WPP plc (Form: 20-F, Received: 04/28/2017)

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 2016

☐

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, 2016, the number of outstanding ordinary shares was 1,331,880,730 which included at such date ordinary shares represented by 13,979,641 ADSs.

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

YES ☒ 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 ☒

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 ☒ 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, or an emerging growth company. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Emerging growth company	☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

†

The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

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 ☒		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 ☒

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		4

Item 4	INFORMATION ON THE COMPANY			6
	A	History and Development of the Company		6
	B	Business Overview		7
	C	Organizational Structure		11
	D	Property, Plant and Equipment		14

Item 4A	UNRESOLVED STAFF COMMENTS			15

Item 5	OPERATING AND FINANCIAL REVIEW AND PROSPECTS			15
	A	Operating Results		15
	B	Liquidity and Capital Resources		24
	C	Research and Development, Patents and Licenses, etc.		25
	D	Trend Information		26
	E	Off-Balance Sheet Arrangements		26
	F	Tabular Disclosure of Contractual Obligations		27

Item 6	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES			36
	A	Directors and Senior Management		36
	B	Compensation		38
	C	Board Practices		63
	D	Employees		74
	E	Share Ownership		75

Item 7	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS			76
	A	Major Shareholders		76
	B	Related Party Transactions		77
	C	Interests of Experts and Counsel		77

Item 8	FINANCIAL INFORMATION			77
	A	Consolidated Statements and Other Financial Information		77
	B	Significant Changes		77

Item 9	THE OFFER AND LISTING			78
	A	Offer and Listing Details		78
	B	Plan of Distribution		79
	C	Markets		79
	D	Selling Shareholders		79
	E	Dilution		79
	F	Expenses of the Issue		79


			Page

Item 10	ADDITIONAL INFORMATION			80
	A	Share Capital		80
	B	Memorandum and Articles of Association		80
	C	Material Contracts		88
	D	Exchange Controls		92
	E	Taxation		92
	F	Dividends and Paying Agents		97
	G	Statements by Experts		97
	H	Documents on Display		98
	I	Subsidiary Information		98

Item 11	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			98

Item 12	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES			98
	A	Debt Securities		98
	B	Warrants and Rights		98
	C	Other Securities		98
	D	American Depositary Shares		99

Part II				101

Item 13	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES			101

Item 14	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS			101

Item 15	CONTROLS AND PROCEDURES			101

Item 16A	AUDIT COMMITTEE FINANCIAL EXPERT			103

Item 16B	CODE OF ETHICS			103

Item 16C	PRINCIPAL ACCOUNTANT FEES AND SERVICES			103

Item 16D	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES			104

Item 16E	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS			104

Item 16F	CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT			104

Item 16G	CORPORATE GOVERNANCE			104

Item 16H	MINE SAFETY DISCLOSURE			105

Part III				105

Item 17	FINANCIