raised previously regarding the remuneration structure and quantum, as evidenced in the material increase in share owner support of the Compensation Committee Report at the AGM last year.


	Votes for				Votes against				Votes cast		Votes withheld
Resolution	Number		%		Number		%		Number		Number
To approve the Compensation
Committee Report		725,366,040		80.58		174,811,202		19.42		900,177,242		86,651,380
To approve the EPSP		798,616,899		83.62		156,420,404		16.38		955,037,303		31,791,319

There have been no changes to the Executive Remuneration Policy, and no substantive changes to the manner of its implementation, during 2013 or planned for 2014. In light of this and the significant improvement in share owner support following the last engagement in 2012/13, the committee determined that further share owner consultation after the 2013 AGM was not required. The committee was aware, prior to the 2013 AGM, of the reasons why some share owners felt unable to support the resolution to approve the Compensation Committee Report. However, the committee considered that the revised policy was in the best interests of the Company which was subsequently corroborated by the support of a significant majority of share owners.

Directors’ remuneration

For the fiscal year ended 31 December 2013 the aggregate compensation paid by WPP to all directors and officers of WPP as a group for services in all capacities was £46.8 million. Such compensation was paid by WPP and its subsidiaries primarily in the form of salaries, performance-related bonuses, other benefits and deferred share awards. The sum of £0.8 million was set aside and paid in the last fiscal year to provide pension benefits for directors and officers of WPP.

Executive directors’ total remuneration received

Single total figure of remuneration in 2013 and 2012


		Base salary and fees		Benefits ³			DEPs ⁴		Pension		Short-term incentives ⁵		Long-term incentives ⁶		Total annual remuneration
		£000		£000			£000		£000		£000		£000		£000
Sir Martin Sorrell ^1,2	2013		1,150		350			1,101		460		4,115		22,670		29,846
	2012		1,300		271	⁷		940		586		3,078		11,368		17,543	⁷
Paul Richardson ²	2013		698		107			—		210		1,753		6,408		9,176
	2012		684		96			—		205		1,401		5,684		8,070
Mark Read	2013		433		11			—		54		800		1,698		2,996
	2012		425		3			—		43		570		1,137		2,178

As noted on page 40, effective 1 January 2013, the Group chief executive’s remuneration package was reduced with decreases to base salary, pension allowance and short- and long-term incentive opportunities.

Any US dollar amounts received in 2013 have been converted into sterling at an exchange rate of $1.5646 to £1.

Details of benefits are set out on page 55.

⁴

Sir Martin Sorrell receives payments in accordance with the approval granted by share owners of amounts equal to the dividends that would be payable during 2013 totalling £1,100,578 (£940,480 during 2012) in respect of the shares reflected in the UK and US Deferred Stock Units Awards Agreements (which are the agreements that now comprise the awards granted under the Capital Investment Plan in 1995).

⁵

This is the aggregate amount awarded for the 2013 (and 2012) financial years’ performance. The awards are delivered equally in a deferred share bonus in the form of an ESA (which vests two years from date of grant subject to continued employment) and cash.

⁶

This is the value of the 2009 (and 2008) LEAP Awards which vested in 2014 (and 2013) following the end of the five-year performance period on 31 December 2013 (and 31 December 2012).

⁷

In this table, the value of benefits shown as having been received by Sir Martin Sorrell for 2012 is £85,259 less than was disclosed in last year’s Annual Report. This is because a non-taxable life insurance premium was included in the benefits figure disclosed in last year’s Annual Report and, following the implementation of the new UK directors’ remuneration reporting requirements, only taxable benefits should be disclosed. A corresponding adjustment has been made to the 2012 total annual remuneration figure for Sir Martin.

Fixed elements of remuneration

Base salary and fees


	Effective/review date		Contractual salary and fees 000	Base salary and fees received in 2013 000
Sir Martin Sorrell ¹		1 Jan 2013	£1,150	£1,150
Paul Richardson ²		1 July 2013	$945 and £100	$935 and £100
Mark Read ²		1 July 2013	£440	£433

In accordance with Sir Martin Sorrell’s contract of employment, 40% of his salary is paid in US dollars. Due to the fluctuations in the US dollar: sterling exchange rates in the year, retranslating the amounts paid at the exchange rate of $1.5646 to £1 gives a total of £1,164,817.

The amount disclosed as the base salary and fees received in 2013 for Paul Richardson and Mark Read is a combination of two contractual amounts given the increase that took place effective 1 July 2013.

Each executive director receives a fee of £100,000 in respect of their directorship of WPP plc, which is included above. Share owners will be aware that the Group chief executive’s base salary is one aspect of his overall remuneration that has been reduced following consultation in 2012/13. Effective 1 January 2013, Sir Martin Sorrell’s base salary and fee was reduced by 12% to £1.15 million.

The base salary and fees for Paul Richardson and Mark Read, which had not changed since January 2011, were reviewed and increased with effect from 1 July 2013 by 1.8% and 3.5% respectively. Employees across the Group who were subject to a salary review received an average annual salary increase of approximately 3%.

Benefits, dividend equivalent payments and pension


	2013 Benefits £000		2013 DEPs £000
Sir Martin Sorrell		350		1,101
Paul Richardson		107		—
Mark Read		11		—

The benefits shown are those provided to the executive directors that are deemed taxable in the UK (or those that would be taxable if Paul Richardson were resident in the UK). These benefits primarily include car and/or car allowance, healthcare, life assurance, long-term disability allowance, spousal travel costs and housing allowance. The table above also includes share owner-approved dividend equivalent payments of £1,100,578 (£940,480 during 2012) which are due on certain of Sir Martin Sorrell’s deferred share awards. The following table provides a breakdown of the key taxable benefits in respect of 2013:


	Car benefits £000		Healthcare £000		Spousal travel £000		Housing allowance £000		Other expenses £000
Sir Martin Sorrell		30		43		167		63		47
Paul Richardson		24		15		—		44		24
Mark Read		—		3		—		—		8


	Contractual pension		2013 Pension £000
Sir Martin Sorrell		40%		460
Paul Richardson		30%		210
Mark Read		15%		54

All pension benefits for the executive directors are provided on either a defined contribution or a cash allowance basis. Only the aggregate of base salary and fees is pensionable. As part of the alterations to the Group chief executive’s remuneration package following share owner consultation, his pension allowance was reduced to 40% with effect from 1 January 2013. Paul Richardson’s pension contribution remained unchanged at 30%. Mark Read’s pension contribution was increased from 10% to 15% with effect from 1 July 2013, aligning it with the standard level of provision for executive roles within the UK.

Variable elements of pay

Short-term incentives

The following tables summarise the measures and performance assessment by the Compensation Committee in respect of the bonus awarded for 2013. The committee has determined that the disclosure of annual performance targets on a retrospective basis would put the Company at a competitive disadvantage and that the information is commercially sensitive. However, in the spirit of the new UK remuneration reporting regulations, details of the actual performance achieved over the year are set out below, along with an indication of where this achievement sat relative to the targets which were set. All financial measures in the short-term incentive plan are calculated on a like-for-like, constant currency basis.

Short-term incentives are determined based on performance across two areas:


Financial objectives (Group or WPP Digital)		Individual strategic objectives
70%		30%

Financial and individual strategic objectives

Sir Martin Sorrell and Paul Richardson

The operational performance in the Group was very strong in 2013 and the challenging targets set by the committee in the beginning of the year were exceeded. Like-for-like Headline PBT increased by 9.7% resulting in a performance level between target and maximum. Like-for-like Headline PBT margin increased by 0.76% resulting in a performance level above the maximum and the like-for-like revenue growth of 3.5% was just above target level.

LOGO

Mark Read

The performance of WPP Digital is not in the public domain and is deemed to be commercially sensitive. However, the chart below illustrates that the operational performance of WPP Digital was very strong and above the maximum level set. The revenue growth was also strong and was positioned between the target and maximum performance level.

LOGO

Based on the performance set out above, the resulting bonus for each executive relating to 2013 was:


	2013 actual bonus (% of base salary and fees)										2013 actual bonus delivery (% of bonus)				2013 Short-term incentive
	Target (financial and individual strategic objectives)		Maximum (financial and individual strategic objectives)		Actual
	Target (financial and individual strategic objectives)		Maximum (financial and individual strategic objectives)		Financial objectives		Individual strategic objectives		Total bonus		Cash		ESA		£

Sir Martin Sorrell		217.5%		435%		252%		106%		358%		50%		50%		4,115,251
Paul Richardson		200%		300%		186%		68%		254%		50%		50%		1,752,652
Mark Read		134%		200%		132%		50%		182%		50%		50%		800,067

As noted above, 50% of the 2013 bonus is delivered in the form of shares as an Executive Share Award (‘ESA’). These will be granted during 2014 following publication of this Annual Report and will vest, subject to continued employment two years later.

Short-term incentive weightings and measures for 2014

The committee has reviewed the performance measures and weightings for 2014 to ensure continued alignment with Company strategy. While the weighting of financial objectives (70%) and individual strategic objectives (30%) will remain unchanged, the Group financial measures have been adjusted. The 2014 measures will be Headline PBT growth, Headline PBIT margin on gross profit improvement and gross profit growth. The financial objectives established for WPP Digital will be consistent with last year and the individual strategic measures will continue to focus on strategic priorities for the relevant business area.

As stated in the Executive Remuneration Policy, the committee is of the view that the targets for the STIP are commercially sensitive and it would be detrimental to the Company to disclose them in advance of or during the relevant performance period. To the extent targets are no longer commercially sensitive, they will be disclosed at the end of the relevant performance period in that year’s Annual Report.

Long-term incentives

2009 – 2013 LEAP III awards vesting

The 2009 awards were the first granted under LEAP III. The vesting was solely dependent on WPP’s relative TSR performance measured in common currency, against a custom group of WPP’s comparators (Aegis, Arbitron, Dentsu, GfK, Havas, Interpublic, Ipsos, Omnicom and Publicis) weighted by market capitalisation.

Over the five-year investment and performance period, WPP out-performed 82% of the weighted peer group, delivering TSR of 241%. In other words, a shareholding of £100 at the start of the period would be worth £241 at the end, including reinvested dividends.

Aegis and Arbitron, two of the comparator companies, were taken over during the investment and performance period by Dentsu and Nielsen respectively. In line with the guidelines established by the committee, the two companies remained in the comparator group as they were both listed for more than 40% of the investment and performance period. Their TSR performance was calculated assuming reinvestment into a synthetic stock of the remaining comparators with effect from the date immediately prior to which it was independently determined that the share price was unaffected by either a takeover premium or speculation.

On a relative basis, financial and operational performance was strong, consistent with the TSR outcome and no ‘exceptional events’ were identified. As a result, the committee found no reason to make any adjustment to the vesting outcome.

WPP’s TSR performance relative to the comparator group resulted in a match of 437%, equating to 87% of the maximum award.


	Number of shares vesting		Share price on vesting £		Value of match at grant price of £6.1025 £000		Value added due to share price appreciation and dividends £000		2013 Long-term incentives £000
Sir Martin Sorrell		1,777,173		12.7564		10,845		11,825		22,670
Paul Richardson		502,352		12.7564		3,066		3,342		6,408
Mark Read		133,118		12.7564		812		886		1,698

2013 EPSP awards granted

In 2013, all three executive directors, along with a select number of senior managers within the Group, were granted awards under the new long-term incentive plan that was approved by share owners at the 2013 AGM, the Executive Performance Share Plan (EPSP). The 2013 awards are subject to three equally weighted independent performance conditions, being relative TSR, EPS and ROE. Performance is measured over the five financial years starting in 2013 as follows:


Measure	Total Shareowner Return (‘TSR’)	Earnings Per Share (‘EPS’)	Return On Equity (‘ROE’)
Weight	One-third	One-third	One-third
Nature	Relative to peers	WPP growth	WPP absolute
Performance zone (threshold to maximum)	Median to upper decile	7% – 14% compound annual growth	10% – 14% average
Payout		Below threshold: 0% of element vests Threshold: 20% of element vests Maximum or above: 100% of element vests Straight-line vesting between threshold and maximum
Performance period		Five years ending on 31 December 2017

As in previous years, WPP’s TSR performance is compared to companies representing our most relevant, listed global competitors, weighted by market capitalisation. In 2013, the comparator group comprised Arbitron, Dentsu, GfK, Havas, Interpublic, Ipsos, Nielsen, Omnicom and Publicis. Subsequent to the grant of the 2013 awards, Arbitron was acquired by Nielsen and, in accordance with the guidelines established by the committee, Arbitron has been removed from the comparator group as it was listed for less than 40% of the investment and performance period. In light of feedback from share owners, TSR performance will be calculated on both a common currency and local currency basis, with each outcome weighted equally.

The following interests were awarded on 28 June 2013 at the preceding five-day average share price of £10.848 (ordinary shares) or $83.4186 (ADRs).


	Basis and level of award (% of salary and fees)		Award over		Number of interests awarded		Face value at date of grant 000
Sir Martin Sorrell		974%		Ordinary shares		1,032,540		£11,201
Paul Richardson		400%		ADRs		52,026		$4,340
Mark Read		200%		Ordinary shares		78,355		£850

Aligning pay and performance

As set out in the Executive Remuneration Policy, the committee seeks to align the variable remuneration with the key strategic priorities of WPP, therefore maximising the dynamic between pay and performance.

This dynamic is contingent upon the committee setting challenging targets each year. The following graph and table demonstrate the relation between pay and performance over the last five years for the Group chief executive.

LOGO

Source: DataStream Return Index

Growth in the value of a hypothetical £100 holding in WPP ordinary shares over five years against an equivalent holding in the FTSE 100 (the broad market equity index of which WPP is a constituent)-comparison based on one month average of trading day values. Source: DataStream.

Calculated using the single figure methodology.

TSR calculated using a one-month trading day average, consistent with the data shown in the graph.

⁴

TSR calculated using a six-month averaging period, consistent with the calculation methodology under LEAP/EPSP.

Relative importance of spend on pay

The following table sets out the percentage change in total staff costs, headcount, dividends and share buy-backs.

2013

2012

% change

Total Staff costs

6,477.1m

6,106.1m

+6.08

Headcount – average over the year

117,115

114,490

+2.29

Dividends and share buy-backs

£594.3m

£441.1m

+34.73

Relative change in pay for the Group chief executive

As required under the new UK remuneration reporting regulations, the following table summarises the change in the Group chief executive’s base salary and fees, taxable benefits and annual bonus, compared to that of all full-time employees within the Group.

Base salary and fees

Taxable benefits ¹

Annual bonus ²

Group chief executive

-13.0%

+29.1%

+33.7%

All employees

+1.5%

+6.8%

+9.5%

Taking into account the worldwide structure and size of the Group, and given the need to calculate benefits on the basis that an individual is resident in the UK for tax purposes, collating data on all employees was not practicable. As a result, the population for the taxable benefits consists of UK employees only.

The annual bonus data used for the Group chief executive uses the short-term incentive figures set out on page 54.

Non-executive directors’ fees

During 2013, a review of the fees due to non-executive directors was undertaken. As a result of that review, the fees for non-executive directorship, the chairman of the Company and for membership of the Nomination and Governance Committee were increased from 1 July 2013. The fees following that review are set out below (£000).


Chairman			475
Non-executive director			70
Senior independent director			20
Chairmanship of Audit or Compensation Committee			40
Chairmanship of Nomination and Governance Committee			15
Member of Audit or Compensation Committee			20
Member of Nomination and Governance Committee			10

Non-executive directors’ total remuneration received

The single total figure of remuneration table below details fee payments received by the non-executive directors while they held a position on the Board. During both 2012 and 2013, the company met the cost (including national insurance and income tax, where relevant) of expenses that were incurred by the nonexecutive directors in performing their duties of office, in accordance with the policy set out on page 52. In 2013, the disclosable value of the expenses that would be chargeable to UK income tax totalled £131,390 (including £38,477 of national insurance and income tax, where relevant). In 2012, because all Board meetings were held outside of the UK (and therefore the non-executive directors did not incur a UK income tax liability in respect of their expenses), there is no disclosable value for that year.


	Fees £000
	2013		2012
Philip Lader		450		425
Roger Agnelli ¹		74		—
Jacques Aigrain ¹		68		—
Charlene Begley ²		8		—
Colin Day		119		108
Esther Dyson		95		90
Orit Gadiesh		75		70
Ruigang Li		83		65
Stanley (Bud) Morten ^3,6		43		85
Koichiro Naganuma ^3,5		—		—
John Quelch ^3,6		39		71
Daniela Riccardi ⁴		27		—
Jeffrey Rosen		153		145
Hugo Shong ¹		74		—
Timothy Shriver ⁶		106		85
Paul Spencer ³		53		106
Sally Susman ¹		49		—
Sol Trujillo		98		85

Appointed to the Board on 13 May 2013.

Appointed to the Board on 1 December 2013.

Stepped down from the Board on 12 June 2013.

⁴

Appointed to the Board on 12 September 2013.

⁵

Received no fees in 2013.

⁶

Fee includes additional payments for presentation, ex officio or consulting services as follows: John Quelch £6,496 (£6,218 in 2012), Stanley Morten £10,000 (£20,000 in 2012) and Tim Shriver £13,428 (nil in 2012).

No payments for loss of office were due to those non-executive directors that stepped down during the year.

Past directors

During 2013, payments were made to past directors who continued to provide advisory services to the Company. Payments were made to Stanley (Bud) Morten and John Quelch after they stepped down from the Board in June 2013. A payment of £40,396 was made to Mr Morten in respect of advisory services provided to the WPP Group. A payment of £55,137 was made to Mr Quelch in respect of educational presentations he gave to companies within the WPP Group and also due to advisory services provided to the WPP Group. A payment of £30,000 was made to John Jackson in respect of his advisory role to WPP, which enables the Company to benefit from his considerable knowledge and experience in the communications and marketing services sector.

Outstanding share-based awards

In the interests of transparency, the following tables summarise all unexercised share options and share-based awards either vesting in the year or subject to ongoing performance conditions.

Executive Share Awards (ESA) held by executive directors

All Executive Share Awards made under the Restricted Stock Plan are made on the basis of satisfaction of previous performance conditions and are subject to continuous employment until the vesting date. The table does not include the 2013 ESAs as these will not be granted until after publication of the Annual Report. Unless otherwise noted, awards are made in the form of WPP ordinary shares.


			Grant date		Share/ADR price on grant date		No. of shares/ADRs granted ⁴		Face value on grant date ³ 000		Additional shares granted in lieu of dividends		Total shares vesting		Vesting date		Share/ADR price on vesting		Value on vesting 000
Sir Martin Sorrell	2009 ESA			04.05.10		£6.7775		80,560		£546		5,510		86,070		01.05.13	£	10.6485		£917
	2010 ESA			31.03.11		£7.6825		123,657		£950		7,421		131,078		01.05.13	£	10.6485		£1,396
	2011 ESA			30.04.12		£8.3325		360,396		£3,003		—		—		06.03.14		—		—
	2012 ESA	¹		30.05.13		£11.6450		132,139		£1,539		—		—		06.03.15		—		—
Paul Richardson ²	2009 ESA			04.05.10		$51.5900		11,813		$609		826		12,639		06.03.13	$	80.9678		$1,023
	2010 ESA			31.03.11		$61.7600		19,121		$1,181		1,173		20,294		06.03.13	$	80.9678		$1,643
	2011 ESA			30.04.12		$67.8200		21,995		$1,492		—		—		06.03.14		—		—
	2012 ESA	¹		30.05.13		$88.3100		12,575		$1,110		—		—		06.03.15		—		—
Mark Read	2009 ESA			04.05.10		£6.7775		23,164		£157		1,584		24,748		01.05.13	£	10.6485		£264
	2010 ESA			31.03.11		£7.6825		38,138		£293		2,289		40,427		01.05.13	£	10.6485		£430
	2011 ESA			30.04.12		£8.3325		48,454		£404		—		—		06.03.14		—		—
	2012 ESA	¹		30.05.13		£11.6450		24,452		£285		—		—		06.03.15		—		—

During 2013, ESAs were granted in respect of annual bonuses for the year ending 31 December 2012. The grants represent 50% of the total bonus earned and are not subject to a secondary performance requirement, other than continued employment.

Paul Richardson’s 2009, 2010, 2011 and 2012 ESAs were granted in respect of ADRs.

Face value has been calculated using the average closing share price for the five trading days preceding the date of grant (as set out in the table).

⁴

Dividend shares will be due on these awards.

Long-term incentive plans – Leadership Equity Acquisition Plans

The following table summarises all of the awards outstanding under Renewed LEAP and LEAP III. Awards granted in 2008 were granted under Renewed LEAP. Awards granted in 2009, 2010, 2011 and 2012 were granted under LEAP III.


Name	Award date			Investment and performance period		Number of investment shares/ ADRs committed by executive		Share/ ADR price on grant date		Maximum number of matching units at 1 Jan 2013		During 2013							Maximum number of matching units at 31 Dec 2013		Share/ ADR price on vesting		Value on vest/ deferral date 000
Name	Award date			Investment and performance period		Number of investment shares/ ADRs committed by executive		Share/ ADR price on grant date		Maximum number of matching units at 1 Jan 2013		Granted/ (lapsed) units			Additional dividend shares		Vested or deferred shares		Maximum number of matching units at 31 Dec 2013		Share/ ADR price on vesting		Value on vest/ deferral date 000
Sir Martin Sorrell
		31.10.08			01.01.08-31.12.12		218,596		£3.7490		1,092,980		(155,203	)		115,688		1,053,465		—	£	10.7907	£	11,368
		15.12.09			01.01.09-31.12.13		365,878		£6.1025		1,829,390		—			—		—		1,829,390		—		—
		24.11.10			01.01.10-31.12.14		416,666		£7.2475		2,083,330		—			—		—		2,083,330		—		—
		07.12.11			01.01.11-31.12.15		711,159		£6.6475		3,555,795		—			—		—		3,555,795		—		—
		10.12.12			01.01.12-31.12.16		431,034		£8.5975		2,155,170		—			—		—		2,155,170		—		—
Paul Richardson
		31.10.08			01.01.08-31.12.12		109,298		£3.7490		546,490		(77,602	)		57,842		526,730		—	£	10.7907		£5,684
		15.12.09			01.01.09-31.12.13		103,423		£6.1025		517,115		—			—		—		517,115		—		—
		24.11.10			01.01.10-31.12.14		100,968		£7.2475		504,840		—			—		—		504,840		—		—
		07.12.11			01.01.11-31.12.15		100,344		£6.6475		501,720		—			—		—		501,720		—		—
		10.12.12	¹		01.01.12-31.12.16		15,517		$69.2500		77,585		—			—		—		77,585		—		—
Mark Read
		31.10.08			01.01.08-31.12.12		21,859		£3.7490		109,295		(15,520	)		11,566		105,341		—	£	10.7907		£1,137
		15.12.09			01.01.09-31.12.13		27,406		£6.1025		137,030		—			—		—		137,030		—		—
		24.11.10			01.01.10-31.12.14		25,281		£7.2475		126,405		—			—		—		126,405		—		—
		07.12.11			01.01.11-31.12.15		30,166		£6.6475		150,830		—			—		—		150,830		—		—
		10.12.12			01.01.12-31.12.16		23,276		£8.5975		116,380		—			—		—		116,380		—		—

Paul Richardson’s 2012 LEAP award was granted in respect of ADRs.

Long-term incentive plans – Executive Performance Share Plan

The following table summarises all of the awards outstanding under Executive Performance Share Plan.


	Grant date		Performance period		Maximum Number of nil cost options over shares/ADRs awarded		Share/ADR price on grant date		During 2013						Maximum number of nil cost options over shares/ADRs at 31 Dec 2013 ¹
	Grant date		Performance period		Maximum Number of nil cost options over shares/ADRs awarded		Share/ADR price on grant date		Options vested/ (lapsed)		Additional dividend shares		Options exercised or deferred
Sir Martin Sorrell		28.06.13		01.01.13-31.12.17		1,032,540		£10.8480		—		—		—		1,032,540
Paul Richardson ²		28.06.13		01.01.13-31.12.17		52,026		$83.4186		—		—		—		52,026
Mark Read		28.06.13		01.01.13-31.12.17		78,355		£10.8480		—		—		—		78,355

Dividend shares will be due on these awards.

Paul Richardson’s 2013 EPSP award was granted in respect of ADRs.

Full Details of the 2013 EPSP award, including performance measures and targets, can be found on page 58.

Implementation of reward policy for management outside the Board

As noted on page 48, the Company uses share-based compensation across the workforce to incentivise, retain and recruit talent which encourages a strong ownership culture among employees. The use of the main share plans in 2013 is described below.

The Restricted Stock Plan

The WPP Leaders, Partners and High Potential program was used to provide awards to about 1,600 of our key executives. Awards will vest three years after grant, provided the participant is still employed within the Group.

The Executive Stock Option Plan

An award was granted to one person in 2013 (one in 2012). This plan is not generally used.

All-employee plan

During 2013, Worldwide Ownership Plan awards were made to over 50,000 employees, including over 11,000 new participants. By 31 December 2013, options under this plan had been granted to approximately 129,000 employees over 61 million shares since March 1997.

Share incentive dilution for 2003 to 2013

The share incentive dilution level, measured on a 10-year rolling basis, was at 3.1% at 31 December 2013 (3.7% – 2012). It is intended that awards under all plans, other than share options, will all be satisfied with purchased shares held either in the ESOPs or in treasury.

C. Board Practices

The role of the Board

The Board is collectively responsible for promoting the success of the Company by directing and supervising the Company’s policy and strategy and is responsible to share owners for the Group’s financial and operational performance. Responsibility for the development and implementation of Group policy and strategy and for day-to-day management issues is delegated by the Board to the Group chief executive and the other executive directors. The list of matters reserved to the Board can be downloaded from the Company’s website.

During 2013, the Board met seven times formally and held 20 committee meetings throughout the year.


Attendance of directors at meetings	Board		Audit Committee		Compensation Committee		Nomination and Governance Committee
Philip Lader ¹ (chairman)		7		7		7		6
Sir Martin Sorrell		7		—		—		—
Paul Richardson		7		—		—		—
Mark Read		7		—		—		—
Roger Agnelli ⁴		4		3		3		3
Jacques Aigrain ⁴		5		3		3		—
Charlene Begley ⁶		1		1		—		—
Colin Day		7		7		7		—
Esther Dyson		7		—		6		6
Orit Gadiesh		5		—		—		5
Ruigang Li ^7,8		7		—		2		2
Bud Morten ^2,3		3		4		4		2
Koichiro Naganuma ³		—		—		—		—
John Quelch ³		2		—		—		—
Daniela Riccardi ⁵		3		—		2		—
Jeffrey Rosen ⁸		7		6		7		3
Hugo Shong ⁴		5		3		2		2
Paul Spencer ³		3		4		—		—
Tim Shriver ⁸		7		—		7		3
Sally Susman ⁴		5		—		—		3
Sol Trujillo ⁷		7		7		3		—

By invitation, the chairman attended all of the Audit Committee meetings.

By invitation, Bud Morten attended certain committee meetings.

Paul Spencer, Bud Morten, John Quelch and Koichiro Naganuma retired in June 2013.

⁴

Roger Agnelli, Jacques Aigrain, Hugo Shong and Sally Susman were appointed on 13 May 2013.

⁵

Daniela Riccardi was appointed on 12 September 2013.

⁶

Charlene Begley was appointed to the Board on 1 December 2013 and appointed to the Nomination and Governance Committee on 17 February 2014.

⁷

Ruigang Li and Sol Trujillo were appointed to the Compensation Committee in June 2013.

⁸

Ruigang Li, Jeffrey Rosen and Tim Shriver were appointed to the Nomination and Governance Committee in June 2013.

Information regarding the period during which each director has served is set forth in Item 6A.

The role of the chairman

The Board is chaired by Philip Lader, who chairs the Nomination and Governance Committee and during 2013 was a member of the Compensation Committee and at the invitation of the Audit Committee chairman, attended all meetings of that committee. The chairman provides the leadership of the Board and is the main point of contact between the Board and the management team. The chairman represents the Board in discussions with share owners, investor bodies, ensures that systems are in place to provide directors with timely and accurate information, represents the Company in extensive external gatherings, and is also responsible for the Board governance principles. He has led the Board recruitment and appointment process, determination and periodic revision of confidential leadership plans for potential emergencies, and the ongoing emphasis on management development and CEO succession planning. Ambassador Lader plans to retire from the Board at the end of December 2014, after the Board’s announcement of a chairman-designate and an orderly transition.

The role of the senior independent director

The senior independent director is Jeffrey Rosen who is available to share owners and acts as a sounding board for the chairman and as an intermediary for the other directors with the chairman when necessary. The senior independent director’s role includes responsibility for the chairman’s appraisal and succession. Jeffrey Rosen has been the senior independent director since April 2010.

Non-executive directors

The non-executive directors have a diverse range of skills, experience and backgrounds. As detailed in their biographies in Item 6A, the non-executive directors work across the globe in media and advertising, investment banking and investment management, pharmaceuticals, mining, logistics and bioenergy, airlines, FMCG, international management consulting, private equity and angel investing, business education, manufacturing, consumer products and retail management, internet start-ups, government and non-profit organisations. They provide constructive challenge and assistance to the Group chief executive in developing the Group’s strategy. All directors have access to the services of the Company Secretary and may take independent professional advice at the Company’s expense in conducting their duties. The Company provides insurance cover for its directors and officers.

The composition of the Board

The Board is now composed of 19 directors, with at least five non-executive directors, including the Board chairman, planning to retire within the next several years under a new Board tenure policy. Three current members are executive directors and 15, plus the chairman, are non-executive directors. The independence of each non-executive director is assessed annually by the Board. The Board has confirmed that all of the non-executives standing for re-election at the 2014 AGM continue to demonstrate the characteristics of independence.

Succession: Board and committee membership

In 2012 WPP commenced a comprehensive review of the Board’s composition and effectiveness, directed by the Nomination and Governance Committee with the assistance of Egon Zehnder International, a prominent Board recruitment and advisory firm. Geographic and gender diversity together with skills and experience in marketing services, finance and pertinent technologies are among the priorities of our Board succession.

As a consequence of this review the composition of the Board and the committees has been refreshed. Four of the longest serving non-executive directors, Bud Morten, John Quelch, Paul Spencer and Koichiro Naganuma did not stand for re-election at the 2013 AGM. Eight new non-executive directors have been appointed during the course of 2013 and 2014:

•

Roger Agnelli

•

Jacques Aigrain

•

Charlene Begley

•

Dr John Hood

•

Daniela Riccardi

•

Nicole Seligman

•

Hugo Shong

•

Sally Susman

The Compensation Committee chairman, Jeffrey Rosen, will step down from the committee at the 2014 AGM and subject to his election, will be succeeded by Dr John Hood. Esther Dyson and Philip Lader also stepped down from the Compensation Committee at the end of December 2013.

Roger Agnelli, Jacques Aigrain, Dr John Hood, Daniela Riccardi, Nicole Seligman and Hugo Shong have joined Colin Day, Sol Trujillo, Tim Shriver and Ruigang Li on the Compensation Committee.

Colin Day succeeded Paul Spencer as chairman of the Audit Committee, and continuing members, Sol Trujillo and Jeffrey Rosen, have been joined by Jacques Aigrain, Roger Agnelli, Hugo Shong and Charlene Begley.

Roger Agnelli, Charlene Begley, Tim Shriver, Jeffrey Rosen, Ruigang Li, Hugo Shong and Sally Susman have joined Esther Dyson and Orit Gadiesh on the Nomination and Governance Committee, with Philip Lader as chairman. The chairman of the Board participates as an ex-officio member of all Board committees.

Time commitment

Letters of appointment for non-executive directors do not set out a fixed time commitment for Board attendance and duties but give an indication of the likely time required. It is anticipated that the time required by directors will fluctuate depending on the demands of the business and other events.

Development

On joining WPP, non-executive directors are given an induction which includes one-to-one meetings with management and the external auditors, briefings on the duties of directors of a Jersey company, the Model Code, WPP Code of Conduct and the UK Corporate Governance Code. The induction also covers the Board committees that a director will join. All directors are fully briefed on important developments in the various business activities which the Group carries out worldwide and regularly receive extensive information concerning the Group’s operations, finances, risk factors and its people, enabling them to fulfil their duties and obligations as directors. The directors are also frequently advised on regulatory and best practice requirements which affect the Group’s businesses on a global basis. At the Board meeting held in Turkey in 2013, the Board received briefings from all the heads of the Group’s Central & Eastern Europe, Middle East and Africa operations.

Evaluation

WPP undertakes an annual review of the Board, its committees and individual directors. In 2013, the annual evaluation was undertaken alongside the Board recruitment process. Egon Zehnder’s consultants rendered candid evaluations of our Board and committees’ performance. From these findings, we concluded that the Board and its committees had been effective and are prepared for a variety of potential macroeconomic, industry, client and personnel challenges but must continue to seek additional ways that their effectiveness might be enhanced.

Re-election

The directors submit themselves for annual re-election at each Annual General Meeting, if they wish to continue serving and are considered by the Board to be eligible. Directors may be appointed by share owners by ordinary resolution or by the Board on the recommendation of the Nomination and Governance Committee and must then stand for re-election at the next Annual General Meeting where they may be re-elected by ordinary resolution of the share owners.

With only specific exceptions to ensure Board continuity, non-executive directors shall not stand for re-election after they have served for the period of their independence, as determined by then-applicable UK and US standards; that currently being a period of nine years.

Diversity

WPP recognises the importance of diversity, including gender, at all levels of the Group as well as the Board.

WPP is committed to increasing diversity across its subsidiaries and supports the development and promotion of talented individuals, including women. In 2013, women comprised 29% of the WPP Board, 32% of Board members and executive leaders in the subsidiaries, 47% of senior managers and 54% of total employees. Following the appointment of Nicole Seligman on 1 January 2014, women now comprise 31% of the WPP Board in line with our aspiration last year to increase the female representation on the Board to 30% of non-executive directors as part of the Board refreshment process.

Directors’ conflicts of interest

The Company’s Articles of Association permit the Board to consider and, if it sees fit, to authorise situations where a director has an interest that conflicts, or may possibly conflict, with the interests of the Company (Situational Conflicts). The Board has a formal system in place for directors to declare Situational Conflicts to be considered for authorisation by those directors who have no interest in the matter being considered. In deciding whether to authorise a Situational Conflict, the non-conflicted directors must act honestly and in good faith with a view to the best interests of the Company and they may impose limits or conditions when giving the authorisation, or subsequently, if they think this is appropriate.

Any Situational Conflicts considered, and any authorisations given, are recorded in the relevant minutes. The prescribed procedures have been followed in deciding whether, and on what terms, to authorise Situational Conflicts and the Board believes that the systems it has in place for reporting and considering Situational Conflicts continue to operate effectively.

Appointments to the Board

This section sets out details with respect to the appointment of a new executive director to the Board of WPP, whether it is an external or internal appointment.

Fixed compensation

Base salary and fees will be set taking into account a range of factors including the profile and prior experience of the candidate, internal relativities, cost and external market data. If base salary and fees are set at a lower initial level contingent on individual performance, the committee retains the discretion to realign the base salary and fees over a phased period of one to three years following appointment, which may result in an exceptional rate of annualised increase in excess of that set out in the policy table.

Other elements of fixed pay will be set in accordance with the policy table, and a new appointment may require the committee to rely on the authorised discretion (as set out on page 47) to make payments related to relocation, for example, in order to facilitate the appointment.

Ongoing variable compensation

The committee will seek to pay only that level of reward necessary to recruit the exceptional talent needed to lead such a complex global group. The actual level of incentive offered will be dependent on the role and existing package of the candidate. The aggregate maximum face value for annual short- and long-term variable compensation will be 10 times base salary and fees, which is materially lower than the current Group chief executive maximum level. The committee retains the discretion to make awards on recruitment, within the policy limits, to provide an immediate alignment of interest with the interests of share owners.

Buy-out awards

The committee may consider buying-out remuneration entitlements that the individual has had to forfeit by accepting the appointment. The structure and value of the awards will be informed by the structure and value of those entitlements being forfeited, and the performance targets, time horizon and vehicle will be set in an appropriate manner at the discretion of the committee. The intention of the committee is that any award will take the form of WPP shares and will be subject to performance as far as possible.

An announcement of the director’s appointment, detailing the incumbent’s compensation will be made on a timely basis through a regulatory information service and posted on the Company’s website.

Service contracts

The following terms will apply for any new executive role appointed to the Board in the future.

•

Executives will normally be appointed on a notice period of up to 12 months, although the committee retains the discretion to appoint an external candidate on a notice period of up to 24 months reducing on a rolling basis to 12 months (such that after 12 months’ service the notice period would have reverted to the standard 12 months).

•

At the committee’s discretion, any payment in lieu of notice will be restricted to base salary, fees, benefits and pension.

•

On termination there will be no entitlements when classified as a bad leaver (defined within the incentive plans). Otherwise base salary, fees, benefits and pension allowance are payable as per the notice period and the committee will have the power to make phased payments that would be reduced or stopped if alternative employment is taken up.

Terms specific to internal appointments

The committee can honour any pre-existing commitments if an internal candidate is appointed to the Board.

Service contracts

The Company’s policy on executive directors’ service contracts is that they should be on a rolling basis without a specific end date.

The effective dates and notice periods under the current executive directors’ service contracts are summarised below:


	Effective from		Notice period
Sir Martin Sorrell		19 November 2008		‘At will’
Paul Richardson		19 November 2008		12 months
Mark Read		19 November 2008		6 months

Sir Martin Sorrell’s service contract may be terminated by either the Company or Sir Martin without any notice, and without any payment in lieu of notice.

The executive directors’ service contracts are available for inspection at the Company’s registered office and head office.

Loss of office provisions

Fixed compensation elements

As noted above, the service contracts of Messrs Richardson and Read provide for notice to be given on termination. The fixed compensation elements of their contracts will continue to be paid in respect of any notice period. There are no provisions relating to payment in lieu of notice. If an executive director is placed on garden leave, the committee retains the discretion to settle benefits in the form of cash. The executive directors are entitled to compensation for any accrued and unused holiday although, to the extent it is possible and in share owner interests, the committee will encourage executive directors to use their leave entitlements prior to the end of their notice period.

Except in respect of any remaining notice period, no aspect of any executive director’s fixed compensation is payable on termination of employment. Sir Martin Sorrell’s service contract contains an indemnity, subject to certain conditions relating to previously deferred awards, from WPP in respect of any US tax which is charged under section 280G as a result of a termination linked to a change in control of WPP. Further details are on page 70.

Short- and long-term compensation elements

If the executive director is dismissed for cause there is no entitlement to a STIP award, and any unvested share-based awards will lapse. Otherwise, the following table summarises the relevant provisions from the directors’ service contracts (cash bonus) and the plan rules (RSP, EPSP and LEAP III) which apply in other leaver scenarios. As noted on page 48, the committee has the authority to ensure that any awards that vest or lapse are treated in accordance with the plan rules which are more extensive than the summary set out in the table below.



Cash bonus		The executive directors are entitled to receive their bonus for any particular year provided they are employed on the last date of the performance period, except in the case of Mark Read where he gives notice of termination or is dismissed for cause before the payment date.

ESA		Provided the executive director is a Good Leaver, unvested awards will be reduced on a time pro-rata basis and paid on the vesting date.

EPSP		• The award will lapse if the executive leaves during the first year of a performance period.

		• Provided the executive director is a Good Leaver, awards will vest subject to performance at the end of the performance period and time pro-rating. Awards will be paid on the normal date.

		• In exceptional circumstances, the Compensation Committee may determine that an award will vest on a different basis.

		• Generally, in the event of death, the performance conditions are to be assessed as at the date of death. However, the committee retains the discretion to deal with an award due to a deceased executive on any other basis that it considers appropriate.

		• Awards will vest immediately on a change-of-control subject to performance and time pro-rating unless it is agreed by the committee and the relevant executive director that the outstanding awards are exchanged for equivalent new awards.

LEAP III		• Awards will vest subject to performance at the end of the performance period and time pro-rating.

		• In the event of death or serious illness, the performance conditions are to be assessed as at the date of cessation of employment.

		• Awards will vest immediately on a change in control subject to performance and time pro-rating unless the committee decides that awards are to be exchanged for equivalent new awards.

		• In the event of a merger, the committee can require participants to release any outstanding award in consideration of the grant of an equivalent award by the newly formed entity.

Other pre-existing terms that apply to Sir Martin Sorrell

•

Sir Martin Sorrell’s deferred LEAP awards and his DSUs (as set out on page 51) will be paid out unconditionally on termination of employment. The performance requirements in respect of these awards have already been met, the awards have vested and are therefore no longer subject to any leaver provisions.

•

In the event any payments due to Sir Martin would be treated as ‘deferred compensation’ in accordance with US legislation and subject to section 409A requirements, those payments will be delayed. If those payments are delayed, an amount in respect of interest as a result of the delay will be due from the Company to Sir Martin.

•

In the event of a change of control of WPP, the Company has agreed to indemnify Sir Martin, with the prior approval of share owners, with respect to any related personal US tax liability under the provisions of section 280G. This indemnity is subject to certain limitations that exempt the Company from liability for any tax related to the share owner approved deferrals of certain awards. Based on the most recent review by the committee in December 2013 of the potential impact of this clause, it is unlikely that any 280G payment would be due from the Company based on an analysis, using standard assumptions, that was reviewed by independent counsel.

Other committee discretions not set out above

•

Leaver status: the committee has the discretion to determine an executive’s leaver classification in light of the guidance set out within the relevant plan rules, except with respect to Sir Martin Sorrell. Unless Sir Martin Sorrell is terminated for cause, he will be treated as having retired on leaving the Company and therefore be treated in accordance with the plan rules as a Good Leaver.

•

Compromise agreements: the committee is authorised to reach compromise agreements with departing executives, informed by the default position set out above.

External appointments

Executive directors are permitted to serve as non-executives on the boards of other organisations. If the Company is a share owner in that organisation, non-executive fees for those roles are waived. However, if the Company is not a share owner in that organisation, any non-executive fees can be retained by the office holder.

Other chairman and non-executive director policies

Letters of appointment for the chairman and non-executive directors

Letters of appointment have a two-month notice period and there are no payments due on loss of office.

Appointments to the Board

Letters of appointment will be consistent with the current terms as set out in the Annual Report. The chairman and non-executive directors are not eligible to receive any variable pay. Fees for any new non-executive directors will be consistent with the operating policy at their time of appointment. In respect of the appointment of a new chairman, the committee has the discretion to set fees taking into account a range of factors including the profile and prior experience of the candidate, cost and external market data.

Payments in exceptional circumstances

In truly unforeseen and exceptional circumstances, the committee retains the discretion to make emergency payments which might not otherwise be covered by this policy. The committee will not use this power to exceed the recruitment policy limit, nor will awards be made in excess of the limits set out in the Executive Remuneration Policy table. An example of such an exceptional circumstance could be the untimely death of a director, requiring another director to take on an interim role until a permanent replacement is found.

Governance in relation to compensation

Compensation Committee members


	No. of meetings attended in 2013
Jeffrey Rosen (chairman)		7
Roger Agnelli ¹		3
Jacques Aigrain ¹		3
Colin Day		7
Esther Dyson ²		6
Philip Lader ²		7
Ruigang Li ¹		2
Daniela Riccardi ³		2
Hugo Shong ¹		2
Tim Shriver		7
Sol Trujillo ¹		3

Appointed to the committee on 12 June 2013.

Stepped down from the committee on 31 December 2013.

Appointed to the committee on 12 September 2013.

Dr John Hood and Ms Nicole Seligman were appointed as non-executive directors of the Company and members of the committee with effect from 1 January 2014, subject to the confirmation of their appointment by share owners at the AGM.

During 2013, the Compensation Committee met seven times on a formal basis, as noted above, with additional ad hoc meetings held as needed. These largely related to formalising policies as required under the new remuneration reporting regulations.

None of the committee members has any personal financial interest (other than as a share owner as disclosed in Item 6E) in the matters to be decided by the committee, potential conflicts of interest arising from cross-directorships or day-to-day involvement in running the Group’s businesses.

The terms of reference for the Compensation Committee are available on the Company’s website and will be on display at the AGM, as set out in the Notice of AGM. This Annual Report on Form 20-F does not incorporate by reference information on the Company’s website.

The committee’s principal responsibilities under its terms of reference include:

•

reviewing and approving the Company’s compensation strategy;

•

determining appropriate remuneration for executive directors;

•

approving the service agreements and severance arrangements for executive directors and other senior executives of the Company;

•

maintaining appropriate procedures for evaluation of executive performance;

•

overseeing succession planning and management development for senior executives in the Group who are not members of the Board;

•

reviewing, approving and administering the Company’s executive long-term incentive plans, employee share schemes and other equity-related incentive plans;

•

reviewing proposed special incentive awards to senior executives;

•

monitoring prohibitions on personal loans to directors and officers;

•

determining targets for performance-related pay schemes;

•

advising on any major changes in employee benefit structures;

•

overseeing the provisions for selecting, appointing and setting the terms of reference for any remuneration consultants to the Company;

•

overseeing the preparation of and recommending to the board the approval of the annual report of the committee in compliance with the disclosure requirements of the Code of Best Practice and the Directors’ Remuneration Report Regulations 2002;

•

overseeing the adequacy of disclosures throughout the year regarding director compensation, stock transactions and benefits;

•

approving the policy for authorising claims for expenses from directors and senior executives; and

•

ensuring that procedures are in place concerning compliance with the employee welfare provisions of the Company’s Code of Business Conduct and Ethics and the Company’s Policy Manual.

Advisors to the Compensation Committee

The Compensation Committee regularly consults with Group executives. In particular, the committee will invite certain individuals to attend meetings, including the Group chief executive (who is not present when matters relating to his own compensation or contracts are discussed and decided), the Company Secretary, the chief talent officer and the worldwide compensation & benefits director. The latter two individuals provide a perspective on information reviewed by the committee and are a conduit for requests for information and analysis from the Company’s external advisors.

External advisors

The committee continued to retain Towers Watson throughout 2013 as independent advisors. Towers Watson is engaged to provide advice to the Compensation Committee and to work with management on matters related to our Executive Remuneration Policy and practices. Towers Watson is a member of the Remuneration Consultants Group and has signed up to the code of conduct relating to the provision of advice in the UK. In light of this, and the level and nature of the service received, the committee remains satisfied that the advice is indeed objective and independent. No other services are provided by Towers Watson at a Group level, although some of the operating companies may engage at a local level. In 2013, Towers Watson received fees of £144,575 in relation to the provision of advice to the committee. The committee also receives external legal advice, where required, to assist it in carrying out its duties.

The level and components of remuneration

The shareholdings of non-executive directors are set out in Item 6E.

Non-executive directors do not participate in the Company’s pension, share option or other incentive plans.

The Board considers that the non-executive directors’ remuneration conforms with the requirements of the UK Corporate Governance Code.

The fees payable to non-executive directors represent compensation in connection with Board and Board committee meetings and where appropriate for devoting additional time and expertise for the benefit of the Group in a wider capacity.

Details of non-executive directors’ remuneration are provided in Item 6B.

Review of the Audit Committee


Audit Committee members
	Meetings
Paul Spencer (chairman until 12 June 2013)		4
Colin Day (chairman from 12 June 2013)		7
Sol Trujillo		7
Jeffrey Rosen		6
Roger Agnelli ¹		3
Jacques Aigrain ¹		3
Charlene Begley ²		1
Hugo Shong ¹		3
¹ Appointed to the Committee on 13 May 2013.
² Appointed to the Committee on 1 December 2013.

The audit committee held seven meetings during the year, which were attended by the external auditors, the Company’s chairman, the Group finance director, Bud Morten, the director of internal audit, the Group chief counsel and the Company Secretary.

Preparatory meetings were also held with the internal and external auditors as well as members of the Company’s senior management. The committee received presentations from the heads of internal audit, finance, tax, compliance and legal. The committee also received reports from the Disclosure Committee on financial reports. The Board received regular reports on all matters of particular significance arising at the committee meetings.

The committee’s terms of reference, which are reviewed with the Board annually and most recently in December 2013, are on the Company’s website at wpp.com/investor. This Annual Report on Form 20-F does not incorporate by reference information on the Company’s website.

The committee and its members were formally assessed by the chairman of the Company as part of the annual evaluation process described on page 65 for their technical suitability to be members and also for its overall effectiveness. The Board has designated Colin Day as the committee’s financial expert for Sarbanes-Oxley Act (SOX) purposes and as having recent and relevant financial experience for the purposes of the UK Corporate Governance Code. The members of the committee have financial and/or financial services experience as set out in their biographies in Item 6A.

Committee responsibilities and how they were discharged in 2013

The main matters dealt with during 2013 were as follows:

•

monitoring the integrity of the Company’s financial statements and reviewing significant financial reporting judgements;

•

reviewing internal financial control and internal audit activities;

•

assisting the Board in meeting its responsibilities in respect of reviewing and reporting on the systems and key elements of risk management as they affect the Group;

•

reviewing the Group Treasury policy with particular focus on debtors, funding foreign exchange and cash management and the continued ability of the Group to adopt the going concern basis in preparing financial statements;

•

reviewing reports on any material litigation or regulatory reviews involving Group companies;

•

reviewing the Group’s mergers and acquisitions strategy, any significant acquisitions, due diligence procedures and integration processes and the debt financing by the Group;

•

reviewing GroupM’s trading model and its risk assessment processes;

•

reviewing the Group’s tax strategy;

•

monitoring the accounting and legal reporting requirements, including all relevant regulations of the UK Listing Authority, the SEC and NASDAQ and the Jersey Financial Services Commission;

•

overseeing continued compliance with Section 404 of SOX, through regular status reports submitted by the internal and external auditors;

•

reviewing the Group’s reporting systems and shared services and IT integration initiatives;

•

reviewing issues raised on our Right to Speak helpline and the actions taken in response to those calls; and

•

reviewing the Group’s initiatives and policies on data privacy and internet security.

The committee examined whether the annual report and accounts for 2013 was fair, balanced and understandable and provided the information necessary for share owners to assess the Group’s performance, business model and strategy.

Financial reporting and significant financial judgements

The management team make key decisions and judgements in the process of applying the Group’s accounting policies. These key judgements were detailed in reports to the committee in respect of 2013 which were then examined by the committee and discussed with management.

Deloitte also reported to and discussed with the committee whether suitable accounting policies had been adopted in the financial statements for the year ended 2013 and whether management had made appropriate estimates and judgements. The areas of significant judgement considered by the committee and how these were addressed included:

•

the assessments made for goodwill impairment. The committee confirmed, based on management’s expectations of future performance of certain businesses, the level of goodwill impairment charges required in 2013;

•

the judgements made in respect of revenue recognition particularly as these relate to media volume income and media trading income. The committee received briefings from Deloitte and management on the appropriateness of the policies adopted and the controls in place;

•

the valuations of non-controlled investments which are based on local management forecasts, recent financing rounds and other supporting information such as industry valuation multiples. The committee examined the valuations with management and considered the sample testing of the investments performed by Deloitte and agreed that the valuations performed were appropriate;

•

the accuracy of forecasting the potential future payments due under earnout agreements in respect of acquired businesses. The committee considered the forecasting with management and the testing undertaken by Deloitte and agreed that earnouts have been accounted for on a consistent basis to previous periods;

•

the approach taken to calculating fair value adjustments in respect of acquired businesses and specifically provisions for non-corporate tax, property and legal exposures which the committee considered was appropriate;

•

the valuation of year-end provisions in respect of working capital. The committee received briefings on the approach taken by management in assessing the level of exposure across the Group and agreed it was consistent and appropriate;

•

accounting for the judgemental elements of remuneration, including, pensions, bonus accruals, severances and share-based payments. The committee agreed that the assumptions applied by management are reasonable;

•

the judgements made in respect of tax, in particular deferred tax assets including their recoverability and the level of tax provisioning. The committee supported management’s assumptions in both these areas and believe the current level of provisions is reasonable; and

•

the going concern assessment and key forecast assumptions. The committee concur with management’s going concern assumptions as set out in note 24 to the Consolidated Financial Statements.

External audit

Deloitte has been WPP’s auditor since 2002. The lead partner rotates every five years and the last rotation was in 2010. In 2013, the effectiveness of the audit process was evaluated through a committee review of the audit planning process and discussions with key members of the Group’s finance function. The 2013 evaluations concluded that there was a good quality audit process and constructive challenge where necessary to ensure balanced reporting. The committee held private meetings with the external auditors and the committee chair met privately with the external auditors before meetings. The committee continues to be satisfied with the performance of Deloitte and confirmed that Deloitte continues to be objective and independent. The committee recommends the reappointment of Deloitte at the AGM on 25 June 2014.

The committee considered the Group’s position on its audit services contract following changes to the UK Corporate Governance Code and European Union regulations concerning the audit market. In view of the uncertainty regarding the form and impact of these regulations, the committee will recommend a course of action to the Board during 2014 in respect of the tender of the audit contract.

Non-audit fees

The committee has established a policy regarding non-audit services that may be provided by Deloitte, which prohibits certain categories of work in line with relevant guidance on independence, such as ethical standards issued by the Auditing Practices Board and independence rules of the Public Company Accounting Oversight Board (United States) and SEC rules. Other categories of work may be provided by the auditors if appropriate and if pre-approved by the committee, either as individual assignments or as aggregate amounts for specified categories of services. All fees are summarised periodically for the committee to assess the aggregate value of non-audit fees against audit fees. The level of fees for 2013 is shown in note 3 on page F-17.

D. Employees

The assets of communications services businesses are primarily their employees, 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 that attract talented personnel. However, the Company, like all 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 31 December 2013, the Group, including all employees of associated undertakings, had approximately 175,000 employees located in over 3,000 offices in 110 countries compared with 165,000 and 158,000 as at 31 December 2012 and 2011, respectively. Excluding all employees of associated undertakings, this figure is 119,116 (2012: 115,711, 2011: 113,615). The average number of employees in 2013 was 117,115 compared to 114,490 and 109,971 in 2012 and 2011, respectively, including acquisitions.

Their geographical distribution was as follows:


	2013	2012	2011
North America	28,093	27,782	27,540
United Kingdom	11,925	11,413	10,761
Western Continental Europe	23,559	23,322	22,298
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe	53,538	51,973	49,372
	117,115	114,490	109,971

Their operating sector distribution was as follows:


	2013	2012	2011
Advertising and Media Investment Management	49,505	48,662	47,252
Data Investment Management*	29,586	28,989	29,204
Public Relations & Public Affairs	8,298	8,437	7,869
Branding & Identity, Healthcare and Specialist Communications	29,726	28,402	25,646
	117,115	114,490	109,971

Data Investment Management was previously reported as Consumer Insight.

E. Share Ownership

Executive directors’ interests

Executive directors’ interests in the Company’s ordinary share capital are shown in the following table. Save as disclosed in this table and in the Compensation Committee Report, no executive director had any interest in any contract of significance with the Group during the year. Each executive director has a technical interest as an employee and potential beneficiary in shares in the Company held under the ESOPs. More specifically, the executive directors have potential interests in shares related to the outstanding awards under LEAP III, the EPSP and ESAs, as set out below. As at 31 December 2013, the Company’s ESOPs (which are entirely independent of the Company and have waived their rights to receive dividends) held in total 24,048,113 shares in the Company (22,570,364 in 2012).


		Total beneficial interests and deferred awards ¹		Scheme interests									Share options without performance conditions exercised ⁸
							Nil- or nominal-cost options
Director				Shares (without performance conditions)			With performance conditions (unvested)			Without performance conditions (vested but unexercised)
Sir Martin Sorrell ⁹	At 31 Dec 2013		18,556,204		492,535	²		10,656,225	⁴		7,813,783	⁶		—
	At 16 Apr 2014		19,010,399		132,139	³		8,826,835	⁵		8,773,456	⁷		—
Paul Richardson	At 31 Dec 2013		681,370		172,850	²		2,171,730	⁴		—			—
	At 16 Apr 2014		762,850		62,875	³		1,654,615	⁵		—			—
Mark Read	At 31 Dec 2013		115,713		72,906	²		609,000	⁴		—			20,494
	At 16 Apr 2014		120,713		24,452	³		471,970	⁵		—			—

Shares held outright together with shares due pursuant to awards that have vested but receipt of which have been deferred with share owner approval (see footnote 6).

Shares due pursuant to the 2011 and 2012 Executive Stock Awards, full details of which can be found on page 61. Additional dividend shares will be due on vesting.

Shares due pursuant to the 2012 Executive Stock Awards, full details of which can be found on page 61. Additional dividend shares will be due on vesting.

⁴

Maximum number of shares due on vesting pursuant to the outstanding LEAP III and EPSP awards, full details of which can be found on page 62. Additional dividend shares will be due on vesting.

⁵

As noted at footnote 4 above, less the maximum due under the 2009 LEAP III Award, which vested on 28 February 2014 (full details can be found on page 57).

⁶

Shares (1) pursuant to the vesting of awards under Renewed LEAP (namely the 2004 and 2005 awards, part of the 2006 award and the 2007 award) and (2) which originally formed part of the Capital Investment Plan (an award made in 1995, which vested in 1999, in respect of 4,691,392 shares in total, some of which have been received by Sir Martin Sorrell) and which now comprise the share owner-approved UK and US Deferred Stock Units Awards Agreements. The receipt of all of these awards has been deferred until November 2017 in accordance with share owner approval. Dividend shares will be due on the exercise of these options.

⁷

As noted at footnote 6 above, with the addition of the shares due pursuant to the vesting of the UK part of the 2009 LEAP III Award. The receipt of this award has been deferred until November 2017 in accordance with share owner approval. Dividend shares will be due on the exercise of this option.

⁸

Shares acquired during the year pursuant to the exercise of options, full details of which can be found on page 77.

⁹

On 28 March 2014, Sir Martin Sorrell gifted 1,100,000 ordinary shares to The JMCMRJ Sorrell Charitable Foundation. At 16 April 2014, The JMCMRJ Sorrell Charitable Foundation is interested in 2,105,936 ordinary shares. Sir Martin has no beneficial interest in these shares.

Share ownership guidelines

As detailed in the Executive Remuneration Policy, the executive directors are required to achieve a minimum level of share ownership of WPP shares. The Group chief executive, Group finance director and chief executive, WPP Digital are required to hold shares to the value of 600%, 300% and 200% of base salary and fees respectively.

At the end of 2013 and at the date of this Compensation Committee Report, all executive directors exceeded their share ownership guidelines.

Non-executive directors’ interests

Non-executive directors’ interests in the Company’s ordinary share capital are shown in the following table. Save as disclosed in this table and in the Compensation Committee Report, no non-executive director had any interest in any contract of significance with the Group during the year.


Non-executive director	Total Interests at 31 Dec 2013		Total Interests at 16 Apr 2014
Roger Agnelli		—		—
Jacques Aigrain		—		4,000
Charlene Begley		—		—
Colin Day		15,240		15,240
Esther Dyson		35,000		35,000
Orit Gadiesh		—		—
John Hood ¹		n/a		—
Philip Lader		11,950		11,950
Ruigang Li		—		—
Daniela Riccardi		—		—
Jeffrey Rosen		12,000		12,000
Nicole Seligman ¹		n/a		3,750
Hugo Shong		—		—
Tim Shriver		10,000		10,000
Sally Susman		—		—
Sol Trujillo		10,000		10,000

Appointed to the Board on 1 January 2014.

Options held by executive directors

The options held by Mark Read at 1 January 2013 were granted prior to him becoming a director of the Company and were not subject to any performance conditions. All outstanding options were exercised on 12 September 2013.


	Grant/ award date		End of exercise period		Exercise price		At 1 Jan 2013 (no. of shares)		Granted (Lapsed) 2013 (no. of shares)		Exercised 2013 (no. of shares)		Share price on exercise		At 31 Dec 2013 (no. of shares)
Mark Read		17.11.2003		17.11.2013	£	5.5950		10,615		—		10,615	£	12.7700		—
		29.10.2004		29.10.2014	£	5.5350		9,879		—		9,879	£	12.7700		—

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. Major Shareholders

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:


			24 April 2014				22 April 2013				20 April 2012
BlackRock Inc.	4.8	%		64,207,978	5.12	%		64,710,630	*			*
Legal & General	*			*	3.51	%		44,375,396	3.55	%		44,960,433

No interests in the issued ordinary share capital of the Company in excess of 3.0% have been notified to the Company.

The disclosed interests refer to the respective combined holdings of those entities and to interests associated with them. The Company has not been notified of any other holdings of ordinary share capital of 3% or more. 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.

The number of outstanding ordinary shares at 31 December 2013 was 1,348,733,317 which includes the underlying ordinary shares represented by 10,970,861 ADSs. 215 share owners of record of WPP ordinary shares were US residents at 31 December 2013.

The geographic distribution of our share ownership as at 31 December 2013 is presented below:


United Kingdom			36%
United States			32%
Asia Pacific, Latin America, Africa & Middle East, Canada and Continental Europe			32%
Total			100%

B. Related Party Transactions

From time to time the Group enters into transactions with its associated undertakings. These transactions were not material for any of the years presented.

C. Interests of Experts and Counsel

Not applicable.

ITEM 8. FINANCIAL INFORMATION

A. Consolidated Statements and Other Financial Information

See Item 18.

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 impact on the Company’s financial position, or on the results of its operations.

Dividend distribution policy

See Item 10B.

ADS holders are eligible for all stock dividends or other entitlements accruing on the underlying WPP plc shares and receive all cash dividends in US dollars. These are normally paid twice a year. Dividend cheques are mailed directly to the ADS holder on the payment date if ADSs are registered with WPP’s US Depositary, Citibank N.A. Dividends on ADSs that are registered with brokers are sent to the brokers, who forward them to ADS holders.

Dollar amounts paid to ADS holders depend on the sterling/dollar exchange rate at the time of payment.

B. Significant Changes

None.

ITEM 9. THE OFFER AND LISTING

A. Offer and Listing Details

Share price history

The Company’s ordinary shares have been traded on The London Stock Exchange since 1971.

The following table sets forth, for the periods 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.


	£ per Ordinary Share
	High		Low
2009		6.15		3.53
2010		7.95		5.73

2011		8.47		5.78

2012
First Quarter		8.80		6.69
Second Quarter		8.74		7.43
Third Quarter		8.73		7.85
Fourth Quarter		8.95		7.88

2013
First Quarter		10.92		9.06
Second Quarter		11.90		10.24
Third Quarter		12.96		11.31
October		13.44		12.15
November		13.71		13.07
December		13.83		12.85
Fourth Quarter		13.83		12.15

2014
January		13.83		12.72
February		13.60		12.65
March		12.89		11.98
First Quarter		13.83		11.98

The ordinary shares have traded in the United States since 29 December 1987 in the form of ADSs, which are evidenced by ADRs or held in book entry form. The Depositary for the ADSs is Citibank, N.A. in New York. The following table sets forth, for the periods indicated, the reported high and low sales prices of the ADSs as reported by NASDAQ.


	US dollars per ADS
	High		Low
2009		49.99		24.54
2010		61.97		44.30

2011		68.78		45.04

2012
First Quarter		70.03		52.14
Second Quarter		69.98		57.56
Third Quarter		70.37		60.98
Fourth Quarter		72.90		63.34

2013
First Quarter		81.78		72.81
Second Quarter		89.12		78.25
Third Quarter		104.91		86.37
October		108.94		97.36
November		111.16		105.88
December		114.86		105.23
Fourth Quarter		114.86		97.36

2014
January		113.58		104.87
February		113.54		102.27
March		107.39		98.96
First Quarter		113.58		98.96

The Depositary held 54,854,338 ordinary shares as at 31 December 2013, approximately 4.07% of the outstanding ordinary shares, represented by 10,970,861 outstanding ADSs.

B. Plan of Distribution

Not applicable.

C. Markets

See the discussion under “Share price history” in Item 9A.

D. Selling Shareholders

Not applicable.

E. Dilution

Not applicable.

F. Expenses of the Issue

Not applicable.

ITEM 10. ADDITIONAL INFORMATION

A. Share Capital

Not applicable.

B. Memorandum and Articles of Association

WPP is a public limited company incorporated under the name “WPP plc” in Jersey with registered number 111714.

The following summarises certain provisions of our memorandum and articles of association and applicable Jersey law. This summary is qualified in its entirety by reference to the Jersey Companies Law and our memorandum and articles of association. A copy of our memorandum and articles of association in the form adopted by special resolution passed on 5 November 2012 and including amendments to reflect the change of name of WPP, which became effective on 2 January 2013, is an exhibit to this Form 20-F.

Objects and Purposes

Under the Jersey Companies Law, the capacity of a Jersey company is not limited by anything contained in its memorandum or articles of association. Accordingly, the memorandum of association of a Jersey company does not contain an objects clause.

Rights attaching to WPP ordinary shares

Voting rights of share owners – subject to disenfranchisement in the event of: (A) non-payment of any call or other sum due and payable in respect of any ordinary share; or (B) any non-compliance with any notice requiring disclosure of the beneficial ownership of any ordinary shares and subject to any special rights or restrictions as to voting for the time being attached to any ordinary shares (as to which there are none at present), on a show of hands every qualifying person (i.e. share owner, proxy or authorised corporate representative) present has one vote other than every proxy appointed by more than one member entitled to vote on the resolution who has two votes, one vote for and one against the resolution if: (i) one or more of the members instructed him to vote for and one or more of the members instructed him to vote against the resolution; or (ii) one or more of the members instructed him to vote for the resolution and one or more of the members gave him discretion as to how to vote and he exercises his discretion by voting against the resolution; or (iii) one or more of the members instructed him to vote against the resolution and one or more of the members gave him discretion as to how to vote and he exercises his discretion by voting for the resolution, and on a poll every share owner present in person or by proxy has one vote for every ordinary share of which he or she is a holder, except that any proxy who has been appointed by the Depositary shall have such number of votes as equals the number of ordinary 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.

Return of capital on a winding up – the liquidator may, with the sanction of a special resolution of WPP and any other sanction required by the Statutes: (A) divide among the WPP share owners in specie the whole or any part of the assets of WPP; or (B) vest the whole or any part of the assets in trustees on such trusts for the benefit of share owners as the liquidator shall think fit, but no share owner shall be compelled to accept any assets upon which there is any liability. The “Statutes” means the Jersey Companies Law and every other statute, statutory instrument, regulation or order, for the time being in force, concerning companies registered under the Jersey Companies Law, including the Electronic Communication (Jersey) Law 2000 and the Companies (Uncertificated Securities) (Jersey) Order 1999 (as amended).

Capitalisation of reserves

The board of directors may, with the authority of an ordinary resolution of WPP: (A) resolve to capitalise any sum standing to the credit of any reserve account of WPP (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 share owners in proportion to the nominal amount of the ordinary shares held by them respectively and apply that sum on their behalf in paying up in full any unissued ordinary shares or debentures of WPP of a nominal amount equal to that sum and allot the ordinary shares or debentures credited as fully paid to those share owners, or as they may direct, in those proportions or in paying up the whole or part of any amounts that are unpaid in respect of any issued ordinary shares 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 ordinary shares to be allotted credited as fully paid up.

Transfer of ordinary shares

Subject to any restrictions in the articles of association, a share owner may transfer all or any of his ordinary shares in any manner that is permitted by the Statutes and is from time to time approved by the board of directors. WPP shall register the transfer of any ordinary shares held in uncertificated form by means of a relevant system in accordance with the Statutes. The board of directors may, in its absolute discretion, refuse to register any transfer of an uncertificated share where permitted by articles of association and the Statutes.

A share owner may transfer all or any of his certificated ordinary shares by an instrument of transfer in any usual form, or in such other form as the board of directors may approve. The instrument of transfer 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. The board of directors may, in its absolute discretion, refuse to register any transfer of any certificated ordinary share that is not fully paid up (but not so as to prevent dealings in ordinary shares admitted to official listing by the United Kingdom Listing Authority (UKLA) from taking place on an open and proper basis) or on which WPP has a lien. The board of directors may also refuse to register any instrument of transfer of a certificated ordinary share unless it is lodged at the registered office, or such other place as the board of directors may decide, for registration, accompanied by the share certificate for the ordinary shares to be transferred and such other evidence as the board of directors may reasonably require to prove title of the intending transferor or his right to transfer the ordinary shares and it is in respect of only one class of WPP shares. If the board of directors refuses to register a transfer of a certificated ordinary share it shall, as soon as practicable and in any event 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. The board of directors must provide the transferee with such further information about the reasons for the refusal as the transferee may reasonably request. Unless otherwise agreed by the board of directors in any particular case, the maximum number of persons who may be entered on the register as joint holders of an ordinary share is four.

Changes in capital

Subject to the provisions of the Jersey Companies Law, WPP may by special resolution:

•

increase its share capital;

•

consolidate and divide all or any of its share capital into ordinary shares of a larger amount;

•

sub-divide all or part of its share capital into ordinary shares of a smaller amount;

•

cancel any ordinary shares that have not, at the date of the special resolution, been taken or agreed to be taken by any person and diminish the amount of its authorised share capital by the amount of the ordinary shares so cancelled; or

•

alter its share capital in any other manner permitted by the Jersey Companies Law.

Subject to the provisions of the Jersey Companies Law, WPP may:

•

purchase ordinary shares, including any redeemable ordinary shares; and

•

by special resolution, reduce its share capital and any capital redemption reserve or share premium account.

Authority to allot securities and disapplication of pre-emption rights

WPP may from time to time pass an ordinary resolution authorising the board of directors to exercise all the powers of WPP to allot relevant securities up to the nominal amount specified in the resolution. 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. The term “relevant securities” means shares in WPP other than subscriber shares, or shares allotted pursuant to an employee share scheme, and any right to subscribe for or to convert any security into, shares in WPP. For the avoidance of doubt, any reference to the allotment of relevant securities includes the grant of such a right but not the allotment of shares pursuant to such a right.

On the passing of a special resolution, the board of directors shall have power to allot equity securities wholly for cash 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.

Variation of rights

Whenever the share capital of WPP is divided into different classes of shares (which it is not as at the date of this document), all or any of the rights for the time being attached to any class of shares in issue may, subject to the Statutes, be varied, either in such manner as those rights may provide or with the consent in writing of the holders of two-thirds in nominal value of the issued ordinary shares of that class or with the sanction of a special resolution passed at a separate general meeting of the holders of those ordinary shares. At any separate general meeting, the necessary quorum is two persons holding or representing by proxy at least one-third in nominal amount of the issued ordinary shares of the class in question (but at any adjourned meeting, one person holding ordinary shares of the class or his proxy is a quorum).

Disclosure of interests in WPP’s shares

WPP may give a disclosure notice to any person whom it believes is either:

•

interested in the WPP’s shares; or

•

has been so interested at any time during the three years on which the disclosure notice is issued.

The disclosure notice may require the person:

•

to confirm that fact or (as the case may be) to state whether or not it is the case; and

•

if he holds, or has during that time held, any such interest, to give such further information as may be required.

The notice may require the person to whom it is addressed, where either:

•

his interest is a present interest and another interest in the shares subsists; or

•

another interest in the shares subsisted during that three year period at a time when his interest subsisted, to give, so far as lies within his knowledge, such particulars with respect to that other interest as may be required by the notice including:

•

the identity of persons interested in the shares in question; and

•

whether persons interested in the same shares are or were parties to either an agreement to acquire interests in a particular company, or an agreement or arrangement relating to the exercise of any rights conferred by the holding of the shares.

The notice may require the person to whom it is addressed, where his interest is a past interest, to give (so far as lies within his knowledge) particulars of the identity of the person who held that interest immediately upon his ceasing to hold it.

Failure to provide the information within 14 days after the notice has been given means that the holder of the relevant shares shall not be entitled to vote either personally or by proxy at a shareholders’ meeting or to exercise any other right confirmed by membership in relation to shareholder meetings for so long as the default continues (and, if those shares represent at least 0.25 percent of the issued shares of the class, the holder shall not be entitled to receive any payment by way of dividend or to transfer any rights in the shares).

Register of members

The register of members of WPP must be kept and maintained in Jersey.

Uncertificated shares – general powers

Subject to the Jersey Companies Law and the Companies Uncertificated Securities (Jersey) Order 1999 (as amended), the board of directors may permit any class of ordinary shares to be held in uncertificated form and to be transferred by means of a relevant system and may revoke such permission. In relation to any uncertificated share, WPP 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 the articles of association or otherwise in effecting any actions. Any provision in the articles of association in relation to uncertificated shares that is inconsistent with any applicable statutory provision shall not apply. WPP may, by notice to the holder of an uncertificated share, require the holder to change the form of that share to certificated form within such period as may be specified in the notice. For the purpose of effecting any action by WPP, the board of directors may determine that holdings of the same share owner in uncertificated form and in certificated form shall be treated as separate holdings but shares of a class held by a person in uncertificated form shall not be treated as a separate class from shares of that class held by that person in certificated form.

Directors

The WPP directors (other than alternate directors) shall not, unless otherwise determined by an ordinary resolution of WPP, be fewer than six in number.

A director need not be a share owner.

At each annual general meeting every director who held office on the date seven days before the date of the notice of annual general meeting shall retire from office, but shall be eligible for re-election.

The directors shall be paid fees not exceeding in aggregate £2,000,000 per annum (or such larger sum as WPP may, by ordinary resolution, determine) as the board of directors may decide to be divided among them. Such fee shall be divided among them in such proportion and manner as they may agree or, failing agreement, equally.

The board of directors may grant special remuneration to any director who performs any special or extra services to, or at the request of, WPP. Special remuneration may be payable to a director in addition to his ordinary remuneration (if any) as a director.

The directors shall also be paid out of the funds of WPP all expenses properly incurred by them in and about the discharge of their duties, including their expenses of travelling to and from the meetings of the board of directors, committee meetings and general meetings.

The board of directors may exercise all the powers of WPP to: (i) pay, provide, arrange or procure the grant of pensions or other retirement benefits, death, disability or sickness benefits, health, accident and other insurances or other such benefits, allowances, gratuities or insurances, including in relation to the termination of employment, to or for the benefit of any person who is or has been at any time a director of WPP or in the employment or service of WPP or of any body corporate that is or was associated with WPP or of the predecessors in business of WPP or any such associated body corporate, or the relatives or dependants of any such person. For that purpose, the board of directors may procure the establishment and maintenance of, or participation in, or contribution to, any pension fund, scheme or arrangement and the payments of any insurance premiums; (ii) establish, maintain, adopt and enable participation in any profit sharing or incentive scheme including shares, share options or cash or any similar schemes for the benefit of any director or employee of WPP or of any associated body corporate, and, subject to any restrictions under applicable legislation, to lend money to any such director or employee or to trustees on their behalf to enable any such schemes to be established, maintained or adopted; and (iii) support and subscribe to any institution or association that may be for the benefit of WPP or of any associated body corporate or any directors or employees of WPP or associated body corporate or their relatives or dependants or connected with any town or place where WPP or an associated body corporate carries on business, and to support and subscribe to any charitable or public object whatsoever.

Subject to any applicable statutory provisions and to declaring his interests in accordance with the articles of association, a director may enter into or be interested in any transaction or arrangement with WPP, either with regard to his tenure of any office or position in the management, administration or conduct of the business of WPP, or as vendor, purchaser or otherwise. A director may hold and be remunerated in respect of any other office or place of profit with WPP (other than the office of auditor of WPP) in conjunction with his office as a director and he (or his firm) may also act in a professional capacity for WPP (except as auditor) and may be remunerated for it.

A director who, to his knowledge, is in any way, whether directly or indirectly, interested in a transaction or arrangement or a proposed transaction or arrangement with WPP or any of its subsidiaries, or if any situation exists in which a director has or can have a direct or indirect interest that conflicts with or may conflict with the interests of WPP, shall disclose to WPP the nature and extent of the interest or situation in accordance with the articles of association.

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 and varying its terms), or the termination of his own appointment, as the holder of any office or place of profit with WPP or any other company in which WPP 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 WPP or any company in which WPP is interested, those proposals may be divided and considered in relation to each director separately, and in such case each of the directors concerned (if not otherwise debarred from voting under the articles of association) shall be entitled to vote and be counted in the quorum in respect of each resolution except that concerning his own appointment or the termination of his own appointment.

A director shall not vote (or be counted in the quorum at a meeting) in respect of any transaction or arrangement or other proposal in which he has an interest that (together with any interest of a connected person) is to his knowledge a direct or indirect interest and as may reasonably be required as likely to give rise to a conflict. Notwithstanding the above, a director shall be entitled to vote (and be counted in the quorum) on: (A) any transaction or arrangement in which he is interested by virtue of an interest in ordinary shares, debentures or other securities of WPP or otherwise in or through WPP; (B) the giving of any guarantee, security or indemnity in respect of money lent or obligations incurred by him or by any other person at the request of, or for the benefit

of, WPP or any of its subsidiaries; or a debt or obligation of WPP or any of its subsidiaries for which he himself has assumed responsibility under a guarantee or indemnity or by the giving of security; (C) (subject to the Statutes) indemnification (including loans made in connection with it) by WPP in relation to the performance of his duties on behalf of WPP or any of its subsidiaries; (D) any issue or offer of ordinary shares, debentures or other securities of WPP or any of its subsidiaries in respect of which he is or may be entitled to participate in his capacity as holder of any such securities or as an underwriter or sub-underwriter; (E) any transaction or arrangement concerning another company in which he and any connected person do not to his knowledge hold, directly or indirectly as shareholders, or through their direct or indirect holdings of financial instruments (within the meaning of Chapter 5 of the Disclosure and Transparency Rules) voting rights representing one percent or more of any class of shares in the capital of such company; (F) any arrangement for the benefit of employees of WPP or any of its subsidiaries that does not accord to him any privilege or benefit not generally accorded to the employees to whom the arrangement relates; and (G) the purchase or maintenance of insurance for the benefit of the directors or for the benefit of persons including the directors. “Disclosure and Transparency Rules” means the rules and regulations made by the Financial Services Authority in its capacity as the UK Listing Authority under Part VI of the UK Financial Services and Markets Act of 2000, as amended, and contained in the UK Listing Authority’s publication of the same name.

WPP shall not make a payment for loss of office to a director unless the payment has been approved by an ordinary resolution of WPP.

General meetings

The board of directors shall convene, and WPP shall hold, an annual general meeting in accordance with the Statutes. Other general meetings shall be held whenever the board of directors thinks fit or on the requisition of WPP share owners in accordance with the Statutes or the articles of association.

An annual general meeting shall be called by not less than 21 days’ written notice and any other general meeting shall be called by not less than 14 clear days’ written notice.

The requisite quorum for general meetings of WPP shall be two qualifying persons, entitled to vote on the business to be transacted at the meeting.

Borrowing powers

The board of directors may exercise all the powers of WPP 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 obligations of WPP or of any third party. The board of directors shall restrict the borrowings of WPP and exercise all voting and other rights or powers of control exercisable by WPP in relation to its subsidiaries (if any) so as to secure (as regards subsidiaries 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 WPP Group (exclusive of any borrowings that are owed by one WPP Group company to another WPP Group company) after deducting the amount of cash deposited will not, without the previous sanction of WPP in general meeting, exceed an amount equal to 2.5 times the adjusted capital and reserves (as defined in the articles of association) or any higher limit fixed by ordinary resolution of WPP that is applicable at the relevant time. “WPP Group” means WPP and its subsidiaries and subsidiary undertakings and, where the context requires, its associated undertakings.

To date, no resolution of the type referred to in the paragraph above has been passed.

Dividends

Declaration of dividends – subject to the provisions of the Jersey Companies Law, WPP may, by ordinary resolution, declare a dividend to be paid to the share owners, 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 of directors.

Fixed and interim dividends – subject to the provisions of the Jersey Companies Law, the board of directors may pay such interim dividends as appear to the board of directors to be justified by the financial position of WPP and may also pay any dividend payable at a fixed rate at intervals settled by the board of directors whenever the financial position of WPP, in the opinion of the board of directors, justifies its payment. If the board of directors acts in good faith, none of the directors shall incur any liability to the share owners conferring preferred rights for any loss such share owners may suffer in consequence of the lawful payment of an interim dividend on any shares having non-preferred or deferred rights.

Calculation and currency of dividends – except insofar as the rights attaching to, or the terms of issue of, any shares 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 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; (C) any amount paid by WPP by way of dividend will be deemed to include any amount that WPP may be compelled by law to withhold or deduct; and (D) dividends may be declared or paid in any currency. The board of directors may agree with any share owner that dividends that may at any time or from time to time be declared or become due on his or her ordinary 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 WPP or any other person to bear any costs involved.

Dividends not to bear interest – no dividend or other moneys payable by WPP on or in respect of any share shall bear interest as against WPP unless otherwise provided by the rights attached to the share.

Calls or debts or amounts required by law may be deducted from dividends – the board of directors 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 WPP on account of calls or otherwise in relation to shares.

Dividends in specie – with the authority of an ordinary resolution of WPP and on the recommendation of the board of directors, payment of any dividend may be satisfied wholly or in part by the distribution of specific assets and in particular of paid up ordinary shares or debentures of any other company.

Scrip dividends – the board of directors may, with the authority of an ordinary resolution of WPP, offer any share owners the right to elect to receive further ordinary shares (whether or not of that class) credited as fully paid, by way of scrip dividend instead of cash in respect of all (or some part) of any dividend specified by the ordinary resolution.

Unclaimed dividends – any dividend unclaimed for a period of 12 years after having become due for payment shall be forfeited and cease to remain owing by WPP.

Forfeiture of shares

If the whole or any part of any call or installment remains unpaid on any share after the due date for payment, the board of directors may serve a written notice on the share owner requiring him to pay so much of the call or installment as remains unpaid, together with any accrued interest.

The written notice shall state a further day, being not less than 14 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 installment is payable will be liable to be forfeited.

If the requirements of a notice 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 of directors. The forfeiture shall include all dividends declared and other moneys payable in respect of the forfeited share and not actually paid before the forfeiture.

Every share that is forfeited or surrendered shall become the property of WPP and (subject to the Statutes) may be sold, re-allotted or otherwise disposed of, upon such terms and in such manner as the board of directors shall decide either to the person who was before the forfeiture the share owner 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.

Website communication with share owners

The articles of association enable WPP to use its website as a means of sending or supplying documents or information to share owners. Before communicating with a share owner by means of its website, WPP must have asked the share owner, individually, to agree (generally or specifically) that WPP may send or supply documents or information to him by means of a website. A member shall be deemed to have agreed that WPP may send or supply a document or information by means of a website if no response to the request is received within 28 days. When communicating with share owners by means of website communications, WPP will notify the share owners (by post or other permitted means) of the presence of a document or information on the website.

Directors’ indemnity, insurance and defence

As far as the legislation allows, WPP may:

(i) indemnify any director (or of an associated body corporate) against any liability;

(ii) indemnify a director of a company that is a trustee of an occupational pension scheme for employees (or former employees) of WPP (or of an associated body corporate) against liability incurred in connection with WPP’s activities as trustee of the scheme;

(iii) purchase and maintain insurance against any liability for any director referred to in paragraph (i) or (ii) above; and

(iv) provide any director referred to in paragraph (i) or (ii) above with funds (whether by loan or otherwise) to meet expenditure incurred or to be incurred by him in defending any criminal, regulatory or civil proceedings or in connection with an application for relief (or to enable any such director to avoid incurring such expenditure).

Takeover Bids

The City Code on Takeovers and Mergers (the “City Code”) applies to WPP. Under the City Code, if an acquisition of ordinary shares were to increase the aggregate holding of an acquirer and its concert parties to ordinary shares carrying 30% or more of the voting rights in WPP, the acquirer (and, depending upon the circumstances, its concert parties) would be required, except with the consent of the Panel on Takeovers and Mergers (an independent body in the United Kingdom), to make a cash offer for the outstanding ordinary shares at a price not less than the highest price paid for the ordinary shares by the acquirer or its concert parties during the previous 12 months. A similar obligation to make a such a mandatory offer would also arise on the acquisition of ordinary shares by a person holding (together with its concert parties) ordinary shares carrying between 30% and 50% of the voting rights in WPP if the effect of such acquisition were to increase that person’s percentage of the voting rights they hold in ordinary shares.

The Jersey Companies Law provides that where a person (the “Offeror”) makes a takeover offer to acquire all of the shares (or all of the shares of any class) in a Jersey company (other than any shares already held by the Offeror at the date of the offer), if the Offeror has by virtue of acceptances of the offer acquired or contracted to acquire not less than 90% in nominal value of the shares (or class of shares) to which the offer relates, the Offeror may (subject to the requirements if the Jersey Companies Law), by notice to the holders of the shares (or class of shares) to which the offer relates which the Offeror has not already acquired or contracted to acquire, compulsorily acquire those shares. A holder of any shares who receives a notice of compulsory acquisition may, within six weeks from the date on which such notice was given apply to the Royal Court of Jersey (the “Jersey Court”) for an order that the Offeror not be entitled and bound to purchase the holder’s shares or that the Offeror purchase the holder’s shares on terms different to those of the Offeror’s offer.

Where before the end of the period within which the takeover offer can be accepted, the Offeror has by virtue of acceptances of the offer acquired or contracted to acquire not less than 90% in nominal value of all of the shares (or all of the shares of a particular class) of the Jersey company, the holder of any shares (or class of shares) to which the offer relates who has not accepted the offer may, by written notice to the Offeror, require the Offeror to acquire the holder’s shares. The Offeror shall (subject to the requirements of the Jersey Companies Law) be entitled and bound to acquire the holder’s shares on the terms of the offer or on such other terms as may be agreed. Where a holder gives the Offeror a notice of compulsory acquisition, each of the Offeror and the holder of the shares is entitled to apply to the Jersey Court for an order that the terms on which the Offeror is entitled and bound to acquire the holder’s shares shall be such as the Jersey Court thinks fit.

C. Material Contracts

The following is a summary of each contract (not being a contract entered into in the ordinary course of business) that has been entered into by any member of the WPP Group: (a) within the two years immediately preceding the date of this Form 20-F which are, or may be, material to the WPP Group; or (b) at any time which contain obligations or entitlements which are, or may be, material to the WPP Group as at the date of this Form 20-F:

(i) On 3 August 1998, WPP 2005 Limited entered into an agreement with Asatsu pursuant to which WPP 2005 Limited subscribed for approximately 23% (at that time) of the share capital of Asatsu for approximately £139 million and Asatsu subscribed for 31,295,646 ordinary shares in WPP 2005 Limited representing approximately 4% (at that time) of the issued share capital of WPP 2005 Limited. Each party agreed not to transfer any shares held by them in the other for a period of five years and thereafter only to transfer such shares following a procedure set out in the agreement. Each party is further entitled to nominate a non-executive director to the board of the other subject to retaining its shareholding in the other. Due to the disparity of the percentage shareholdings of WPP 2005 Limited in Asatsu and of Asatsu in WPP plc (originally held in WPP 2005 Limited), an agreement was also entered into on 3 August 1998 imposing, inter alia , limitations, in certain circumstances, on the voting rights in respect of the shares held by WPP 2005 Limited in Asatsu;

(ii) On 23 June 2004, WPP Finance (UK) issued US$650,000,000 of 5.875% notes due 2014 pursuant to the Indenture and the First Supplemental Indenture both dated as at 23 June 2004 among WPP Finance (UK), as Issuer, WPP 2005 Limited, as guarantor and Citibank N.A., as Trustee. The Notes were fully and unconditionally guaranteed by WPP 2008 Limited pursuant to the Second Supplemental Indenture dated 27 June 2006 and by Young & Rubicam Brands US Holdings (a subsidiary of WPP) pursuant to the Third Supplemental Indenture dated 19 December 2006. The Notes were fully and unconditionally guaranteed by WPP 2012 Limited (formerly known as WPP plc) and WPP Air 1 Limited (a subsidiary of WPP) pursuant to the Fourth Supplemental Indenture dated 7 October 2008 and the Fifth Supplemental Indenture dated 30 April 2009. The Indenture contains events of default provisions (including a cross-default provision). It also contains a restriction on the Issuer or any of the guarantors referred to above consolidating or merging with any other person and conveying, transferring or leasing all or substantially all of their properties and assets to any person except where the entity resulting from such consolidation or merger or to whom such properties and assets are transferred becomes a primary obligor of the Notes and gives certain certificates and indemnities. The

covenants of the Indenture also contain a negative pledge and a limitation on the sale and leaseback of any assets by the guarantors referred to above and their principal subsidiaries. The Indenture allows for defeasance of these covenants subject to certain conditions. The Indenture also contains a joint and several indemnity from the Issuer and the guarantors referred to above in favour of the Trustee. On 2 December 2011, holders exchanged US$281,369,000 of the foregoing notes for $312,387,000 principal amount of 4.75% guaranteed senior notes due November 2021 issued by WPP Finance 2010 and guaranteed by WPP 2012 Limited, WPP Air 1 Limited, WPP 2008 Limited and WPP 2005 Limited. The outstanding principal of the 5.875% notes due 2014 is therefore now US$368,631,000. In the Sixth Supplemental Indenture dated 14 December 2012, arrangements were made for WPP plc and WPP Jubilee Limited to accede as additional guarantors subject to the court approval of the scheme of arrangement referred to in the above ;

(iii) On 4 April 2007, WPP 2008 Limited issued £400,000,000 6.0% guaranteed bonds due 2017. The bonds are guaranteed by WPP 2005 Limited and were constituted by a Trust Deed dated 4 April 2007 between Citicorp Trustee Company Limited, the guarantor and WPP 2008 Limited. The bonds are listed on the London Stock Exchange and the terms and conditions contain a redemption provision at the option of the bondholders on a Change of Control, a negative pledge provision and events of default provisions (including a cross-default provision). The Trust Deed also contains an indemnity by WPP 2008 Limited in favour of Citicorp Trustee Company Limited. Pursuant to a supplemental trust deed dated 14 November 2008, WPP 2012 Limited (formerly known as WPP plc), WPP Air 1 Limited and WPP Air 3 Limited acceded as additional guarantors to the bonds. In a second supplemental trust deed dated 14 December 2012, arrangements were made for WPP plc to substitute WPP 2008 Limited as issuer and for WPP 2008 Limited and WPP Jubilee Limited to accede as additional guarantors subject to the court approval of the scheme of arrangement referred to in the above;

(iv) On 6 November 2007, WPP Finance S.A. issued EUR 500,000,000 5.25% guaranteed bonds due 2015 and £200,000,000 6.375% guaranteed bonds due 2020. Both tranches of bonds are guaranteed by WPP 2005 Limited and WPP 2008 Limited and were constituted respectively by two Trust Deeds dated 6 November 2007 between Citicorp Trustee Company Limited, the guarantors and WPP Finance S.A. The bonds are listed on the London Stock Exchange and the terms and conditions contain a redemption provision at the option of the bondholders on a Change of Control, a negative pledge provision and events of default provisions (including a cross-default provision). The Trust Deeds also contain indemnities by WPP Finance S.A. in favour of Citicorp Trustee Company Limited. Pursuant to a supplemental trust deed dated 14 November 2008, WPP 2012 Limited (formerly known as WPP plc), WPP Air 1 Limited and WPP Air 3 Limited acceded as additional guarantors to the bonds. In two second supplemental trust deeds for each of the bonds respectively dated 14 December 2012, arrangements were made for WPP plc and WPP Jubilee Limited to accede as additional guarantors subject to the court approval of the scheme of arrangement referred to in the above;

(v) On 12 May 2008, WPP 2008 Limited issued EUR 750,000,000 6.625% guaranteed bonds due 2016. The bonds are guaranteed by WPP 2005 Limited and were constituted by a Trust Deed dated 12 May 2008 between Citicorp Trustee Company Limited, the guarantor and WPP 2008 Limited. The bonds are listed on the London Stock Exchange and the terms and conditions contain a redemption provision at the option of the bondholders on a Change of Control, a negative pledge provision and events of default provisions (including a cross-default provision). The Trust Deed also contains an indemnity by WPP 2008 Limited in favour of Citicorp Trustee Company Limited. Pursuant to a supplemental trust deed dated 14 November 2008, WPP 2012 Limited (formerly known as WPP plc), WPP Air 1 Limited and WPP Air 3 Limited acceded as additional guarantors to the bonds. In a second supplemental trust deed dated 14 December 2012, arrangements were made for WPP 2008 Limited to be substituted by WPP plc as issuer, and WPP 2008 Limited and WPP Jubilee Limited to accede as additional guarantors subject to the court approval of the scheme of arrangement referred to in the above;

(vi) On 10 June 2009, WPP Finance (UK) issued US$600,000,000 of 8% guaranteed senior notes due 2014 pursuant to the Indenture and the First Supplemental Indenture both dated as at 10 June 2009

among WPP Finance (UK) as Issuer, WPP 2012 Limited (formerly known as WPP plc), WPP Air 1 Limited, WPP 2008 Limited and WPP 2005 Limited as Guarantors, and Wilmington Trust Company, as Trustee. The indenture contains events of default provisions (including a cross-default provision). It also contains a restriction on the Issuer or any of the Guarantors referred to above consolidating or merging with any other person and conveying, transferring or leasing all or substantially all of their properties and assets to any person except where the entity resulting from such consolidation or merger or to whom such properties and assets are transferred becomes a primary obligor of the notes and gives certain certificates and indemnities. The covenants of the Indenture also contain a negative pledge and a limitation on the sale and leaseback of any assets by the Guarantors referred to above and their principal subsidiaries. The Indenture allows for defeasance of these covenants subject to certain conditions. The holders of the notes have the right to require the Issuer to repurchase the notes at a price equal to 101% of the principal amount of the notes in the event that there is a Change of Control of WPP plc and the notes lose their investment grade rating. The Indenture also contains a joint and several indemnity from the Issuer and the Guarantors referred to above in favour of the Trustee. In the Second Supplemental Indenture dated 14 December 2012, arrangements were made for WPP plc and WPP Jubilee Limited to accede as additional guarantors subject to the court approval of the scheme of arrangement referred to in the above;

(vii) On 21 November 2011, WPP Finance 2010 issued US$500,000,000 of 4.75% guaranteed senior notes due November 2021. On 2 December 2011 WPP Finance 2010 issued an additional $312,387,000 of 4.75% guaranteed senior notes due November 2021 in exchange for $281,369,000 of outstanding 5.875% Senior Notes due 2014 of WPP Finance (UK). In total, WPP Finance 2010 issued US$812,387,000 of the 4.75% guaranteed senior notes due November 2021 pursuant to the Indenture and the First Supplemental Indenture, both dated as at 2 November 2011, among WPP Finance 2010 as Issuer, WPP plc, WPP Air 1 Limited, WPP 2008 Limited and WPP 2005 Limited as Guarantors, and Wilmington Trust National Association as Trustee, Citibank, N.A., as Security Registrar and Principal Paying Agent and Citibank N.A., London Branch as Paying Agent. Aside from the coupon and repayment date, the terms and conditions of the notes are the same as those for the $600,000,000 8% notes due September 2014 described above. In the Fourth Supplemental Indenture dated 14 December 2012, arrangements were made for WPP plc and WPP Jubilee Limited to accede as additional guarantors subject to the court approval of the scheme of arrangement referred to in the above;

(viii) On 30 November 2011, WPP CP Finance plc, WPP Finance Co. Limited and WPP Group Canada Finance Inc (as borrowers), guaranteed by WPP 2012 Limited (formerly known as WPP plc) , WPP 2005 Limited, WPP 2008 Limited, WPP Air 1 Limited and WPP CP Finance plc entered into an agreement for a five-year multi-currency revolving credit facility (with a US Dollar swingline option) for US$1.05 billion and £375 million with a syndicate of banks and Citibank International plc as facility agent. The facility is available for drawing by way of multi-currency cash advances on a revolving basis, with an option to draw US Dollar swingline advances up to a sub-limit of US$825 million. The rate of margin for the facility is, if the long-term unsecured and non-credit enhanced debt rating of WPP published by Moody’s and Standard & Poor’s (the Credit Rating) is A-/A3 or higher, 0.55% per annum. If the Credit Rating is BBB+ or Baa1, the rate of margin for the facility shall be 0.65% per annum. If the Credit Rating is BBB or Baa2, the rate of margin for the facility is 0.75% per annum. If the Credit Rating is BBB- or Baa3, the rate of margin for the facility is 0.95% per annum. If the Credit Rating is BB+ or Ba1 or lower, the rate of margin for the facility is 1.25% per annum. If Moody’s and Standard & Poor’s assign different Credit Ratings, the margin shall be the average of the margins determined by each of Moody’s and Standard & Poor’s. The commitment fee payable on undrawn commitments is equal to 35% of the then applicable margin. A utilisation fee of 0.20% per annum is payable on US dollar outstandings on any day on which the US dollar amount of dollar outstandings exceed 33% of the total dollar facility commitments but is less than or equal to 66% of the total dollar facility commitments. A utilisation fee of 0.40% per annum is payable on US dollar outstandings on any day on which the US dollar amount of dollar outstandings exceed 66% of the total

dollar facility commitments. A utilisation fee of 0.20% per annum is payable on sterling outstandings on any day on which the sterling amount of sterling outstandings exceed 33% but is less than or equal to 66% of the total sterling facility commitments. A utilisation fee of 0.40% per annum is payable on sterling outstandings on any day on which the sterling amount of sterling outstandings exceed 66% of the total sterling facility commitments. The facility agreement contains customary representations, covenants and events of default. The interest rate for swingline advances is the higher of the US prime commercial lending rate and 0.50% per annum above the federal funds rate. In an Amendment and Restatement agreement dated 14 December 2012, arrangements were made for WPP plc and WPP Jubilee Limited to accede as additional guarantors subject to the court approval of the scheme of arrangement referred to in the above. In an Amendment and Restatement agreement dated 25 April 2013 the total dollar facility commitments were increased by US$150 million to US$1.20 billion with a corresponding increase in the total swingline commitments by an amount of US$150 million to US$975 million. In addition the total sterling facility commitments were increased by £100 million to £475 million;

(ix) On 7 September 2012, WPP Finance 2010 issued US$500,000,000 3.625% guaranteed senior notes due September 2022 and $300,000,000 5.125% guaranteed senior notes due 2042. These notes were issued under the Indenture dated as at 2 November 2011, described above, as supplemented by the Second Supplemental Indenture and the Third Supplemental Indenture, respectively, each dated as at 7 September 2012, among WPP Finance 2010 as issuer, WPP 2012 Limited (formerly known as WPP plc), WPP Air 1 Limited, WPP 2008 Limited and WPP 2005 Limited as guarantors, Wilmington Trust, National Association as trustee, Citibank, N.A., as security registrar and Principal Paying Agent and Citibank, N.A., London Branch as Paying Agent. Aside from the coupon and repayment date, the terms and conditions of these notes are the same as those for the $600,000,000 8% notes due September 2014 described above. In the Fourth Supplemental Indenture dated 14 December 2012, arrangements were made for WPP plc and WPP Jubilee Limited to accede as additional guarantors subject to the court approval of the scheme of arrangement referred to above;

(x) On 2 January 2013, WPP plc entered into a deposit agreement with Citibank, N.A., as US Depositary, and the holders and beneficial owners of ADSs that sets out the terms on which the US Depositary has agreed to act as depositary with respect to WPP ADSs The deposit agreement contains, amongst other things, customary provisions pertaining to the form of ADRs, the deposit and withdrawal of ordinary shares, distributions to holders of ADSs, voting of ordinary shares underlying ADSs, obligations of the US Depositary and WPP plc, charges of the US Depositary, and compliance with U.S. securities laws.

(xi) On 12 November 2013, WPP Finance 2010 issued US$500,000,000 5.625% guaranteed senior notes due November 2043. These notes were issued under the Indenture dated as at 12 November 2013, as supplemented by the Supplemental Indenture dated as at 12 November 2013, among WPP Finance 2010 as issuer, WPP plc, WPP Jubilee Limited, and WPP 2005 Limited as guarantors, Wilmington Trust, National Association as trustee, Citibank, N.A., as security registrar and Principal Paying Agent and Citibank, N.A., London Branch as Paying Agent. Aside from the coupon and repayment date, the terms and conditions of these notes are the same as those for the $600,000,000 8% notes due September 2014 described above;

(xii) On 20 November 2013, WPP Finance 2013 issued EUR 750,000,000 3.000% guaranteed senior bonds due November 2023. The bonds are guaranteed by WPP plc, WPP 2005 Limited, and WPP Jubilee Limited, and were constituted by a Trust Deed dated 11 November 2013 between WPP Finance 2013, the guarantors, and Citicorp Trustee Company Limited. The administration of payments to bondholders is provided for in an Agency Agreement dated 11 December 2013 between WPP Finance 2013, the guarantors, and Citibank, N.A., London Branch. The bonds are listed on the Global Exchange Market of the Irish Stock Exchange and the terms and conditions contain a redemption provision at the option of the bondholders on a Change of Control, a negative pledge provision and the events of default provisions in the terms and conditions contain a cross-default provision.

D. Exchange Controls

There are currently no Jersey foreign exchange control restrictions on remittances of dividends on the ordinary shares or on the conduct of the Registrant’s operations.

E. 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 ADSs. Each investor should seek advice based on their individual particular circumstances from an independent tax adviser.

The following summary of the Jersey (UK in relation to dividend distributions) and the United States tax consequences is not exhaustive of all possible tax considerations and should not be considered legal or tax advice. In addition, this summary does not represent a detailed description of the tax consequences applicable to persons subject to special treatment under Jersey and United States tax laws. 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 advisors. In addition, this summary only addresses holders that hold ordinary shares or ADSs as capital assets, and it does not address the taxation of a United States shareholder (either corporate or individual) where that shareholder controls, or is deemed to control, 10% or more of the voting stock of the Company.

References in this discussion to WPP Shares include references to WPP ADSs and corresponding references to WPP Share Owners (or holders of WPP ADSs) include references to holders of WPP ADSs, unless indicated otherwise.

United Kingdom, Jersey and the United States taxation

United Kingdom taxation

Tax on dividends

The Company will not be required to withhold UK tax at source from dividend payments it makes.

WPP Share Owners who are resident outside the UK for tax purposes will not generally be able to claim repayment from HMRC of any part of the tax credit attaching to dividends received from WPP, although this will depend on the existence and terms of any double taxation convention between the UK and the country in which such WPP Share Owner is resident. A WPP Share Owner resident outside the UK may also be subject to taxation on dividend income under local law. A WPP Share Owner who is not solely resident in the UK for tax purposes should consult his own tax advisers concerning his tax liabilities (in the UK and any other country) on dividends received from WPP, whether they are entitled to claim any part of the tax credit and, if so, the procedure for doing so, and whether any double taxation relief is due in any country in which they are subject to tax.

Taxation of disposals

An individual WPP Share Owner who has ceased to be resident or ordinarily resident for tax purposes in the UK for a period of less than five tax years and who disposes of all or part of his WPP Shares during that period may be liable to capital gains tax in respect of any chargeable gain arising from such a disposal on his return to the UK, subject to any available exemptions or reliefs.

Stamp duty and stamp duty reserve tax (SDRT)

No UK stamp duty or SDRT will be payable on the issue of WPP Shares. UK stamp duty should generally not need to be paid on a transfer of the WPP Shares. No UK SDRT will be payable in respect of any agreement to transfer WPP Shares unless they are registered in a register kept in the UK by or on behalf of WPP. It is not intended that such a register will be kept in the UK.

The statements in this paragraph summarise the current position on stamp duty and SDRT and are intended as a general guide only. Special rules apply to agreements made by, amongst others, intermediaries and certain categories of person may be liable to stamp duty or SDRT at higher rates.

Jersey taxation

General

The following summary of the anticipated tax treatment in Jersey of WPP and WPP Share Owners and holders of WPP ADSs (other than residents of Jersey) is based on Jersey taxation law as it is understood to apply at the date of this Form 20-F. It does not constitute legal or tax advice. WPP Share Owners or holders of WPP ADSs should consult their professional advisers on the implications of acquiring, buying, holding, selling or otherwise disposing of WPP Shares or WPP ADSs under the laws of the jurisdictions in which they may be liable to taxation. WPP Share Owners or holders of WPP ADSs should be aware that tax rules and practice and their interpretation may change.

Income Tax

(a) WPP

Under the Jersey Income Tax Law, WPP will be regarded as either:

(i) not resident in Jersey under Article 123(1) of the Jersey Income Tax Law provided that (and for so long as) it satisfies the conditions set out in that provision, in which case WPP will not (except as noted below) be liable to Jersey income tax; or

(ii) resident in Jersey and will fall under Article 123C of the Jersey Income Tax Law, in which case WPP (being neither a financial services company nor a specified utility company under the Jersey Income Tax Law at the date hereof) will (except as noted below) be subject to Jersey income tax at a rate of 0 per cent.

WPP is tax resident in the United Kingdom and therefore should not be regarded as resident in Jersey.

(b) Holders of WPP Shares

WPP will be entitled to pay dividends to holders of WPP Shares without any withholding or deduction for or on account of Jersey tax. Holders of WPP Shares (other than residents of Jersey) will not be subject to any tax in Jersey in respect of the holding, sale or other disposition of such WPP Shares.

Under Jersey law and the WPP Articles, WPP is only permitted to pay a dividend to a person who is recorded in its register of members as the holder of a WPP Share. The US Depositary will be recorded in WPP’s register of members as the holder of each WPP Share represented by a WPP ADS. Accordingly, WPP will pay all dividends in respect of each WPP Share represented by a WPP ADS to the US Depositary (as the registered holder of each such WPP Share) rather than to the holder of the ADS.

The US Depositary will not be subject to any tax in Jersey in respect of the holding, sale or other disposition of the WPP Shares held by it. In addition, holders of the WPP ADSs (other than residents of Jersey) should not be subject to any tax in Jersey in respect of the holding, sale or other disposition of such WPP ADSs.

Goods and services tax

WPP is an “international services entity” for the purposes of the Goods and Services Tax (Jersey) Law 2007 (the GST Law ). Consequently, WPP is not required to:

(a) register as a taxable person pursuant to the GST Law;

(b) charge goods and services tax in Jersey in respect of any supply made by it; or

(c) subject to limited exceptions that are not expected to apply to WPP, pay goods and services tax in Jersey in respect of any supply made to it.

Stamp duty

No stamp duty is payable in Jersey on the issue or inter vivos transfer of WPP Shares or WPP ADSs.

Upon the death of a WPP Share Owner, a grant of probate or letters of administration will be required to transfer the WPP Shares of the deceased person. However, WPP may (at its discretion) dispense with this requirement where: (a) the deceased person was domiciled outside of Jersey at the time of death; and (b) the value of the deceased’s movable estate in Jersey (including any WPP Shares) does not exceed £10,000.

Upon the death of a WPP Share Owner, where the deceased person was domiciled outside of Jersey at the time of death, Jersey stamp duty will be payable on the registration in Jersey of a grant of probate or letters of administration, which will be required in order to transfer or otherwise deal the deceased person’s personal estate situated in Jersey (including any WPP Shares) if the net value of such personal estate exceeds £10,000.

The rate of stamp duty payable is:

(i)

(where the net value of the deceased person’s relevant personal estate is more than £10,000 but does not exceed £100,000) 0.50 per cent. of the net value of the deceased person’s relevant personal estate; or

(ii)

(where the net value of the deceased person’s relevant personal estate exceeds £100,000) £500 for the first £100,000 plus 0.75 per cent. of the net value of the deceased person’s relevant personal estate which exceeds £100,000.

In addition, application and other fees may be payable.

US federal income taxation

Introduction

TO ENSURE COMPLIANCE WITH TREASURY DEPARTMENT CIRCULAR 230, HOLDERS OF WPP SHARES OR WPP ADSs ARE HEREBY NOTIFIED THAT: (A) ANY DISCUSSION OF US FEDERAL TAX ISSUES IS NOT INTENDED OR WRITTEN TO BE RELIED UPON, AND CANNOT BE RELIED UPON, BY HOLDERS OF WPP SHARES OR WPP ADSs FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON, HOLDERS OF WPP SHARES OR WPP ADSs UNDER THE INTERNAL REVENUE CODE OF 1986; AND (C) HOLDERS OF WPP SHARES OR WPP ADSs SHOULD SEEK ADVICE BASED ON THEIR PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISER.

The following is a summary of certain material US federal income tax consequences of the ownership and disposition of WPP Shares or WPP ADSs by a US Holder (as defined below). This summary deals only with initial acquirers of WPP Shares or WPP ADSs that are US Holders and that will hold the WPP Shares or WPP ADSs as capital assets. The discussion does not cover all aspects of US federal income taxation that may be relevant to, or the actual tax effect that any of the matters described herein will have on, the acquisition, ownership or disposition of WPP Shares or WPP ADSs by particular investors, and does not address state, local, foreign or other tax laws. In particular, this summary does not address all of the tax considerations that may be relevant to investors subject to special treatment under the US federal income tax laws (such as financial institutions, insurance companies, investors liable for the alternative minimum tax, investors that own (directly or indirectly) 10% or more of the voting stock of WPP, investors that hold WPP Shares or WPP ADSs through a

permanent establishment, individual retirement accounts and other tax-deferred accounts, tax-exempt organisations, dealers in securities or currencies, traders that elect to mark to market, investors that will hold the WPP Shares or WPP ADSs as part of straddles, hedging transactions or conversion transactions for US federal income tax purposes, investors whose functional currency is not the US dollar or persons who received their WPP Shares or WPP ADSs in connection with the performance of services or on exercise of options received as compensation in connection with the performance of services).

As used herein, the term “US Holder” means a beneficial owner of WPP Shares or WPP ADSs that is, for US federal income tax purposes: (i) a citizen or individual resident of the United States; (ii) a corporation, or other entity treated as a corporation for US federal tax purposes, created or organised in or under the laws of the United States or any State thereof; (iii) an estate the income of which is subject to US federal income tax without regard to its source; or (iv) a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more US persons have the authority to control all substantial decisions of the trust, or the trust has elected to be treated as a domestic trust for US federal income tax purposes.

This discussion does not address any tax consequences applicable to holders of equity interests in a holder of WPP Shares or WPP ADSs. The US federal income tax treatment of a partner in a partnership that holds WPP Shares or WPP ADSs will depend on the status of the partner and the activities of the partnership. Holders of WPP Shares or WPP ADSs that are partnerships should consult their tax advisers concerning the US federal income tax consequences to their partners of the acquisition, ownership and disposition of WPP Shares or WPP ADSs.

WPP does not expect to become a passive foreign investment company (a “PFIC”) for US federal income tax purposes and this summary assumes the correctness of this position. WPP’s possible status as a PFIC must be determined annually and therefore may be subject to change. If WPP were to be a PFIC in any year, materially adverse consequences could result for US Holders.

The summary is based on the US federal income tax laws, including the US Internal Revenue Code of 1986 as amended, its legislative history, existing and proposed regulations thereunder, published rulings and court decisions, all as currently in effect, and all of which are subject to change, perhaps with retroactive effect.

The summary of US federal income tax consequences set out below is for general information only. US Holders are urged to consult their own tax advisers as to the particular tax consequences to them of owning the WPP Shares or WPP ADSs, including the applicability and effect of state, local, foreign and other tax laws and possible changes in tax law.

Classification of the WPP ADSs

US Holders of WPP ADSs should be treated for US federal income tax purposes as owners of the WPP Shares represented by the WPP ADSs. Accordingly, the US federal income tax consequences discussed below apply equally to US Holders of WPP ADSs.

Tax on dividends

Distributions paid by WPP out of current or accumulated earnings and profits (as determined for US federal income tax purposes) will generally be taxable to a US Holder as foreign source dividend income, and will not be eligible for the dividends received deduction generally allowed to US corporations. A US Holder of WPP ADSs generally will include dividends in gross income in the taxable year in which such holder actually or constructively receives the dividend. US Holders that surrender their WPP ADSs in exchange for the underlying WPP Shares should consult their tax advisers regarding the proper timing for including dividends in gross income.

Distributions in excess of current and accumulated earnings and profits will be treated as a non-taxable return of capital to the extent of the US Holder’s basis in the WPP Shares or WPP ADSs and thereafter as capital gains. However, WPP will not maintain calculations of its earnings and profits in accordance with US federal income tax accounting principles. US Holders should, therefore, assume that any distribution by WPP with respect to the WPP Shares or WPP ADSs will constitute ordinary dividend income. US Holders should consult their tax advisers with respect to the appropriate US federal income tax treatment of any distribution received from WPP.

Under current federal income tax law, dividends paid by a foreign corporation to a non-corporate US Holder as “qualified dividend income” are taxable at the special reduced rate normally applicable to capital gains provided the foreign corporation qualifies for the benefits of the income tax treaty between the United States and the corporation’s country of residence. In such case, the non-corporate US Holder is eligible for the reduced rate only if the US Holder has held the shares or ADSs for more than 60 days during the 121 day-period beginning 60 days before the ex-dividend date. WPP believes it will qualify for the benefits of the income tax treaty between the United States and the United Kingdom (the “Treaty”).

US Holders of WPP Shares or WPP ADSs who receive distributions from WPP will need to consult their own tax advisors regarding the continued applicability of this special reduced rate to such distributions.

Dividends paid in pounds sterling will be included in income in a US dollar amount calculated by reference to the exchange rate in effect on the day the dividends are received by the US Holder in the case of WPP Shares or the US Depositary (in case of WPP ADSs), regardless of whether the pounds sterling are converted into US dollars at that time. If dividends received in pounds sterling are converted into US dollars on the day they are received, the US Holder generally will not be required to recognise a foreign currency gain or loss in respect of the dividend income. Generally, a gain or loss realised on a subsequent conversion of pounds sterling to US dollars or other disposition will be treated as US source ordinary income or loss.

Sale or other disposition

Upon a sale or other disposition of WPP Shares or WPP ADSs (other than an exchange of WPP ADSs for WPP Shares), a US Holder generally will recognise a capital gain or loss equal to the difference, if any, between the amount realised on the sale or other disposition and the US Holder’s adjusted tax basis in the WPP Shares or WPP ADSs. This capital gain or loss will generally be US source and will be a long-term capital gain or loss if the US Holder’s holding period in the WPP Shares or WPP ADSs exceeds one year. However, regardless of a US Holder’s actual holding period, any loss may be a long-term capital loss to the extent the US Holder receives a dividend that qualifies for the reduced rate described above under the section entitled “Tax on Dividends”, above, and exceeds 10% of the US Holder’s tax basis in its WPP Shares or WPP ADSs. Deductibility of capital losses is subject to limitations.

A US Holder’s tax basis in a WPP Share or a WPP ADS will generally be its US dollar cost. The US dollar cost of a WPP Share or a WPP ADS purchased with foreign currency will generally be the US dollar value of the purchase price on the date of purchase or, in the case of WPP Shares or WPP ADSs traded on an established securities market, as defined in the applicable Treasury Regulations, that are purchased by a cash basis US Holder (or an accrual basis US Holder that so elects), on the settlement date for the purchase. Such an election by an accrual basis US Holder must be applied consistently from year to year and cannot be revoked without the consent of the Internal Revenue Service (the “IRS”).

The surrender of WPP ADSs in exchange for WPP Shares (or vice versa) should not be a taxable event for US federal income tax purposes and US Holders should not recognise any gain or loss upon such a surrender. A US Holder’s tax basis in the withdrawn WPP Shares will be the same as the US Holder’s tax basis in the WPP ADSs surrendered, and the holding period of the WPP Shares will include the holding period of the WPP ADSs.

The amount realised on a sale or other disposition of WPP Shares or WPP ADSs for an amount in foreign currency will be the US dollar value of this amount on the date of sale or disposition. On the settlement date, the US Holder will recognise US source foreign currency gain or loss (taxable as ordinary income or loss) equal to the difference (if any) between the US dollar value of the amount received based on the exchange rates in effect on the date of sale or other disposition and the settlement date. However, in the case of WPP Shares or WPP ADSs traded on an established securities market that are sold by a cash basis US Holder (or an accrual basis US Holder that so elects), the amount realised will be determined using the exchange rate in effect on the settlement date for the sale, and no exchange gain or loss will be recognised at that time.

Foreign currency received on the sale or other disposition of a WPP Share or a WPP ADS will have a tax basis equal to its US dollar value on the settlement date. Any gain or loss recognised on a sale or other disposition of a foreign currency (including upon exchange for US dollars) will be US source ordinary income or loss.

Backup withholding and information reporting

Payments of dividends and other proceeds with respect to WPP Shares or WPP ADSs by a US paying agent or other US intermediary will be reported to the IRS and to the US Holder unless the holder is a corporation or otherwise establishes a basis for exemption. Backup withholding may apply to reportable payments if the US Holder fails to provide an accurate taxpayer identification number or certification of exempt status or fails to report all interest and dividends required to be shown on its US federal income tax returns. Any backup withholding tax will be refunded or allowed as a credit against the US Holder’s US federal income tax liability if the US Holder timely gives the appropriate information to the IRS. US Holders should consult their tax advisers as to their qualification for exemption from backup withholding and the procedure for obtaining an exemption.

F. Dividends and Paying Agents

Not applicable.

G. Statements by Experts

Not applicable.

H. Documents on Display

The Company is subject to the informational requirements of the Exchange Act. In accordance with these requirements, the Company files reports and other information with the United States Securities and Exchange Commission. You may read and copy any materials filed with the SEC at the Public Reference Room at 100 F Street N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a web site at http://www.sec.gov that contains reports, proxy statements and other information regarding registrants that file electronically with the SEC.

I. Subsidiary Information

Not applicable.

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 fair value of derivatives held by the Company at 31 December 2013 is estimated to be a net asset of £51.5 million (£113.2 million with respect to derivative assets and £61.7 million for derivative liabilities). These amounts are based on market values of equivalent instruments at the balance sheet date.

Interest rate and foreign currency risks

The Company’s interest rate and foreign currency risks management policies are discussed in note 24 to the consolidated financial statements.

Interest rate derivatives and currency derivatives utilised by the Group are discussed in note 25 to the consolidated financial statements.

Analysis of fixed and floating rate debt by currency, including the effect of interest rate and cross currency swaps, as at the balance sheet date is provided in note 10 to the consolidated financial statements.

Sensitivity analyses that address the effect of interest rate and currency risks on the Group’s financial instruments is provided in note 24 to the consolidated financial statements.

Credit risk

Our credit risk exposure and management policies are discussed in note 24 to the consolidated financial statements.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

A. Debt Securities

Not applicable.

B. Warrants and Rights

Not applicable.

C. Other Securities

Not applicable.

100

D. American Depositary Shares

Fees and Charges

Holders of ADSs and persons depositing ordinary shares or surrendering ADSs for cancellation are currently required to pay the following service fees to the Depositary:


Service	Rate	By Whom Paid
(1) Issuance of ADSs upon deposit of ordinary shares (excluding issuances as a result of distributions described in paragraph (4) below).	Up to U.S.$5.00 per 100 ADSs (or fraction thereof) issued.	Person depositing ordinary shares or person receiving ADSs.

(2) Delivery of deposited securities against surrender of ADSs.	Up to U.S.$5.00 per 100 ADSs (or fraction thereof) surrendered.	Person surrendering ADSs for purpose of withdrawal of deposited securities or person to whom deposited securities are delivered.

(3) Distribution of cash dividends or other cash distributions ( i.e ., sale of rights and other entitlements).	Up to U.S.$2.00 per 100 ADSs (or fraction thereof) held, unless prohibited by the exchange upon which the ADSs are listed.	Person to whom distribution is made.

(4) Distribution of ADSs pursuant to (i) stock dividends or other free stock distributions, or (ii) exercise of rights to purchase additional ADSs.	Up to U.S.$5.00 per 100 ADSs (or fraction thereof) issued, unless prohibited by the exchange upon which the ADSs are listed.	Person to whom distribution is made.

(5) Distribution of securities other than ADSs or rights to purchase additional ADSs ( i.e. , spin-off shares).	Up to U.S.$5.00 per unit of 100 securities (or fraction thereof) distributed.	Person to whom distribution is made.

(6) Depositary Services.	Up to U.S.$2.00 per 100 ADSs (or fraction thereof) held as of the last day of each calendar year, except to the extent of any cash dividend fee(s) charged under paragraph (3) above during the applicable calendar year.	Person of record on last day of any calendar year.

(7) Transfer of ADRs.	U.S.$1.50 per certificate presented for transfer.	Person presenting certificate for transfer.

Holders of ADSs and persons depositing ordinary shares or surrendering ADSs for cancellation and for the purpose of withdrawing deposited securities are also responsible for the payment of certain fees and expenses incurred by the Depositary, and certain taxes and governmental charges, such as:

(i)

Taxes (including applicable interest and penalties) and other governmental charges;

(ii)

Such registration fees as may from time to time be in effect for the registration of ordinary shares on the share register and applicable to transfers of ordinary shares or other securities on deposit to or from the name of the Custodian, the Depositary or any nominees upon the making of deposits and withdrawals, respectively;

101

(iii)

Such cable, telex and facsimile transmission and delivery expenses as are expressly provided in the deposit agreement to be at the expense of the person depositing or withdrawing ordinary shares or holders of ADSs;

(iv)

The expenses and charges incurred by the Depositary in the conversion of foreign currency;

(v)

Such fees and expenses as are incurred by the Depositary in connection with compliance with exchange control regulations and other regulatory requirements applicable to ordinary shares, ordinary shares on deposit, ADSs and ADRs; and

(vi)

The fees and expenses incurred by the Depositary, the Custodian or any nominee in connection with the servicing or delivery of ordinary shares on deposit.

WPP has agreed to pay various other charges and expenses of the Depositary. Please note that the fees and charges that holders of ADSs may be required to pay may vary over time and may be changed by WPP and by the Depositary. Holders of ADSs will receive prior notice of such changes.

Depositary Payments—Fiscal Year 2013

WPP did not receive any payments from Citibank, N.A., the Depositary for its American Depositary Receipt program, in 2013.

102

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

None.

ITEM 15. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We performed an evaluation under the supervision and with the participation of our management, including our Group Chief Executive and our Group Finance Director, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as at 31 December 2013. Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in the Company’s periodic reports. Following the evaluation described above, our management, including the Group Chief Executive and Group Finance Director, concluded that our disclosure controls and procedures were effective at that time.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our management, with the participation of our Group Chief Executive and our Group Finance Director, carried out an assessment of the effectiveness of our internal control over financial reporting as at 31 December 2013. The assessment was performed using the criteria for effective internal control reflected in the Internal Control-Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on our assessment of the system of internal control, management concludes that as at 31 December 2013 our internal control over financial reporting was effective.

The Company’s internal control over financial reporting as at 31 December 2013 has been audited by Deloitte LLP, an independent registered public accounting firm, who also audited the Company’s consolidated financial statements. Their audit report on the effectiveness of internal control over financial reporting is presented on page 104.

103

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of WPP plc

We have audited the internal control over financial reporting of WPP plc and subsidiaries (the “Company”) as at 31 December 2013, based on criteria established in Internal Control—Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as at 31 December 2013, based on the criteria established in Internal Control—Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as at and for the year ended 31 December 2013 of the Company and our report dated 30 April 2014 expressed an unqualified opinion on those financial statements.

/s/ Deloitte LLP

Deloitte LLP

London, United Kingdom

30 April 2014

104

Changes in Internal Control Over Financial Reporting

There has been no change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during 2013, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

The audit committee consisted of Colin Day, Sol Trujillo, Jeffrey Rosen, Roger Agnelli, Jacques Aigrain, Charlene Begley and Hugo Shong at 31 December 2013. The board of directors has determined that all members of the audit committee are “independent” as that term is defined in the applicable NASDAQ listing standards and rules of the Securities and Exchange Commission.

WPP does have an audit committee financial expert, Colin Day, serving as Chairman of its audit committee. See the biography of Colin Day in Item 6A.

ITEM 16B. CODE OF ETHICS

WPP has in place a Code of Business Conduct that constitutes a “code of ethics” as defined in applicable regulations of the Securities and Exchange Commission. The Code of Business Conduct (which is regularly reviewed by the Audit Committee and the Board) and was last updated in 2012, sets out the principal obligations of all employees. Directors and senior executives throughout the Group are required each year to sign this Code. A copy of the WPP Code of Business Conduct may be obtained free of charge by contacting the Company’s investor relations department in London or New York at the following addresses or telephone numbers:

London:

Deputy Group finance director

WPP

27 Farm Street

London W1J 5RJ England

Tel: +44 (0)20 7408 2204

Fax: +44 (0)20 7493 6819

New York:

Investor Relations

WPP

100 Park Avenue

New York, New York 10017-5516

Tel: (212) 632-2200

Fax: (212) 632-2222

105

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES


	2013	2012
	£m	£m
Audit fees	19.6	19.1
Tax fees ¹	3.5	3.5
All other fees ²	5.0	4.4
	28.1	27.0

Tax fees comprise tax advisory, planning and compliance services.

Other fees comprise assurance services, including fees for due diligence, transition support fees and review of earn-out payment calculations.

See note 3 to the Consolidated Financial Statements for more details of auditors’ remuneration for the years ended 31 December 2013, 2012 and 2011.

Audit Committee Pre-Approval Policies and Procedures

The Audit Committee has adopted a pre-approval policy for the engagement of the external auditors in relation to the supply of permissible non-audit services (including taxation), taking into account relevant ethical and regulatory requirements. WPP’s policy regarding non-audit services that may be provided by the Group’s auditors, Deloitte LLP, prohibits certain categories of work in line with relevant guidance on independence, such as ethical standards issued by the Auditing Practices Board and independence rules of the Public Company Accounting Oversight Board (United States) and the SEC. Other categories of work may be undertaken by Deloitte LLP subject to an approvals process that is designed appropriately for different categories and values of proposed work.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.

Not applicable.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.

At the Annual General Meeting of WPP plc on 13 June 2012 a special resolution was passed authorising WPP plc to make market purchases of its own shares up to a maximum number of 126,006,600 ordinary shares. This authorisation was replaced on 2 January 2013 as part of the Scheme of Arrangement when a resolution was passed, authorising the Company, in accordance with its Articles of Association to purchase up to 126,300,365 of its own shares in the market. This authority expired at the Annual General Meeting of WPP plc on 12 June 2013 and was replaced by a new authority to purchase up to a maximum number of 126,615,840 ordinary shares until the earlier of the conclusion of the Annual General Meeting of WPP plc in 2014 and 1 September 2014.


	Total number of shares purchased		Average price		Total number of shares purchased as part of publicly announced plan		Maximum number of shares that may yet be purchased under plan
January		459,241	£	9.20		459,241		125,841,124
February		64,450	£	10.41		64,450		125,776,674
March		4,086,797	£	10.77		4,086,797		121,689,877
April		7,950,985	£	10.53		7,950,985		113,738,892
May		10,881	£	11.38		10,881		113,728,011
June		10,907	£	11.23		10,907		126,604,933
July		10,907	£	11.72		10,907		126,594,026
August		10,763	£	11.70		10,763		126,583,263
September		10,730	£	12.72		10,730		126,572,533
October		130,443	£	13.30		130,443		126,442,090
November		1,390,714	£	13.43		1,390,714		125,051,376
December		3,279,584	£	13.21		3,279,584		121,771,792
Total		17,416,402	£	11.31		17,416,402

106

ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

Not applicable.

ITEM 16G. CORPORATE GOVERNANCE

The Company’s ADSs are listed on the NASDAQ Global Select Market. In general, under NASDAQ’s Rule 5615, foreign private issuers such as WPP listed on NASDAQ are permitted to follow home country corporate governance practices instead of certain of the corporate governance requirements of NASDAQ’s Rule 5600 Series and Rule 5250(d). A foreign private issuer that elects to follow a home country practice instead of any such provisions of the Rule 5600 Series or Rule 5250(d) must submit in advance to NASDAQ a written statement from an independent counsel in such issuer’s home country certifying that the issuer’s practices are not prohibited by the home country’s laws. The Company’s independent Jersey counsel has certified to NASDAQ that the Company’s corporate governance practices are not prohibited by the laws of Jersey.

The requirements of the Rule 5600 Series and Rule 5250(d) and the corporate governance practices that the Company follows in lieu thereof are described below:

•

Rule 5250(d) requires that if an issuer posts its annual report to its investor relations website rather than mailing hard copies to its stockholders, the issuer must also post a prominent undertaking to provide shareholders, upon request, with a hard copy of the report free of charge. The issuer must also issue a press release stating that the report has been posted to the website and that stockholders can obtain a hard copy free of charge upon request. The Company posts its annual report to its investor relations website, issues a press release stating that the report has been posted and mails a hard copy of the report to all share owners of record, but does not undertake to send a copy of the report to any share owner upon request.

•

Rule 5605(d)(3) requires that compensation committees have authority to retain compensation consultants, legal counsel and other advisers at the issuer’s expense, and requires that they consider specific factors before doing so. The terms of reference of the Compensation Committee give the Committee the authority to obtain outside legal assistance and any professional advice, at the Company’s expense, as the Committee considers necessary for the discharge of its responsibilities, but do not specifically require the Committee to consider the factors listed in Rule 5605(d)(3).

•

Rule 5620(c) requires that the quorum for any meeting of stockholders must not be less than 33 ¹ / ₃ % of the outstanding shares of a company’s common voting stock. The Company’s Articles of Association provide that the necessary quorum for a general share owner meeting is a minimum of two persons entitled to vote on the business to be transacted, each being a share owner or a proxy for a share owner or a duly authorised representative of a corporate share owner.

•

Rule 5635(c) requires that issuers obtain stockholder approval before a stock option or purchase plan is established or materially amended or other equity compensation arrangement is made or materially amended pursuant to which stock may be acquired by officers, directors, employees or consultants of the issuer, subject to certain exceptions. The Company seeks share owner approval for the adoption or amendment of stock plans or stock purchase plans only as required by the Articles of Association of the Company, the Listing Rules of the UK Listing Authority (the Listing Rules) and the laws of Jersey. Subject to the exceptions permitted in the Listing Rules, this involves seeking share owner approval to any such plan that falls into either of the following categories (as defined in the Listing Rules):

(a)

an employees’ share scheme if the scheme involves or may involve the issue of new shares or the transfer of treasury shares; and

107

(b)

a long-term incentive scheme in which one or more directors of the Company is eligible to participate and to material amendments of that scheme to the extent required by the scheme’s rules. In this context, it should be noted that the provisions of the rules relating to whether amendments to the scheme rules must be approved by share owners must themselves be drafted to ensure compliance with the Listing Rules.

ITEM 16H. MINE SAFETY DISCLOSURE

Not applicable.

108

PART III

ITEM 17. FINANCIAL STATEMENTS

Not applicable.

ITEM 18. FINANCIAL STATEMENTS

The Consolidated Financial Statements of WPP plc at 31 December 2013, 2012 and 2011 are included in this report beginning on page F-1.

ITEM

19. EXHIBITS


Exhibit No.		Exhibit Title

	1.1	Memorandum and Articles of Association of WPP plc (incorporated herein by reference to Exhibit 1 to the Registrant’s Report on Form 6-K filed on 2 January 2013).

	2.1	Deposit Agreement dated as of 2 January 2013 among the Registrant, 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 99(A)(I) to the Registrant’s Registration Statement on Form F-6EF filed on 31 December 2012).

	2.2	Restricted ADS Letter Agreement dated as of 2 January 2013 between the Registrant and Citibank, N.A., as Depositary (incorporated herein by reference to Exhibit 99(A)(II) to the Registrant’s Registration Statement on Form F-6EF filed on 31 December 2012).

	2.3	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to $650,000,000 5.875% Notes due 2014 (incorporated herein by reference to Exhibit 2.3 of the Registrant’s Annual Report on Form 20-F filed for the year ended 31 December 2012).

	2.4	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to £400 million of 6% Bonds due 4 April 2017 (incorporated herein by reference to Exhibit 2.20 of the Registrant’s Annual Report on Form 20-F filed for the year ended 31 December 2006).

	2.5	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to € 500 million of 5.25% bonds due 2015 (incorporated herein by reference to Exhibit 2.21 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2007).

	2.6	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to £200 million of 6.375% bonds due 2020 (incorporated herein by reference to Exhibit 2.22 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2007).

	2.7	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to € 750 million of 6.625% Guaranteed Bonds due 2016 (incorporated herein by reference to Exhibit 2.23 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2007).

	2.8	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to a U.S.$1,200,000,000 and £475,000,000 Revolving Credit Facilities Agreement (incorporating a U.S.$975,000,000 Swingline Facility) dated 30 November 2011, and Amended and Restated on 25 April 2013.*

109


Exhibit No.		Exhibit Title

	2.9	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to a £650,000,000 Term Facility Agreement dated 9 July 2008 and Amended and Restated on 17 November 2008 (incorporated herein by reference to Exhibit 2.17 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).

	2.10	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to $600,000,000 of 8% Senior Notes due 2014 (incorporated herein by reference to Exhibit 2.19 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2009).

	2.11	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to $30 million of 6.22% promissory notes due July 10, 2012, and $25 million of 6.34% promissory notes due July 10, 2014 (incorporated herein by reference to Exhibit 2.21 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2009).

	2.12	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to $812.4 million of 4.75% Senior Notes due 2021 (incorporated herein by reference to Exhibit 2.22 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2011).

	2.13	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to U.S.$500,000,000 3.625% Guaranteed Senior Notes due September 2022 and $300,000,000 5.125% Guaranteed Senior Notes due 2042 (incorporated herein by reference to Exhibit 2.15 of the Registrant’s Annual Report on Form 20-F filed for the year ended 31 December 2012).

	2.14	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to U.S.$500,000,000 5.625% Guaranteed Senior Notes due November 2043.*

	2.15	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to € 750 million of 3.00% Fixed Rate Senior Notes due November 2023.*

	4.1	J. Walter Thompson Company, Inc. Retained Benefit Supplemental Employee Retirement Plan (incorporated herein by reference to Exhibit 4.9 to the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2000).

	4.2	Young & Rubicam Inc. Deferred Compensation Plan (incorporated herein by reference to Exhibit 10.26 to Young & Rubicam’s Registration Statement on Form S-1 (File No. 333-46929)).

	4.3	Amendment No. 2 to Young & Rubicam Inc. Deferred Compensation Plan effective as of 1 January 1999 (incorporated herein by reference to Exhibit 10.27 to Young & Rubicam’s Annual Report on Form 10-K for the year ended 31 December 1998).

	4.4	Young & Rubicam Inc. Executive Income Deferral Program (incorporated herein by reference to Exhibit 4.19 to the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2000).

	4.5	Ogilvy & Mather ERISA Excess Plan Summary Plan Description (incorporated herein by reference to Exhibit 4.12 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).

	4.6	Ogilvy & Mather Executive Savings Plan Summary Plan Description, in connection with a 25% matching contribution (incorporated herein by reference to Exhibit 4.13 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).

	4.7	Ogilvy & Mather Executive Savings Plan Summary Plan Description, in connection with a 50% matching contribution (incorporated herein by reference to Exhibit 4.14 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).

110


Exhibit No.		Exhibit Title

	4.8	Ogilvy & Mather Deferred Compensation Plan Summary Plan Description (incorporated herein by reference to Exhibit 4.15 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).

	4.9	WPP Executive Stock Option Plan, as amended through 12 November 2012 (incorporated herein by reference to Exhibit 4.9 of the Registrant’s Annual Report on Form 20-F filed for the year ended 31 December 2012).

	4.10	WPP plc Restricted Stock Plan, as amended through 12 November 2012 (incorporated herein by reference to Exhibit 4.10 of the Registrant’s Annual Report on Form 20-F filed for the year ended 31 December 2012).

	4.11	WPP 2005 Executive Stock Option Plan, as amended through 12 November 2012 (incorporated herein by reference to Exhibit 4.11 of the Registrant’s Annual Report on Form 20-F filed for the year ended 31 December 2012).

	4.12	WPP plc Annual Bonus Deferral Programme, as amended through 12 November 2012 (incorporated herein by reference to Exhibit 4.12 of the Registrant’s Annual Report on Form 20-F filed for the year ended 31 December 2012).

	4.13	GroupM Executive Savings Plan Summary Plan Description (incorporated herein by reference to Exhibit 4.24 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).

	4.14	WPP 2008 Executive Stock Option Plan, as amended through 12 November 2012 (incorporated herein by reference to Exhibit 4.14 of the Registrant’s Annual Report on Form 20-F filed for the year ended 31 December 2012).

	4.15	UK Service Agreement, effective from 19 November 2008, between WPP 2005 Limited, Sir Martin Sorrell and WPP plc (incorporated herein by reference to Exhibit 4.28 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).

	4.16	Service Agreement in the USA, effective 26 November 2010, between WPP Group USA, Inc. and Sir Martin Sorrell (incorporated herein by reference to Exhibit 4.23 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2010).

	4.17	Service Agreement in the USA, dated 30 April 2009, between WPP Group USA, Inc. and Paul W.G. Richardson (incorporated herein by reference to Exhibit 4.30 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).

	4.18	Director’s appointment agreement, dated 21 November 2008, between WPP plc and Paul Richardson (incorporated herein by reference to Exhibit 4.31 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).

	4.19	Service Agreement, dated 12 February 2009, between WPP 2005 Limited and Mark Read (incorporated herein by reference to Exhibit 4.32 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).

	4.20	Director’s appointment agreement, dated 21 November 2008, between WPP plc and Mark Read (incorporated herein by reference to Exhibit 4.33 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).

	4.21	Supplemental Retirement Agreement, dated as of 1 July 2008, by and between WPP Group USA, Inc. and Paul Richardson (incorporated herein by reference to Exhibit 4.34 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).

	4.22	Amendment dated 19 November 2008 to Supplemental Retirement Agreement, dated as of 1 July 2008, by and between WPP Group USA, Inc. and Paul Richardson (incorporated herein by reference to Exhibit 4.35 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).

111


Exhibit No.		Exhibit Title

	4.23	Stock Purchase Agreement, dated 3 August 1998, among Asatsu Inc., WPP International Holding B.V. and WPP Group plc (incorporated herein by reference to Exhibit 4.36 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).

	4.24	24/7 Media, Inc. 1998 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the Registration Statement on Form S-1 of 24/7 Media, Inc. filed on June 4, 2009, File No. 333-56085).

	4.25	24/7 Real Media, Inc. 2002 Stock Incentive Plan (incorporated herein by reference to a proxy statement filed by 24/7 Real Media, Inc. on August 9, 2002, File No. 000-29768).

	4.26	Grey Advertising Inc. Senior Executive Officer Post-Employment Compensation Plan (incorporated herein by reference to Exhibit 4.40 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).

	4.27	Amendment No. 1 to the Grey Advertising Inc. Senior Executive Officer Post-Employment Compensation Plan, effective as of January 1, 2009 (incorporated herein by reference to Exhibit 4.41 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).

	4.28	Amendment No. 1 to the J. Walter Thompson Retained Benefit Supplemental Employee Retirement Plan, effective as of January 1, 2009 (incorporated herein by reference to Exhibit 4.42 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).

	4.29	WPP Group plc 2004 Leadership Equity Acquisition Plan, as amended through 12 November 2012 (incorporated herein by reference to Exhibit 4.29 of the Registrant’s Annual Report on Form 20-F filed for the year ended 31 December 2012).

	4.30	WPP plc Leadership Equity Acquisition Plan III, as amended through 10 December 2012 (incorporated herein by reference to Exhibit 4.30 of the Registrant’s Annual Report on Form 20-F filed for the year ended 31 December 2012).

	4.31	Second Amendment, dated 22 June 2011, to Supplemental Retirement Agreement, dated as of 1 July 2008, by and between WPP Group USA, Inc. and Paul Richardson (incorporated herein by reference to Exhibit 4.41 to the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2011).

	4.32	WPP 2012 Executive Stock Option Plan (incorporated herein by reference to Exhibit 4.32 of the Registrant’s Annual Report on Form 20-F filed for the year ended 31 December 2012).

	4.33	WPP plc Executive Performance Share Plan.*

	8.1	List of subsidiaries.*

	12.1	Certification of Group Chief Executive.*

	12.2	Certification of Group Finance Director.*

	13.1	Certification of Group Chief Executive under 18 U.S.C. Section 1350.*

	13.2	Certification of Group Finance Director under 18 U.S.C. Section 1350.*

	14.1	Consent of Independent Registered Public Accounting Firm (for WPP plc and subsidiaries).*

Filed herewith.

112

Signatures

The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.


WPP plc

By:		/s/ Paul W.G. Richardson
		Paul W. G. Richardson Group Finance Director
		30 April 2014

113

Item 18

INDEX TO FINANCIAL STATEMENTS


Financial Statement Number			Page

	A.	Financial Statements of WPP plc as at 31 December 2013 and 2012 and for the years ended 31 December 2013, 2012 and 2011

		(i) Report of Independent Registered Public Accounting Firm		F-1

		(ii) Accounting policies		F-2

		(iii) Consolidated income statement for the years ended 31 December 2013, 2012 and 2011		F-9

		(iv) Consolidated statement of comprehensive income for the years ended 31 December 2013, 2012 and 2011		F-10

		(v) Consolidated cash flow statement for the years ended 31 December 2013, 2012 and 2011		F-11

		(vi) Consolidated balance sheet at 31 December 2013 and 2012		F-12

		(vii) Consolidated statement of changes in equity for the years ended 31 December 2013, 2012 and 2011		F-13

		(viii) Notes to the consolidated financial statements		F-14

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of WPP plc

We have audited the accompanying consolidated balance sheets of WPP plc and subsidiaries (the “Company”) as at 31 December 2013 and 2012, and the related consolidated income statements, consolidated statements of comprehensive income, consolidated cash flow statements, and consolidated statement of changes in equity for each of the three years in the period ended 31 December 2013. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (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, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as at 31 December 2013 and 2012, and the results of its operations and cash flows for each of the three years in the period ended 31 December 2013, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as at 31 December 2013, based on the criteria established in Internal Control—Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated 30 April 2014 expressed an unqualified opinion on the Company’s internal control over financial reporting.

/s/ Deloitte LLP

Deloitte LLP

London, United Kingdom

30 April 2014

F-1

Our 2013 financial statements

Accounting policies

The consolidated financial statements of WPP plc and its subsidiaries (the Group) for the year ended 31 December 2013 have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board as they apply to the financial statements of the Group for the year ended 31 December 2013.

Basis of preparation

The consolidated financial statements have been prepared under the historical cost convention, except for the revaluation of certain financial instruments. The principal accounting policies are set out below.

The financial statements were approved by the Board of Directors and authorized for issue on 30 April 2014.

Basis of consolidation

In January 2013, pursuant to a Scheme of Arrangement under Article 25 of the Companies (Jersey) Law 1991, a new parent company was introduced which is now called WPP plc. The previous parent company has been renamed and re-registered as WPP 2012 Limited. The introduction of a new holding company constitutes a Group reconstruction and has been accounted for using merger accounting principles. Accordingly, the results of the Group for the entire year ended 31 December 2013 are shown in the consolidated income statement and the comparative figures for the years ended 31 December 2012 and 2011 are also prepared on this basis. Earnings per share are unaffected by the reorganisation.

The consolidated financial statements include the results of the Company and all its subsidiary undertakings made up to the same accounting date. All intra-Group balances, transactions, income and expenses are eliminated in full on consolidation. The results of subsidiary undertakings acquired or disposed of during the period are included or excluded from the consolidated income statement from the effective date of acquisition or disposal.

Goodwill and other intangible assets

Intangible assets comprise goodwill, certain acquired separable corporate brand names, acquired customer relationships, acquired proprietary tools and capitalised computer software not integral to a related item of hardware.

Goodwill represents the excess of fair value attributed to investments in businesses or subsidiary undertakings over the fair value of the underlying net assets, including intangible assets, at the date of their acquisition.

Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the net present value of future cash flows derived from the underlying assets using a projection period of up to five years for each cash-generating unit. After the projection period a steady growth rate representing an appropriate long-term growth rate for the industry is applied. Any impairment is recognised immediately as an expense and is not subsequently reversed.

Corporate brand names, customer relationships and proprietary tools acquired as part of acquisitions of businesses are capitalised separately from goodwill as intangible assets if their value can be measured reliably on initial recognition and it is probable that the expected future economic benefits that are attributable to the asset will flow to the Group.

Certain corporate brands of the Group are considered to have an indefinite 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 the Group’s commitment to develop and enhance their value. The carrying value of these intangible assets is reviewed at least annually for impairment and adjusted to the recoverable amount if required.

Amortisation 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:

•

Brand names (with finite lives) – 10-20 years.

•

Customer-related intangibles – 3-10 years.

•

Other proprietary tools – 3-10 years.

•

Other (including capitalised computer software) – 3-5 years.

Contingent consideration

Contingent consideration is accounted for in accordance with IFRS 3 Business Combinations.

F-2

Accounting policies (continued)

obligations are dependent on the future financial performance of the interests acquired (typically over a four- to five-year period following the year of acquisition) and assume the operating companies improve profits in line with directors’ estimates. The directors derive their estimates from internal business plans together with financial due diligence performed in connection with the acquisition.

Subsequent adjustments to the fair value are recorded in the consolidated income statement within revaluation of financial instruments. For acquisitions completed prior to 1 January 2010, such adjustments are recorded in the consolidated balance sheet within goodwill.

Property, plant and equipment

Property, plant and equipment are shown at cost less accumulated depreciation and any provision for impairment with the exception of freehold land which is not depreciated. The Group assesses the carrying value of its property, plant and equipment to determine if any impairment has occurred. Where this indicates that an asset may be impaired, the Group applies the requirements of IAS 36 Impairment of Assets in assessing the carrying amount of the asset. This process includes comparing its recoverable amount with its carrying value.

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 – 50 years.

•

Leasehold land and buildings – over the term of the lease or life of the asset, if shorter.

•

Fixtures, fittings and equipment – 3-10 years.

•

Computer equipment – 3-5 years.

Interests in associates and joint ventures

An associate is an entity over which the Group has significant influence. In certain circumstances, significant influence may be represented by factors other than ownership and voting rights, such as representation on the Board of Directors.

The Group’s share of the profits less losses of associate undertakings net of tax, interest and non-controlling interests is included in the consolidated income statement and the Group’s share of net assets is shown within interests in associates in the consolidated balance sheet. 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.

The Group assesses the carrying value of its associate undertakings to determine if any impairment has occurred. Where this indicates that an investment may be impaired, the Group applies the requirements of IAS 36 in assessing the carrying amount of the investment. This process includes comparing its recoverable amount with its carrying value.

The Group accounts for joint venture investments under the equity method which is consistent with the Group’s treatment of associates.

Other investments

Other investments are designated as ‘available for sale’ and are shown at fair value with any movements in fair value taken to equity.

On disposal the cumulative gain or loss previously recognised in equity is included in the profit or loss for the year.

Inventory and work in progress

Work in progress is valued at cost, which includes outlays incurred on behalf of clients and an appropriate proportion of directly attributable costs and overheads on incomplete assignments. Provision is made for irrecoverable costs where appropriate. Inventory is stated at the lower of cost and net realisable value.

Trade receivables

Trade receivables are stated net of provisions for bad and doubtful debts.

Foreign currency and interest rate hedging

The Group’s policy on interest rate and foreign exchange rate management sets out the instruments and methods available to hedge interest and currency risk exposures and the control procedures in place to ensure effectiveness.

The Group uses derivative financial instruments to reduce exposure to foreign exchange risk and interest rate movements. The Group does not hold or issue derivative financial instruments for speculative purposes.

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each balance sheet date. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging

F-3

Accounting policies (continued)

instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

At the inception of the hedge relationship the entity documents the relationship between the hedging instrument and hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument that is used in a hedging relationship is highly effective in offsetting changes in fair values or cash flows of the hedged item.

Note 25 contains details of the fair values of the derivative instruments used for hedging purposes.

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in profit or loss immediately, together with any changes in the fair value of the hedged item that is attributable to the hedged risk.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow or net investment hedges is deferred in equity. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss. Amounts deferred in equity are recycled in profit or loss in the periods when the hedged item is recognised in profit or loss. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. At that time, any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until the forecast transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to net profit or loss for the period.

Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of host contracts and the host contracts are not carried at fair value with unrealised gains or losses reported in the consolidated income statement.

Liabilities in respect of option agreements

Option agreements that allow the Group’s equity partners to require the Group to purchase a non-controlling interest are treated as derivatives over equity instruments and are recorded in the consolidated balance sheet at fair value and the valuation is remeasured at each period end. Fair value is based on the present value of expected cash outflows and the movement in the fair value is recognised as income or expense within revaluation of financial instruments in the consolidated income statement.

Derecognition of financial liabilities

In accordance with IAS 39 Financial Instruments: Recognition and Measurement, a financial liability of the Group is only released to the consolidated income statement when the underlying legal obligation is extinguished.

Convertible debt

Convertible debt is assessed according to the substance of the contractual arrangements and is classified into liability and equity elements on the basis of the initial fair value of the liability element. The difference between this figure and the cash received is classified as equity.

The consolidated income statement charge for the finance cost is spread evenly over the term of the convertible debt so that at redemption the liability equals the redemption value.

Other debt

Other interest-bearing debt is recorded at the proceeds received, net of direct issue costs.

Borrowing costs

Finance costs of borrowing are recognised in the consolidated income statement over the term of those borrowings.

Revenue recognition

Revenue comprises commission and fees earned in respect of amounts billed. Direct costs include fees paid to external suppliers where they are retained to perform part or all of a specific project for a client and the resulting expenditure is directly attributable to the revenue earned. Revenue is 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. Revenue may consist of various arrangements involving commissions, fees, incentive-based revenue or a combination of the three, as agreed upon with each client.

F-4

Accounting policies (continued)

Revenue is recognised when the service is performed, in accordance with the terms of the contractual arrangement. The amount of revenue recognised depends on whether we act as an agent or as a principal in an arrangement with a client. Where we act as an agent, the revenue recorded is the net amount retained when the fee or commission is earned. Although the Group may bear credit risk in respect of these activities, the arrangements with our clients are such that we consider that we are acting as an agent on their behalf. In such cases, costs incurred with external suppliers (such as media suppliers) are excluded from our revenue. Where the Group acts as a principal and contracts directly with suppliers for media payments and production costs, the revenue recorded is the gross amount billed.

Incentive-based revenue 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 or receivable.

Data Investment Management

Revenue recognised in proportion to the level of service performed for market research contracts is based on proportional performance. In assessing contract performance, both input and output criteria are reviewed. Costs incurred are used as an objective input measure of performance. The primary input of all work performed under these arrangements is labour. As a result of the relationship between labour and cost, there is normally a direct relationship between costs incurred and the proportion of the contract performed to date. Costs incurred as a proportion of expected total costs is used as an initial proportional performance measure. This indicative proportional performance measure is subsequently validated against other more subjective criteria (i.e. relevant output measures) such as the percentage of interviews completed, percentage of reports delivered to a client and the achievement of any project milestones stipulated in the contract. In the event of divergence between the objective and more subjective measures, the more subjective measures take precedence since these are output measures.

While most of the studies provided in connection with the Group’s market research contracts are undertaken in response to an individual client’s or group of clients’ specifications, in certain instances a study may be developed as an off-the-shelf product offering sold to a broad client base. For these transactions, revenue is recognised when the product is delivered. Where the terms of transaction provide for licensing the product on a subscription basis, revenue is recognised over the subscription period on a straight-line basis or, if applicable, based on usage.

Substantially all services are provided on a fixed price basis. Pricing may also include a provision for a surcharge where the actual labour hours incurred in completing a project are significantly above the labour hours quoted in the project proposal. In instances where this occurs, the surcharge will be included in the total revenue base on which to measure proportional performance when the actual threshold is reached provided that collectability is reasonably assured.

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 consolidated income statement revenue and related costs as contract activity progresses.

Taxation

Corporate taxes are payable on taxable profits at current rates. The tax expense represents the sum of the tax currently payable and deferred tax.

F-5

Accounting policies (continued)

Any interest and penalties accrued are included in income taxes both in the consolidated income statement and balance sheet. Where the final outcome of such matters differs from the amount recorded, any differences may impact the income tax and deferred tax provisions in the period in which the final determination is made.

The tax laws that apply to the Group’s subsidiaries may be amended by the relevant tax authorities. Such potential amendments are regularly monitored and adjustments are made to the Group’s tax liabilities and deferred tax assets and liabilities where necessary.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences unless specifically excepted by IAS 12 Income Taxes. Deferred tax is charged or credited in the consolidated income statement, except when it relates to items charged or credited to other comprehensive income or directly to equity, in which case the deferred tax is also dealt with in other comprehensive income or equity. Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or other assets and liabilities (other than in a business combination) in a transaction that affects neither the tax profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based on enacted or substantively enacted legislation. Deferred tax is charged or credited in the consolidated income statement, except when it relates to items charged or credited directly to equity or the consolidated statement of comprehensive income, in which case the deferred tax is also dealt with in equity or the consolidated statement of comprehensive income.

Retirement benefit costs

The Group accounts for retirement benefit costs in accordance with IAS 19 (amended): Employee Benefits.

For defined contribution plans, contributions are charged to the consolidated income statement as payable in respect of the accounting period.

For defined benefit plans the amounts charged to operating profit are the current service costs, past service costs, administrative expenses and gains and losses on settlements and curtailments. They are included as part of staff costs. Past service costs are recognised immediately in the consolidated income statement when the related plan amendment occurs. The interest cost on pension plan liabilities and expected return on plan assets reported in previous years have been replaced with a net interest amount which is shown within finance costs. The net interest is calculated by applying the discount rate to the recognised overall surplus or deficit in the plan.

Actuarial gains and losses are recognised immediately in the consolidated statement of comprehensive income.

Where defined benefit plans are funded, the assets of the plan are held separately from those of the Group, in separate independently managed funds. Pension plan assets are measured at fair value and liabilities are measured on an actuarial basis using the projected unit method and discounted at a rate equivalent to the current

F-6

Accounting policies (continued)

rate of return on a high-quality corporate bond of equivalent currency and term to the plan liabilities. The actuarial valuations are obtained at least triennially and are updated at each balance sheet date.

Recognition of a surplus in a defined benefit plan is limited based on the economic gain the Company is expected to benefit from in the future by means of a refund or reduction in future contributions to the plan, in accordance with IAS 19 (amended): Employee Benefits.

Finance leases

Assets held under finance leases are recognised as assets of the Group at the inception of the lease at the lower of their fair value and the present value of the minimum lease payments. Depreciation on leased assets is charged to the consolidated income statement on the same basis as owned assets. Leasing payments are treated as consisting of capital and interest elements and the interest is charged to the consolidated income statement as it is incurred.

Operating leases

Operating lease rentals are charged to the consolidated income statement on a straight-line basis over the lease term. Any premium or discount on the acquisition of a lease is spread over the life of the lease on a straight-line basis.

Translation of foreign currencies

Foreign currency transactions arising from normal trading activities are recorded at the rates in effect at the date of the transaction. 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 consolidated income statement as they arise.

The income statements of overseas subsidiary undertakings are translated into pounds sterling at average exchange rates and the year-end net assets of these companies are translated at year-end exchange rates.

Exchange differences arising from retranslation of the opening net assets and on foreign currency borrowings (to the extent that they hedge the Group’s investment in such operations) are reported in the consolidated statement of comprehensive income.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

Share-based payments

The Group issues equity-settled share-based payments (including share options) to certain employees and accounts for these awards in accordance with IFRS 2 Share-Based Payment. Equity-settled share-based payments are measured at fair value (excluding the effect of non-market-based vesting conditions) at the date of grant. Details regarding the fair value of equity settled share-based transactions are set out in notes 22 and 26.

The fair value determined at the grant date is recognised in the consolidated income statement as an expense on a straight-line basis over the relevant vesting period, based on the Group’s estimate of the number of shares that will ultimately vest and adjusted for the effect of non-market-based vesting conditions.

New IFRS accounting pronouncements

At the date of authorisation of these financial statements, the following Standards and Interpretations, which have not been applied in these financial statements, were in issue but not yet effective:

•

IFRS 9: Financial Instruments;

•

IFRS 14: Regulatory Deferral Accounts; and

•

IAS 32 (amended): Financial Instruments: Presentation.

The Group does not consider that these Standards and Interpretations will have a significant impact on the financial statements of the Group except for additional disclosures when the relevant standards come into effect.

In the current year, the following Standards and Interpretations became effective:

•

IFRS 10: Consolidated Financial Statements;

•

IFRS 11: Joint Arrangements;

•

IFRS 12: Disclosure of Interests in Other Entities;

•

IFRS 13: Fair Value Measurement

•

IAS 1 (amended): Presentation of Financial Statements;

•

IAS 27 (revised): Separate Financial Statements; and

•

IAS 28 (revised): Investments in Associates and Joint Ventures.

The adoption of these Standards has not led to any changes in the Group’s accounting policies.

The Group also adopted IAS 19 (amended): Employee Benefits during the year. As a result, the interest cost on

F-7

Accounting policies (continued)

pension plan liabilities and expected return on plan assets reported in previous years have been replaced with a net interest amount. The Group has amended the presentation of prior year comparative amounts to reflect these requirements. There is no material impact of adopting IAS 19 (amended) on the profit for any of the years presented.

Critical judgements in applying accounting policies

Management is required to make key decisions and judgements in the process of applying the Group’s accounting policies. The most significant areas where such judgements have been necessary are revenue recognition, goodwill and other intangibles, payments due to vendors (earnout agreements), acquisition reserves, taxation and accounting for pension liabilities. Where judgement has been applied, the key factors taken into consideration are disclosed in the accounting policies and the appropriate note in these financial statements.

F-8

Consolidated income statement

For the years ended 31 December 2013, 2012, 2011


	Notes		2013 £m			2012 £m			2011 £m
Revenue		2		11,019.4			10,373.1			10,021.8
Direct costs				(943.3	)		(858.3	)		(783.3	)
Gross profit		2		10,076.1			9,514.8			9,238.5
Operating costs		3		(8,665.8	)		(8,273.7	)		(8,046.3	)
Operating profit				1,410.3			1,241.1			1,192.2
Share of results of associates		4		68.1			69.4			66.1
Profit before interest and taxation				1,478.4			1,310.5			1,258.3
Finance income		6		64.3			55.9			64.7
Finance costs		6		(267.9	)		(269.8	)		(264.6	)
Revaluation of financial instruments		6		21.0			(4.7	)		(50.0	)
Profit before taxation				1,295.8			1,091.9			1,008.4
Taxation		7		(283.7	)		(197.2	)		(91.9	)
Profit for the year				1,012.1			894.7			916.5

Attributable to:
Equity holders of the parent				936.5			822.7			840.1
Non-controlling interests				75.6			72.0			76.4
				1,012.1			894.7			916.5

Earnings per share ¹
Basic earnings per ordinary share		9		72.4p			66.2p			67.6p
Diluted earnings per ordinary share		9		69.6p			62.8p			64.5p

Notes

The accounting policies on pages F-2 to F-8 and the accompanying notes on pages F-14 to F-53 form an integral part of this consolidated income statement.

The calculations of the Group’s earnings per share are set out in note 9.

F-9

Consolidated statement of comprehensive income

For the years ended 31 December 2013, 2012, 2011


	2013 £m			2012 £m			2011 £m
Profit for the year		1,012.1			894.7			916.5
Items that may be reclassified subsequently to profit or loss :
Exchange adjustments on foreign currency net investments		(372.6	)		(305.2	)		(256.3	)
Gain/(loss) on revaluation of available for sale investments		72.0			(3.5	)		11.3
		(300.6	)		(308.7	)		(245.0	)
Items that will not be reclassified subsequently to profit or loss :
Actuarial gain/(loss) on defined benefit pension plans		76.2			(83.9	)		(72.0	)
Deferred tax on defined benefit pension plans		(1.2	)		7.3			0.1
		75.0			(76.6	)		(71.9	)
Other comprehensive loss for the year		(225.6	)		(385.3	)		(316.9	)
Total comprehensive income for the year		786.5			509.4			599.6
Attributable to:
Equity holders of the parent		727.0			444.2			529.5
Non-controlling interests		59.5			65.2			70.1
		786.5			509.4			599.6

Note

The accounting policies on pages F-2 to F-8 and the accompanying notes on pages F-14 to F-53 form an integral part of this consolidated statement of comprehensive income.

F-10

Consolidated cash flow statement

For the years ended 31 December 2013, 2012, 2011


	Notes		2013 £m			2012 £m			2011 £m
Net cash inflow from operating activities		11		1,374.2			908.3			665.2
Investing activities
Acquisitions and disposals		11		(201.4	)		(566.5	)		(469.8	)
Purchases of property, plant and equipment				(240.7	)		(290.3	)		(216.1	)
Purchases of other intangible assets (including capitalised computer software)				(43.8	)		(39.8	)		(37.1	)
Proceeds on disposal of property, plant and equipment				7.3			123.5			13.2
Net cash outflow from investing activities				(478.6	)		(773.1	)		(709.8	)
Financing activities
Share option proceeds				42.4			56.0			28.8
Cash consideration for non-controlling interests		11		(19.6	)		(20.1	)		(62.6	)
Share repurchases and buy-backs		11		(197.0	)		(134.5	)		(182.2	)
Net increase in borrowings		11		436.8			380.5			301.4
Financing and share issue costs				(19.1	)		(8.2	)		(11.9	)
Equity dividends paid				(397.3	)		(306.6	)		(218.4	)
Dividends paid to non-controlling interests in subsidiary undertakings				(53.2	)		(51.9	)		(62.2	)
Net cash outflow from financing activities				(207.0	)		(84.8	)		(207.1	)
Net increase/(decrease) in cash and cash equivalents				688.6			50.4			(251.7	)
Translation differences				(164.7	)		(119.3	)		(29.9	)
Cash and cash equivalents at beginning of year				1,359.3			1,428.2			1,709.8
Cash and cash equivalents at end of year		11		1,883.2			1,359.3			1,428.2

Note

The accounting policies on pages F-2 to F-8 and the accompanying notes on pages F-14 to F-53 form an integral part of this consolidated cash flow statement.

F-11

Consolidated balance sheet

At 31 December 2013, 2012


	Notes		2013 £m			2012 £m
Non-current assets
Intangible assets:
Goodwill		12		9,472.8			9,457.2
Other		12		1,667.8			1,827.4
Property, plant and equipment		13		773.3			768.3
Interests in associates and joint ventures		14		792.8			887.2
Other investments		14		270.6			176.5
Deferred tax assets		15		119.4			91.2
Trade and other receivables		17		158.5			245.1
				13,255.2			13,452.9
Current assets
Inventory and work in progress		16		304.5			348.2
Corporate income tax recoverable				136.0			124.2
Trade and other receivables		17		9,088.1			9,007.0
Cash and short-term deposits				2,221.6			1,945.3
				11,750.2			11,424.7
Current liabilities
Trade and other payables		18		(10,710.7	)		(10,907.8	)
Corporate income tax payable				(120.1	)		(102.9	)
Bank overdrafts and loans		20		(941.4	)		(1,085.9	)
				(11,772.2	)		(12,096.6	)
Net current liabilities				(22.0	)		(671.9	)
Total assets less current liabilities				13,233.2			12,781.0
Non-current liabilities
Bonds and bank loans		20		(3,520.6	)		(3,680.6	)
Trade and other payables		19		(457.6	)		(512.0	)
Corporate income tax payable				(362.6	)		(375.3	)
Deferred tax liabilities		15		(650.7	)		(680.3	)
Provision for post-employment benefits		23		(247.5	)		(335.6	)
Provisions for liabilities and charges		21		(147.7	)		(136.6	)
				(5,386.7	)		(5,720.4	)
Net assets				7,846.5			7,060.6
Equity
Called-up share capital		26		134.9			126.5
Share premium account				483.4			175.9
Shares to be issued				0.5			1.8
Merger reserve				–			(5,135.7	)
Other reserves		27		317.3			622.7
Own shares				(253.0	)		(166.5	)
Retained earnings				6,903.7			11,186.3
Equity share owners’ funds				7,586.8			6,811.0
Non-controlling interests				259.7			249.6
Total equity				7,846.5			7,060.6

Note

The accounting policies on pages F-2 to F-8 and the accompanying notes on pages F-14 to F-53 form an integral part of this consolidated balance sheet.

F-12

Consolidated statement of changes in equity

For the years ended 31 December 2013, 2012, 2011


	Called-up share capital £m			Share premium account £m			Shares to be issued £m			Merger reserve £m			Other reserves ¹ £m			Own shares £m			Retained earnings £m			Total equity share owners’ funds £m			Non- controlling interests £m			Total £m
Balance at 1 January 2011		126.4			54.5			3.1			(5,136.8	)		1,182.8			(144.8	)		10,361.4			6,446.6			201.3			6,647.9
Ordinary shares issued		0.6			30.4			(0.7	)		0.6			–			–			–			30.9			–			30.9
Share cancellations		(0.7	)		–			–			–			0.7			–			(45.9	)		(45.9	)		–			(45.9	)
Treasury share additions		–			–			–			–			–			(29.8	)		–			(29.8	)		–			(29.8	)
Treasury share allocations		–			–			–			–			–			0.8			(0.8	)		–			–			–
Net profit for the year		–			–			–			–			–			–			840.1			840.1			76.4			916.5
Exchange adjustments on foreign currency net investments		–			–			–			–			(250.0	)		–			–			(250.0	)		(6.3	)		(256.3	)
Gain on revaluation of available for sale investments		–			–			–			–			11.3			–			–			11.3			–			11.3
Actuarial loss on defined benefit pension plans		–			–			–			–			–			–			(72.0	)		(72.0	)		–			(72.0	)
Deferred tax on defined benefit pension plans		–			–			–			–			–			–			0.1			0.1			–			0.1
Comprehensive income		–			–			–			–			(238.7	)		–			768.2			529.5			70.1			599.6
Dividends paid		–			–			–			–			–			–			(218.4	)		(218.4	)		(62.2	)		(280.6	)
Scrip dividend		0.3			20.8			–			–			–			–			(21.1	)		–			–			–
Non-cash share-based incentive plans (including share options)		–			–			–			–			–			–			78.8			78.8			–			78.8
Tax adjustment on share-based payments		–			–			–			–			–			–			(11.7	)		(11.7	)		–			(11.7	)
Net movement in own shares held by ESOP Trusts		–			–			–			–			–			(3.8	)		(102.7	)		(106.5	)		–			(106.5	)
Recognition/remeasurement of financial instruments		–			–			–			–			(5.9	)		–			33.8			27.9			–			27.9
Acquisition of subsidiaries ²		–			–			–			–			–			–			(38.1	)		(38.1	)		21.8			(16.3	)
Balance at 31 December 2011		126.6			105.7			2.4			(5,136.2	)		938.9			(177.6	)		10,803.5			6,663.3			231.0			6,894.3
Ordinary shares issued		1.0			55.0			(0.6	)		0.5			–			–			–			55.9			–			55.9
Share issue/cancellation costs		–			(0.2	)		–			–			–			–			–			(0.2	)		–			(0.2	)
Share cancellations		(0.7	)		–			–			–			0.7			–			(55.1	)		(55.1	)		–			(55.1	)
Treasury share additions		–			–			–			–			–			(0.6	)		–			(0.6	)		–			(0.6	)
Treasury share allocations		–			–			–			–			–			0.9			(0.9	)		–			–			–
Treasury share cancellations		(0.6	)		–			–			–			0.6			37.2			(37.2	)		–			–			–
Net profit for the year		–			–			–			–			–			–			822.7			822.7			72.0			894.7
Exchange adjustments on foreign currency net investments		–			–			–			–			(298.4	)		–			–			(298.4	)		(6.8	)		(305.2	)
Loss on revaluation of available for sale investments		–			–			–			–			(3.5	)		–			–			(3.5	)		–			(3.5	)
Actuarial loss on defined benefit pension plans		–			–			–			–			–			–			(83.9	)		(83.9	)		–			(83.9	)
Deferred tax on defined benefit pension plans		–			–			–			–			–			–			7.3			7.3			–			7.3
Comprehensive income		–			–			–			–			(301.9	)		–			746.1			444.2			65.2			509.4
Dividends paid		–			–			–			–			–			–			(306.6	)		(306.6	)		(51.9	)		(358.5	)
Scrip dividend		0.2			15.4			–			–			–			–			(15.6	)		–			–			–
Non-cash share-based incentive plans (including share options)		–			–			–			–			–			–			92.8			92.8			–			92.8
Tax adjustment on share-based payments		–			–			–			–			–			–			18.3			18.3			–			18.3
Net movement in own shares held by ESOP Trusts		–			–			–			–			–			(26.4	)		(52.4	)		(78.8	)		–			(78.8	)
Recognition/remeasurement of financial instruments		–			–			–			–			2.7			–			14.8			17.5			–			17.5
Share purchases – close period commitments		–			–			–			–			(18.3	)		–			–			(18.3	)		–			(18.3	)
Acquisition of subsidiaries ²		–			–			–			–			–			–			(21.4	)		(21.4	)		5.3			(16.1	)
Balance at 31 December 2012		126.5			175.9			1.8			(5,135.7	)		622.7			(166.5	)		11,186.3			6,811.0			249.6			7,060.6
Reclassification due to Group reconstruction ³		–			(176.0	)		–			5,135.7			(2.0	)		–			(4,957.7	)		–			–			–
Ordinary shares issued		0.7			41.7			(1.3	)		–			–			–			1.2			42.3			–			42.3
Share issue/cancellation costs		–			(0.4	)		–			–			–			–			–			(0.4	)		–			(0.4	)
Shares issued on conversion of bond		7.7			442.2			–			–			–			–			–			449.9			–			449.9
Reclassification of convertible bond		–			–			–			–			(44.5	)		–			36.1			(8.4	)		–			(8.4	)
Deferred tax on convertible bond		–			–			–			–			9.7			–			(7.8	)		1.9			–			1.9
Treasury share additions		–			–			–			–			–			(17.6	)		–			(17.6	)		–			(17.6	)
Treasury share allocations		–			–			–			–			–			3.3			(3.3	)		–			–			–
Net profit for the year		–			–			–			–			–			–			936.5			936.5			75.6			1,012.1
Exchange adjustments on foreign currency net investments		–			–			–			–			(356.5	)		–			–			(356.5	)		(16.1	)		(372.6	)
Gain on revaluation of available for sale investments		–			–			–			–			72.0			–			–			72.0			–			72.0
Actuarial gain on defined benefit pension plans		–			–			–			–			–			–			76.2			76.2			–			76.2
Deferred tax on defined benefit pension plans		–			–			–			–			–			–			(1.2	)		(1.2	)		–			(1.2	)
Comprehensive income		–			–			–			–			(284.5	)		–			1,011.5			727.0			59.5			786.5
Dividends paid		–			–			–			–			–			–			(397.3	)		(397.3	)		(53.2	)		(450.5	)
Non-cash share-based incentive plans (including share options)		–			–			–			–			–			–			105.4			105.4			–			105.4
Tax adjustment on share-based payments		–			–			–			–			–			–			47.9			47.9			–			47.9
Net movement in own shares held by ESOP Trusts		–			–			–			–			–			(72.2	)		(107.2	)		(179.4	)		–			(179.4	)
Recognition/remeasurement of financial instruments		–			–			–			–			(2.4	)		–			(0.2	)		(2.6	)		–			(2.6	)
Share purchases – close period commitments		–			–			–			–			18.3			–			–			18.3			–			18.3
Acquisition of subsidiaries ²		–			–			–			–			–			–			(11.2	)		(11.2	)		3.8			(7.4	)
Balance at 31 December 2013		134.9			483.4			0.5			–			317.3			(253.0	)		6,903.7			7,586.8			259.7			7,846.5

Notes

The accounting policies on pages F-2 to F-8 and the accompanying notes on pages F-14 to F-53 form an integral part of this consolidated statement of changes in equity.

Other reserves are analysed in note 27.

Acquisition of subsidiaries represents movements in retained earnings and non-controlling interests arising from changes in ownership of existing subsidiaries and recognition of non-controlling interests on new acquisitions.

On 2 January 2013, pursuant to a scheme of arrangement under Article 125 of the Companies (Jersey) Law 1991, a new parent company was introduced. Upon implementation, the Group’s share premium account and merger reserve have been transferred to retained earnings.

F-13

Notes to the consolidated financial statements

1. General information

WPP plc is a company incorporated in Jersey. The address of the registered office is Queensway House, Hilgrove Street, St Helier, Jersey, JE11ES and the address of the principal executive office is 27 Farm Street, London, United Kingdom, W1J 5RJ. The nature of the Group’s operations and its principal activities are set out in note 2. These consolidated financial statements are presented in pounds sterling.

2. Segment information

The Group is a leading worldwide communications services organisation offering national and multinational clients a comprehensive range of communications services.

The Group is organised into four reportable segments – Advertising and Media Investment Management; Data Investment Management; Public Relations & Public Affairs; and Branding & Identity, Healthcare and Specialist Communications. This last reportable segment includes WPP Digital and direct, digital, promotional and relationship marketing.

IFRS 8 Operating Segments requires operating segments to be identified on the same basis as is used internally for the review of performance and allocation of resources by the Group chief executive. Provided certain quantitative and qualitative criteria are fulfilled, IFRS 8 permits the aggregation of these components into reportable segments for the purposes of disclosure in the Group’s financial statements. In assessing the Group’s reportable segments, the directors have had regard to the similar economic characteristics of certain operating segments, their shared client base, the similar nature of their products or services and their long-term margins, amongst other factors.

Operating sectors

Reported contributions were as follows:


Other information	Revenue ¹		Gross Profit		Headline PBIT ²		Headline PBIT margin		Headline PBIT margin on gross profit ³
	£m		£m		£m		%		%
2013
Advertising and Media Investment Management		4,578.8		4,463.6		824.4		18.0		18.5
Data Investment Management ⁴		2,549.7		1,843.7		263.8		10.3		14.3
Public Relations & Public Affairs		920.7		907.5		133.8		14.5		14.7
Branding & Identity, Healthcare and Specialist Communications		2,970.2		2,861.3		439.6		14.8		15.4
		11,019.4		10,076.1		1,661.6		15.1		16.5
2012
Advertising and Media Investment Management		4,273.2		4,201.3		754.5		17.7		18.0
Data Investment Management ⁴		2,460.2		1,768.9		246.9		10.0		14.0
Public Relations & Public Affairs		917.1		901.1		136.4		14.9		15.1
Branding & Identity, Healthcare and Specialist Communications		2,722.6		2,643.5		393.2		14.4		14.9
		10,373.1		9,514.8		1,531.0		14.8		16.1
2011
Advertising and Media Investment Management		4,157.2		4,110.2		667.9		16.1		16.2
Data Investment Management ⁴		2,458.0		1,802.9		258.7		10.5		14.3
Public Relations & Public Affairs		885.4		869.3		142.9		16.1		16.4
Branding & Identity, Healthcare and Specialist Communications		2,521.2		2,456.1		359.5		14.3		14.6
		10,021.8		9,238.5		1,429.0		14.3		15.5

Notes

Intersegment sales have not been separately disclosed as they are not material.

A reconciliation from profit before interest and taxation (PBIT) to headline PBIT is provided in note 31. PBIT is reconciled to profit before taxation in the consolidated income statement.

Headline PBIT margin on gross profit is calculated as headline PBIT as a percentage of gross profit.

⁴

Data Investment Management was previously reported as Consumer Insight.

F-14

Notes to the consolidated financial statements (continued)

2. Segment information (continued)


Other information	Share-based payments		Capital additions ¹		Depreciation and amortisation ²		Goodwill impairment		Share of results of associates		Interests in associates and joint ventures
	£m		£m		£m		£m		£m		£m
2013
Advertising and Media Investment Management		55.5		127.2		102.2		–		35.0		486.3
Data Investment Management ³		19.2		62.8		53.7		–		20.2		105.5
Public Relations & Public Affairs		5.9		14.2		15.3		12.0		1.5		45.3
Branding & Identity, Healthcare and Specialist Communications		24.8		70.2		63.5		11.3		11.4		155.7
		105.4		274.4		234.7		23.3		68.1		792.8
2012
Advertising and Media Investment Management		49.3		198.4		97.1		0.7		34.7		566.9
Data Investment Management ³		16.6		60.5		55.5		–		18.6		102.4
Public Relations & Public Affairs		4.9		12.4		15.7		31.3		2.3		47.9
Branding & Identity, Healthcare and Specialist Communications		22.0		66.9		56.4		–		13.8		170.0
		92.8		338.2		224.7		32.0		69.4		887.2
2011
Advertising and Media Investment Management		44.5		112.7		94.2		–		36.4		549.9
Data Investment Management ³		12.7		63.1		49.8		–		16.3		101.3
Public Relations & Public Affairs		3.9		15.4		15.8		–		3.2		42.6
Branding & Identity, Healthcare and Specialist Communications		17.7		62.0		51.7		–		10.2		107.5
		78.8		253.2		211.5		–		66.1		801.3

Notes

Capital additions include purchases of property, plant and equipment and other intangible assets (including capitalised computer software).

Depreciation of property, plant and equipment and amortisation of other intangible assets.

Data Investment Management was previously reported as Consumer Insight.


	Assets						Liabilities
Balance sheet	Segment assets		Unallocated corporate assets ¹		Consolidated total assets		Segment liabilities			Unallocated corporate liabilities ¹			Consolidated total liabilities
	£m		£m		£m		£m			£m			£m
2013
Advertising and Media Investment Management		11,787.6						(8,919.1	)
Data Investment Management ²		3,330.2						(960.0	)
Public Relations & Public Affairs		1,693.7						(350.6	)
Branding & Identity, Healthcare and Specialist Communications		5,716.9						(1,333.8	)
		22,528.4		2,477.0		25,005.4		(11,563.5	)		(5,595.4	)		(17,158.9	)
2012
Advertising and Media Investment Management		12,013.9						(9,152.7	)
Data Investment Management ²		3,371.4						(1,004.0	)
Public Relations & Public Affairs		1,724.2						(370.8	)
Branding & Identity, Healthcare and Specialist Communications		5,607.4						(1,364.5	)
		22,716.9		2,160.7		24,877.6		(11,892.0	)		(5,925.0	)		(17,817.0	)
2011
Advertising and Media Investment Management		12,075.9						(9,331.8	)
Data Investment Management ²		3,525.3						(1,058.2	)
Public Relations & Public Affairs		1,825.0						(411.4	)
Branding & Identity, Healthcare and Specialist Communications		5,147.6						(1,353.5	)
		22,573.8		2,121.1		24,694.9		(12,154.9	)		(5,645.7	)		(17,800.6	)

Notes

Included in unallocated corporate assets and liabilities are corporate income tax, deferred tax and net interest-bearing debt.

Data Investment Management was previously reported as Consumer Insight.

F-15

Notes to the consolidated financial statements (continued)

2. Segment information (continued)

Contributions by geographical area were as follows:


			2013 £m				2012 £m				2011 £m
Revenue ¹
North America ⁵				3,744.7				3,546.5				3,388.2
UK				1,414.0				1,275.2				1,183.5
Western Continental Europe				2,592.6				2,439.2				2,505.1
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe				3,268.1				3,112.2				2,945.0
				11,019.4				10,373.1				10,021.8
Gross Profit
North America ⁵				3,547.0				3,365.0				3,227.1
United kingdom				1,303.9				1,155.7				1,079.1
Western Continental Europe				2,217.8				2,121.5				2,210.5
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe				3,007.4				2,872.6				2,721.8
				10,076.1				9,514.8				9,238.5

	Margin				Margin				Margin
Headline PBIT ²
North America ⁵		16.5%		616.5		16.3%		578.6		15.5%		525.6
UK		14.5%		204.7		13.6%		173.3		14.0%		165.3
Western Continental Europe		10.5%		272.0		10.4%		252.9		11.3%		284.0
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe		17.4%		568.4		16.9%		526.2		15.4%		454.1
		15.1%		1,661.6		14.8%		1,531.0		14.3%		1,429.0

			Margin				Margin				Margin
Headline PBIT margin on gross profit ³
North America ⁵				17.4%				17.2%				16.3%
UK				15.7%				15.0%				15.3%
Western Continental Europe				12.3%				11.9%				12.8%
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe				18.9%				18.3%				16.7%
				16.5%				16.1%				15.5%
			2013 £m				2012 £m
Non-current assets ⁴
North America ⁵				5,125.5				5,131.9
UK				1,772.2				1,766.7
Western Continental Europe				3,562.6				3,590.3
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe				2,620.2				2,731.1
				13,080.5				13,220.0

Notes

Intersegment sales have not been separately disclosed as they are not material.

See note 31 for a reconciliation of headline PBIT to PBIT.

Headline PBIT margin on gross profit is calculated as headline PBIT as a percentage of gross profit.

⁴

Non-current assets excluding financial instruments and deferred tax.

⁵

North America includes the US with revenue of £3,498.1 million (2012: £3,309.4 million, 2011: £3,149.9 million), gross profit of £3,310.8 million (2012: £3,138.7 million, 2011: £2,997.6 million), headline PBIT of £582.6 million (2012: £547.8 million, 2011: £490.2 million) and non-current assets of £4,479.5 million (2012: £4,534.4 million).

3. Operating costs


	2013 £m			2012 £m			2011 £m
Staff costs (note 5)		6,477.1			6,106.1			5,872.5
Establishment costs		727.4			690.6			674.1
Other operating costs (net)		1,461.3			1,477.0			1,499.7
Total operating costs		8,665.8			8,273.7			8,046.3
Operating costs include:
Goodwill impairment (note 12)		23.3			32.0			–
Investment write-downs		0.4			19.6			32.8
Gain on sale of freehold property in New York		–			(71.4	)		–
Cost of changes to corporate structure		–			4.1			–
Restructuring costs		5.0			93.4			–
Amortisation and impairment of acquired intangible assets (note 12)		179.8			171.9			172.0
Amortisation of other intangible assets (note 12)		32.7			33.7			25.7
Depreciation of property, plant and equipment		195.5			184.2			178.7
(Gains)/losses on sale of property, plant and equipment		(0.4)			0.7			(0.9)
Gains on disposal of investments		(6.0)			(26.8)			(0.4)
Gains on remeasurement of equity interest on acquisition of controlling interest		(30.0	)		(5.3	)		(31.6	)
Net foreign exchange (gains)/losses		(1.1	)		7.7			1.1
Operating lease rentals:
Land and buildings		483.0			464.6			459.6
Sublease income		(13.2	)		(23.0	)		(29.1	)
		469.8			441.6			430.5
Plant and machinery		21.1			21.9			23.0
		490.9			463.5			453.5

In 2013, operating profit includes credits totalling £19.9 million (2012: £19.8 million, 2011: £14.0 million) relating to the release of excess provisions and other balances established in respect of acquisitions completed prior to 2012. Further details of the Group’s approach to acquisition reserves, as required by IFRS 3 Business Combinations, are given in note 28.

Investment write-downs of £0.4 million (2012: £19.6 million, 2011: £32.8 million) relate to certain non-core minority investments in the US where forecast financial performance and/or liquidity issues indicate a permanent decline in the recoverability of the Group’s investment.

All of the operating costs of the Group are related to administrative expenses.

F-16

Notes to the consolidated financial statements (continued)

3. Operating costs (continued)

Auditors’ remuneration:


	2013 £m		2012 £m		2011 £m
Fees payable to the Company’s auditors for the audit of the Company’s annual accounts		1.4		1.4		1.4
The audit of the Company’s subsidiaries pursuant to legislation		15.1		14.6		15.3
		16.5		16.0		16.7
Other services pursuant to legislation		3.1		3.1		3.1
Fees payable to the auditors pursuant to legislation		19.6		19.1		19.8
Tax advisory services		2.3		2.5		2.3
Tax compliance services		1.2		1.0		1.1
		3.5		3.5		3.4
Corporate finance services		0.2		0.5		0.5
Other services ¹		4.8		3.9		4.7
Total non-audit fees		8.5		7.9		8.6
Total fees		28.1		27.0		28.4

Note

Other services include audits for earnout purposes and services for expatriate employees.

Minimum committed annual rentals

Amounts payable in 2014 under leases will be as follows:


	Plant and machinery						Land and buildings
	2014 £m		2013 £m		2012 £m		2014 £m		2013 £m		2012 £m
In respect of operating leases which expire:
– within one year		4.1		4.1		5.5		26.3		34.8		27.4
– within two to five years		13.1		13.0		13.2		195.2		166.1		190.7
– after five years		0.1		0.2		0.5		139.7		145.4		143.6
		17.3		17.3		19.2		361.2		346.3		361.7

Future minimum annual amounts payable under all lease commitments in existence at 31 December 2013 are as follows:


	Minimum rental payments ¹ £m		Less sub- let rentals £m			Net payment £m
Year ending 31 December
2014		378.5		(6.5	)		372.0
2015		310.5		(4.7	)		305.8
2016		257.5		(3.3	)		254.2
2017		209.5		(2.0	)		207.5
2018		197.8		(0.6	)		197.2
Later years		1,187.4		(0.4	)		1,187.0
		2,541.2		(17.5	)		2,523.7

Note

During 2013, WPP signed a lease with rental commitments of £487.3 million (2017: £2.1 million, 2018: £25.1 million and 2019 and after: £460.1 million) that have been included in the table above. The lease is contingent upon the developer obtaining financing to construct the building.

4. Share of results of associates

Share of results of associates include:


	2013 £m			2012 £m			2011 £m
Share of profit before interest and taxation		111.0			105.1			99.9
Share of exceptional (losses)/gains		(10.7	)		(3.0	)		2.1
Share of interest and non-controlling interests		(4.6	)		(1.6	)		(2.5	)
Share of taxation		(27.6	)		(31.1	)		(33.4	)
		68.1			69.4			66.1

5. Our people

Our staff numbers averaged 117,115 for the year ended 31 December 2013 against 114,490 in 2012 and 109,971 in 2011, including acquisitions. Their geographical distribution was as follows:


	2013		2012		2011
North America		28,093		27,782		27,540
UK		11,925		11,413		10,761
Western Continental Europe		23,559		23,322		22,298
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe		53,538		51,973		49,372
		117,115		114,490		109,971

Their operating sector distribution was as follows:


	2013		2012		2011
Advertising and Media Investment Management		49,505		48,662		47,252
Data Investment Management ¹		29,586		28,989		29,204
Public Relations & Public Affairs		8,298		8,437		7,869
Branding & Identity, Healthcare and Specialist Communications		29,726		28,402		25,646
		117,115		114,490		109,971

Note

Data Investment Management was previously reported as Consumer Insight.

At the end of 2013 staff numbers were 119,116 (2012: 115,711, 2011: 113,615). Including all employees of associated undertakings, this figure was approximately 175,000 at 31 December 2013 (2012: 165,000, 2011: 158,000).

Staff costs include:


	2013 £m			2012 £m			2011 £m
Wages and salaries		4,481.4			4,289.7			4,079.4
Cash-based incentive plans		222.2			198.1			259.4
Share-based incentive plans (note 22)		105.4			92.8			78.8
Social security costs		577.3			524.7			499.3
Pension costs (note 23)		151.3			148.7			135.4
Severance		26.9			50.8			53.9
Other staff costs ¹		912.6			801.3			766.3
		6,477.1			6,106.1			5,872.5
Staff cost to revenue ratio		58.8	%		58.9	%		58.6	%

Note

Freelance and temporary staff costs are included in other staff costs.

Included above are charges of £16.9 million (2012: £15.6 million, 2011: £9.9 million) for share-based incentive plans in respect of key management personnel (who comprise the directors of the Group). Total compensation received by key management personnel in respect of 2013 was £42.0 million (2012: £27.9 million, 2011: £17.7 million) of which £0.7 million (2012: £0.8 million, 2011: £0.8 million) were pension contributions. The value of the matching LEAP awards, which vest in the year following the end of the five-year performance period, is included in total compensation in the year the relevant five-year performance period ends.

F-17

Notes to the consolidated financial statements (continued)

6. Finance income, finance costs and revaluation of financial instruments

Finance income includes:


	2013 £m		2012 £m		2011 £m
Income from available for sale investments		10.1		1.2		0.6
Interest income		54.2		54.7		64.1
		64.3		55.9		64.7

Finance costs include:


	2013 £m		2012 £m		2011 £m
Net interest expense on pension plans ¹ (note 23)		11.4		11.3		11.2
Interest on other long-term employee benefits		1.7		1.7		1.8
Interest payable and similar charges ²		254.8		256.8		251.6
		267.9		269.8		264.6

Revaluation of financial instruments ³ include:


	2013 £m			2012 £m			2011 £m
Movements in fair value of treasury instruments		6.3			(14.8	)		(12.7	)
Revaluation of put options over non-controlling interests		(1.1	)		(5.1	)		(30.9	)
Revaluation of payments due to vendors (earnout agreements)		15.8			15.2			(6.4	)
		21.0			(4.7	)		(50.0	)

Notes

Comparative figures have been restated to reflect the requirements of IAS 19 (amended): Employee Benefits.

Interest payable and similar charges are payable on bank overdrafts, bonds and bank loans held at amortised cost.

Financial instruments are held at fair value through profit and loss.

The majority of the Group’s long-term debt is represented by $3,081 million of US dollar bonds at an average interest rate of 5.51%, € 2,000 million of Eurobonds at an average interest rate of 4.92% and £600 million of sterling bonds including convertible bonds at an average interest rate of 6.13%.

Average borrowings under the Revolving Credit Facilities (note 10) amounted to the equivalent of $2 million at an average interest rate of 1.24% inclusive of margin.

Average borrowings under the US Commercial Paper Program (note 10) amounted to $25 million at an average interest rate of 0.34% inclusive of margin.

7. Taxation

In 2013, the tax rate on profit before taxation was 21.9% (2012: 18.1%).

Cash taxes paid in the year were £273.3 million (2012: £257.0 million).

The tax charge is based on the profit for the year and comprises:


	2013 £m			2012 £m			2011 £m
Corporation tax
Current year		359.1			335.5			310.3
Prior years		(48.1	)		(41.7	)		(47.7	)
Release of prior-year provisions		–			–			(106.1	)
Tax credit relating to restructuring costs		–			(15.7	)		–
		311.0			278.1			156.5
Deferred tax
Current year		(9.0	)		(14.4	)		4.5
Net credit in relation to the amortisation of acquired intangible assets and other goodwill items		(10.6	)		(86.0	)		(72.4	)
Deferred tax on gain on sale of freehold property in New York		–			20.0			–
		(19.6	)		(80.4	)		(67.9	)
Prior years		(7.7	)		(0.5	)		3.3
		(27.3	)		(80.9	)		(64.6	)
Tax charge		283.7			197.2			91.9

In 2011, the tax rate was lower, primarily due to the resolution of historic tax liabilities. The release of prior-year corporate tax provisions resulted from the resolution of a number of open matters.

The tax charge for the year can be reconciled to profit before taxation in the consolidated income statement as follows:


	2013 £m			2012 £m			2011 £m
Profit before taxation		1,295.8			1,091.9			1,008.4
Tax at the corporation tax rate of 23.25% ¹		301.3			273.0			252.1
Tax effect of share of results of associates		(15.8	)		(17.4	)		(16.5	)
Tax effect of expenses that are not deductible/(taxable) in determining taxable profit		3.4			(7.5	)		13.0
Effect of different tax rates of subsidiaries operating in other jurisdictions		17.6			13.9			9.2
Origination and reversal of temporary differences not previously recognised		35.5			(39.2	)		20.2
Tax losses not utilised in the year		40.6			45.4			49.3
Tax effect of utilisation of tax losses not previously recognised		(28.3	)		(18.6	)		(41.4	)
Tax effect of recognition of tax losses not previously recognised		(14.8	)		(10.2	)		(43.5	)
Release of prior-year provisions in relation to acquired businesses		(11.6	)		(20.6	)		(21.4	)
Other prior-year adjustments		(44.2	)		(21.6	)		(23.0	)
Release of prior-year provisions		–			–			(106.1	)
Tax charge		283.7			197.2			91.9
Effective tax rate on profit before tax		21.9	%		18.1	%		9.1	%

Note

The parent company of the Group was tax resident in the UK for 2013, and tax resident in Ireland for 2012 and 2011. As such, the tax rate in the tax reconciliation for 2013 is the blended UK corporation tax rate of 23.25%. For 2012 and 2011, the tax rate is the Irish non-trading corporation tax rate of 25%.

F-18

Notes to the consolidated financial statements (continued)

8. Ordinary dividends

Amounts recognised as distributions to equity holders in the year:


	2013			2012			2011			2013		2012		2011
Per share	Pence per share									£m		£m		£m
2012 Final dividend ¹		19.71	p		17.14	p		11.82	p		258.0		212.8		147.3
2013 Interim dividend ²		10.56	p		8.80	p		7.46	p		139.3		109.4		92.2
		30.27	p		25.94	p		19.28	p		397.3		322.2		239.5

Proposed final dividend for the year ended 31 December 2013:

2013

2012

2011

Per share

Pence per share

2013 Final dividend ¹

23.65

19.71

17.14

Notes

Second interim dividend in 2011 and 2010.

First interim dividend in 2012 and 2011.

The payment of dividends will not have any tax consequences for the Group.

9. Earnings per share

Basic EPS

The calculation of basic EPS is as follows:


	2013			2012			2011
Earnings ¹ (£m)		936.5			822.7			840.1
Average shares used in basic EPS calculation (m)		1,293.8			1,243.4			1,242.7
EPS		72.4	p		66.2	p		67.6	p

Note

Earnings is equivalent to profit for the year attributable to equity holders of the parent.

Diluted EPS

The calculation of diluted EPS is as follows:


	2013			2012			2011
Diluted earnings (£m)		947.1			848.8			866.2
Average shares used in diluted EPS calculation (m)		1,360.3			1,352.6			1,342.2
Diluted EPS		69.6	p		62.8	p		64.5	p

Diluted EPS has been calculated based on the diluted earnings amounts above. On 19 May 2009 the Group issued £450 million 5.75% convertible bonds due May 2014. During the year ended 31 December 2013, these bonds were converted into 76.5 million shares. For the year ended 31 December 2013 these convertible bonds were dilutive and earnings were consequently increased by £10.6 million (2012: £26.1 million, 2011: £26.1 million) for the purpose of the calculation of diluted earnings. In addition, at 31 December 2013, options to purchase 6.0 million ordinary shares (2012: 6.3 million, 2011: 4.0 million) were outstanding, but were excluded from the computation of diluted earnings per share because the exercise prices of these options were greater than the average market price of the Group’s shares and, therefore, their inclusion would have been accretive.

A reconciliation between the shares used in calculating basic and diluted EPS is as follows:


	2013 m		2012 m		2011 m
Average shares used in basic EPS calculation		1,293.8		1,243.4		1,242.7
Dilutive share options outstanding		6.8		4.9		4.5
Other potentially issuable shares		30.8		27.8		18.5
£450 million 5.75% convertible bonds		28.9		76.5		76.5
Shares used in diluted EPS calculation		1,360.3		1,352.6		1,342.2

At 31 December 2013 there were 1,348,733,317 ordinary shares in issue.

10. Sources of finance

The following table summarises the equity and debt financing of the Group, and changes during the year:

Debt

2013
£m

2012
£m

2013
£m

2012
£m

Analysis of changes in financing

Beginning of year

302.4

232.3

4,180.5

3,893.0

Ordinary shares issued

42.4

56.0

–

Reclassification due to Group reconstruction ¹

(176.0

)

–

Share cancellations

–

(0.7

)

–

Treasury share cancellations

–

(0.6

)

–

Share issue/cancellation costs

(0.4

)

(0.2

)

–

Shares issued on conversion of bond

449.9

–

Scrip dividend

–

15.6

–

Net (decrease)/increase in drawings on bank loans, corporate bonds and convertible bonds

–

(13.1

)

380.5

Net amortisation of financing costs included in debt

–

8.3

6.8

Debt acquired

–

20.0

Other movements

–

(48.0

)

(18.2

)

Exchange adjustments

–

(4.1

)

(101.6

)

End of year

618.3

302.4

4,123.6

4,180.5

Note

Further details on the Group reconstruction are given in note 26.

The above table excludes bank overdrafts which fall within cash and cash equivalents for the purposes of the consolidated cash flow statement.

Shares

At 31 December 2013, the Company’s share base was entirely composed of ordinary equity share capital and share premium of £618.3 million (2012: £302.4 million), further details of which are disclosed in note 26.

Debt

US$ bonds The Group has in issue $369 million of 5.875% bonds due June 2014, $600 million of 8% bonds due September 2014, $812 million of 4.75% bonds due November 2021, $500 million of 3.625% bonds due September 2022 and $300 million of 5.125% bonds due September 2042. In November 2013, the Group issued $500 million of 5.625% bonds due November 2043.

Eurobonds The Group has in issue € 500 million of 5.25% bonds due January 2015 and € 750 million of 6.625% bonds due May 2016. In November 2013, the Group issued € 750 million of 3% bonds due November 2023.

Sterling bonds The Group has in issue £400 million of 6% bonds due April 2017 and £200 million of 6.375% bonds due November 2020.

Revolving Credit Facilities The Group has a five-year Revolving Credit Facility of $1.2 billion and £475 million due November 2016. The Group’s borrowing under these facilities, which are drawn down predominantly in US dollars and pounds sterling, averaged the equivalent of $2 million in 2013. The Group had available undrawn committed credit facilities of £1,199.4 million at December 2013 (2012: £1,021.5 million).

Borrowings under the Revolving Credit Facilities are governed by certain financial covenants based on the results and financial position of the Group.

US Commercial Paper Program

The Group operates a commercial paper program using the Revolving Credit Facility as a backstop. The average commercial paper outstanding during the year was $25.0 million. There was no US Commercial Paper outstanding at 31 December 2013.

Convertible bonds

At 31 December 2012 the Group had in issue £450 million of 5.75% convertible bonds due May 2014. During 2013, £449.9 million of these bonds were converted into 76,513,563 WPP ordinary shares. The remaining £0.1 million was repaid in November 2013 due to the early redemption of all of the outstanding convertible bonds.

F-19

Notes to the consolidated financial statements (continued)

10. Sources of finance (continued)

The following table is an analysis of future anticipated cash flows in relation to the Group’s debt, on an undiscounted basis which, therefore, differs from the fair value and carrying value:


	2013 £m			2012 £m
Within one year		(807.8	)		(721.4	)
Between one and two years		(575.3	)		(1,244.8	)
Between two and three years		(757.5	)		(529.6	)
Between three and four years		(500.0	)		(707.4	)
Between four and five years		(92.0	)		(465.1	)
Over five years		(2,968.3	)		(1,610.3	)
Debt financing under the Revolving Credit Facility and in relation to unsecured loan notes		(5,700.9	)		(5,278.6	)
Short-term overdrafts – within one year		(338.4	)		(586.0	)
Future anticipated cash flows		(6,039.3	)		(5,864.6	)
Effect of discounting/financing rates		1,577.3			1,098.1
Debt financing		(4,462.0	)		(4,766.5	)

Analysis of fixed and floating rate debt by currency including the effect of interest rate and cross-currency swaps:

2013
Currency

£m

Fixed
rate ¹

Floating
basis

Period
(months) ¹

– fixed

2,177.4

5.54%

n/a

119

– floating

233.1

n/a

LIBOR

n/a

– fixed

100.0

7.50%

n/a

– floating

200.0

n/a

LIBOR

n/a

€

– fixed

1,331.8

4.86%

n/a

– floating

108.0

n/a

EURIBOR

n/a

Other

(26.7

)

n/a

4,123.6

Note

Weighted average. These rates do not include the effect of gains on interest rate swap terminations that are written to income over the life of the original instrument. At 31 December 2013 the amount still to be written to income was £0.2 million (2012: £0.7 million) in respect of US dollar swap terminations, to be written to income evenly until June 2014.


2012 Currency		£m			Fixed rate ¹		Floating basis		Period (months) ¹
$	– fixed		1,913.0			5.53%		n/a		92
	– floating		444.0			n/a		LIBOR		n/a
£	– fixed		550.0			6.07%		n/a		58
	– floating		200.0			n/a		LIBOR		n/a
€	– fixed		690.7			6.50%		n/a		38
	– floating		344.2			n/a		EURIBOR		n/a
¥	– fixed		64.0			2.07%		n/a		11
Other			(25.4	)		n/a		n/a		n/a
			4,180.5

Note

Weighted average. These rates do not include the effect of gains on interest rate swap terminations that are written to income over the life of the original instrument.

10. Sources of finance (continued)

The following table is an analysis of future anticipated cash flows in relation to the Group’s financial derivatives, which include interest rate swaps, cash flow hedges and other foreign exchange swaps:

Financial liabilities

Financial assets

2013

Payable
£m

Receivable
£m

Payable
£m

Receivable
£m

Within one year

376.6

311.9

772.8

859.9

Between one and two years

445.8

352.7

530.5

619.5

Between two and three years

1.1

0.7

4.6

12.4

Between three and four years

26.1

25.6

228.3

237.4

Between four and five years

–

Over five years

–

849.6

690.9

1,536.2

1,729.2


	Financial liabilities				Financial assets
2012	Payable £m		Receivable £m		Payable £m		Receivable £m
Within one year		333.0		262.7		773.9		865.8
Between one and two years		339.9		280.8		753.5		839.8
Between two and three years		454.1		352.5		525.9		608.7
Between three and four years		1.1		0.4		2.4		12.4
Between four and five years		26.1		25.4		226.7		237.4
Over five years		–		–		–		–
		1,154.2		921.8		2,282.4		2,564.1

F-20

Notes to the consolidated financial statements (continued)

11. Analysis of cash flows

The following tables analyse the items included within the main cash flow headings on page F-11.

Net cash from operating activities:


	2013 £m			2012 £m			2011 £m
Profit for the year		1,012.1			894.7			916.5
Taxation		283.7			197.2			91.9
Revaluation of financial instruments		(21.0	)		4.7			50.0
Finance costs		267.9			269.8			264.6
Finance income		(64.3	)		(55.9	)		(64.7	)
Share of results of associates		(68.1	)		(69.4	)		(66.1	)
Adjustments for:
Non-cash share-based incentive plans (including share options)		105.4			92.8			78.8
Depreciation of property, plant and equipment		202.0			191.0			185.8
Impairment of goodwill		23.3			32.0			–
Amortisation and impairment of acquired intangible assets		179.8			171.9			172.0
Amortisation of other intangible assets		32.7			33.7			25.7
Investment write-downs		0.4			19.6			32.8
Gains on disposal of investments		(6.0	)		(26.8	)		(0.4	)
Gains on remeasurement of equity interest on acquisition of controlling interest		(30.0	)		(5.3	)		(31.6	)
Gain on sale of freehold property in New York		–			(71.4	)		–
(Gains)/losses on sale of property, plant and equipment		(0.4	)		0.7			(0.9	)
Decrease/(increase) in inventories and work in progress		36.7			(17.6	)		32.7
Increase in receivables		(253.3	)		(436.4	)		(1.8	)
Increase/(decrease) in payables – short-term		67.2			105.3			(618.5	)
Increase in payables – long-term		28.3			4.1			19.2
Decrease in provisions		(12.3	)		(43.6	)		(52.5	)
Corporation and overseas tax paid		(273.3	)		(257.0	)		(247.9	)
Interest and similar charges paid		(254.7	)		(228.3	)		(241.4	)
Interest received		51.3			56.6			63.2
Investment income		10.1			1.2			0.6
Dividends from associates		56.7			44.7			57.2
Net cash inflow from operating activities		1,374.2			908.3			665.2

11. Analysis of cash flows (continued)

Acquisitions and disposals:


	2013 £m			2012 £m			2011 £m
Initial cash consideration		(165.1	)		(462.0	)		(352.3	)
Cash and cash equivalents acquired (net)		25.0			46.6			98.8
Earnout payments		(27.7	)		(85.7	)		(150.0	)
Loan note redemptions		–			(1.0	)		(0.8	)
Purchase of other investments (including associates)		(45.6	)		(111.4	)		(68.1	)
Proceeds on disposal of investments		12.0			47.0			2.6
Acquisitions and disposals		(201.4	)		(566.5	)		(469.8	)
Cash consideration for non-controlling interests		(19.6	)		(20.1	)		(62.6	)
Net cash outflow		(221.0	)		(586.6	)		(532.4	)

Share repurchases and buy-backs:
	2013 £m			2012 £m			2011 £m
Purchase of own shares by ESOP Trusts		(179.4	)		(78.8	)		(106.5	)
Share cancellations (excluding brokerage fees)		–			(55.1	)		(45.9	)
Shares purchased into treasury		(17.6	)		(0.6	)		(29.8	)
Net cash outflow		(197.0	)		(134.5	)		(182.2	)

Net increase in borrowings:
	2013 £m			2012 £m			2011 £m
Proceeds from issue of € 750 million bonds		624.8			–			–
Proceeds from issue of $500 million bonds		314.2			312.1			319.5
Proceeds from issue of $300 million bonds		–			187.3			–
Repayment of € 600 million bonds		(502.1	)		–			–
Repayment of convertible bonds		(0.1	)		–			–
Decrease in drawings on bank loans		–			(79.7	)		–
Repayment of debt acquired		–			(20.0	)		(18.1	)
Repayment of $30 million TNS private placements		–			(19.2	)		–
Net cash inflow		436.8			380.5			301.4

Cash and cash equivalents:
	2013 £m			2012 £m			2011 £m
Cash at bank and in hand		2,099.1			1,721.4			1,833.5
Short-term bank deposits		122.5			223.9			113.1
Overdrafts ¹		(338.4	)		(586.0	)		(518.4	)
Cash and cash equivalents at end of year		1,883.2			1,359.3			1,428.2

Note

Bank overdrafts are included in cash and cash equivalents because they form an integral part of the Group’s cash management.

The Group considers that the carrying amount of cash and cash equivalents approximates their fair value.

F-21

Notes to the consolidated financial statements (continued)

12. Intangible assets

Goodwill

The movements in 2013 and 2012 were as follows:


	£m
Cost:
1 January 2012		9,988.5
Additions ¹		360.8
Revision of earnout estimates		8.6
Exchange adjustments		(315.8	)
31 December 2012		10,042.1
Additions ¹		209.0
Revision of earnout estimates		(5.7	)
Exchange adjustments		(179.6	)
31 December 2013		10,065.8

Accumulated impairment losses and write-downs:
1 January 2012		557.7
Impairment losses for the year		32.0
Exchange adjustments		(4.8	)
31 December 2012		584.9
Impairment losses for the year		17.7
Exchange adjustments		(9.6	)
31 December 2013		593.0

Net book value:
31 December 2013		9,472.8
31 December 2012		9,457.2
1 January 2012		9,430.8

Note

Additions represent goodwill arising on the acquisition of subsidiary undertakings including the effect of any revisions to fair value adjustments that had been determined provisionally at the immediately preceding balance sheet date, as permitted by IFRS 3 Business Combinations. The effect of such revisions was not material in either year presented. Goodwill arising on the acquisition of associate undertakings is shown within interests in associates and joint ventures in note 14.

Cash-generating units with significant goodwill as at 31 December 2013 and 2012 are:


	2013 £m		2012 £m
GroupM		2,004.7		1,964.4
Kantar		1,800.9		1,764.0
Wunderman		1,063.7		1,096.9
Y&R Advertising		956.5		984.5
Burson-Marsteller		463.4		480.4
Other		3,183.6		3,167.0
Total goodwill		9,472.8		9,457.2

Other goodwill represents goodwill on a large number of cash- generating units, none of which is individually significant in comparison to the total carrying value of goodwill.

12. Intangible assets (continued)

Other intangible assets

The movements in 2013 and 2012 were as follows:


	Brands with an indefinite useful life £m			Acquired intangibles £m			Other £m			Total £m
Cost:
1 January 2012		1,036.4			1,463.6			253.8			2,753.8
Additions		–			–			39.8			39.8
Disposals		–			–			(19.0	)		(19.0	)
New acquisitions		–			185.2			1.3			186.5
Other movements ¹		–			12.9			0.3			13.2
Exchange adjustments		(43.3	)		(34.1	)		(11.9	)		(89.3	)
31 December 2012		993.1			1,627.6			264.3			2,885.0
Additions		–			–			43.8			43.8
Disposals		–			–			(18.9	)		(18.9	)
New acquisitions		–			45.5			0.4			45.9
Other movements ¹		–			2.2			0.6			2.8
Exchange adjustments		(35.2	)		(8.9	)		(6.0	)		(50.1	)
31 December 2013		957.9			1,666.4			284.2			2,908.5
Amortisation and impairment:
1 January 2012		–			722.2			171.7			893.9
Charge for the year		–			169.6			33.7			203.3
Disposals		–			–			(18.4	)		(18.4	)
Other movements		–			–			(2.8	)		(2.8	)
Exchange adjustments		–			(10.2	)		(8.2	)		(18.4	)
31 December 2012		–			881.6			176.0			1,057.6
Charge for the year		–			176.9			32.7			209.6
Disposals		–			–			(17.7	)		(17.7	)
Other movements		–			–			1.4			1.4
Exchange adjustments		–			(5.7	)		(4.5	)		(10.2	)
31 December 2013		–			1,052.8			187.9			1,240.7
Net book value:
31 December 2013		957.9			613.6			96.3			1,667.8
31 December 2012		993.1			746.0			88.3			1,827.4
1 January 2012		1,036.4			741.4			82.1			1,859.9

Note

Other movements in acquired intangibles include revisions to fair value adjustments arising on the acquisition of subsidiary undertakings that had been determined provisionally at the immediately preceding balance sheet date, as permitted by IFRS 3 Business Combinations.

Brands with an indefinite life are carried at historical cost in accordance with the Group’s accounting policy for intangible assets. The carrying values of the separately identifiable brands are not individually significant in comparison with the total carrying value of brands with an indefinite useful life.

Acquired intangible assets at net book value at 31 December 2013 include brand names of £386.8 million (2012: £408.8 million), customer-related intangibles of £206.5 million (2012: £287.7 million), and other assets (including proprietary tools) of £20.3 million (2012: £49.5 million).

The total amortisation and impairment of acquired intangible assets of £179.8 million (2012: £171.9 million) includes £2.9 million (2012: £2.3 million) in relation to associates.

In accordance with the Group’s accounting policy, the carrying values of goodwill and intangible assets with indefinite useful lives are reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired.

The goodwill impairment review is undertaken annually on 30 September. The review assessed whether the carrying value of goodwill was supported by the net

F-22

Notes to the consolidated financial statements (continued)

12. Intangible assets (continued)

present value of future cash flows, using a pre-tax discount rate of 9.5% (2012: 9.5%) and management forecasts for a projection period of up to five years, followed by an assumed annual long-term growth rate of 3.0% (2012: 3.0%) and no assumed improvement in operating margin. Management have made the judgement that this long-term growth rate does not exceed the long-term average growth rate for the industry.

The goodwill impairment charge of £23.3 million (2012: £32.0 million) relates to a number of under-performing businesses in the Group, of which £5.6 million (2012: nil) is in relation to associates. In certain markets, the impact of local economic conditions and trading circumstances on these businesses was sufficiently severe to indicate impairment to the carrying value of goodwill.

Under IFRS, an impairment charge is required for both goodwill and other indefinite-lived assets when the carrying amount exceeds the ‘recoverable amount’, defined as the higher of fair value less costs to sell and value in use.

Our approach in determining the recoverable amount utilises a discounted cash flow methodology, which necessarily involves making numerous estimates and assumptions regarding revenue growth, operating margins, appropriate discount rates and working capital requirements. These estimates will likely differ from future actual results of operations and cash flows, and it is possible that these differences could be material. In addition, judgements are applied in determining the level of cash-generating unit identified for impairment testing and the criteria used to determine which assets should be aggregated. A difference in testing levels could affect whether an impairment is recorded and the extent of impairment loss. Changes in our business activities or structure may also result in changes to the level of testing in future periods. Further, future events could cause the Group to conclude that impairment indicators exist and that the asset values associated with a given operation have become impaired. Any resulting impairment loss could have a material impact on the Group’s financial condition and results of operations.

Historically our impairment losses have resulted from a specific event, condition or circumstance in one of our companies, such as the loss of a significant client. As a result, changes in the assumptions used in our impairment model have not had a significant effect on the impairment charges recognised and a reasonably possible change in assumptions would not lead to a significant impairment. The carrying value of goodwill and other intangible assets will continue to be reviewed at least annually for impairment and adjusted to the recoverable amount if required.

13. Property, plant and equipment

The movements in 2013 and 2012 were as follows:


	Land £m			Freehold buildings £m			Leasehold buildings £m			Fixtures, fittings and equipment £m			Computer equipment £m			Total £m
Cost:
1 January 2012		12.4			73.1			713.9			369.7			612.2			1,781.3
Additions		29.7			71.2			79.6			34.6			83.3			298.4
New acquisitions		–			–			2.3			1.8			4.4			8.5
Disposals		(4.0	)		(26.3	)		(79.8	)		(54.0	)		(81.8	)		(245.9	)
Exchange adjustments		(1.0	)		(0.4	)		(29.7	)		(18.7	)		(25.5	)		(75.3	)
31 December 2012		37.1			117.6			686.3			333.4			592.6			1,767.0
Additions		–			8.8			92.2			44.2			85.4			230.6
New acquisitions		–			–			0.6			4.2			2.6			7.4
Disposals		–			(1.6	)		(27.9	)		(35.8	)		(57.8	)		(123.1	)
Exchange adjustments		–			(19.0	)		(9.9	)		(20.2	)		(17.0	)		(66.1	)
31 December 2013		37.1			105.8			741.3			325.8			605.8			1,815.8

Depreciation:
1 January 2012		–			29.5			343.1			225.6			454.8			1,053.0
Charge for the year		–			3.2			62.3			40.6			84.9			191.0
Disposals		–			(14.3	)		(56.5	)		(47.6	)		(78.0	)		(196.4	)
Exchange adjustments		–			(0.6	)		(14.3	)		(13.2	)		(20.8	)		(48.9	)
31 December 2012		–			17.8			334.6			205.4			440.9			998.7
Charge for the year		–			4.0			68.4			41.9			87.7			202.0
Disposals		–			(1.3	)		(23.9	)		(34.3	)		(57.9	)		(117.4	)
Exchange adjustments		–			(0.7	)		(6.2	)		(21.3	)		(12.6	)		(40.8	)
31 December 2013		–			19.8			372.9			191.7			458.1			1,042.5

Net book value:
31 December 2013		37.1			86.0			368.4			134.1			147.7			773.3
31 December 2012		37.1			99.8			351.7			128.0			151.7			768.3
1 January 2012		12.4			43.6			370.8			144.1			157.4			728.3

At the end of the year, capital commitments contracted, but not provided for in respect of property, plant and equipment were £31.6 million (2012: £47.0 million).

F-23

Notes to the consolidated financial statements (continued)

14. Interests in associates, joint ventures and other investments

The movements in 2013 and 2012 were as follows:


	Net assets of associates and joint ventures £m			Goodwill and other intangibles of associates and joint ventures £m			Total associates and joint ventures £m			Other investments £m
1 January 2012		392.2			409.1			801.3			190.8
Additions		32.1			–			32.1			24.8
Goodwill arising on acquisition of new associates		–			54.5			54.5			–
Share of results of associate undertakings (note 4)		69.4			–			69.4			–
Dividends and other movements		(49.3	)		15.8			(33.5	)		–
Exchange adjustments		(28.7	)		(29.6	)		(58.3	)		(6.1	)
Disposals		(9.6	)		–			(9.6	)		(14.4	)
Reclassification from subsidiaries		35.2			2.9			38.1			–
Revaluation of other investments		–			–			–			(3.5	)
Amortisation of other intangible assets		–			(2.3	)		(2.3	)		–
Write-downs		(0.7	)		(3.8	)		(4.5	)		(15.1	)
31 December 2012		440.6			446.6			887.2			176.5
Additions		11.5			–			11.5			28.5
Goodwill arising on acquisition of new associates		–			13.9			13.9			–
Share of results of associate undertakings (note 4)		68.1			–			68.1			–
Dividends and other movements		(73.1	)		16.7			(56.4	)		–
Exchange adjustments		(40.0	)		(52.3	)		(92.3	)		(1.4	)
Disposals		–			(7.6	)		(7.6	)		(5.0	)
Reclassification to subsidiaries		(11.3	)		(11.4	)		(22.7	)		–
Revaluation of other investments		–			–			–			72.0
Amortisation of other intangible assets		–			(2.9	)		(2.9	)		–
Goodwill impairment		–			(5.6	)		(5.6	)		–
Write-downs		(0.4	)		–			(0.4	)		–
31 December 2013		395.4			397.4			792.8			270.6

The investments included above as ‘other investments’ represent investments in equity securities that present the Group with opportunity for return through dividend income and trading gains. They have no fixed maturity or coupon rate. The fair values of the listed securities are based on quoted market prices. For unlisted securities, where market value is not available, the Group has estimated relevant fair values on the basis of publicly available information from outside sources or on the basis of discounted cash flow models where appropriate.

The carrying values of the Group’s associates and joint ventures are reviewed for impairment in accordance with the Group’s accounting policies.

14. Interests in associates, joint ventures and other investments (continued)

The Group’s principal associates and joint ventures at 31 December 2013 included:


	% owned		Country of incorporation
Asatsu-DK Inc.		24.6		Japan
Barrows Design and Manufacturing (Pty) Limited		35.0		South Africa
CHI & Partners Limited		49.9		UK
Chime Communications Plc ¹		17.7		UK
CTR Market Research Co., Ltd		46.0		China
CVSC Sofres Media Co Limited		40.0		China
GIIR Inc.		29.9		Korea
Globant SA		21.5		Argentina
Grass Roots Group plc		44.8		UK
High Co SA		34.1		France
IBOPE Latinoamericana, SA		41.8		Brazil
Singleton, Ogilvy & Mather (Holdings) Pty Limited		33.3		Australia
STW Communications Group Limited		20.0		Australia
The Jupiter Drawing Room (Proprietary) Limited		49.0		South Africa
WVI Marketing Communications Group Limited		50.0		Russia

Note

Although the group holds less than 20% of Chime Communications Plc, it is considered to be an associate as the Group exercises significant influence by virtue of a position on the Board of Directors.

The market value of the Group’s shares in its principal listed associate undertakings at 31 December 2013 was as follows: Asatsu-DK Inc: £148.3 million, Chime Communications Plc: £58.4 million, GIIR Inc: £22.0 million, High Co SA: £15.0 million, and STW Communications Group Limited: £63.6 million (2012: Asatsu-DK Inc: £150.7 million, Chime Communications Plc: £40.0 million, GIIR Inc: £18.3 million, High Co SA: £15.2 million, Scangroup Limited: £40.6 million, and STW Communications Group Limited: £53.2 million).

The carrying value (including goodwill and other intangibles) of these equity interests in the Group’s consolidated balance sheet at 31 December 2013 was as follows: Asatsu-DK Inc: £155.3 million, Chime Communications Plc: £34.7 million, GIIR Inc: £28.2 million, High Co SA: £31.6 million, and STW Communications Group Limited: £66.5 million (2012: Asatsu-DK Inc: £197.0 million, Chime Communications Plc: £36.8 million, GIIR Inc: £26.7 million, High Co SA: £32.4 million, Scangroup Limited: £21.0 million, and STW Communications Group Limited: £67.8 million).

Where the market value of the Group’s listed associates is less than the carrying value, an impairment review is performed utilising the discounted cash flow methodology discussed in note 12.

The Group’s investments in its principal associate undertakings are represented by ordinary shares.

F-24

Notes to the consolidated financial statements (continued)

14. Interests in associates, joint ventures and other investments (continued)

Summarised financial information

The following tables present a summary of the aggregate financial performance and net asset position of the Group’s associate undertakings and joint ventures. These have been estimated and converted, where appropriate, to an IFRS presentation based on information provided by the relevant companies at 31 December 2013.


	2013 £m		2012 £m		2011 £m
Income statement
Revenue		2,366.7		2,268.0		2,127.2
Operating profit		274.8		262.1		293.7
Profit before taxation		261.5		262.8		316.5
Profit for the year		188.8		176.5		190.5


	2013 £m			2012 £m
Balance sheet
Assets		5,027.4			4,956.5
Liabilities		(2,411.9	)		(2,424.0	)
Net assets		2,615.5			2,532.5

The application of equity accounting is ordinarily discontinued when the investment is reduced to zero and additional losses are not provided for unless the investor has guaranteed obligations of the investee or is otherwise committed to provide further financial support for the investee.

At the end of the year, capital commitments contracted, but not provided for in respect of interests in associates and other investments were £27.3 million (2012: £18.8 million).

15. Deferred tax

The Group’s deferred tax assets and liabilities are measured at the end of each period in accordance with IAS 12. The recognition of deferred tax assets is determined by reference to the Group’s estimate of recoverability, using models where appropriate to forecast future taxable profits.

Deferred tax assets have only been recognised for territories where the Group considers that it is probable there would be sufficient taxable profits for the future deductions to be utilised.

Based on available evidence, both positive and negative, we determine whether it is probable that all or a portion of the deferred tax assets will be realised. The main factors that we consider include:

– the future earnings potential determined through the use of internal forecasts;

– the cumulative losses in recent years;

– the various jurisdictions in which the potential deferred tax assets arise;

– the history of losses carried forward and other tax assets expiring;

– the timing of future reversal of taxable temporary differences;

– the expiry period associated with the deferred tax assets; and

– the nature of the income that can be used to realise the deferred tax asset.

If it is probable that some portion of these assets will not be realised, then no asset is recognised in relation to that portion.

If market conditions improve and future results of operations exceed our current expectations, our existing recognised deferred tax assets may be adjusted, resulting in future tax benefits. Alternatively, if market conditions deteriorate further or future results of operations are less than expected, future assessments may result in a determination that some or all of the deferred tax assets are not realisable. As a result, all or a portion of the deferred tax assets may need to be reversed.

15. Deferred tax (continued)

Certain deferred tax assets and liabilities have been offset as they relate to the same tax group. The following is the analysis of the deferred tax balances for financial reporting purposes:


	Gross £m			Offset £m			As reported £m
2013
Deferred tax assets		224.3			(104.9	)		119.4
Deferred tax liabilities		(755.6	)		104.9			(650.7	)
		(531.3	)		–			(531.3	)
2012
Deferred tax assets		221.2			(130.0	)		91.2
Deferred tax liabilities		(810.3	)		130.0			(680.3	)
		(589.1	)		–			(589.1	)

The following are the major gross deferred tax assets recognised by the Group and movements thereon in 2013 and 2012:


	Tax losses £m			Retirement benefit obligations £m			Property, plant & equipment £m			Share- based pay- ments £m			Other temporary differences £m			Total £m
1 January 2012		31.6			13.5			2.7			34.7			68.9			151.4
Credit/(charge) to income		5.7			3.0			41.2			9.9			(0.2	)		59.6
Credit to other comprehensive income		–			7.7			–			–			–			7.7
Credit to equity		–			–			–			13.3			–			13.3
Transfer to corporation tax		–			–			–			–			3.9			3.9
Exchange adjustments		(1.7	)		(0.5	)		(0.2	)		(2.0	)		(10.3	)		(14.7	)
31 December 2012		35.6			23.7			43.7			55.9			62.3			221.2
(Charge)/credit to income		(7.3	)		–			(12.3	)		3.0			(2.2	)		(18.8	)
Charge to other comprehensive income		–			(1.2	)		–			–			–			(1.2	)
Credit to equity		–			–			–			30.2			–			30.2
Exchange adjustments		(3.1	)		(3.5	)		(0.1	)		(2.8	)		2.4			(7.1	)
31 December 2013		25.2			19.0			31.3			86.3			62.5			224.3

Other temporary differences comprise a number of items, none of which is individually significant to the Group’s consolidated balance sheet. At 31 December 2013 the balance related to temporary differences in relation to accounting provisions, tax credits, and tax deductible goodwill.

In addition the Group has recognised the following gross deferred tax liabilities and movements thereon in 2013 and 2012:


	Brands and other intangibles £m			Associate earnings £m			Goodwill £m			Property, plant & equipment £m			Other temporary differences £m			Total £m
1 January 2012		662.5			22.9			110.5			0.1			10.8			806.8
Acquisition of subsidiaries		59.4			–			–			–			1.9			61.3
(Credit)/ charge to income		(71.8	)		1.5			21.1			30.2			(2.2	)		(21.2	)
Exchange adjustments		(25.4	)		(3.4	)		(5.9	)		–			(1.9	)		(36.6	)
31 December 2012		624.7			21.0			125.7			30.3			8.6			810.3
Acquisition of subsidiaries		13.5			–			–			–			–			13.5
(Credit)/ charge to income		(58.9	)		1.8			13.5			(0.2	)		(2.3	)		(46.1	)
Credit to equity		–			–			–			–			(1.9	)		(1.9	)
Exchange adjustments		(14.7	)		(1.3	)		(3.7	)		(0.5	)		–			(20.2	)
31 December 2013		564.6			21.5			135.5			29.6			4.4			755.6

F-25

Notes to the consolidated financial statements (continued)

15. Deferred tax (continued)

At the balance sheet date, the Group has gross tax losses and other temporary differences of £5,391.0 million (2012: £4,730.9 million) available for offset against future profits. Deferred tax assets have been recognised in respect of the tax benefit of £710.8 million (2012: £687.9 million) of such tax losses and other temporary differences. No deferred tax asset has been recognised in respect of the remaining £4,680.2 million (2012: £4,043.0 million) of losses and other temporary differences as the Group considers that there will not be enough taxable profits in the entities concerned such that any additional asset could be considered recoverable. Included in the total unrecognised temporary differences are losses of £280.0 million that will expire by 2023, £27.1 million that will expire by 2027, £60.1 million that will expire by 2029, £10.6 million that will expire by 2032 and £3,086.9 million of losses that may be carried forward indefinitely.

At the balance sheet date, the aggregate amount of the temporary differences in relation to the investment in subsidiaries for which deferred tax liabilities have not been recognised was £1,938.3 million. No liability has been recognised in respect of these differences because the Group is in a position to control the timing of the reversal of the temporary differences and the Group considers that it is probable that such differences will not reverse in the foreseeable future.

16. Inventory and work in progress

The following are included in the net book value of inventory and work in progress:


	2013 £m		2012 £m
Work in progress		288.9		343.3
Inventory		15.6		4.9
		304.5		348.2

17. Trade and other receivables

The following are included in trade and other receivables:

Amounts falling due within one year:


	2013 £m		2012 £m
Trade receivables (net of bad debt provision)		5,986.5		6,204.2
VAT and sales taxes recoverable		82.0		75.6
Prepayments and accrued income		2,533.3		2,232.2
Fair value derivatives		57.9		28.5
Other debtors		428.4		466.5
		9,088.1		9,007.0

The ageing of trade receivables and other financial assets is as follows:



2013	Carrying amount at 31 December 2013 £m		Neither past due nor impaired £m		0-30 days £m		31-90 days £m		91-180 days £m		181 days- 1 year £m		Greater than 1 year £m
Trade receivables		5,986.5		3,942.6		1,337.9		570.3		114.1		20.7		0.9
Other financial assets		416.0		282.2		68.3		18.1		12.5		12.2		22.7
		6,402.5		4,224.8		1,406.2		588.4		126.6		32.9		23.6


2012	Carrying amount at 31 December 2012 £m		Neither past due nor impaired £m		0-30 days £m		31-90 days £m		91-180 days £m		181 days- 1 year £m		Greater than 1 year £m
Trade receivables		6,204.2		3,942.5		1,447.2		659.2		140.1		9.5		5.7
Other financial assets		467.4		311.3		77.0		35.7		7.4		10.1		25.9
		6,671.6		4,253.8		1,524.2		694.9		147.5		19.6		31.6

Other financial assets are included in other debtors.

Past due amounts are not impaired where collection is considered likely.

17. Trade and other receivables (continued)

Amounts falling due after more than one year:


	2013 £m		2012 £m
Prepayments and accrued income		24.5		29.5
Other debtors		78.7		73.9
Fair value of derivatives		55.3		141.7
		158.5		245.1

Movements on bad debt provisions were as follows:


	2013 £m			2012 £m			2011 £m
Balance at beginning of year		105.3			125.7			114.6
New acquisitions		2.1			0.7			4.0
Charged to operating costs		26.3			18.1			31.1
Exchange adjustments		(1.7	)		(4.1	)		(1.9	)
Utilisations and other movements		(39.2	)		(35.1	)		(22.1	)
Balance at end of year		92.8			105.3			125.7

The allowance for bad and doubtful debts is equivalent to 1.5% (2012: 1.7%, 2011: 2.0%) of gross trade accounts receivable.

The Group considers that the carrying amount of trade and other receivables approximates their fair value.

18. Trade and other payables: amounts falling due within one year

The following are included in trade and other payables falling due within one year:


	2013 £m		2012 £m
Trade payables		7,150.2		7,227.5
Other taxation and social security		415.3		433.6
Payments due to vendors (earnout agreements)		49.7		33.4
Liabilities in respect of put option agreements with vendors		53.5		64.3
Deferred income		917.8		880.2
Fair value of derivatives		41.8		31.6
Share purchases – close period commitments		–		18.2
Other creditors and accruals		2,082.4		2,219.0
		10,710.7		10,907.8

The Group considers that the carrying amount of trade and other payables approximates their fair value.

19. Trade and other payables: amounts falling due after more than one year

The following are included in trade and other payables falling due after more than one year:


	2013 £m		2012 £m
Payments due to vendors (earnout agreements)		143.8		160.6
Liabilities in respect of put option agreements with vendors		85.6		80.0
Fair value of derivatives		19.9		79.7
Other creditors and accruals		208.3		191.7
		457.6		512.0

The Group considers that the carrying amount of trade and other payables approximates their fair value.

F-26

Notes to the consolidated financial statements (continued)

19. Trade and other payables: amounts falling due after more than one year (continued)

The following tables set out payments due to vendors, comprising deferred consideration and the directors’ best estimates of future earnout-related obligations:


	2013 £m		2012 £m
Within one year		49.7		33.4
Between one and two years		26.1		35.7
Between two and three years		44.1		28.7
Between three and four years		54.0		30.4
Between four and five years		12.9		63.8
Over five years		6.7		2.0
		193.5		194.0


	2013 £m			2012 £m
At the beginning of the year		194.0			234.1
Earnouts paid (note 11)		(27.7	)		(85.7	)
New acquisitions		51.9			61.5
Revision of estimates taken to goodwill (note 12)		(5.7	)		8.6
Revaluation of payments due to vendors (note 6)		(15.8	)		(15.2	)
Exchange adjustments		(3.2	)		(9.3	)
At the end of the year		193.5			194.0

As of 31 December 2013, the potential undiscounted amount of future payments that could be required under the earnout agreements for acquisitions completed in the current year and for all earnout agreements range from £nil to £289 million (2012: £nil to £322 million) and £nil to £1,042 million (2012: £nil to £819 million), respectively. The increase in the maximum potential undiscounted amount of future payments for all earnout agreements is due to earnout arrangements related to new acquisitions partially offset by earnout arrangements that have completed and payments made on active arrangements during the year.

20. Bank overdrafts, bonds and bank loans

Amounts falling due within one year:


	2013 £m		2012 £m
Bank overdrafts		338.4		586.0
Corporate bonds and bank loans		603.0		499.9
		941.4		1,085.9

The Group considers that the carrying amount of bank overdrafts approximates their fair value.

Amounts falling due after more than 1 year:


	2013 £m		2012 £m
Corporate bonds and bank loans		3,520.6		3,680.6

The Group estimates that the fair value of convertible and corporate bonds is £4,344.9 million at 31 December 2013 (2012: £4,759.7 million). The Group considers that the carrying amount of bank loans approximates their fair value. The fair values of the corporate bonds are based on quoted market prices.

The corporate bonds, convertible bonds, bank loans and overdrafts included within liabilities fall due for repayment as follows:


	2013 £m		2012 £m
Within one year		941.4		1,085.9
Between one and two years		424.2		1,071.2
Between two and three years		618.5		408.4
Between three and four years		424.8		607.8
Between four and five years		–		433.0
Over five years		2,053.1		1,160.2
		4,462.0		4,766.5

21. Provisions for liabilities and charges

The movements in 2013 and 2012 were as follows:


	Property £m			Other £m			Total £m
1 January 2012		48.3			105.7			154.0
Charged to the income statement		8.9			14.8			23.7
Acquisitions		0.7			11.4			12.1
Utilised		(8.0	)		(18.8	)		(26.8	)
Released to the income statement		(6.8	)		(5.4	)		(12.2	)
Transfers		(0.7	)		(7.7	)		(8.4	)
Exchange adjustments		(1.1	)		(4.7	)		(5.8	)
31 December 2012		41.3			95.3			136.6
Charged to the income statement		11.5			13.8			25.3
Acquisitions ¹		2.7			14.7			17.4
Utilised		(7.6	)		(11.3	)		(18.9	)
Released to the income statement		(9.1	)		(4.6	)		(13.7	)
Transfers		(0.7	)		6.4			5.7
Exchange adjustments		(0.8	)		(3.9	)		(4.7	)
31 December 2013		37.3			110.4			147.7

Note

Acquisitions include £3.5 million of provisions arising from revisions to fair value adjustments related to the acquisition of subsidiary undertakings that had been determined provisionally at the immediately preceding balance sheet date, as permitted by IFRS 3 Business Combinations.

Provisions comprise liabilities where there is uncertainty about the timing of settlement, but where a reliable estimate can be made of the amount. These include provisions for vacant space, sub-let losses and other property-related liabilities. Also included are other provisions, such as certain long-term employee benefits and legal claims, where the likelihood of settlement is considered probable.

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.

22. Share-based payments

Charges for share-based incentive plans were as follows:

2013
£m

2012
£m

2011
£m

Share-based payments

105.4

92.8

78.8

Share-based payments comprise charges for stock options and restricted stock awards to employees of the Group.

As of 31 December 2013, there was £167.6 million (2012: £167.0 million) of total unrecognised compensation cost related to the Group’s restricted stock plans. That cost is expected to be recognised over a period of one to two years.

Further information on stock options is provided in note 26.

Restricted stock plans

The Group operates a number of equity-settled share incentive schemes, in most cases satisfied by the delivery of stock from one of the Group’s ESOP Trusts. The most significant current schemes are as follows:

Renewed Leadership Equity Acquisition Plan (Renewed LEAP) and Leadership Equity Acquisition Plan III (LEAP III)

Under Renewed LEAP and LEAP III, the most senior executives of the Group, including certain executive directors, commit WPP shares (‘investment shares’) in order to have the opportunity to earn additional WPP shares (‘matching shares’). The number of matching shares which a participant can receive at the end of the fixed performance period of five years is dependent on the performance (based on the Total Share Owner Return (TSR)) of the Company over that period against a comparator group of other listed communications services companies. The maximum possible number of matching shares for each of the 2012, 2011, 2010 and 2009 grants is five shares for each investment share. The 2009 Renewed LEAP plan vested in February 2014 at a match of 4.37 shares for each investment share. The last LEAP III award was granted in 2012 and no further awards will be made following the introduction of the EPSP.

F-27

Notes to the consolidated financial statements (continued)

22. Share-based payments (continued)

Executive Performance Share Plan (EPSP)

The first grant of restricted stock under the EPSP was made in 2013. This scheme is intended to reward and incentivise the most senior executives of the Group and has effectively replaced LEAP III. The performance period is five complete financial years, commencing with the financial year in which the award is granted. Grant date will usually be in the first half of the first performance year, with vest date in the March following the end of the five-year performance period. Vesting is conditional on continued employment throughout the vesting period.

There are three performance criteria, each constituting one-third of the vesting value, and each measured over this five-year period:

(i) TSR against a comparator group of companies. Threshold performance (equating to ranking in the 50th percentile of the comparator group) will result in 20% vesting of the part of the award dependent on TSR. The maximum vest of 100% will arise if performance ranks in the 90th percentile, with a sliding scale of vesting for performance between threshold and maximum.

(ii) Headline diluted earnings per share. Threshold performance (7% compound annual growth) will again result in a 20% vest. Maximum performance of 14% compound annual growth will give rise to a 100% vest, with a sliding vesting scale for performance between threshold and maximum.

(iii) Return on equity (ROE). Average annual ROE defined as headline diluted EPS divided by the balance sheet value per share of share owners’ equity. Threshold of 10% average annual ROE, maximum of 14%, with a sliding scale for performance in between. Threshold again gives rise to a 20% vest, with 100% for maximum.

Performance Share Awards (PSA)

Grants of restricted stock under PSA are dependent upon annual performance targets, typically based on one or more of: operating profit, profit before taxation and operating margin. Grants are made in the year following the year of performance measurement, and vest two years after grant date provided the individual concerned is continually employed by the Group throughout this time.

Leaders, Partners and High Potential Group

This scheme provides annual grants of restricted stock to well over 1,000 key executives of the Group. Vesting is conditional on continued employment over the three-year vesting period.

Valuation methodology

For all of these schemes, the valuation methodology is based upon fair value on grant date, which is determined by the market price on that date or the application of a Black-Scholes model, depending upon the characteristics of the scheme concerned. The assumptions underlying the Black-Scholes model are detailed in note 26, including details of assumed dividend yields. Market price on any given day is obtained from external, publicly available sources.

Market/non-market conditions

Most share-based plans are subject to non-market performance conditions, such as margin or growth targets, as well as continued employment. The Renewed LEAP, LEAP III and EPSP schemes are subject to a number of performance conditions, including TSR, a market-based condition.

For schemes without market-based performance conditions, the valuation methodology above is applied and, at each year end, the relevant accrual for each grant is revised, if appropriate, to take account of any changes in estimate of the likely number of shares expected to vest.

For schemes with market-based performance conditions, the probability of satisfying these conditions is assessed at grant date through a statistical model (such as the Monte Carlo Model) and applied to the fair value. This initial valuation remains fixed throughout the life of the relevant plan, irrespective of the actual outcome in terms of performance. Where a lapse occurs due to cessation of employment, the cumulative charge taken to date is reversed.

22. Share-based payments (continued)

Movement on ordinary shares granted for significant restricted stock plans:

Non-vested
1 January
2013
number

Granted
number
m

Lapsed
number
m

Vested
number
m

Non-vested
31 December
2013
number
m

Renewed LEAP/ LEAP III ¹

4.6

3.5

–

(4.3

)

3.8

Executive Performance Share Plan (EPSP)

–

2.5

–

2.5

Performance Share Awards (PSA)

7.0

2.0

(0.3

)

(3.5

)

5.2

Leaders, Partners and High Potential Group

9.8

2.2

(0.7

)

(3.0

)

8.3

Weighted average fair value (pence per share):

Renewed LEAP/ LEAP III ¹

683p

375p

725p

375p

749p

Executive Performance Share Plan (EPSP)

–

1,122p

–

1,122p

Performance Share Awards (PSA)

802p

970p

878p

731p

911p

Leaders, Partners and High Potential Group

740p

1,223p

765p

673p

891p

Note

The number of shares granted represents the matched shares awarded on vest date for the 2008 Renewed LEAP plan which vested in March 2013. The actual number of shares that vest for each Renewed LEAP/LEAP III plan is dependent on the extent to which the relevant performance criteria are satisfied.

The total fair value of shares vested for all the Group’s restricted stock plans during the year ended 31 December 2013 was £87.1 million (2012: £47.5 million, 2011: £76.5 million).

23. Provision for post-employment benefits

Companies within the Group operate a large number of pension plans, the forms and benefits of which vary with conditions and practices in the countries concerned. The Group’s pension costs are analysed as follows:


	2013 £m		2012 £m		2011 £m
Defined contribution plans		124.4		124.9		114.7
Defined benefit plans charge to operating profit		26.9		23.8		20.7
Pension costs (note 5)		151.3		148.7		135.4
Net interest expense on pension plans ¹ (note 6)		11.4		11.3		11.2
		162.7		160.0		146.6

Note

Comparative figures have been restated to reflect the requirements of IAS 19 (amended): Employee Benefits.

Defined benefit plans

The pension costs are assessed in accordance with the advice of local independent qualified actuaries. The latest full actuarial valuations for the various pension plans were carried out at various dates in the last three years. These valuations have been updated by the local actuaries to 31 December 2013.

The Group’s policy is to close existing defined benefit plans to new members. This has been implemented across a significant number of the pension plans.

Contributions to funded plans are determined in line with local conditions and practices. Contributions in respect of unfunded plans are paid as they fall due. The total contributions (for funded plans) and benefit payments (for unfunded plans) paid for 2013 amounted to £47.8 million (2012: £56.5 million, 2011: £66.8 million). Employer contributions and benefit payments in 2014 are expected to be approximately £80 million.

F-28

Notes to the consolidated financial statements (continued)

23. Provision for post-employment benefits (continued)

(a) Assumptions

There are a number of areas in pension accounting that involve judgements made by management based on advice of qualified advisors. These include establishing the discount rates, rates of increase in salaries and pensions in payment, inflation, and mortality assumptions. The main weighted average assumptions used for the actuarial valuations at 31 December are shown in the following table:


	2013 % pa		2012 % pa		2011 % pa		2010 % pa
UK
Discount rate ¹		4.5		4.2		4.7		5.4
Rate of increase in salaries		3.6		2.9		3.0		3.4
Rate of increase in pensions in payment		4.2		3.9		4.0		4.0
Inflation		2.9		2.4		2.5		3.2
North America
Discount rate ¹		4.5		3.5		4.4		5.1
Rate of increase in salaries		3.0		3.0		3.0		3.0
Inflation		2.5		2.5		2.5		2.5
Western Continental Europe
Discount rate ¹		3.7		3.6		4.8		5.3
Rate of increase in salaries		2.4		2.4		2.7		2.7
Rate of increase in pensions in payment		2.0		2.0		2.0		2.0
Inflation		2.0		2.0		2.0		2.0
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe
Discount rate ¹		4.4		4.1		4.8		4.0
Rate of increase in salaries		5.9		6.1		5.7		4.4
Inflation		4.5		4.7		4.8		5.1

Note

Discount rates are based on high-quality corporate bond yields. In countries where there is no deep market in corporate bonds, the discount rate assumption has been set with regard to the yield on long-term government bonds.

For the Group’s pension plans, the plans’ assets are invested with the objective of being able to meet current and future benefit payment needs, while controlling balance sheet volatility and future contributions. Pension plan assets are invested with a number of investment managers, and assets are diversified among equities, bonds, insured annuities, property and cash or other liquid investments. The primary use of bonds as an investment class is to match the anticipated cash flows from the plans to pay pensions. The Group is invested in high-quality corporate and government bonds which share similar risk characteristics and are of equivalent currency and term to the plan liabilities. Various insurance policies have also been bought historically to provide a more exact match for the cash flows, including a match for the actual mortality of specific plan members. These insurance policies effectively provide protection against both investment fluctuations and longevity risks. The strategic target allocation varies among the individual plans.

Management considers the types of investment classes in which the pension plan assets are invested. The types of investment classes are determined by economic and market conditions and in consideration of specific asset class risk.

Management periodically commissions detailed asset and liability studies performed by third-party professional investment advisors and actuaries that generate probability-adjusted expected future returns on those assets. These studies also project the estimated future pension payments and evaluate the efficiency of the allocation of the pension plan assets into various investment categories.

At 31 December 2013, the life expectancies underlying the value of the accrued liabilities for the main defined benefit pension plans operated by the Group were as follows:


Years life expectancy after age 65	All plans		North America		UK		Western Continental Europe		Other ¹
– current pensioners (at age 65) – male		21.9		20.5		24.1		20.6		19.3
– current pensioners (at age 65) – female		23.9		22.7		25.4		23.6		24.7
– future pensioners (current age 45) – male		24.1		22.6		26.2		23.0		19.3
– future pensioners (current age 45) – female		25.9		24.6		27.6		25.5		24.7

Note

Includes Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe.

23. Provision for post-employment benefits (continued)

The life expectancies after age 65 at 31 December 2012 were 21.9 years and 23.9 years for male and female current pensioners (at age 65) respectively, and 24.1 years and 26.0 years for male and female future pensioners (current age 45), respectively.

In the determination of mortality assumptions, management uses the most up-to-date mortality tables available in each country.

The following table provides information on the weighted average duration of the defined benefit pension obligations and the distribution of the timing of benefit payments for the next 10 years. The duration corresponds to the weighted average length of the underlying cash flows.


	All plans		North America		UK		Western Continental Europe		Other ¹
Weighted average duration of the defined benefit obligation (years)		12.4		10.4		13.4		15.9		5.6
Expected benefit payments over the next 10 years (£m)
Benefits expected to be paid within 12 months		50.9		25.8		16.1		7.2		1.8
Benefits expected to be paid in 2015		52.5		27.5		16.0		7.4		1.6
Benefits expected to be paid in 2016		59.3		26.7		18.4		7.4		6.8
Benefits expected to be paid in 2017		52.9		25.6		17.7		7.7		1.9
Benefits expected to be paid in 2018		53.4		24.9		18.3		8.1		2.1
Benefits expected to be paid in the next five years		292.1		135.1		100.9		43.8		12.3

Note

Includes Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe.

F-29

Notes to the consolidated financial statements (continued)

23. Provision for post-employment benefits (continued)

The following table presents a sensitivity analysis for each significant actuarial assumption showing how the defined benefit obligation would have been affected by changes in the relevant actuarial assumption that were reasonably possible at the balance sheet date. This sensitivity analysis applies to the defined benefit obligation only and not to the net defined benefit pension liability in its entirety, the measurement of which is driven by a number of factors including, in addition to the assumptions below, the fair value of plan assets.

The sensitivity analyses are based on a change in one assumption while holding all other assumptions constant so that interdependencies between the assumptions are excluded. The methodology applied is consistent with that used to determine the recognised defined benefit obligation. The sensitivity analysis for inflation is not shown as it is an underlying assumption to build the pension and salary increase assumptions. Changing the inflation assumption on its own without changing the salary or pension assumptions will not result in a significant change in pension liabilities.


Sensitivity analysis of significant actuarial assumptions	Increase/(decrease) in benefit obligation 2013 £m
Discount rate
Increase by 25 basis points
UK		(10.8	)
North America		(9.9	)
Western Continental Europe		(7.1	)
Other ¹		(0.5	)
Decrease by 25 basis points
UK		11.5
North America		10.1
Western Continental Europe		7.5
Other ¹		0.4
Rate of increase in salaries
Increase by 25 basis points
UK		0.2
North America		–
Western Continental Europe		1.1
Other ¹		0.4
Decrease by 25 basis points
UK		(0.1	)
North America		(0.1	)
Western Continental Europe		(1.1	)
Other ¹		(0.5	)
Rate of increase in pensions in payment
Increase by 25 basis points
UK		2.2
Western Continental Europe		4.9
Decrease by 25 basis points
UK		(2.1	)
Western Continental Europe		(4.7	)
Life expectancy
Increase in longevity by one additional year
UK		11.5
North America		4.5
Western Continental Europe		3.8
Other ¹		–

Note

Includes Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe.

23. Provision for post-employment benefits (continued)

(b) Assets and liabilities

At 31 December, the fair value of the assets in the pension plans, and the assessed present value of the liabilities in the pension plans are shown in the following table:


	2013 £m			%		2012 £m			%		2011 £m			%
Equities		147.7			20.3		145.0			20.4		168.7			25.8
Bonds		405.8			55.9		282.3			39.8		271.4			41.5
Insured annuities		68.7			9.5		74.5			10.5		67.6			10.4
Property		1.0			0.1		0.8			0.1		9.4			1.4
Cash ¹		37.0			5.1		150.9			21.3		84.9			13.0
Other ¹		66.0			9.1		56.3			7.9		51.7			7.9
Total fair value of assets		726.2			100.0		709.8			100.0		653.7			100.0
Present value of liabilities		(972.8	)				(1,044.1	)				(934.5	)
Deficit in the plans		(246.6	)				(334.3	)				(280.8	)
Irrecoverable surplus		(0.9	)				(1.0	)				(1.1	)
Unrecognised past service cost ²		–					(0.3	)				(0.4	)
Net liability ³		(247.5	)				(335.6	)				(282.3	)
Plans in surplus		17.7					1.5					5.6
Plans in deficit		(265.2	)				(337.1	)				(287.9	)

Notes

In the 2012 and 2011 financial statements these were presented in ‘cash and other’.

In accordance with IAS 19 (amended) past service costs are recognized immediately in the income statement when the related plan amendment occurs. Prior years have not been restated as the impact to the financial statements would be immaterial.

The related deferred tax asset is discussed in note 15.

All plan assets have quoted prices in active markets with the exception of insured annuities and other assets.

The total fair value of assets, present value of pension plan liabilities and deficit in the plans were £631.3 million, £871.2 million and £239.9 million in 2010 and £588.1 million, £836.1 million and £248.0 million in 2009, respectively.


Surplus/(deficit) in plans by region	2013 £m			2012 £m			2011 £m
UK		11.3			(9.4	)		(1.6	)
North America		(136.7	)		(193.8	)		(172.5	)
Western Continental Europe		(96.0	)		(100.0	)		(84.5	)
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe		(25.2	)		(31.1	)		(22.2	)
Deficit in the plans		(246.6	)		(334.3	)		(280.8	)

Some of the Group’s defined benefit plans are unfunded (or largely unfunded) by common custom and practice in certain jurisdictions. In the case of these unfunded plans, the benefit payments are made as and when they fall due. Pre-funding of these plans would not be typical business practice.

F-30

Notes to the consolidated financial statements (continued)

23. Provision for post-employment benefits (continued)

The following table shows the split of the deficit at 31 December 2013, 2012 and 2011 between funded and unfunded pension plans.


	2013 Surplus/ (deficit) £m			2013 Present value of liabilities £m			2012 Deficit £m			2012 Present value of liabilities £m			2011 Deficit £m			2011 Present value of liabilities £m
Funded plans by region
UK		11.3			(346.4	)		(9.4	)		(366.6	)		(1.6	)		(327.8	)
North America		(68.8	)		(334.2	)		(115.6	)		(375.0	)		(93.1	)		(340.2	)
Western Continental Europe		(41.6	)		(135.4	)		(45.5	)		(129.1	)		(36.4	)		(108.0	)
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe		(5.0	)		(14.3	)		(5.1	)		(14.7	)		(2.3	)		(11.1	)
Deficit/liabilities in the funded plans		(104.1	)		(830.3	)		(175.6	)		(885.4	)		(133.4	)		(787.1	)
Unfunded plans by region
UK		–			–			–			–			–			–
North America		(67.9	)		(67.9	)		(78.2	)		(78.2	)		(79.4	)		(79.4	)
Western Continental Europe		(54.4	)		(54.4	)		(54.5	)		(54.5	)		(48.1	)		(48.1	)
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe		(20.2	)		(20.2	)		(26.0	)		(26.0	)		(19.9	)		(19.9	)
Deficit/liabilities in the unfunded plans		(142.5	)		(142.5	)		(158.7	)		(158.7	)		(147.4	)		(147.4	)
Deficit/liabilities in the plans		(246.6	)		(972.8	)		(334.3	)		(1,044.1	)		(280.8	)		(934.5	)

In accordance with IAS 19 (amended), plans that are wholly or partially funded are considered funded plans.

(c) Pension expense

The following table shows the breakdown of the pension expense between amounts charged to operating profit, amounts charged to finance costs and amounts recognised in the consolidated statement of comprehensive income (OCI):


	2013 £m		2012 £m			2011 £m
Service cost ¹		24.8		23.8			20.7
Administrative expenses ²		2.1		–			–
Charge to operating profit		26.9		23.8			20.7
Net interest expense on pension plans ³		11.4		11.3			11.2
Charge to profit before taxation for defined benefit plans		38.3		35.1			31.9
Return on plan assets (excluding interest income) ^2,4		3.2		40.1			(5.7	)
Experience gain/(loss) arising on the plan liabilities		0.4		(1.6	)		(3.9	)
Changes in demographic assumptions underlying the present value of the plan liabilities		13.5		(26.0	)		–
Changes in financial assumptions underlying the present value of the plan liabilities		58.9		(96.5	)		(62.2	)
Change in irrecoverable surplus		0.2		0.1			(0.2	)
Actuarial gain/(loss) recognised in OCI		76.2		(83.9	)		(72.0	)

Notes

Includes current service cost, past service costs related to plan amendments and (gain)/loss on settlements and curtailments. In the 2012 and 2011 financial statements these were presented as separate line items.

In accordance with IAS 19 (amended) administrative expenses are included in operating expenses. Administrative expenses of £2.3 million in 2012 and £2.1 million in 2011 were included as a reduction in expected return on plan assets. Prior years have not been restated as the impact to the financial statements would be immaterial.

Interest cost on pension plan liabilities and expected return on plan assets reported in previous years have been replaced with a net interest amount. Presentation of prior year comparative figures has been revised to reflect these requirements.

⁴

Gain/(loss) on pension plan assets relative to expected return for years prior to 2013.

23. Provision for post-employment benefits (continued)

As at 31 December 2013 the cumulative amount of net actuarial losses recognised in equity since 1 January 2001 was £260.4 million (2012: £336.6 million, 2011: £252.7 million). Of this amount, a net loss of £159.3 million was recognised since the 1 January 2004 adoption of IAS 19.

(d) Movement in plan liabilities

The following table shows an analysis of the movement in the pension plan liabilities for each accounting period:


	2013 £m			2012 £m			2011 £m
Plan liabilities at beginning of year		1,044.1			934.5			871.2
Service cost ¹		24.8			23.8			20.7
Interest cost		39.7			41.3			43.8
Actuarial (gain)/loss
Effect of changes in demographic assumptions		(13.5	)		26.0			–
Effect of changes in financial assumptions		(58.9	)		96.5			62.2
Effect of experience adjustments		(0.4	)		1.6			3.9
Benefits paid		(54.5	)		(56.9	)		(59.5	)
Gain due to exchange rate movements		(5.0	)		(25.3	)		(2.0	)
Settlement payments		(2.9	)		(1.7	)		(13.7	)
Other ^1,2		(0.6	)		4.3			7.9
Plan liabilities at end of year		972.8			1,044.1			934.5

Notes

Includes current service cost, past service costs related to plan amendments and (gain)/loss on settlements and curtailments. In the 2012 and 2011 financial statements the past service costs related to plan amendments and (gain)/loss on settlements and curtailments were presented in ‘other’.

Other includes disposals, acquisitions, plan participants’ contributions and reclassifications. The reclassifications represent certain of the Group’s defined benefit plans which are included in this note for the first time in the periods presented.

(e) Movement in plan assets

The following table shows an analysis of the movement in the pension plan assets for each accounting period:


	2013 £m			2012 £m			2011 £m
Fair value of plan assets at beginning of year		709.8			653.7			631.3
Interest income on plan assets ¹		28.3			30.0			32.6
Return on plan assets (excluding interest income) ^2,3		3.2			40.1			(5.7	)
Employer contributions		47.8			56.5			66.8
Benefits paid		(54.5	)		(56.9	)		(59.5	)
Loss due to exchange rate movements		(4.8	)		(13.9	)		(1.3	)
Settlement payments		(2.9	)		(1.9	)		(13.5	)
Administrative expenses ³		(2.1	)		–			–
Other ⁴		1.4			2.2			3.0
Fair value of plan assets at end of year		726.2			709.8			653.7
Actual return on plan assets		31.5			70.1			26.9

Notes

Expected return for years prior to 2013.

Gain/(loss) on pension plan assets relative to expected return for years prior to 2013.

⁴

24. Risk management policies

Foreign currency risk

The Group’s results in pounds sterling are subject to fluctuation as a result of exchange rate movements. The Group does not hedge this translation exposure to its earnings but does hedge the currency element of its net assets using foreign currency borrowings, cross-currency swaps and forward foreign exchange contracts.

F-31

Notes to the consolidated financial statements (continued)

24. Risk management policies (continued)

The Group effects these currency net asset hedges 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, pounds sterling and euros. Borrowings in these currencies represented 100.0% of the Group’s gross indebtedness at 31 December 2013 (at $3,993 million, £300 million and € 1,730 million) and 98.7% of the Group’s average gross debt during the course of 2013 (at $3,587 million, £502 million and € 1,622 million).

The Group’s operations conduct the majority of their activities in their own local currency and consequently the Group has no significant transactional foreign exchange exposures. Any significant cross-border trading exposures are hedged by the use of forward foreign-exchange contracts. No speculative foreign exchange trading is undertaken.

Interest rate risk

The Group is exposed to interest rate risk on both interest-bearing assets and interest-bearing liabilities. The Group has a policy of actively managing its interest rate risk exposure while recognising 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.

Including the effect of interest rate and cross-currency swaps, 90.3% of the year-end US dollar debt is at fixed rates averaging 5.54% for an average period of 119 months; 33.3% of the sterling debt is at a fixed rate of 7.5% for an average period of 62 months; and 92.5% of the euro debt is at fixed rates averaging 4.86% for an average period of 70 months.

Other than fixed rate debt, the Group’s other fixed rates are achieved principally 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 31 December 2013 no forward rate agreements or interest rate caps were in place. These interest rate derivatives are used only to hedge exposures to interest rate movements arising from the Group’s borrowings 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.

Going concern and liquidity risk

In considering going concern and liquidity risk, the directors have reviewed the Group’s future cash requirements and earnings projections. The directors believe these forecasts have been prepared on a prudent basis and have also considered the impact of a range of potential changes to trading performance. The directors have concluded that the Group should be able to operate within its current facilities and comply with its banking covenants for the foreseeable future and therefore believe it is appropriate to prepare the financial statements of the Group on a going concern basis.

At 31 December 2013, the Group has access to £5.3 billion of committed bank facilities with maturity dates spread over the years 2013 to 2042 as illustrated below:

£m

2014
£m

2015
£m

2016
£m

2017
£m

2018+
£m

US bond $500m
(5.625% ’43)

301.8

301.8

US bond $300m
(5.125% ’42)

181.1

181.1

Eurobonds € 750m
(3.0% ’23)

624.3

624.3

US bond $500m
(3.625% ’22)

301.8

301.8

US bond $812m
(4.75% ’21)

490.4

490.4

£ bonds £200m
(6.375% ’20)

200.0

200.0

£ bonds £400m
(6.0% ’17)

400.0

400.0

Bank revolver
($1,200m and £475m)

1,199.4

1,199.4

Eurobonds € 750m
(6.625% ’16)

624.3

624.3

Eurobonds € 500m
(5.25% ’15)

416.2

416.2

US bond $600m
(8.0% ’14)

362.2

362.2

US bond $369m
(5.875% ’14)

222.5

222.5

TNS private placements
$25m

15.1

15.1

Total committed facilities available

5,339.1

599.8

416.2

1,823.7

400.0

2,099.4

Drawn down facilities at 31 December 2013

4,139.7

599.8

416.2

624.3

400.0

2,099.4

Undrawn committed credit facilities

1,199.4

Given the strong cash generation of the business, its debt maturity profile and available facilities, the directors believe the Group has sufficient liquidity to match its requirements for the foreseeable future.

Treasury activities

Treasury activity is managed centrally from London, New York and Hong Kong, and is principally concerned with the monitoring of working capital, managing external and internal funding requirements and the monitoring and management of financial market risks, in particular interest rate and foreign exchange exposures.

The treasury operation is not a profit centre and its activities are carried out in accordance with policies approved by the Board of Directors and subject to regular review and audit.

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 peak net-borrowing levels and debt maturities are closely monitored. Targets for debt and cash position are set on an annual basis and, to assist in meeting this, working capital targets are set for all the Group’s major operations.

Capital risk management

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 10, cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in the consolidated statement of changes in equity and in notes 26 and 27.

Credit risk

The Group’s principal financial assets are cash and short-term deposits, trade and other receivables and investments, the carrying values of which represent the Group’s maximum exposure to credit risk in relation to financial assets, as shown in note 25.

The Group’s credit risk is primarily attributable to its trade receivables. The majority of the Group’s trade receivables are due from large national or multinational companies where the risk of default is considered low. The amounts presented in the consolidated balance sheet are net of allowances for doubtful receivables, estimated by the Group’s management based on prior experience and their assessment of the current economic environment. A relatively small number of clients make up a significant percentage of the Group’s debtors, but no single client represents more than 7% of total trade receivables as at 31 December 2013.

The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies or banks that have been financed by their government.

A relatively small number of clients contribute a significant percentage of the Group’s consolidated revenues. The Group’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 Group’s clients will continue to utilise the Group’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 Group’s largest clients, if not replaced by new client accounts or an increase in business from existing clients, would adversely affect the Group’s prospects, business, financial condition and results of operations.

Sensitivity analysis

The following sensitivity analysis addresses the effect of currency and interest rate risks on the Group’s financial instruments. The analysis assumes that all hedges are highly effective.

Currency risk

A 10% weakening of sterling against the Group’s major currencies would result in the following losses, which would be posted directly to equity. These losses would arise on the retranslation of foreign currency denominated borrowings and derivatives designated as effective net investment hedges of overseas net assets. These losses would be partially offset in equity by a corresponding gain arising on the retranslation of the related hedged foreign currency net assets. A 10% strengthening of sterling would have an equal and opposite effect. There are no other material foreign exchange exposures which would create gains or losses to the functional reporting currencies of individual entities in the Group.


	2013 £m		2012 £m
US dollar		61.2		85.3
Euro		44.4		69.8

F-32

Notes to the consolidated financial statements (continued)

24. Risk management policies (continued)

Interest rate risk

A one percentage point increase in market interest rates for all currencies in which the Group had cash and borrowings at 31 December 2013 would increase profit before tax by approximately £13.7 million (2012: £4.0 million). A one percentage decrease in market interest rates would have an equal and opposite effect. This has been calculated by applying the interest rate change to the Group’s variable rate cash and borrowings.

25. Financial instruments

Currency derivatives

The Group utilises currency derivatives to hedge significant future transactions and cash flows and the exchange risk arising on translation of the Group’s investments in foreign operations. The Group is a party to a variety of foreign currency derivatives in the management of its exchange rate exposures. The instruments purchased are primarily denominated in the currencies of the Group’s principal markets.

At 31 December 2013, the fair value of the Group’s currency derivatives is estimated to be a net liability of approximately £7.4 million (2012: £44.4 million). These amounts are based on market values of equivalent instruments at the balance sheet date, comprising £50.6 million (2012: £60.8 million) assets included in trade and other receivables and £58.0 million (2012: £105.2 million) liabilities included in trade and other payables. The amounts taken to and deferred in equity during the year for currency derivatives that are designated and effective hedges was a credit of £56.1 million (2012: credit of £42.7 million) for net investment hedges and a charge of £32.1 million (2012: £1.0 million) for cash flow hedges.

Changes in the fair value relating to the ineffective portion of the currency derivatives amounted to a gain of £12.9 million (2012: loss of £9.4 million, 2011: gain of £3.1 million) which is included in the revaluation of financial instruments for the year. This gain resulted from a £36.9 million gain on hedging instruments and a £24.0 million loss on hedged items.

The Group currently designates its foreign currency-denominated debt and cross-currency swaps as hedging instruments against the currency risk associated with the translation of its foreign operations.

At the balance sheet date, the total nominal amount of outstanding forward foreign exchange contracts not designated as hedges was £52.5 million (2012: £63.6 million). The Group estimates the fair value of these contracts to be a net asset of £1.2 million (2012: £0.5 million).

These arrangements are designed to address significant exchange exposure and are renewed on a revolving basis as required.

Interest rate swaps

The Group uses interest rate swaps as hedging instruments in fair value hedges to manage its exposure to interest rate movements on its borrowings. Contracts with a nominal value of € 500 million have fixed interest receipts of 5.25% up until January 2015 and have floating interest payments averaging EURIBOR plus 0.80%. Contracts with a nominal value of € 100 million have fixed interest payments of 5.56% until June 2014 and have floating rate receipts averaging EURIBOR plus 0.96%. Contracts with a nominal value of £200 million have fixed interest receipts of 6.00% up until April 2017 and have floating rate payments averaging LIBOR plus 0.64%.

A contract with a nominal value of $25 million has fixed interest receipts averaging 6.34% until on average July 2014 and has floating rate payments averaging LIBOR plus 0.61%.

The fair value of interest rate swaps entered into at 31 December 2013 is estimated to be a net asset of approximately £57.7 million (2012: £102.8 million). These amounts are based on market values of equivalent instruments at the balance sheet date, comprising £61.2 million (2012: £108.7 million) assets included in trade and other receivables and £3.5 million (2012: £5.9 million) liabilities included in trade and other payables.

Changes in the fair value relating to the ineffective portion of interest rate swaps amounted to a loss of £2.4 million (2012: gain of £0.6 million, 2011: loss of £9.5 million) which is included in the revaluation of financial instruments for the year. This loss resulted from a £44.4 million loss on hedging instruments and a £42.0 million gain on hedged items.

25. Financial instruments (continued)

An analysis of the Group’s financial assets and liabilities by accounting classification is set out below:


	Derivatives in designated hedge relationships			Held for trading			Loans & receivables		Available for sale		Amortised cost			Carrying value
	£m			£m			£m		£m		£m			£m
2013
Other investments		–			–			–		270.6		–			270.6
Cash and short-term deposits		–			–			2,221.6		–		–			2,221.6
Bank overdrafts and loans		–			–			–		–		(941.4	)		(941.4	)
Bonds and bank loans		–			–			–		–		(3,520.6	)		(3,520.6	)
Trade and other receivables: amounts falling due within one year		–			–			6,350.5		–		–			6,350.5
Trade and other receivables: amounts falling due after more than one year		–			–			55.2		–		–			55.2
Trade and other payables: amounts falling due within one year		–			–			–		–		(7,197.4	)		(7,197.4	)
Trade and other payables: amounts falling due after more than one year		–			–			–		–		(4.7	)		(4.7	)
Derivative assets		111.8			1.4			–		–		–			113.2
Derivative liabilities		(61.5	)		(0.2	)		–		–		–			(61.7	)
Payments due to vendors (earnout agreements)		–			(193.5	)		–		–		–			(193.5	)
Liabilities in respect of put options		–			(139.1	)		–		–		–			(139.1	)
		50.3			(331.4	)		8,627.3		270.6		(11,664.1	)		(3,047.3	)

F-33

Notes to the consolidated financial statements (continued)

25. Financial instruments (continued)


	Derivatives in designated hedge relationships			Held for trading			Loans & receivables		Available for sale		Amortised cost			Carrying value
	£m			£m			£m		£m		£m			£m
2012
Other investments		–			–			–		176.5		–			176.5
Cash and short-term deposits		–			–			1,945.3		–		–			1,945.3
Bank overdrafts and loans		–			–			–		–		(1,085.9	)		(1,085.9	)
Bonds and bank loans		–			–			–		–		(3,680.6	)		(3,680.6	)
Trade and other receivables: amounts falling due within one year		–			–			6,605.4		–		–			6,605.4
Trade and other receivables: amounts falling due after more than one year		–			–			69.7		–		–			69.7
Trade and other payables: amounts falling due within one year		–			–			–		–		(7,306.5	)		(7,306.5	)
Trade and other payables: amounts falling due after more than one year		–			–			–		–		(14.2	)		(14.2	)
Derivative assets		169.5			0.7			–		–		–			170.2
Derivative liabilities		(111.1	)		(0.2	)		–		–		–			(111.3	)
Share purchases – close period commitments		–			(18.2	)		–		–		–			(18.2	)
Payments due to vendors (earnout agreements)		–			(194.0	)		–		–		–			(194.0	)
Liabilities in respect of put options		–			(144.3	)		–		–		–			(144.3	)
		58.4			(356.0	)		8,620.4		176.5		(12,087.2	)		(3,587.9	)

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into levels 1 to 3 based on the degree to which the fair value is observable:

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices);

Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

25. Financial instruments (continued)


	Level 1 £m		Level 2 £m			Level 3 £m			Carrying value £m
2013
Derivatives in designated hedge relationships
Derivative assets		–		111.8			–			111.8
Derivative liabilities		–		(61.5	)		–			(61.5	)
Held for trading
Derivative assets		–		1.4			–			1.4
Derivative liabilities		–		(0.2	)		–			(0.2	)
Payments due to vendors (earnout agreements) (note 19)		–		–			(193.5	)		(193.5	)
Liabilities in respect of put options		–		–			(139.1	)		(139.1	)
Available for sale
Other investments		23.0		–			247.6			270.6
		23.0		51.5			(85.0	)		(10.5	)


	Level 1 £m			Level 2 £m			Level 3 £m			Carrying value £m
2012
Derivatives in designated hedge relationships
Derivative assets		–			169.5			–			169.5
Derivative liabilities		–			(111.1	)		–			(111.1	)
Held for trading
Derivative assets		–			0.7			–			0.7
Derivative liabilities		–			(0.2	)		–			(0.2	)
Share purchases – close period commitments		(18.2	)		–			–			(18.2	)
Payments due to vendors (earnout agreements) (note 19)		–			–			(194.0	)		(194.0	)
Liabilities in respect of put options		–			–			(144.3	)		(144.3	)
Available for sale
Other investments		–			–			176.5			176.5
		(18.2	)		58.9			(161.8	)		(121.1	)

Reconciliation of level 3 fair value measurements ¹ :


	Liabilities in respect of put options £m			Other investments £m			Carrying value £m
1 January 2012		(168.3	)		190.8			22.5
Losses recognised in the income statement		(5.1	)		(15.1	)		(20.2	)
Losses recognised in other comprehensive income		–			(3.5	)		(3.5	)
Exchange adjustments		11.6			(6.1	)		5.5
Additions		(4.6	)		24.8			20.2
Disposals		–			(14.4	)		(14.4	)
Settlements		22.1			–			22.1
31 December 2012		(144.3	)		176.5			32.2
Losses recognised in the income statement		(1.1	)		–			(1.1	)
Gain recognised in other comprehensive income		–			72.0			72.0
Exchange adjustments		8.9			(1.4	)		7.5
Additions		(12.9	)		5.5			(7.4	)
Disposals		–			(5.0	)		(5.0	)
Settlements		10.3			–			10.3
31 December 2013		(139.1	)		247.6			108.5

Note

Refer to note 19 for the reconciliation of payments due to vendors (earnout agreements).

F-34

Notes to the consolidated financial statements (continued)

25. Financial instruments (continued)

The fair values of financial assets and liabilities are based on quoted market prices where available. Where the market value is not available, the Group has estimated relevant fair values on the basis of publicly available information from outside sources or on the basis of discounted cash flow models where appropriate.

Payments due to vendors and liabilities in respect of put options

Future anticipated payments due to vendors in respect of contingent consideration (earnout agreements) and liabilities in respect of put option agreements are recorded at fair value, which is the present value of the expected cash outflows of the obligations. These obligations are dependent on the future financial performance of the entity and it is assumed that future profits are in line with directors’ estimates. The directors derive their estimates from internal business plans together with financial due diligence performed in connection with the acquisition. At 31 December 2013, the weighted average growth rate in estimating future financial performance was 18.7%, which reflects the prevalence of recent acquisitions in the faster growing markets and new media sectors.

A one percentage point increase or decrease in the growth rate in estimated future financial performance would increase or decrease the combined liabilities due to earnout agreements and put options by approximately £5.1 million and £4.5 million, respectively. An increase in the liability would result in a reduction in the revaluation of financial instruments, while a decrease would result in a further gain.

Other investments

The fair value of other investments included in level 1 are based on quoted market prices. Other investments included in level 3 are unlisted securities, where market value is not readily available. The Group has estimated relevant fair values on the basis of publicly available information from outside sources or on the basis of discounted cash flow models where appropriate. The sensitivity to changes in unobservable inputs is specific to each individual investment.

26. Authorised and issued share capital


	Equity ordinary shares		Nominal value £m
Authorised
At 1 January 2012 – WPP 2012 Limited (formerly WPP plc)		1,750,000,000		175.0
At 31 December 2012 – WPP 2012 Limited (formerly WPP plc)		1,750,000,000		175.0
At 31 December 2013 – WPP plc		1,750,000,000		175.0

Issued and fully paid
At 1 January 2013		1,265,407,107		126.5
Conversion of bond		17,006		–
At 2 January 2013 – shares in WPP 2012 Limited (formerly WPP plc) of 10p each		1,265,424,113		126.5

On formation of WPP plc
Group reconstruction – shares in WPP 2012 Limited (formerly WPP plc) exchange for shares in WPP plc of 10p each		1,265,424,113		126.5
Conversion of bond		76,496,557		7.7
Exercise of share options		6,812,647		0.7
At 31 December 2013		1,348,733,317		134.9

On 2 January 2013 under a scheme of arrangement between WPP 2012 Limited (formerly WPP plc), the former holding company of the Group, and its share owners under Article 125 of the Companies (Jersey) Law 1991, all the issued shares in that company were cancelled and the same number of shares were issued to WPP plc (formerly WPP 2012 plc) in consideration for the allotment to share owners of one ordinary share in WPP plc for each ordinary share in WPP 2012 Limited held on that date.

In the above table the figures up to 2 January 2013 relate to shares in WPP 2012 Limited. Subsequent movements relate to shares in WPP plc.

WPP 2012 plc was incorporated on 25 October 2012 with an authorised share capital of £175,000,000 and 2 issued ordinary shares of 10 pence each. On 2 January 2013 as part of the scheme of arrangement noted above, a further 1,265,424,113 ordinary shares were issued at a price of £8.88 each, whereby WPP 2012 plc became the new holding company of the Group. It was renamed WPP plc.

26. Authorised and issued share capital (continued)

Company’s own shares

The Company’s holdings of own shares are stated at cost and represent shares held in treasury and purchases by the Employee Share Ownership Plan (‘ESOP’) trusts of shares in WPP plc for the purpose of funding certain of the Group’s share-based incentive plans.

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 2013 was 24,048,113 (2012: 22,570,364), and £331.9 million (2012: £200.4 million) respectively. The number and market value of ordinary shares held in treasury at 31 December 2013 was 1,370,700 and £18.9 million respectively. There were no ordinary shares held in treasury at 31 December 2012.

Share options

WPP Executive Share Option Scheme

As at 31 December 2013, unexercised options over ordinary shares of 365,841 and unexercised options over ADRs of 88,305 have been granted under the WPP Executive Share Option Scheme as follows:


Number of ordinary shares under option	Exercise price per share (£)		Exercise dates
21,830		5.520		2008 - 2014
257,032		5.535		2007 - 2014
11,423		5.775		2009 - 2015
10,872		5.818		2008 - 2015
14,304		5.895		2008 - 2015
8,536		5.903		2011 - 2018
14,721		6.718		2009 - 2016
12,447		7.378		2014 - 2021
7,935		7.723		2010 - 2017
3,696		8.333		2015 - 2022
3,045		10.595		2016 - 2023


Number of ADRs under option	Exercise price per ADR ($)		Exercise dates
822		30.410		2011 - 2018
887		50.670		2008 - 2015
68,525		50.800		2007 - 2014
1,073		51.220		2007 - 2014
898		55.740		2008 - 2015
4,350		57.020		2008 - 2015
8,981		58.460		2009 - 2016
844		59.170		2011 - 2018
938		63.900		2009 - 2020
987		75.940		2010 - 2017

F-35

Notes to the consolidated financial statements (continued)

26. Authorised and issued share capital (continued)

WPP Worldwide Share Ownership Program

As at 31 December 2013, unexercised options over ordinary shares of 11,116,559 and unexercised options over ADRs of 1,417,829 have been granted under the WPP Worldwide Share Ownership Program as follows:


Number of ordinary shares under option	Exercise price per share (£)		Exercise dates
10,250		4.819		2011 - 2018
12,750		5.435		2007 - 2014
4,750		5.483		2012 - 2016
254,325		5.483		2012 - 2019
1,375		5.483		2012 - 2020
99,982		5.483		2013 - 2019
20,625		5.608		2012 - 2019
375		5.775		2008 - 2015
7,800		5.913		2011 - 2018
10,375		5.917		2011 - 2018
150,200		6.028		2011 - 2018
40,400		6.195		2008 - 2015
2,134,085		6.268		2014 - 2021
71,826		6.268		2014 - 2018
300,767		6.268		2015 - 2021
625		6.668		2009 - 2017
6,750		6.740		2009 - 2016
82,150		6.938		2009 - 2016
6,500		7.005		2010 - 2017
5,875		7.113		2013 - 2017
741,867		7.113		2013 - 2020
213,851		7.113		2014 - 2020
15,250		7.478		2011 - 2017
52,848		7.543		2014 - 2021
147,575		7.718		2010 - 2017
2,949,258		8.458		2015 - 2022
125,000		13.505		2016 - 2020
3,266,625		13.505		2016 - 2023
382,500		13.505		2017 - 2023


Number of ADRs under option	Exercise price per ADR ($)		Exercise dates
73,535		44.560		2012 - 2019
282,144		49.230		2014 - 2021
3,005		49.880		2007 - 2014
127,557		56.560		2013 - 2020
52,110		59.500		2011 - 2018
16,820		59.520		2008 - 2015
28,600		60.690		2009 - 2016
340,678		67.490		2015 - 2022
48,135		75.760		2010 - 2017
445,245		110.760		2016 - 2023

26. Authorised and issued share capital (continued)

24/7 Real Media, Inc. 2002 Stock Incentive Plan

As at 31 December 2013, unexercised options over ADRs of 23,078 have been granted under the 24/7 Real Media, Inc. 2002 Stock Incentive Plan as follows:


Number of ADRs under option	Exercise price per ADR ($)		Exercise dates
92		15.8800		2007 - 2014
187		20.0700		2007 - 2015
79		23.1800		2007 - 2015
263		24.2000		2007 - 2014
50		25.1500		2007 - 2014
3,654		27.5000		2007 - 2015
89		38.8700		2007 - 2015
14,980		40.6500		2007 - 2015
115		49.6000		2007 - 2016
89		50.4900		2007 - 2016
78		52.5900		2008 - 2017
157		53.4800		2008 - 2017
314		54.1100		2007 - 2016
944		54.2400		2007 - 2016
314		55.2600		2007 - 2016
74		55.6400		2007 - 2016
157		56.2700		2007 - 2016
574		56.7200		2007 - 2016
157		58.9400		2007 - 2017
393		60.0200		2007 - 2016
78		61.2300		2008 - 2017
108		61.9200		2007 - 2016
54		64.6500		2007 - 2016
78		65.5400		2007 - 2016

Taylor Nelson Sofres Plc 1999 Worldwide Employee Sharesave Plan

As at 31 December 2013, unexercised options over ordinary shares of 81,138 have been granted under the Taylor Nelson Sofres plc 1999 Worldwide Employee Sharesave Plan as follows:


Number of ordinary shares under option	Exercise price per share (£)		Exercise dates
76,216		1.7300		2013 - 2015
2,644		2.6500		2012 - 2014
2,278		3.0000		2011 - 2014

The aggregate status of the WPP Share Option Plans during 2013 was as follows:

Movements on options granted (represented in ordinary shares)


	1 January 2013		Granted		Exercised			Lapsed			Outstanding 31 December 2013		Exercisable 31 December 2013
WPP		2,813,304		3,045		(1,969,302	)		(39,681	)		807,366		788,178
WWOP		18,819,836		6,080,400		(4,129,291	)		(2,565,241	)		18,205,704		3,368,609
24/7		153,200		–		(34,220	)		(3,590	)		115,390		68,160
TNS		775,351		–		(679,834	)		(14,379	)		81,138		81,138
		22,561,691		6,083,445		(6,812,647	)		(2,622,891	)		19,209,598		4,306,085

F-36

Notes to the consolidated financial statements (continued)

26. Authorised and issued share capital (continued)

Weighted-average exercise price for options over


	1 January 2013		Granted		Exercised		Lapsed		Outstanding 31 December 2013		Exercisable 31 December 2013
Ordinary shares (£)
WPP		5.647		10.595		5.598		5.558		5.801		5.675
WWOP		7.163		13.505		6.775		7.536		9.378		6.613
TNS		1.748		–		1.731		2.252		1.796		1.796
ADRs ($)
WPP		50.373		–		49.420		48.593		52.250		52.250
WWOP		58.581		110.760		58.516		59.924		74.990		57.540
24/7		39.735		–		36.298		48.491		40.480		40.363

Options over ordinary shares

Outstanding


Range of exercise prices £	Weighted average exercise price £	Weighted average contractual life Months
1.730 – 13.505	9.212	99

Options over ADRs

Outstanding


Range of exercise prices $	Weighted average exercise price $	Weighted average contractual life Months
15.88 – 110.76	73.156	93

As at 31 December 2013 there was £9.9 million (2012: £8.5 million) of total unrecognised compensation cost related to share options. That cost is expected to be recognised over a weighted average period of 20 months (2012: 20 months).

Share options are satisfied out of newly issued shares.

The weighted average fair value of options granted in the year calculated using the Black-Scholes model was as follows:


	2013		2012		2011
Fair value of UK options (shares)		160.0p		135.3p		120.6p
Fair value of US options (ADRs)	$	12.92	$	10.90	$	9.20
Weighted average assumptions:
UK Risk-free interest rate		1.20%		0.56%		0.84%
US Risk-free interest rate		0.95%		0.51%		0.67%
Expected life (months)		48		48		48
Expected volatility		20%		27%		30%
Dividend yield		2.8%		2.8%		2.5%

Options are issued at an exercise price equal to market value on the date of grant.

The weighted average share price of the Group for the year ended 31 December 2013 was £11.63 (2012: £8.17, 2011: £7.11) and the weighted average ADR price for the same period was $91.22 (2012: $64.90, 2011: $57.09).

Expected volatility is sourced from external market data and represents the historic volatility in the Group’s share price over a period equivalent to the expected option life.

Expected life is based on a review of historic exercise behaviour in the context of the contractual terms of the options, as described in more detail below.

Terms of share option plans

The Worldwide Share Ownership Program is open for participation to employees with at least two years’ employment in the Group. It is not available to those participating in other share-based incentive programs or to executive directors. The vesting period for each grant is three years and there are no performance conditions other than continued employment with the Group.

The Executive Stock Option Plan has historically been open for participation to WPP Group Leaders, Partners and High Potential Group. It is not currently offered to parent company executive directors. The vesting period is three years and performance conditions include achievement of various TSR (Total Share Owner Return) and EPS (Earnings Per Share) objectives, as well as continued employment. In 2005, the Group moved away from the issuance of stock options for Leaders, Partners and High Potential Group and has since largely made grants of restricted stock instead (note 22).

The Group grants stock options with a life of 10 years, including the vesting period. The terms of stock options with performance conditions are such that if, after nine years and eight months, the performance conditions have not been met, then the stock option will vest automatically.

27. Other reserves

Other reserves comprise the following:


	Capital redemption reserve £m			Equity reserve £m			Revaluation reserve £m			Translation reserve £m			Total other reserves £m
1 January 2011		–			(81.7	)		14.0			1,250.5			1,182.8
Exchange adjustments on foreign currency net investments		–			–			–			(250.0	)		(250.0	)
Gain on revaluation of available for sale investments		–			–			11.3			–			11.3
Recognition and remeasurement of financial instruments		–			(5.9	)		–			–			(5.9	)
Share cancellations		0.7			–			–			–			0.7
31 December 2011		0.7			(87.6	)		25.3			1,000.5			938.9
Exchange adjustments on foreign currency net investments		–			–			–			(298.4	)		(298.4	)
Loss on revaluation of available for sale investments		–			–			(3.5	)		–			(3.5	)
Recognition and remeasurement of financial instruments		–			2.7			–			–			2.7
Share cancellations		0.7			–			–			–			0.7
Treasury share cancellations		0.6			–			–			–			0.6
Share purchases – close period commitments		–			(18.3	)		–			–			(18.3	)
31 December 2012		2.0			(103.2	)		21.8			702.1			622.7
Reclassification due to Group reconstruction		(2.0	)		–			–			–			(2.0	)
Reclassification of convertible bond		–			(44.5	)		–			–			(44.5	)
Deferred tax on convertible bond		–			9.7			–			–			9.7
Exchange adjustments on foreign currency net investments		–			–			–			(356.5	)		(356.5	)
Gain on revaluation of available for sale investments		–			–			72.0			–			72.0
Recognition and remeasurement of financial instruments		–			(2.4	)		–			–			(2.4	)
Share purchases – close period commitments		–			18.3			–			–			18.3
31 December 2013		–			(122.1	)		93.8			345.6			317.3

28. Acquisitions

The Group accounts for acquisitions in accordance with IFRS 3 Business Combinations. IFRS 3 requires the acquiree’s identifiable assets, liabilities and contingent liabilities (other than non-current assets or disposal groups held for

F-37

Notes to the consolidated financial statements (continued)

28. Acquisitions (continued)

sale) to be recognised at fair value at acquisition date. In assessing fair value at acquisition date, management make their best estimate of the likely outcome where the fair value of an asset or liability may be contingent on a future event. In certain instances, the underlying transaction giving rise to an estimate may not be resolved until some years after the acquisition date. IFRS 3 requires the release to profit of any acquisition reserves which subsequently become excess in the same way as any excess costs over those provided at acquisition date are charged to profit. At each period end management assess provisions and other balances established in respect of acquisitions for their continued probability of occurrence and amend the relevant value accordingly through the consolidated income statement or as an adjustment to goodwill as appropriate under IFRS 3.

Acquisitions in 2013

The Group acquired a number of subsidiaries in the year. The following table sets out the book values of the identifiable assets and liabilities acquired and their fair value to the Group. The fair value adjustments for certain acquisitions have been determined provisionally at the balance sheet date.


	Book value at acquisition £m			Fair value adjustments £m			Fair value to Group £m
Intangible assets		0.4			45.5			45.9
Property, plant and equipment		7.4			–			7.4
Cash		25.0			–			25.0
Trade receivables due within one year		66.4			(0.8	)		65.6
Other current assets		25.0			–			25.0
Total assets		124.2			44.7			168.9
Current liabilities		(76.8	)		–			(76.8	)
Trade and other payables due after one year		(1.3	)		(9.7	)		(11.0	)
Deferred tax liabilities		0.7			(12.8	)		(12.1	)
Provisions		(1.5	)		(12.4	)		(13.9	)
Total liabilities		(78.9	)		(34.9	)		(113.8	)
Net assets		45.3			9.8			55.1
Non-controlling interests								(22.8	)
Fair value of equity stake in associate undertakings before acquisition of controlling interest								(53.0	)
Goodwill								225.4
Consideration								204.7
Consideration satisfied by:
Cash								164.1
Payments due to vendors								40.6

Goodwill arising from acquisitions represents the value of synergies with our existing portfolio of businesses and skilled staff to deliver services to our clients. Goodwill that is expected to be deductible for tax purposes is £38.9 million.

Non-controlling interests in acquired companies are measured at the non-controlling interests’ proportionate share of the acquiree’s identifiable net assets.

The contribution to revenue and operating profit of acquisitions completed in the year was not material. There were no material acquisitions completed between 31 December 2013 and the date the financial statements have been authorised for issue.

28. Acquisitions (continued)

Acquisitions in 2012


	Book value at acquisition £m			Fair value adjustments £m			Fair value to Group £m
Intangible assets		1.3			185.2			186.5
Property, plant and equipment		8.5			–			8.5
Cash (net of overdrafts)		48.1			–			48.1
Trade receivables due within one year		66.9			(1.9	)		65.0
Other current assets		36.8						36.8
Total assets		161.6			183.3			344.9
Current liabilities		(91.3	)		–			(91.3	)
Trade and other payables due after one year		(3.3	)		(20.2	)		(23.5	)
Deferred tax liabilities		(1.9	)		(59.4	)		(61.3	)
Provisions		(0.9	)		(11.2	)		(12.1	)
Bank loans		(20.0	)		–			(20.0	)
Total liabilities		(117.4	)		(90.8	)		(208.2	)
Net assets		44.2			92.5			136.7
Non-controlling interests								(10.2	)
Fair value of equity stake in associate undertakings before acquisition of controlling interest								(10.3	)
Goodwill								385.3
Consideration								501.5
Consideration satisfied by:
Cash								454.4
Payments due to vendors								47.1

Goodwill arising from acquisitions represents the value of synergies with our existing portfolio of businesses and to deliver services to our clients. Goodwill that is expected to be deductible for tax purposes is £34.3 million.

Non-controlling interests in acquired companies are measured at the non-controlling interests’ proportionate share of the acquiree’s identifiable net assets.

The contribution to revenue and operating profit of acquisitions completed in the year was not material.

F-38

Notes to the consolidated financial statements (continued)

28. Acquisitions (continued)

Acquisitions in 2011


	Book value at acquisition £m			Fair value adjustments £m			Fair value to Group £m
Intangible assets		2.0			117.6			119.6
Property, plant and equipment		14.4			(0.4	)		14.0
Cash (net of overdrafts)		98.8			-			98.8
Trade receivables due within one year		211.3			(1.3	)		210.0
Other current assets		16.8			1.3			18.1
Total assets		343.3			117.2			460.5
Current liabilities		(283.1	)		-			(283.1	)
Trade and other payables due after one year		(5.7	)		(27.4	)		(33.1	)
Deferred tax liabilities		-			(37.2	)		(37.2	)
Provisions		(3.7	)		(16.1	)		(19.8	)
Bank loans		(17.5	)		-			(17.5	)
Total liabilities		(310.0	)		(80.7	)		(390.7	)
Net assets		33.3			36.5			69.8
Non-controlling interests								(20.7	)
Fair value of equity stake in associate undertakings before acquisition of controlling interest								(72.6	)
Goodwill								454.5
Consideration								431.0
Consideration satisfied by:
Cash								350.6
Payments due to vendors								80.4

Goodwill arising from acquisitions represents the value of synergies with our existing portfolio of businesses and skilled staff to deliver services to our clients Goodwill that is expected to be deductible for tax purposes is £126.0 million.

Non-controlling interests in acquired companies are measured at the non-controlling interest’s proportionate share of the acquirees’ identifiable net assets.

The contribution to revenue and operating profit of acquisitions completed in the year was not material.

29. Principal subsidiary undertakings

The principal subsidiary undertakings of the Group are:


		Country of incorporation
Grey Global Group, Inc		US
J. Walter Thompson Company, Inc		US
GroupM Worldwide, Inc		US
The Ogilvy Group, Inc		US
Young & Rubicam, Inc		US
TNS Group Holdings Ltd		UK

All of these subsidiaries are operating companies and are 100% owned by the Group.

30. Related party transactions

From time to time the Group enters into transactions with its associate undertakings. These transactions were not material for any of the years presented.

31. Reconciliation to non-GAAP measures of performance

Reconciliation of profit before interest and taxation to headline PBIT:


	2013 £m			2012 £m			2011 £m
Profit before interest and taxation		1,478.4			1,310.5			1,258.3
Amortisation and impairment of acquired intangible assets		179.8			171.9			172.0
Goodwill impairment		23.3			32.0			–
Gains on disposal of investments	(6.0)			(26.8)			(0.4)
Gains on remeasurement of equity on acquisition of controlling interest		(30.0	)		(5.3	)		(31.6	)
Investment write-downs		0.4			19.6			32.8
Cost of changes to corporate structure		–			4.1			–
Gain on sale of freehold property in New York		–			(71.4	)		–
Restructuring costs		5.0			93.4			–
Share of exceptional losses/(gains) of associates		10.7			3.0			(2.1	)
Headline PBIT		1,661.6			1,531.0			1,429.0
Headline PBIT margin (as a percentage of revenue)		15.1	%		14.8	%		14.3	%
Headline PBIT margin on gross profit ¹		16.5	%		16.1	%		15.5	%

Headline PBIT as a percentage of gross profit

32. Condensed consolidating financial information

In September 2012, WPP Finance 2010 issued $500 million of 3.625% bonds due September 2022 and $300 million of 5.125% bonds due September 2042, with WPP plc as parent guarantor and WPP Air 1 Limited, WPP 2008 Limited, and WPP 2005 Limited as subsidiary guarantors.

In November and December 2011, WPP Finance 2010 issued $812 million of 4.75% bonds due November 2021, with WPP plc as parent guarantor and WPP Air 1 Limited, WPP 2008 Limited, and WPP 2005 Limited as subsidiary guarantors. $312 million of these bonds were issued in exchange for $281 million of the 5.875% bonds due June 2014 which were issued by WPP Finance (UK). Consequently, the amount in issue of the 5.875% bonds due June 2014 has reduced to $369 million from the previous $650 million.

WPP Finance (UK) is the issuer of $369 million of 5.875% bonds due June 2014, with WPP plc as parent guarantor and WPP Air 1 Limited, WPP 2008 Limited, WPP 2005 Limited, and Young & Rubicam Brands US Holdings as subsidiary guarantors, previously registered under the Securities Act of 1933. A Form 15 giving notice of termination of registration was filed with the SEC in relation to this security on 2 August 2006. In June 2009, WPP Finance (UK) issued $600 million of 8% bonds due September 2014, with WPP plc as parent guarantor and WPP Air 1 Limited, WPP 2008 Limited and WPP 2005 Limited as subsidiary guarantors.

On 2 January 2013, under the scheme of arrangement discussed on page F-2, WPP plc completed a reorganization of its corporate structure (“the reorganization”) and WPP 2012 plc (now known as WPP plc) became the new parent company of the Group. The former WPP plc was renamed WPP 2012 Limited and became a wholly owned subsidiary of WPP plc. The reorganization is a transaction between entities under common control and has been accounted for on a carryover basis in the condensed consolidating financial information. Following the reorganization, and at the year ended 31 December 2013, the bonds are guaranteed by WPP plc as parent guarantor and WPP Air 1 Limited, WPP 2008 Limited, WPP 2005 Limited, WPP 2012 Limited, WPP Jubilee Limited (a company formed as part of the reorganization), and Young & Rubicam Brands US Holdings (only for the $369 million bond) as subsidiary guarantors.

The issuer and guarantors of the bonds (issuers and subsidiary guarantors are 100% owned by WPP plc) are each subject to the reporting requirements under section 15(d) of the Securities Exchange Act of 1934. In accordance with SEC Rule 3-10, condensed consolidating financial information containing financial information for WPP Finance (UK), WPP Finance 2010 and the guarantors is presented beginning on page F-41. Condensed consolidating financial information is prepared in accordance with IFRS as issued by the IASB, except to the extent that, in the parent

F-39

Notes to the consolidated financial statements (continued)

32. Condensed consolidating financial information (continued)

company, subsidiary issuer and subsidiary guarantors columns investments in subsidiaries are accounted for under the equity method of accounting. Under the equity method, earnings of subsidiaries are reflected as “share of results of subsidiaries” in the income statement and as “investment in subsidiaries” in the balance sheet, as required by the SEC. The condensed consolidating financial information has been presented using the guarantor structure as of 31 December 2013. This presentation does not have a significant impact on the columns presented in the condensed consolidating financial information for the year ended 31 December 2012 and 2011, except that the former WPP plc is now called WPP 2012 Limited and is a subsidiary guarantor rather than a parent guarantor.

Although the $600 million, $812 million, $500 million and $300 million bonds do not have the identical subsidiary guarantor structure to the $369 million bonds, the exclusion of the financial information of Young & Rubicam Brands US Holdings has no financial impact on the columns presented in the condensed consolidating financial information for the years ended 31 December 2013, 2012 and 2011, as it is an indirect wholly owned subsidiary of WPP Jubilee Limited with no operations or cash flows of its own and its sole assets are its interests in certain operating subsidiaries.

In the event that WPP Finance (UK) and WPP Finance 2010 fail to pay the holders of the securities, thereby requiring WPP plc, WPP Air 1 Limited, WPP 2008 Limited, WPP 2005 Limited, WPP 2012 Limited, WPP Jubilee Limited or Young & Rubicam Brands US Holdings to make payment pursuant to the terms of its full and unconditional, and joint and several guarantee of those securities, there is no impediment to WPP plc, WPP Air 1 Limited, WPP 2008 Limited, WPP 2005 Limited, WPP 2012 Limited, WPP Jubilee Limited or Young & Rubicam Brands US Holdings in obtaining reimbursement for any such payments from WPP Finance (UK) and WPP Finance 2010.

F-40

32. Condensed consolidating financial information (continued)

Condensed consolidating income statement information

For the year ended 31 December 2013, £m


	WPP plc			Subsidiary Guarantors ¹			WPP Finance (UK)			WPP Finance 2010			Other Subsidiaries			Reclassifications / Eliminations			Consolidated WPP plc
Revenue		—			—			—			—			11,019.4			—			11,019.4
Direct costs		—			—			—			—			(943.3	)		—			(943.3	)
Gross profit		—			—			—			—			10,076.1			—			10,076.1
Operating costs		(27.5	)		(26.2	)		—			—			(8,612.1	)		—			(8,665.8	)
Operating profit/(loss)		(27.5	)		(26.2	)		—			—			1,464.0			—			1,410.3
Share of results of subsidiaries		1,058.2			1,203.3			(2.4	)		—			—			(2,259.1	)		—
Share of results of associates		—			—			—			—			68.1			—			68.1
Profit/(loss) before interest and taxation		1,030.7			1,177.1			(2.4	)		—			1,532.1			(2,259.1	)		1,478.4
Finance income		13.0			32.4			45.4			47.5			94.3			(168.3	)		64.3
Finance costs		(117.2	)		(155.8	)		(55.6	)		(49.9	)		(57.7	)		168.3			(267.9	)
Revaluation of financial instruments		10.0			3.2			—			—			7.8			—			21.0
Profit/(loss) before taxation		936.5			1,056.9			(12.6	)		(2.4	)		1,576.5			(2,259.1	)		1,295.8
Taxation		—			1.3			—			—			(285.0	)		—			(283.7	)
Profit/(loss) for the year		936.5			1,058.2			(12.6	)		(2.4	)		1,291.5			(2,259.1	)		1,012.1
Attributable to:
Equity holders of the parent		936.5			1,058.2			(12.6	)		(2.4	)		1,215.9			(2,259.1	)		936.5
Non-controlling interests		—			—			—			—			75.6			—			75.6
		936.5			1,058.2			(12.6	)		(2.4	)		1,291.5			(2,259.1	)		1,012.1

For the year ended 31 December 2012, £m


	WPP plc			Subsidiary Guarantors ²			WPP Finance (UK)			WPP Finance 2010			Other Subsidiaries			Reclassifications / Eliminations			Consolidated WPP plc
Revenue		—			—			—			—			10,373.1			—			10,373.1
Direct costs		—			—			—			—			(858.3	)		—			(858.3	)
Gross profit		—			—			—			—			9,514.8			—			9,514.8
Operating costs		(5.7	)		(79.5	)		(0.1	)		—			(8,188.4	)		—			(8,273.7	)
Operating profit/(loss)		(5.7	)		(79.5	)		(0.1	)		—			1,326.4			—			1,241.1
Share of results of subsidiaries		877.7			1,135.5			(1.7	)		—			—			(2,011.5	)		—
Share of results of associates		—			—			—			—			69.4			—			69.4
Profit/(loss) before interest and taxation		872.0			1,056.0			(1.8	)		—			1,395.8			(2,011.5	)		1,310.5
Finance income ³		—			63.6			41.4			30.2			101.9			(181.2	)		55.9
Finance costs ³		(49.3	)		(244.0	)		(54.8	)		(31.9	)		(71.0	)		181.2			(269.8	)
Revaluation of financial instruments		—			(0.5	)		—			—			(4.2	)		—			(4.7	)
Profit/(loss) before taxation		822.7			875.1			(15.2	)		(1.7	)		1,422.5			(2,011.5	)		1,091.9
Taxation		—			2.6			—			—			(199.8	)		—			(197.2	)
Profit/(loss) for the year		822.7			877.7			(15.2	)		(1.7	)		1,222.7			(2,011.5	)		894.7
Attributable to:
Equity holders of the parent		822.7			877.7			(15.2	)		(1.7	)		1,150.7			(2,011.5	)		822.7
Non-controlling interests		—			—			—			—			72.0			—			72.0
		822.7			877.7			(15.2	)		(1.7	)		1,222.7			(2,011.5	)		894.7

Note

Includes: WPP Air 1 Limited, WPP 2008 Limited, WPP 2005 Limited, WPP 2012 Limited, WPP Jubilee Limited and Young & Rubicam Brands US Holdings.

Includes: WPP Air 1 Limited, WPP 2008 Limited, WPP 2005 Limited and Young & Rubicam Brands US Holdings.

Figures have been represented to conform to the current year presentation.

F-41

32. Condensed consolidating financial information (continued)

Condensed consolidating income statement information (continued)

For the year ended 31 December 2011, £m


	WPP plc			Subsidiary Guarantors ²			WPP Finance (UK)			WPP Finance 2010			Other Subsidiaries			Reclassifications / Eliminations			Consolidated WPP plc
Revenue		—			—			—			—			10,021.8			—			10,021.8
Direct costs		—			—			—			—			(783.3	)		—			(783.3	)
Gross profit		—			—			—			—			9,238.5			—			9,238.5
Operating costs		(5.5	)		(62.5	)		—			—			(7,978.3	)		—			(8,046.3	)
Operating profit/(loss)		(5.5	)		(62.5	)		—			—			1,260.2			—			1,192.2
Share of results of subsidiaries		886.4			1,148.8			(1.9	)		—			—			(2,033.3	)		—
Share of results of associates		—			—			—			—			66.1			—			66.1
Profit/(loss) before interest and taxation		880.9			1,086.3			(1.9	)		—			1,326.3			(2,033.3	)		1,258.3
Finance income ³		—			60.8			3.9			0.8			186.3			(187.1	)		64.7
Finance costs ³		(40.8	)		(268.5	)		(75.0	)		(2.7	)		(64.7	)		187.1			(264.6	)
Revaluation of financial instruments		—			4.7			—			—			(54.7	)		—			(50.0	)
Profit/(loss) before taxation		840.1			883.3			(73.0	)		(1.9	)		1,393.2			(2,033.3	)		1,008.4
Taxation		—			3.1			—			—			(95.0	)		—			(91.9	)
Profit/(loss) for the year		840.1			886.4			(73.0	)		(1.9	)		1,298.2			(2,033.3	)		916.5
Attributable to:
Equity holders of the parent		840.1			886.4			(73.0	)		(1.9	)		1,221.8			(2,033.3	)		840.1
Non-controlling interests		—			—			—			—			76.4			—			76.4
		840.1			886.4			(73.0	)		(1.9	)		1,298.2			(2,033.3	)		916.5

Note

Includes: WPP Air 1 Limited, WPP 2008 Limited, WPP 2005 Limited and Young & Rubicam Brands US Holdings.

Figures have been represented to conform to the current year presentation.

F-42

32. Condensed consolidating financial information (continued)

Condensed consolidating statement of comprehensive income

For the year ended 31 December 2013, £m


	WPP plc			Subsidiary Guarantors ¹			WPP Finance (UK)			WPP Finance 2010			Other Subsidiaries			Reclassifications / Eliminations			Consolidated WPP plc
Profit/(loss) for the year		936.5			1,058.2			(12.6	)		(2.4	)		1,291.5			(2,259.1	)		1,012.1
Items that may be reclassified subsequently to profit or loss:
Exchange adjustments on foreign currency net investments		(356.5	)		(360.9	)		4.0			0.2			(376.6	)		717.2			(372.6	)
Gain on revaluation of available for sale investments		72.0			72.0			—			—			72.0			(144.0	)		72.0
		(284.5	)		(288.9	)		4.0			0.2			(304.6	)		573.2			(300.6	)
Items that will not be reclassified subsequently to profit or loss:
Actuarial gain on defined benefit pension plans		76.2			76.2			—			—			76.2			(152.4	)		76.2
Deferred tax on defined benefit pension plans		(1.2	)		(1.2	)		—			—			(1.2	)		2.4			(1.2	)
		75.0			75.0			—			—			75.0			(150.0	)		75.0
Other comprehensive (loss)/income for the year		(209.5	)		(213.9	)		4.0			0.2			(229.6	)		423.2			(225.6	)
Total comprehensive income/(loss) for the year		727.0			844.3			(8.6	)		(2.2	)		1,061.9			(1,835.9	)		786.5
Attributable to:
Equity holders of the parent		727.0			844.3			(8.6	)		(2.2	)		1,002.4			(1,835.9	)		727.0
Non-controlling interests		—			—			—			—			59.5			—			59.5
		727.0			844.3			(8.6	)		(2.2	)		1,061.9			(1,835.9	)		786.5

For the year ended 31 December 2012, £m


	WPP plc			Subsidiary Guarantors ²			WPP Finance (UK)			WPP Finance 2010			Other Subsidiaries			Reclassifications / Eliminations			Consolidated WPP plc
Profit/(loss) for the year		822.7			877.7			(15.2	)		(1.7	)		1,222.7			(2,011.5	)		894.7
Items that may be reclassified subsequently to profit or loss:
Exchange adjustments on foreign currency net investments		(298.4	)		(298.4	)		6.6			0.1			(330.7	)		615.6			(305.2	)
Loss on revaluation of available for sale investments		(3.5	)		(3.5	)		—			—			(3.5	)		7.0			(3.5	)
		(301.9	)		(301.9	)		6.6			0.1			(334.2	)		622.6			(308.7	)
Items that will not be reclassified subsequently to profit or loss:
Actuarial loss on defined benefit pension plans		(83.9	)		(83.9	)		—			—			(83.9	)		167.8			(83.9	)
Deferred tax on defined benefit pension plans		7.3			7.3			—			—			7.3			(14.6	)		7.3
		(76.6	)		(76.6	)		—			—			(76.6	)		153.2			(76.6	)
Other comprehensive (loss)/income for the year		(378.5	)		(378.5	)		6.6			0.1			(410.8	)		775.8			(385.3	)
Total comprehensive income/(loss) for the year		444.2			499.2			(8.6	)		(1.6	)		811.9			(1,235.7	)		509.4
Attributable to:
Equity holders of the parent		444.2			499.2			(8.6	)		(1.6	)		746.7			(1,235.7	)		444.2
Non-controlling interests		—			—			—			—			65.2			—			65.2
		444.2			499.2			(8.6	)		(1.6	)		811.9			(1,235.7	)		509.4

Note

Includes: WPP Air 1 Limited, WPP 2008 Limited, WPP 2005 Limited, WPP 2012 Limited, WPP Jubilee Limited and Young & Rubicam Brands US Holdings.

Includes: WPP Air 1 Limited, WPP 2008 Limited, WPP 2005 Limited and Young & Rubicam Brands US Holdings.

F-43

32. Condensed consolidating financial information (continued)

Condensed consolidating statement of comprehensive income (continued)

For the year ended 31 December 2011, £m


	WPP plc			Subsidiary Guarantors ²			WPP Finance (UK)			WPP Finance 2010			Other Subsidiaries			Reclassifications / Eliminations			Consolidated WPP plc
Profit/(loss) for the year		840.1			886.4			(73.0	)		(1.9	)		1,298.2			(2,033.3	)		916.5
Items that may be reclassified subsequently to profit or loss:
Exchange adjustments on foreign currency net investments		(250.0	)		(250.0	)		(3.0	)		(0.1	)		(248.1	)		494.9			(256.3	)
Gain on revaluation of available for sale investments		11.3			11.3			—			—			11.3			(22.6	)		11.3
		(238.7	)		(238.7	)		(3.0	)		(0.1	)		(236.8	)		472.3			(245.0	)
Items that will not be reclassified subsequently to profit or loss:
Actuarial loss on defined benefit pension plans		(72.0	)		(72.0	)		—			—			(72.0	)		144.0			(72.0	)
Deferred tax on defined benefit pension plans		0.1			0.1			—			—			0.1			(0.2	)		0.1
		(71.9	)		(71.9	)		—			—			(71.9	)		143.8			(71.9	)
Other comprehensive loss for the year		(310.6	)		(310.6	)		(3.0	)		(0.1	)		(308.7	)		616.1			(316.9	)
Total comprehensive income/(loss) for the year		529.5			575.8			(76.0	)		(2.0	)		989.5			(1,417.2	)		599.6
Attributable to:
Equity holders of the parent		529.5			575.8			(76.0	)		(2.0	)		919.4			(1,417.2	)		529.5
Non-controlling interests		—			—			—			—			70.1			—			70.1
		529.5			575.8			(76.0	)		(2.0	)		989.5			(1,417.2	)		599.6

Note

Includes: WPP Air 1 Limited, WPP 2008 Limited, WPP 2005 Limited and Young & Rubicam Brands US Holdings.

F-44

32. Condensed consolidating financial information (continued)

Condensed consolidating cash flow statement information

For the year ended 31 December 2013, £m


	WPP plc			Subsidiary Guarantors ¹			WPP Finance (UK)			WPP Finance 2010			Other Subsidiaries			Reclassifications/ Eliminations		Consolidated WPP plc
Net cash inflow/(outflow) from operating activities		(896.3	)		544.5			21.7			1.0			1,703.3			—		1,374.2
Investing activities
Acquisitions and disposals		—			—			—			—			(201.4	)		—		(201.4	)
Purchases of property, plant and equipment		—			(4.1	)		—			—			(236.6	)		—		(240.7	)
Purchases of other intangible assets (including capitalised computer software)		—			—			—			—			(43.8	)		—		(43.8	)
Proceeds on disposal of property, plant and equipment		—			—			—			—			7.3			—		7.3
Net cash outflow from investing activities		—			(4.1	)		—			—			(474.5	)		—		(478.6	)
Financing activities
Share option proceeds		17.3			25.1			—			—			—			—		42.4
Cash consideration for non-controlling interests		—			—			—			—			(19.6	)		—		(19.6	)
Share repurchases and buy-backs		—			(17.6	)		—			—			(179.4	)		—		(197.0	)
Net increase/(decrease) in borrowings		(502.2	)		—			—			314.2			624.8			—		436.8
Financing and share issue costs		—			(1.2	)		—			(10.8	)		(7.1	)		—		(19.1	)
Capital contribution (paid)/received		—			—			—			—			—			—		—
Equity dividends paid		(139.3	)		(258.0	)		—			—			—			—		(397.3	)
Dividends paid to non-controlling interests in subsidiary undertakings		—			—			—			—			(53.2	)		—		(53.2	)
Net cash (outflow)/inflow from financing activities		(624.2	)		(251.7	)		—			303.4			365.5			—		(207.0	)
Net increase/(decrease) in cash and cash equivalents		(1,520.5	)		288.7			21.7			304.4			1,594.3			—		688.6
Translation differences		1.7			(13.5	)		0.2			(12.5	)		(140.6	)		—		(164.7	)
Cash and cash equivalents at beginning of year		—			(1,862.9	)		(3.6	)		(5.0	)		3,230.8			—		1,359.3
Cash and cash equivalents at end of year		(1,518.8	)		(1,587.7	)		18.3			286.9			4,684.5			—		1,883.2

For the year ended 31 December 2012, £m


	WPP plc			Subsidiary Guarantors ²			WPP Finance (UK)			WPP Finance 2010			Other Subsidiaries			Reclassifications / Eliminations		Consolidated WPP plc
Net cash inflow/(outflow) from operating activities		(43.9	)		1,579.4			(652.6	)		(489.7	)		515.1			—		908.3
Investing activities
Acquisitions and disposals		—			—			—			—			(566.5	)		—		(566.5	)
Purchases of property, plant and equipment		—			(5.5	)		—			—			(284.8	)		—		(290.3	)
Purchases of other intangible assets (including capitalised computer software)		—			—			—			—			(39.8	)		—		(39.8	)
Proceeds on disposal of property, plant and equipment		—			—			—			—			123.5			—		123.5
Net cash outflow from investing activities		—			(5.5	)		—			—			(767.6	)		—		(773.1	)
Financing activities
Share option proceeds		56.0			—			—			—			—			—		56.0
Cash consideration for non-controlling interests		—			—			—			—			(20.1	)		—		(20.1	)
Share repurchases and buy-backs		(55.7	)		—			—			—			(78.8	)		—		(134.5	)
Net increase/(decrease) in borrowings		—			—			—			499.4			(118.9	)		—		380.5
Financing and share issue costs		(0.2	)		—			—			(7.9	)		(0.1	)		—		(8.2	)
Capital contribution (paid)/received		(287.7	)		—			—			—			287.7			—		—
Equity dividends paid		(18.9	)		—			—			—			(287.7	)		—		(306.6	)
Dividends paid to non-controlling interests in subsidiary undertakings		—			—			—			—			(51.9	)		—		(51.9	)
Net cash (outflow)/inflow from financing activities		(306.5	)		—			—			491.5			(269.8	)		—		(84.8	)
Net increase/(decrease) in cash and cash equivalents		(350.4	)		1,573.9			(652.6	)		1.8			(522.3	)		—		50.4
Translation differences		0.1			(18.6	)		(30.6	)		(6.8	)		(63.4	)		—		(119.3	)
Cash and cash equivalents at beginning of year		(144.4	)		(2,923.5	)		679.6			—			3,816.5			—		1,428.2
Cash and cash equivalents at end of year		(494.7	)		(1,368.2	)		(3.6	)		(5.0	)		3,230.8			—		1,359.3

Note

Includes: WPP Air 1 Limited, WPP 2008 Limited, WPP 2005 Limited, WPP 2012 Limited, WPP Jubilee Limited and Young & Rubicam Brands US Holdings.

Includes: WPP Air 1 Limited, WPP 2008 Limited, WPP 2005 Limited and Young & Rubicam Brands US Holdings.

F-45

32. Condensed consolidating financial information (continued)

Condensed consolidating cash flow statement information (continued)

For the year ended 31 December 2011, £m


	WPP plc			Subsidiary Guarantors ²			WPP Finance (UK)			WPP Finance 2010		Other Subsidiaries			Reclassifications / Eliminations		Consolidated WPP plc
Net cash inflow/(outflow) from operating activities		474.2			(404.7	)		(46.1	)		—		641.8			—		665.2
Investing activities
Acquisitions and disposals		—			—			—			—		(469.8	)		—		(469.8	)
Purchases of property, plant and equipment		—			(5.0	)		—			—		(211.1	)		—		(216.1	)
Purchases of other intangible assets (including capitalised computer software)		—			—			—			—		(37.1	)		—		(37.1	)
Proceeds on disposal of property, plant and equipment		—			0.5			—			—		12.7			—		13.2
Net cash outflow from investing activities		—			(4.5	)		—			—		(705.3	)		—		(709.8	)
Financing activities
Share option proceeds		28.8			—			—			—		—			—		28.8
Cash consideration for non-controlling interests		—			—			—			—		(62.6	)		—		(62.6	)
Share repurchases and buy-backs		(75.7	)		—			—			—		(106.5	)		—		(182.2	)
Net increase in borrowings		—			—			—			—		301.4			—		301.4
Financing and share issue costs		—			—			—			—		(11.9	)		—		(11.9	)
Capital contribution (paid)/received		(554.9	)		475.1			—			—		79.8			—		—
Equity dividends paid		(18.0	)		(121.0	)		—			—		(79.4	)		—		(218.4	)
Dividends paid to non-controlling interests in subsidiary undertakings		—			—			—			—		(62.2	)		—		(62.2	)
Net cash (outflow)/inflow from financing activities		(619.8	)		354.1			—			—		58.6			—		(207.1	)
Net decrease in cash and cash equivalents		(145.6	)		(55.1	)		(46.1	)		—		(4.9	)		—		(251.7	)
Translation differences		(0.2	)		(29.2	)		3.7			—		(4.2	)		—		(29.9	)
Cash and cash equivalents at beginning of year		1.4			(2,839.2	)		722.0			—		3,825.6			—		1,709.8
Cash and cash equivalents at end of year		(144.4	)		(2,923.5	)		679.6			—		3,816.5			—		1,428.2

Note

Includes: WPP Air 1 Limited, WPP 2008 Limited, WPP 2005 Limited and Young & Rubicam Brands US Holdings.

F-46

32. Condensed consolidating financial information (continued)

Condensed consolidating balance sheet information

At 31 December 2013, £m


	WPP plc			Subsidiary guarantors ¹			WPP Finance (UK)			WPP Finance 2010			Other Subsidiaries			Reclassifications/ Eliminations			Consolidated WPP plc
Non-current assets
Intangible assets:
Goodwill		—			—			—			—			9,472.8			—			9,472.8
Other		—			—			—			—			1,667.8			—			1,667.8
Property, plant and equipment		—			13.0			—			—			760.3			—			773.3
Investment in subsidiaries		8,687.6			14,058.6			—			—			—			(22,746.2	)		—
Interests in associates and joint ventures		—			—			—			—			792.8			—			792.8
Other investments		—			—			—			—			270.6			—			270.6
Deferred tax assets		—			—			—			—			119.4			—			119.4
Trade and other receivables		32.7			—			—			—			125.8			—			158.5
Intercompany receivables		—			20.8			—			963.5			1,319.8			(2,304.1	)		—
		8,720.3			14,092.4			—			963.5			14,529.3			(25,050.3	)		13,255.2
Current assets
Inventory and work in progress		—			—			—			—			304.5			—			304.5
Corporate income tax recoverable		—			—			—			—			136.0			—			136.0
Trade and other receivables		8.7			190.7			0.2			0.1			8,888.4			—			9,088.1
Intercompany receivables		1,610.6			581.7			593.8			8.5			331.8			(3,126.4	)		—
Cash and short-term deposits		—			1,700.9			18.3			286.9			5,019.6			(4,804.1	)		2,221.6
		1,619.3			2,473.3			612.3			295.5			14,680.3			(7,930.5	)		11,750.2
Current liabilities
Trade and other payables		(66.4	)		(70.5	)		(9.0	)		(11.3	)		(10,553.5	)		—			(10,710.7	)
Intercompany payables		(119.6	)		(2,424.2	)		(0.8	)		(0.2	)		(581.6	)		3,126.4			—
Corporate income tax payable		—			—			—			—			(120.1	)		—			(120.1	)
Bank overdrafts and loans		(1,518.8	)		(3,288.6	)		(584.0	)		—			(354.1	)		4,804.1			(941.4	)
		(1,704.8	)		(5,783.3	)		(593.8	)		(11.5	)		(11,609.3	)		7,930.5			(11,772.2	)
Net current (liabilities)/assets		(85.5	)		(3,310.0	)		18.5			284.0			3,071.0			—			(22.0	)
Total assets less current liabilities		8,634.8			10,782.4			18.5			1,247.5			17,600.3			(25,050.3	)		13,233.2
Non-current liabilities
Bonds and bank loans		(1,048.0	)		—			—			(1,253.2	)		(1,219.4	)		—			(3,520.6	)
Trade and other payables		—			—			(5.7	)		—			(457.6	)		5.7			(457.6	)
Intercompany payables		—			(2,094.8	)		(188.5	)		—			(20.8	)		2,304.1			—
Corporate income tax payable		—			—			—			—			(362.6	)		—			(362.6	)
Deferred tax liabilities		—			—			—			—			(650.7	)		—			(650.7	)
Provision for post-employment benefits		—			—			—			—			(247.5	)		—			(247.5	)
Provisions for liabilities and charges		—			—			—			—			(147.7	)		—			(147.7	)
		(1,048.0	)		(2,094.8	)		(194.2	)		(1,253.2	)		(3,106.3	)		2,309.8			(5,386.7	)
Net assets/(liabilities)		7,586.8			8,687.6			(175.7	)		(5.7	)		14,494.0			(22,740.5	)		7,846.5
Attributable to:
Equity share owners’ funds		7,586.8			8,687.6			(175.7	)		(5.7	)		14,234.3			(22,740.5	)		7,586.8
Non-controlling interests		—			—			—			—			259.7			—			259.7
Total equity		7,586.8			8,687.6			(175.7	)		(5.7	)		14,494.0			(22,740.5	)		7,846.5

Note

Includes: WPP Air 1 Limited, WPP 2008 Limited, WPP 2005 Limited, WPP 2012 Limited, WPP Jubilee Limited and Young & Rubicam Brands US Holdings.

F-47

32. Condensed consolidating financial information (continued)

Condensed consolidating balance sheet information (continued)

At 31 December 2012, £m


	WPP plc			Subsidiary guarantors ²			WPP Finance (UK)			WPP Finance 2010			Other Subsidiaries			Reclassifications/ Eliminations			Consolidated WPP plc
Non-current assets
Intangible assets:
Goodwill		—			—			—			—			9,457.2			—			9,457.2
Other		—			—			—			—			1,827.4			—			1,827.4
Property, plant and equipment		—			12.2			—			—			756.1			—			768.3
Investment in subsidiaries		7,877.5			13,319.6			—			—			—			(21,197.1	)		—
Interests in associates and joint ventures		—			—			—			—			887.2			—			887.2
Other investments		—			—			—			—			176.5			—			176.5
Deferred tax assets		—			—			—			—			91.2			—			91.2
Trade and other receivables		—			74.9			—			—			170.2			—			245.1
Intercompany receivables ³		—			174.2			636.4			982.6			305.0			(2,098.2	)		—
		7,877.5			13,580.9			636.4			982.6			13,670.8			(23,295.3	)		13,452.9
Current assets
Inventory and work in progress		—			—			—			—			348.2			—			348.2
Corporate income tax recoverable		—			—			—			—			124.2			—			124.2
Trade and other receivables		0.3			135.8			0.6			—			8,870.3			—			9,007.0
Intercompany receivables ³		—			423.7			—			8.5			1,555.9			(1,988.1	)		—
Cash and short-term deposits		1.2			1,763.0			—			—			3,816.7			(3,635.6	)		1,945.3
		1.5			2,322.5			0.6			8.5			14,715.3			(5,623.7	)		11,424.7
Current liabilities
Trade and other payables		(23.9	)		(119.0	)		(9.2	)		(9.5	)		(10,746.2	)		—			(10,907.8	)
Intercompany payables ³		(113.2	)		(1,450.5	)		(0.7	)		—			(423.7	)		1,988.1			—
Corporate income tax payable		—			—			—			—			(102.9	)		—			(102.9	)
Bank overdrafts and loans		(495.9	)		(3,631.1	)		(3.6	)		(5.0	)		(585.9	)		3,635.6			(1,085.9	)
		(633.0	)		(5,200.6	)		(13.5	)		(14.5	)		(11,858.7	)		5,623.7			(12,096.6	)
Net current (liabilities)/assets		(631.5	)		(2,878.1	)		(12.9	)		(6.0	)		2,856.6			—			(671.9	)
Total assets less current liabilities		7,246.0			10,702.8			623.5			976.6			16,527.4			(23,295.3	)		12,781.0
Non-current liabilities
Bonds and bank loans		(435.0	)		(1,042.0	)		(594.8	)		(980.2	)		(628.6	)		—			(3,680.6	)
Trade and other payables		—			(51.7	)		(3.6	)		—			(460.3	)		3.6			(512.0	)
Intercompany payables ³		—			(1,731.6	)		(192.4	)		—			(174.2	)		2,098.2			—
Corporate income tax payable		—			—			—			—			(375.3	)		—			(375.3	)
Deferred tax liabilities		—			—			—			—			(680.3	)		—			(680.3	)
Provision for post-employment benefits		—			—			—			—			(335.6	)		—			(335.6	)
Provisions for liabilities and charges		—			—			—			—			(136.6	)		—			(136.6	)
		(435.0	)		(2,825.3	)		(790.8	)		(980.2	)		(2,790.9	)		2,101.8			(5,720.4	)
Net assets/(liabilities)		6,811.0			7,877.5			(167.3	)		(3.6	)		13,736.5			(21,193.5	)		7,060.6
Attributable to:
Equity share owners’ funds		6,811.0			7,877.5			(167.3	)		(3.6	)		13,486.9			(21,193.5	)		6,811.0
Non-controlling interests		—			—			—			—			249.6			—			249.6
Total equity		6,811.0			7,877.5			(167.3	)		(3.6	)		13,736.5			(21,193.5	)		7,060.6

Note

Includes: WPP Air 1 Limited, WPP 2008 Limited, WPP 2005 Limited and Young & Rubicam Brands US Holdings.

Figures have been represented to conform to the current year presentation.

F-48

33. Condensed consolidating financial information for bond issued in 2013

As described in note 32, on 2 January 2013, under the scheme of arrangement, WPP plc completed a reorganization of its corporate structure (“the reorganization”) and WPP 2012 plc (now known as WPP plc) became the new parent company of the Group. The former WPP plc was renamed WPP 2012 Limited and became a wholly owned subsidiary of WPP plc.

As part of the reorganization, WPP plc and WPP Jubilee Limited assumed substantially all the assets and liabilities of WPP Air 1 Limited, WPP 2008 Limited and WPP 2012 Limited. Accordingly, the subsidiary guarantor structure for future bonds has been modified with WPP Jubilee Limited and WPP 2005 Limited to act initially as the sole subsidiary guarantors of such future bonds. The intent of the modification is to streamline the guarantor structure as WPP plc and WPP Jubilee Limited have assumed substantially all the assets and liabilities of the predecessor subsidiary guarantors.

In November 2013, WPP Finance 2010 issued $500 million of 5.625% bonds due November 2043, with WPP plc as parent guarantor and WPP Jubilee Limited and WPP 2005 Limited as subsidiary guarantors.

Since the reorganization took place in the year ended 31 December 2013 and there were transactions between group entities, there are differences in the condensed consolidating financial information for the new guarantor structure and the old guarantor structure. Accordingly, separate condensed consolidating financial information for the year ended 31 December 2013 for the new guarantor structure is presented beginning on page F-50. The comparative financial information for the years ended 31 December 2012 and 2011 is as presented in note 32.

The issuer and guarantors of the bonds (issuer and subsidiary guarantors are 100% owned by WPP plc) are each subject to the reporting requirements under section 15(d) of the Securities Exchange Act of 1934. Condensed consolidating financial information containing financial information for WPP Finance 2010 and the guarantors is presented in accordance with SEC Rule 3-10 and is prepared in accordance with IFRS as issued by the IASB, except to the extent that, in the parent company, subsidiary issuer and subsidiary guarantors columns investments in subsidiaries are accounted for under the equity method of accounting. Under the equity method, earnings of subsidiaries are reflected as “share of results of subsidiaries” in the income statement and as “investment in subsidiaries” in the balance sheet, as required by the SEC.

In the event that WPP Finance 2010 fails to pay the holders of the securities, thereby requiring WPP plc, WPP Jubilee Limited and WPP 2005 Limited to make payment pursuant to the terms of its full and unconditional, and joint and several guarantee of those securities, there is no impediment to WPP plc, WPP Jubilee Limited and WPP 2005 Limited in obtaining reimbursement for any such payments from WPP Finance 2010.

F-49

33. Condensed consolidating financial information for bond issued in 2013 (continued)

Condensed consolidating income statement information

For the year ended 31 December 2013, £m


	WPP plc			Subsidiary Guarantors ¹			WPP Finance (UK)			WPP Finance 2010			Other Subsidiaries			Reclassifications/ Eliminations			Consolidated WPP plc
Revenue		—			—			—			—			11,019.4			—			11,019.4
Direct costs		—			—			—			—			(943.3	)		—			(943.3	)
Gross profit		—			—			—			—			10,076.1			—			10,076.1
Operating costs		(27.5	)		(26.2	)		—			—			(8,612.1	)		—			(8,665.8	)
Operating profit/(loss)		(27.5	)		(26.2	)		—			—			1,464.0			—			1,410.3
Share of results of subsidiaries		1,058.2			1,203.3			(2.4	)		—			—			(2,259.1	)		—
Share of results of associates		—			—			—			—			68.1			—			68.1
Profit/(loss) before interest and taxation		1,030.7			1,177.1			(2.4	)		—			1,532.1			(2,259.1	)		1,478.4
Finance income		13.0			32.4			45.4			47.5			94.3			(168.3	)		64.3
Finance costs		(117.2	)		(155.8	)		(55.6	)		(49.9	)		(57.7	)		168.3			(267.9	)
Revaluation of financial instruments		10.0			3.2			—			—			7.8			—			21.0
Profit/(loss) before taxation		936.5			1,056.9			(12.6	)		(2.4	)		1,576.5			(2,259.1	)		1,295.8
Taxation		—			1.3			—			—			(285.0	)		—			(283.7	)
Profit/(loss) for the year		936.5			1.058.2			(12.6	)		(2.4	)		1,291.5			(2,259.1	)		1,012.1
Attributable to:
Equity holders of the parent		936.5			1,058.2			(12.6	)		(2.4	)		1,215.9			(2,259.1	)		936.5
Non-controlling interests		—			—			—			—			75.6			—			75.6
		936.5			1,058.2			(12.6	)		(2.4	)		1,291.5			(2,259.1	)		1,012.1

Note

Includes: WPP Jubilee Limited and WPP 2005 Limited.

F-50

33. Condensed consolidating financial information for bond issued in 2013 (continued)

Condensed consolidating statement of comprehensive income

For the year ended 31 December 31 2013, £m


	WPP plc			Subsidiary Guarantors ¹			WPP Finance (UK)			WPP Finance 2010			Other Subsidiaries			Reclassifications/ Eliminations			Consolidated WPP plc
Profit/(loss) for the year		936.5			1,058.2			(12.6	)		(2.4	)		1,291.5			(2,259.1	)		1,012.1
Items that may be reclassified subsequently to profit or loss:
Exchange adjustments on foreign currency net investments		(356.5	)		(360.9	)		4.0			0.2			(376.6	)		717.2			(372.6	)
Gain on revaluation of available for sale investments		72.0			72.0			—			—			72.0			(144.0	)		72.0
		(284.5	)		(288.9	)		4.0			0.2			(304.6	)		573.2			(300.6	)
Items that will not be reclassified subsequently to profit or loss:
Actuarial gain on defined benefit pension plans		76.2			76.2			—			—			76.2			(152.4	)		76.2
Deferred tax on defined benefit pension plans		(1.2	)		(1.2	)		—			—			(1.2	)		2.4			(1.2	)
		75.0			75.0			—			—			75.0			(150.0	)		75.0
Other comprehensive (loss)/income for the year		(209.5	)		(213.9	)		4.0			0.2			(229.6	)		423.2			(225.6	)
Total comprehensive income/(loss) for the year		727.0			844.3			(8.6	)		(2.2	)		1,061.9			(1,835.9	)		786.5
Attributable to:
Equity holders of the parent		727.0			844.3			(8.6	)		(2.2	)		1,002.4			(1,835.9	)		727.0
Non-controlling interests		—			—			—			—			59.5			—			59.5
		727.0			844.3			(8.6	)		(2.2	)		1,061.9			(1,835.9	)		786.5

Note

Includes: WPP Jubilee Limited and WPP 2005 Limited.

F-51

33. Condensed consolidating financial information for bond issued in 2013 (continued)

Condensed consolidating cash flow statement information

For the year ended 31 December 2013, £m


	WPP plc			Subsidiary Guarantors ¹			WPP Finance (UK)			WPP Finance 2010			Other Subsidiaries			Reclassifications/ Eliminations		Consolidated WPP plc
Net cash inflow/(outflow) from operating activities		(896.3	)		521.3			21.7			1.0			1,726.5			—		1,374.2
Investing activities
Acquisitions and disposals		—			—			—			—			(201.4	)		—		(201.4	)
Purchases of property, plant and equipment		—			(4.1	)		—			—			(236.6	)		—		(240.7	)
Purchases of other intangible assets (including capitalised computer software)		—			—			—			—			(43.8	)		—		(43.8	)
Proceeds on disposal of property, plant and equipment		—			—			—			—			7.3			—		7.3
Net cash outflow from investing activities		—			(4.1	)		—			—			(474.5	)		—		(478.6	)
Financing activities
Share option proceeds		17.3			—			—			—			25.1			—		42.4
Cash consideration for non-controlling interests		—			—			—			—			(19.6	)		—		(19.6	)
Share repurchases and buy-backs		—			—			—			—			(197.0	)		—		(197.0	)
Net increase/(decrease) in borrowings		(502.2	)		—			—			314.2			624.8			—		436.8
Financing and share issue costs		—			—			—			(10.8	)		(8.3	)		—		(19.1	)
Capital contribution (paid)/received		—			—			—			—			—			—		—
Equity dividends paid		(139.3	)		—			—			—			(258.0	)		—		(397.3	)
Dividends paid to non-controlling interests in subsidiary undertakings		—			—			—			—			(53.2	)		—		(53.2	)
Net cash (outflow)/inflow from financing activities		(624.2	)		—			—			303.4			113.8			—		(207.0	)
Net increase/(decrease) in cash and cash equivalents		(1,520.5	)		517.2			21.7			304.4			1,365.8			—		688.6
Translation differences		1.7			5.8			0.2			(12.5	)		(159.9	)		—		(164.7	)
Cash and cash equivalents at beginning of year		—			(2,114.4	)		(3.6	)		(5.0	)		3,482.3			—		1,359.3
Cash and cash equivalents at end of year		(1,518.8	)		(1,591.4	)		18.3			286.9			4,688.2			—		1,883.2

Note

Includes: WPP Jubilee Limited and WPP 2005 Limited.

F-52

33. Condensed consolidating financial information for bond issued in 2013 (continued)

Condensed consolidating balance sheet information

At 31 December 2013, £m


	WPP plc			Subsidiary guarantors ¹			WPP Finance (UK)			WPP Finance 2010			Other Subsidiaries			Reclassifications/ Eliminations			Consolidated WPP plc
Non-current assets
Intangible assets:
Goodwill		—			—			—			—			9,472.8			—			9,472.8
Other		—			—			—			—			1,667.8			—			1,667.8
Property, plant and equipment		—			13.0			—			—			760.3			—			773.3
Investment in subsidiaries		8,687.6			13,890.0			—			—			—			(22,577.6	)		—
Interests in associates and joint ventures		—			—			—			—			792.8			—			792.8
Other investments		—			—			—			—			270.6			—			270.6
Deferred tax assets		—			—			—			—			119.4			—			119.4
Trade and other receivables		32.7			—			—			—			125.8			—			158.5
Intercompany receivables		—			20.8			—			963.5			1,319.8			(2,304.1	)		—
		8,720.3			13,923.8			—			963.5			14,529.3			(24,881.7	)		13,255.2
Current assets
Inventory and work in progress		—			—			—			—			304.5			—			304.5
Corporate income tax recoverable		—			—			—			—			136.0			—			136.0
Trade and other receivables		8.7			190.7			0.2			0.1			8,888.4			—			9,088.1
Intercompany receivables		1,610.6			581.6			593.8			8.5			331.9			(3,126.4	)		—
Cash and short-term deposits		—			1,696.9			18.3			286.9			5,023.3			(4,803.8	)		2,221.6
		1,619.3			2,469.2			612.3			295.5			14,684.1			(7,930.2	)		11,750.2
Current liabilities
Trade and other payables		(66.4	)		(70.5	)		(9.0	)		(11.3	)		(10,553.5	)		—			(10,710.7	)
Intercompany payables		(119.6	)		(2,251.8	)		(0.8	)		(0.2	)		(754.0	)		3,126.4			—
Corporate income tax payable		—			—			—			—			(120.1	)		—			(120.1	)
Bank overdrafts and loans		(1,518.8	)		(3,288.3	)		(584.0	)		—			(354.1	)		4,803.8			(941.4	)
		(1,704.8	)		(5,610.6	)		(593.8	)		(11.5	)		(11,781.7	)		7,930.2			(11,772.2	)
Net current (liabilities)/assets		(85.5	)		(3,141.4	)		18.5			284.0			2,902.4			—			(22.0	)
Total assets less current liabilities		8,634.8			10,782.4			18.5			1,247.5			17,431.7			(24,881.7	)		13,233.2
Non-current liabilities
Bonds and bank loans		(1,048.0	)		—			—			(1,253.2	)		(1,219.4	)		—			(3,520.6	)
Trade and other payables		—			—			(5.7	)		—			(457.6	)		5.7			(457.6	)
Intercompany payables		—			(2,094.8	)		(188.5	)		—			(20.8	)		2,304.1			—
Corporate income tax payable		—			—			—			—			(362.6	)		—			(362.6	)
Deferred tax liabilities		—			—			—			—			(650.7	)		—			(650.7	)
Provision for post-employment benefits		—			—			—			—			(247.5	)		—			(247.5	)
Provisions for liabilities and charges		—			—			—			—			(147.7	)		—			(147.7	)
		(1,048.0	)		(2,094.8	)		(194.2	)		(1,253.2	)		(3,106.3	)		2,309.8			(5,386.7	)
Net assets/(liabilities)		7,586.8			8,687.6			(175.7	)		(5.7	)		14,325.4			(22,571.9	)		7,846.5
Attributable to:
Equity share owners’ funds		7,586.8			8,687.6			(175.7	)		(5.7	)		14,065.7			(22,571.9	)		7,586.8
Non-controlling interests		—			—			—			—			259.7			—			259.7
Total equity		7,586.8			8,687.6			(175.7	)		(5.7	)		14,325.4			(22,571.9	)		7,846.5

Note

Includes: WPP Jubilee Limited and WPP 2005 Limited.

F-53

Exhibit Index


Exhibit No.		Exhibit Title

	2.8	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to a U.S.$1,200,000,000 and £475,000,000 Revolving Credit Facilities Agreement (incorporating a U.S.$975,000,000 Swingline Facility) dated 30 November 2011, and Amended and Restated on 25 April 2013.

	2.14	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to U.S.$500,000,000 5.625% Guaranteed Senior Notes due November 2043.

	2.15	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to € 750 million of 3.00% Fixed Rate Senior Notes due November 2023.

	4.33	WPP plc Executive Performance Share Plan.

	8.1	List of subsidiaries.

	12.1	Certification of Group Chief Executive.

	12.2	Certification of Group Finance Director.

	13.1	Certification of Group Chief Executive under 18 U.S.C. Section 1350.

	13.2	Certification of Group Finance Director under 18 U.S.C. Section 1350.

	14.1	Consent of Independent Registered Public Accounting Firm (for WPP plc and subsidiaries).

Exhibit 2.8

WPP plc

27 Farm Street

London W1J 5RJ, England

30 April 2014

Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C. 20549

Dear Sir or Madam:

Reference is made to an Amendment and Restatement Agreement, dated 25 April 2013, by and among WPP CP Finance plc and WPP Finance Co. Limited, as Borrowers, WPP plc, WPP Jubilee Limited, WPP 2012 Limited (formerly WPP plc), WPP 2005 Limited, WPP 2008 Limited, WPP Air 1 Limited and WPP CP Finance plc, as Guarantors, and Citibank International plc, as Facility Agent, relating to a US$1,200,000,000 and £475,000,000 Revolving Credit Facilities Agreement (Incorporating a US$975,000,000 Swingline Facility) (the “Loan Facility”).

The Registrant 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 Loan Facility upon request.


Very truly yours, WPP plc

By:		/s/ Paul W.G. Richardson
		Paul W.G. Richardson Group Finance Director

Exhibit 2.14

WPP plc

27 Farm Street

London W1J 5RJ, England

30 April 2014

Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C. 20549

Dear Sir or Madam:

In 2013 WPP Finance 2010, a subsidiary of the Registrant, issued $500,000,000 5.625% Senior Notes due 15 November 2043 (the “5.625% Notes”). The 5.625% Notes are guaranteed by WPP plc, WPP Jubilee Limited and WPP 2005 Limited.


Very truly yours, WPP plc

By:		/s/ Paul W.G. Richardson
		Paul W.G. Richardson Group Finance Director

Exhibit 2.15

WPP plc

27 Farm Street

London W1J 5RJ, England

30 April 2014

Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C. 20549

Dear Sir or Madam:

In 2013 WPP Finance 2013, a subsidiary of the Registrant, issued €750,000,000 3.00% Fixed Rate Senior Notes due 20 November 2023 (the “3.00% Notes”). The 3.00% Notes are guaranteed by WPP plc, WPP 2005 Limited and WPP Jubilee Limited.


Very truly yours, WPP plc

By:		/s/ Paul W.G. Richardson
		Paul W.G. Richardson Group Finance Director

Exhibit 4.33

WPP PLC

EXECUTIVE PERFORMANCE SHARE PLAN

Approved by the Company in General Meeting on 12 June 2013

and adopted by the board of directors of the Company

on 15 April 2013

SQUIRE SANDERS (UK) LLP

7 Devonshire Square

London

EC2M 4YH

United Kingdom

DX 136546 Bishopsgate 2

O +44 20 7655 1000

F +44 20 7655 1001

Reference WPP.002-1495

CONTENTS



1 HOW THE PLAN WORKS AND HOW AWARDS ARE GRANTED					1

2 RIGHTS OF A PARTICIPANT AFTER GRANT BUT BEFORE VESTING					3

3 VESTING OF AWARDS					3

4 LEAVING EMPLOYMENT					4

5 REDUCTION OF AWARDS					6

6 TRANSACTIONS AFFECTING THE COMPANY					6

7 CHANGING THE PLAN					8

8 GENERAL					9

9 GLOSSARY					12

SCHEDULE FOR PARTICIPANTS SUBJECT TO SECTION 409A					15

1	HOW THE PLAN WORKS AND HOW AWARDS ARE GRANTED

1.1	How the Plan works

The Plan gives a Participant the right to receive free Shares subject to the satisfaction of certain conditions and continued employment.

1.2	Who grants Awards

Awards will be granted by the Company but the Compensation Committee will decide who gets Awards, over how many Shares and on what terms.

1.3	Who can participate

The Company can grant an Award to any employee (including an executive director) of the Company or of any Subsidiary. However, unless the Compensation Committee considers that special circumstances exist, an Award may not be granted to an employee who, on the Award Date, has given or received notice of termination of employment, whether or not that termination is lawful.

1.4	Dividend Awards

The Compensation Committee may decide that a Participant will be granted a Dividend Award in conjunction with, and at the same time as, being granted an Award. The Dividend Award will Vest at the same time as the Award to which it relates. If an Award to which a Dividend Award relates lapses (in whole or in part), the same proportion of that Dividend Award will lapse at the same time.

1.5	When Awards can be granted

Awards can only be granted within 42 days of any of the following:

(a)

the date on which the Plan is approved by the share owners of the Company;

(b)

the Business Day after the announcement of the Company’s results through a Regulatory Information Service for any period;

(c)

the Business Day after the Company’s annual general meeting;

(d)

any day on which the Company decides that exceptional circumstances exist which justify the grant of Awards;

(e)

any day on which changes to the legislation or regulations affecting the Plan are announced, effected or made; or

(f)

the lifting of Dealing Restrictions which prevented the granting of Awards during any period specified above.

1.6	When the Plan expires

Awards can only be granted within the period of 10 years from the date of approval of the Plan by the share owners of the Company.

1.7	Personal limit

The Market Value (established at the date that the Compensation Committee makes its decisions under this rule 1) of all the Shares subject to Awards granted to a Participant in respect of a financial year cannot be more than 9.75 times that Participant’s Basic Salary.

1.8	Other limits

There are also limits on the number of Shares which can be issued under the Plan - see rule 8.1.

1.9	Effect of the limits in rules 1.7 and 1.8

If the Company purports to grant an Award which is inconsistent with either of rules 1.7 or 1.8, the Award will be limited on a basis consistent with those rules with effect from the Award Date.

1.10	Performance condition

The Vesting of an Award will be conditional on the satisfaction of one or more conditions. These will be linked to the performance of the Company, the Participant or the business or Member of the Group in which the Participant works. A Performance Condition must be objective and may provide that an Award will lapse to the extent it is not satisfied. The Compensation Committee may impose other conditions when granting an Award.

1.11	Form of Awards

Awards and Dividend Awards can be granted as nil cost options, conditional rights to receive Shares or in any other form that the Compensation Committee decides.

1.12	Grant requirements

Awards and Dividend Awards must be granted by deed or other legally binding document. The terms of the Award, as determined by the Compensation Committee, must be specified in the deed or other document and must include:

(a)

the number of Shares subject to the Award;

(b)

the Performance Condition; and

(c)

the Award Date.

1.13	No requirement to pay for an Award

A Participant is not required to pay for the grant of an Award or Dividend Award.

1.14	Right to decline

Participants will be notified of the grant of Awards and Dividend Awards. A Participant may decline their Award within 30 days after the Award Date by notice in writing to any person nominated by the Compensation Committee. If this happens, the Award and the Dividend Award that relates to it will be treated as if they had never been granted under the Plan. A Participant is not required to make any payment to decline an Award or Dividend Award.

2	RIGHTS OF A PARTICIPANT AFTER GRANT BUT BEFORE VESTING

2.1	Rights to transfer an Award

A Participant may not transfer, assign, charge or otherwise dispose of an Award or Dividend Award or any rights in respect of them. If a Participant does, whether voluntarily or involuntarily, then the Award will immediately lapse unless the Compensation Committee decides to the contrary.

2.2	Right to transfer on death

Rule 2.1 does not apply to the transfer of an Award or Dividend Award on the death of a Participant to their personal representatives.

2.3	Share rights before Vesting

A Participant cannot vote and is not entitled to receive dividends in respect of the Shares subject to their Award or Dividend Award until after Vesting, as described in rule 3.6.

3	VESTING OF AWARDS

3.1	When Awards Vest

As soon as reasonably practicable after the end of the Performance Period (or the date of death if rule 4.6 applies), the Compensation Committee will determine the extent to which the Performance Condition has been satisfied. Subject to the rest of these rules, Vesting will take place on the Business Day after the date on which the Compensation Committee makes its determination, unless the Compensation Committee decides to set a different date for Vesting.

3.2	Adjustments for exceptional events

If the Compensation Committee considers that there has been an exceptional event or that there have been exceptional circumstances during a Performance Period that have made it materially easier or harder for the Company to achieve a Performance Condition, the Compensation Committee may adjust the extent to which an Award Vests to mitigate the effect of the exceptional event or circumstances.

3.3	What Vests and what lapses

The Award will Vest to the extent the Performance Condition is satisfied and the balance will lapse.

3.4	Effect of a Dealing Restriction

If, on the date an Award is supposed to Vest, a Dealing Restriction prevents it from Vesting, it will Vest on the first Business Day after the Dealing Restriction ceases to apply.

3.5	Satisfaction of Awards

As soon as reasonably practicable after the Vesting of an Award, the Company will arrange for the transfer or issue to, or to the order of, the Participant of the number of Shares in respect of which the Award and Dividend Award have Vested. Before this happens, however, any tax needs to be paid and any consents need to be obtained (see rules 3.8, 3.9 and 8.10).

3.6	Share rights after Vesting

The Participant will be entitled to all rights attaching to the Shares which are transferred or issued following Vesting by reference to a record date on or after the date of the transfer or issue.

3.7	Payment of cash equivalent

Instead of the transfer or issue of Shares after Vesting of an Award, the Company may (subject to rules 3.8 and 3.9) pay to, or to the order of, the Participant an amount equal to the Cash Value of the Shares that have Vested under the Award and Dividend Award. The Company can decide to do this at the Award Date or at any time before satisfaction of the Award, including after Vesting.

3.8	Responsibility for tax

The Participant must pay all tax, social security contributions and other levies in respect of any Award or Dividend Award. If the Participant is to be responsible for the payment of any employers’ social security contributions, this must be specified in the terms of the Award.

3.9	Methods of paying the tax

If any Member of the Group or any employee benefit trust has to pay or account for any item referred to in rule 3.8, the Participant must pay or repay that amount on demand. Instead, or in addition, the Member of the Group or trustee can do any one or more of the following:

(a)

sell sufficient of the Shares subject to the Award and/or Dividend Award on behalf of the Participant and retain the proceeds or pay them to any tax authority;

(b)

reduce the number of Shares subject to the Award or to which the Participant is entitled following Vesting; and/or

(c)

deduct the amount from any amount to which the Participant is entitled under the Plan, their employment contract or otherwise.

4	LEAVING EMPLOYMENT

4.1	General rule when leaving employment

Except in the circumstances set out in rules 4.5 and 4.6 below, if a Participant leaves employment before the date on which their Award Vests, the Award will lapse.

4.2	Leaving in the first year of a Performance Period

If a Participant leaves employment within the first year of a Performance Period, the Award to which that Performance Period applies will lapse.

4.3	Reduction in working hours

If a Participant’s working hours are materially reduced before the date on which their Award Vests, the Compensation Committee may reduce the number of Shares in respect of which an Award Vests, as it considers appropriate.

4.4	Pro-rating Awards that don’t lapse

If the Participant leaves employment for one of the reasons listed in rule 4.5, unless the Compensation Committee decides otherwise, the Award will not lapse but will continue and will Vest at the normal time to the extent that the Performance Condition has been satisfied over the Performance Period. The number of Shares in respect of which it Vests will be reduced to reflect the period from the beginning of the Performance Period to the date of leaving (calculated using the number of complete calendar months since the beginning of the Performance Period) as a proportion of the whole Performance Period. In exceptional circumstances, the Compensation Committee may determine that the Award will Vest on a different basis.

4.5	Categories of good leavers

The reasons are:

(a)

ill-health, injury or disability, established to the satisfaction of the Compensation Committee;

(b)

retirement either pursuant to a Participant’s employment contract which has been approved by the Compensation Committee or on any other basis acceptable to the Compensation Committee;

(c)

the Participant’s employing company ceasing to be a Subsidiary;

(d)

a transfer of the undertaking, or the part of the undertaking, in which the Participant works to a person which is not a Member of the Group; and

(e)

any other reason if the Compensation Committee so decides generally or in any particular case within 20 Business Days of the Participant leaving.

4.6	What happens on death

If a Participant dies and unless the Compensation Committee decides otherwise, their Award will Vest to the extent that the Performance Condition has been satisfied

(as determined by the Compensation Committee) up to the date of death. The number of Shares in respect of which the Award Vests will be reduced to reflect the period from the beginning of the Performance Period to the date of death as a proportion of the whole Performance Period (calculated using the number of complete calendar months since the beginning of the Performance Period). In exceptional circumstances, the Compensation Committee may determine that an Award will Vest on any other basis that it considers appropriate. Shares will be issued or transferred (or cash paid) under the Plan to the Participant’s personal representatives.

4.7	What leaving employment means

A Participant will be treated as leaving employment only when they are no longer either an employee or a director of any Member of the Group and will not be treated as leaving if they recommence an employment or office with a Member of the Group within 7 days.

5	REDUCTION OF AWARDS

5.1	When the Compensation Committee can reduce an Award

If a Participant:

(a)

commits an act of fraud, dishonesty or deceit which affected an amount of Performance Remuneration paid to them;

(b)

does or omits to do something that results in a set of audited accounts being materially wrong or misleading and either;

(i)

those accounts have to be materially corrected; or

(ii)

a subsequent set of accounts or data have to be adjusted or include a provision or write down as a result of that act or omission; or

(c)

knew or should have known that any information used to calculate any of their Performance Remuneration was incorrect;

and the Compensation Committee determines that, as a result, an amount of the Participant’s Performance Remuneration has been overpaid, it can decide that an Award or part of an Award will lapse to compensate the Company for that overpayment.

5.2	The Compensation Committee’s actions if reducing an Award

The Compensation Committee will act reasonably in using its authority under this rule 5.

6	TRANSACTIONS AFFECTING THE COMPANY

6.1	Early Vesting

Subject to rules 6.2 to 6.4, Awards will Vest under this rule 6 if:

(a)

a person (or a group of persons acting in concert) obtains Control of the Company as a result of making an offer to acquire Shares;

(b)

the court sanctions a scheme of arrangement under Part 18A of the Companies (Jersey) Law 1991 involving the acquisition of Shares; or

(c)

the Company passes a resolution for its voluntary winding up or an order is made for its compulsory winding up.

6.2	Pro-rating on early Vesting

Where an Award Vests under rule 6.1, it will Vest to the extent that the Performance Condition has been satisfied as at the date of Vesting. The number of Shares in respect of which it Vests will be reduced to reflect the period from the beginning of the Performance Period to the date of Vesting under rule 6.1 (calculated using the number of complete calendar months since the beginning of the Performance Period) as a proportion of the whole Performance Period.

6.3	Achieving the Performance Condition on early Vesting

The extent to which the Performance Condition is satisfied will be worked out as required by the Performance Condition or, if the Performance Condition does not specify the outcome in sufficient detail, in the manner that the Compensation Committee considers reasonable.

6.4	Exchanging Awards rather than early Vesting

An Award will not Vest under rule 6.1 to the extent that:

(a)

an offer to exchange the Award and Dividend Award is made and accepted by a Participant; or

(b)

the Compensation Committee, with the consent of the Acquiring Company, decides before the person obtains Control or the court sanctions the scheme of arrangement that the Award and Dividend Award will be automatically exchanged.

6.5	What happens when Awards are exchanged

Where an Award and a Dividend Award are to be exchanged under rule 6.4, the exchange will take place as soon as practicable after the relevant event and the Participant will be granted new awards in exchange for their existing Award and Dividend Award. The new awards:

(a)

must confer a right to acquire shares in the Acquiring Company or another body corporate determined by the Acquiring Company;

(b)

must be equivalent to the existing Award and Dividend Award;

(c)

will be treated as having been acquired at the same time as the existing Award and will Vest in the same manner and at the same time;

(d)

may, at the discretion of the Compensation Committee, be subject to a Performance Condition which will be, so far as possible, equivalent to any Performance Condition applying to the existing Award; and

(e)

will be governed by the Plan as if references to Shares were references to the shares over which the new award is granted and references to the Company were references to the Acquiring Company or the body corporate determined under this rule.

6.6	Demergers

If the Company is affected by a demerger (in whatever form) or a special dividend or distribution, the Compensation Committee may:

(a)

decide that Awards will Vest, in which case rules 6.2 and 6.3 will apply as if the Awards had Vested under rule 6.1; or

(b)

adjust the number, class or identity of Shares comprised in an Award or a Dividend Award.

6.7	Variations of capital

If the Company is affected by:

(a)

a rights issue; or

(b)

a variation in the equity share capital of the Company, including a capitalisation or sub-division, consolidation or reduction of share capital;

the Compensation Committee may adjust the number, class or identity of Shares comprised in an Award or Dividend Award.

7	CHANGING THE PLAN

7.1	Compensation Committee’s right to change the Plan or Awards

Except as described in the rest of this rule, the Compensation Committee may at any time:

(a)

change the Plan or the terms of any Award (but not the Performance Condition applicable to an Award) or Dividend Award in any way; or

(b)

amend the Performance Condition that applies to an Award if it considers that, as a result of an event or a change in circumstances, the amendment would ensure a fairer measure of performance while being no less difficult to satisfy than the original Performance Condition.

7.2	Limitations on the right to make changes

The Company must approve by ordinary resolution in general meeting any proposed change to the Plan, Award or Dividend Award to the advantage of present or future Participants, which relates to the following:

(a)

the persons to or for whom Shares may be provided under the Plan;

(b)

the limitations on the number of Shares which may be issued under the Plan;

(c)

the individual limit for each Participant under the Plan;

(d)

the basis for determining a Participant’s entitlement to, and the terms of, Shares provided under the Plan;

(e)

the rights of a Participant in the event of a capitalisation issue, rights issue or open offer, sub-division or consolidation of shares or reduction of capital or any other variation of capital of the Company; or

(f)

the terms of this rule 7.2.

7.3	Compensation Committee’s right to make minor changes

However, the Compensation Committee can make minor changes to the Plan without the approval of the Company in general meeting:

(a)

to benefit the administration of the Plan;

(b)

to comply with or take account of the provisions of any proposed or existing legislation;

(c)

to take account of any changes to legislation; or

(d)

to obtain or maintain favourable tax, exchange control or regulatory treatment of any Member of the Group or any present or future Participant.

8	GENERAL

8.1	Company limits

The Company must not grant an Award or Dividend Award if the number of Shares issued and committed to be issued under that Award or Dividend Award exceeds:

(a)

10 per cent of the ordinary share capital of the Company in issue immediately before that day, when added to the number of Shares which have been issued or committed to be issued to satisfy Awards and Dividend Awards under the Plan, or options or awards under any other employee share plan operated by the Company, granted in the previous 10 years; or

(b)

5 per cent of the ordinary share capital of the Company in issue immediately before that day, when added to the number of Shares which have been issued or committed to be issued to satisfy Awards and Dividend Awards under the Plan, or options or awards under any other discretionary employee share plan adopted by the Company, granted in the previous 10 years.

Shares that have been or may be transferred out of treasury to satisfy awards or options will be treated as Shares issued or committed to be issued for the purposes of this rule 8.1 but these limits do not include Shares subject to awards or options which have lapsed or been surrendered.

8.2	How to serve notice on a Participant

Any notice or other document which has to be given to a person who is or will be eligible to be a Participant under or in connection with the Plan may be:

(a)

delivered or sent by post to the Participant at their home address according to the records of the employing company; or

(b)

sent by e-mail or fax to any e-mail address or fax number which according to the records of the employing company is used by the Participant;

or, in either case, any other address that the Compensation Committee considers appropriate or communicated by any other electronic means that the Compensation Committee approves.

8.3	How to serve notice on the Company

Any notice or other document which has to be given to the Company or other duly appointed agent under or in connection with the Plan may be delivered or sent by post to the registered office of the Company (or any other place that the Compensation Committee or duly appointed agent may from time to time decide and notify to Participants) or sent by e-mail or fax to any e-mail address or fax number or by other electronic means notified to the Participant.

8.4	When notices are treated as served

Notices sent by post will be deemed to have been given on the second day after the date of posting. However, notices sent by or to a Participant who is working overseas will be deemed to have been given on the seventh day after the date of posting. Notices sent by e-mail or fax, in the absence of evidence to the contrary, will be deemed to have been received on the day after sending.

8.5	The effect of Compensation Committee decisions

The decision of the Compensation Committee on the interpretation of the Plan or in any dispute relating to an Award, Dividend Award or matter relating to the Plan will be final and conclusive.

8.6	The costs of the Plan

The Company will pay the costs of introducing and administering the Plan. The Company may require a Participant’s employer to bear the costs in respect of an Award and/or Dividend Award granted to that Participant.

8.7	Administering the Plan

The Compensation Committee has the power, from time to time, to make or vary regulations for the administration and operation of the Plan.

8.8	Relationship between the Plan and employment

This rule governs the relationship between the Plan and a Participant’s employment.

(a)

For the purposes of this rule, “Employee” means any employee (including an executive director) of a Member of the Group.

(b)

This rule applies during an Employee’s employment and after the termination of an Employee’s employment, whether or not the termination is lawful.

(c)

Nothing in the rules or the operation of the Plan forms part of the contract of employment of an Employee. The rights and obligations arising from the employment relationship between the Employee and the Member of the Group are separate from, and are not affected by, the Plan. Participation in the Plan does not create any right to, or expectation of, continued employment.

(d)

No Employee has a right to participate in the Plan. Participation in the Plan or the grant of Awards or Dividend Awards on a particular basis in any year does not create any right to or expectation of participation in the Plan or the grant of Awards or Dividend Awards on the same basis, or at all, in any future year. Neither Awards nor Dividend Awards granted under the Plan are pensionable.

(e)

The terms and operation of the Plan do not entitle the Employee to the exercise of any discretion in their favour.

(f)

The Employee will have no claim or right of action in respect of any decision, omission or exercise of discretion relating to the Plan, an Award or a Dividend Award which may operate to the disadvantage of the Employee even if it is unreasonable (except in relation to any authority exercised under rule 5), irrational or might otherwise be regarded as being in breach of the duty of trust and confidence (and/or any other implied duty) between the Employee and the employer.

(g)

No Employee has any right to compensation for any loss in relation to the Plan, including any loss in relation to:

(i)

any loss or reduction of rights or expectations under the Plan in any circumstances (including lawful or unlawful termination of employment);

(ii)

any exercise of a discretion or a decision taken in relation to an Award, Dividend Award or to the Plan, or any failure to exercise a discretion or take a decision; or

(iii)

the operation, suspension, termination or amendment of the Plan.

(h)

Participation in the Plan is permitted only on the basis that the Participant accepts all the provisions of the rules, including this rule. By participating in the Plan, an Employee waives all rights under the Plan, other than the right to acquire Shares subject to and in accordance with the express terms of the Plan and the Performance Condition, in consideration for, and as a condition of, the grant of an Award under the Plan.

8.9	Personal data

By participating in the Plan, the Participant consents to the holding and processing of personal data provided by the Participant to any Member of the Group, trustee or third party service provider, for all purposes relating to the operation of the Plan. These include, but are not limited to:

(a)

administering and maintaining Participant records;

(b)

providing information to Members of the Group, trustees of any employee benefit trust, registrars, brokers or third party administrators of the Plan;

(c)

providing information to future purchasers of the Company or the business in which the Participant works; and

(d)

transferring information about the Participant to a country or territory outside the European Economic Area that may not provide the same statutory protection for the information as the Participant’s home country.

8.10	Consents

All allotments, issues and transfers of Shares will be subject to any necessary consents under any relevant legislation or regulations for the time being in force in Jersey, the United Kingdom, the United States of America or elsewhere. The Participant will be responsible for complying with any requirements they need to fulfil in order to obtain or avoid the need for that consent.

8.11	Shares subject to the articles of association

Any Shares acquired under the Plan are subject to the articles of association of the Company from time to time in force.

8.12	Application for listing on the London Stock Exchange

If and so long as the ordinary shares of the Company are listed on the Official List and traded on the London Stock Exchange, the Company will apply for listing of any ordinary shares issued under the Plan as soon as practicable.

8.13	Application for listing on NASDAQ

If and so long as the ADSs of the Company are listed and traded on NASDAQ, the Company will apply for any necessary listing of any ADSs created for the purpose of satisfying Awards as soon as practicable.

8.14	Governing law

The laws of England and Wales govern the Plan and all Awards and their construction. The courts of England and Wales have exclusive jurisdiction in respect of disputes arising under or in connection with the Plan, any Award or any Dividend Award.

9	GLOSSARY

“Acquiring Company” means the person or persons who obtain Control or the person who acquires Shares as a result of a transaction mentioned in rule 6.1.

“ADSs” means depositary instruments representing a beneficial holding in fully paid ordinary shares in the capital of the Company.

“Award” means a conditional right to acquire Shares under the Plan.

“Award Date” means the date on which an Award is granted under rule 1.12.

“Basic Salary” means the person’s gross salary and fees (excluding any bonuses or other benefits). Where it is necessary to convert the currency of a person’s basic salary for the purposes of rule 1.7, it will be converted at a rate specified by the Compensation Committee.

“Business Day” means a day on which both the London Stock Exchange and NASDAQ are open for the transaction of business.

“ Cash Value ” means:

(a)

in the case of an ordinary share in the Company, the middle market quotation of an ordinary share in the Company (taken from the Daily Official List of the London Stock Exchange); and

(b)

in the case of an ADS, the average of the highest and lowest price of an ADS on NASDAQ;

in either case taken on the Business Day before Vesting.

“Company” means WPP plc, a public limited company incorporated in Jersey with registered number 111714.

“Compensation Committee” means a duly authorised committee appointed by the board of directors of the Company or, where any discretion has to be exercised under rule 6, the people who comprised the Compensation Committee immediately before the transaction by virtue of which that rule applies.

“Control” means the power of a person, or persons acting in concert, to secure that at least 50% of the voting rights in relation to the Company’s share capital are exercised in accordance with its or their wishes.

“Dealing Restrictions” means restrictions imposed by statute, order, regulation or Government directive, or by the Model Code or any code adopted by the Company based on the Model Code.

“Dividend Award” means a conditional right to acquire the number of Shares that could have been bought using the ordinary dividends (not including the tax credit) paid between the Award Date and the date of Vesting on the number of Shares that vest in respect of the Award to which the Dividend Award relates.

“Listing Rules” means the rules relating to admission to the Official List.

“London Stock Exchange” means London Stock Exchange plc or its successor.

“Market Value” means the average of:

(a)

in the case of an ordinary share in the Company, the middle market quotation of an ordinary share in the Company (taken from the Daily Official List of the London Stock Exchange); and

(b)

in the case of an ADS, the average of the highest and lowest price of an ADS on NASDAQ;

in either case taken over the five Business Days before the date on which that value is to be determined.

“Member of the Group” means:

(a)

the Company; or

(b)

any Subsidiary from time to time; or

(c)

any other company which is designated by the Compensation Committee as associated with the Company for some or all purposes of the Plan.

“Model Code” means the Model Code on dealings in securities set out in Listing Rule 9 Annex 1.

“ NASDAQ ” means the US screen-based system for the quotation and transfer of equity securities.

“Official List” means the list maintained by the Financial Services Authority for the purposes of section 74(1) of the Financial Services and Markets Act 2000.

“Participant” means a person holding an Award or their personal representatives.

“Performance Condition” means any performance condition imposed under rule 1.10.

“Performance Period” means the period in respect of which a Performance Condition is to be satisfied.

“Performance Remuneration” means any remuneration of the Participant where the amount was calculated by reference to the performance of the Participant, a Member of the Group as a whole or any business within a Member of the Group.

“Plan” means these rules known as the “WPP plc Executive Performance Share Plan” as changed from time to time.

“Regulatory Information Service” means a service that is approved by the Financial Services Authority as meeting the Primary Information Provider criteria and is on the list of Regulatory Information Services maintained by the Financial Services Authority.

“ Section 409A ” means Section 409A of the United States Internal Revenue Code, including Treasury Regulations issued thereunder.

“Shares” means fully paid ordinary shares (including treasury shares) in the capital of the Company or ADSs.

“Subsidiary” means a company which is a subsidiary of the Company within the meaning of Articles 2 and 2A of the Companies (Jersey) Law 1991.

“Trustee” means the trustee or trustees of any employee benefit trust established by the Company or any Member of the Group.

“Vesting” means a Participant becoming entitled to have the Shares issued or transferred to them subject to these rules.

SCHEDULE FOR PARTICIPANTS SUBJECT TO SECTION 409A

The following modifications to the Plan will apply to Participants who are taxpayers subject to Section 409A:

1.	Rule 1.11 will be revised to read as follows:

“Awards and Dividend Awards can be granted as conditional rights to receive Shares or in any other form that the Compensation Committee decides, but no Award or Dividend Award can be granted in a form that would result in an additional tax to the Participant under Section 409A.”

2.	The following language will be added at the end of Rule 3.5:

“Shares in respect of an Award or a Dividend Award that has Vested will be transferred to the Participant on or before 15 March of the calendar year following the year in which that Award or Dividend Award has Vested.”

3.	The following language will be added immediately before the end of Rule 4.4:

“but, the Compensation Committee may not make a determination that will have the effect of requiring the Participant to pay any additional tax under Section 409A without the Participant’s agreement.”

4.	The following language will be added immediately before the end of Rule 7.1:

“however, a change will not be effective with respect to a Participant if, as a result of that change, the Participant will or may be required to pay any additional tax under Section 409A with respect to that Award or Dividend Award.”

Exhibit 8.1

Our principal subsidiaries as of December 31, 2013, are listed below. All other subsidiaries, if considered in the aggregate, would not constitute a significant subsidiary under Rule 1-02(w) of Regulation S-X.


COMPANY NAME		JURISDICTION UNDER WHICH ORGANISED
United States
Action Holdings, Inc.		Delaware
AKQA, Inc.		California
Burson-Marsteller, LLC		Delaware
Competitive Media Reporting LLC		Delaware
Geometry Global LLC		New York
Glover Park Group LLC		Delaware
Grey Global Group LLC		Delaware
Grey Healthcare Group LLC		New York
Group M Worldwide, LLC		Delaware
I-Behavior LLC		Delaware
J. Walter Thompson Company Limited		Delaware
J. Walter Thompson U.S.A., LLC		Delaware
KBM Group LLC		Delaware
Landor Ohio LLC		Delaware
Landor, LLC		Delaware
Lightspeed, LLC		Delaware
Marketing and Planning Systems LLC		Delaware
Maxus Communications LLC		Delaware
Mediacom Worldwide LLC		Delaware
Mediaedge:CIA LLC		Delaware
Millward Brown, LLC		Illinois
Mindshare USA, LLC		New York
Ogilvy CommonHealth Worldwide LLC		Delaware
Ogilvy Public Relations Worldwide, Inc.		Delaware
OgilvyOne, LLC		Delaware
Penn, Schoen, Berland Associates, LLC		Delaware
Sudler & Hennessey, LLC		Delaware
TeamDetroit, LLC		Delaware
The Ogilvy Group LLC		Delaware
TNS US, LLC		Pennsylvania
VML, Inc.		Missouri
WPP Group U.S. Finance LLC		Delaware
WPPIH 2001, Inc		Delaware
Wunderman Worldwide, LLC		Nevada
Xaxis, Inc.		Delaware
Young & Rubicam Inc		Delaware


COMPANY NAME		JURISDICTION UNDER WHICH ORGANISED
Non-US
Mediacom Australia Pty Limited		Australia
Newdesign Participações Ltda		Brazil
Y&R Propaganda Ltda		Brazil
J. Walter Thompson Company Limited La Compagnie		Canada
GroupM (Shanghai) Advertising Co. Ltd		China
J. Walter Thompson Bridge Advertising Co. Ltd.		China
Millward Brown ACSR Co. Ltd		China
Kantar SAS		France
Media Insight SNC		France
Advanced Techniques Group (ATG) GmbH		Germany
Commarco GmbH		Germany
GroupM Competence Center GmbH		Germany
groupm Germany GmbH		Germany
MEC GmbH		Germany
MediaCom Agentur für Media-Beratung GmbH		Germany
MediaCom Hamburg GmbH		Germany
MindShare GmbH		Germany
TNS Infratest GmbH		Germany
Always (Shanghai) Marketing Services Co Ltd		Hong Kong
Total Glory International Limited		Hong Kong
GroupM Media India Pvt Ltd		India
Hindustan Thompson Associates Private Limited		India
Ogilvy & Mather Pvt Ltd		India
CIA Medianetwork Club Srl		Italy
CIA Medianetwork Milano Srl		Italy
Mindshare SpA		Italy
WPP Luxembourg Gamma Sarl		Luxembourg
WPP Luxembourg Gamma Three Sarl		Luxembourg
WPP Luxembourg Sarl		Luxembourg
JWT México, S.R.L. de C.V.		Mexico
Cavendish Square Holding BV		Netherlands
Lightspeed Research B.V.		Netherlands
WPP US Investments BV		Netherlands


COMPANY NAME		JURISDICTION UNDER WHICH ORGANISED
Kantar Media S.A.		Spain
Mediacom Iberia SA		Spain
Mediaedge:CIA SL		Spain
Mindshare Spain SA		Spain
Vinizius Young & Rubicam SL		Spain
AKQA Limited		United Kingdom
Creative Services Unit Limited		United Kingdom
Enduring Organisation		United Kingdom
Flexible Organisation		United Kingdom
J. Walter Thompson Group Limited		United Kingdom
Kinetic Worldwide Limited		United Kingdom
Lightspeed Research Ltd		United Kingdom
Maxus Communications (UK) Limited		United Kingdom
MediaCom UK Limited		United Kingdom
Mediaedge:CIA UK Limited		United Kingdom


COMPANY NAME		JURISDICTION UNDER WHICH ORGANISED
Mediaedge:CIA Worldwide Limited		United Kingdom
Millward Brown UK Limited		United Kingdom
Mindshare Media UK Limited		United Kingdom
Ogilvy & Mather Group (Holdings) Limited		United Kingdom
Ogilvyone Worldwide Limited		United Kingdom
TNS Group Holdings Limited		United Kingdom
TNS UK Limited		United Kingdom
WPP 2005 Limited		United Kingdom
WPP 2008 Limited		United Kingdom
WPP Finance 2010		United Kingdom
WPP Finance Co. Limited		United Kingdom
WPP Jubilee Limited		United Kingdom
WPP No. 2337 Limited		United Kingdom
WPP Pearls Limited		United Kingdom
Young & Rubicam Group Limited		United Kingdom

Exhibit 12.1

Certification

I, Sir Martin Sorrell, certify that:

I have reviewed this annual report on Form 20-F of WPP plc;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: 30 April 2014

/s/ Sir Martin Sorrell

Sir Martin Sorrell

Group Chief Executive

(principal executive officer)

Exhibit 12.2

Certification

I, Paul Richardson, certify that:

I have reviewed this annual report on Form 20-F of WPP plc;

Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: 30 April 2014

/s/ Paul W.G. Richardson

Paul W.G. Richardson

Group Finance Director

(principal financial officer)

EXHIBIT 13.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of WPP plc (the “Company”) on Form 20-F for the period ending 31 December 2013 (the “Report”), I, Sir Martin Sorrell, Group Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all material respects, the Company’s financial position and results of operations.

Date: 30 April 2014

/s/ Sir Martin Sorrell

Sir Martin Sorrell

Group Chief Executive

EXHIBIT 13.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of WPP plc (the “Company”) on Form 20-F for the period ending 31 December 2013 (the “Report”), I, Paul Richardson, Finance Director of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all material respects, the Company’s financial position and results of operations.

Date: 30 April 2014

/s/ Paul W.G. Richardson

Paul W.G. Richardson

Group Finance Director

Exhibit 14.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-06378, No. 333-103888, No. 333-108149, No. 333-129640, No. 333-129733, No. 333-145041, No. 333-152662, No. 333-157729, No. 333-185886, No. 333-185887, No. 333-185889 and No. 333-185890 each on Form S-8, and Registration Statement No. 333-183695 and No. 333-192115 each on Form F-3 of our reports dated 30 April 2014 relating to the consolidated financial statements of WPP plc and subsidiaries (the “Company”) and the effectiveness of the Company’s internal control over financial reporting, appearing in this Annual Report on Form 20-F of WPP plc for the year ended 31 December 2013.

Date: 30 April 2014

/s/ Deloitte LLP

Deloitte LLP

London, United Kingdom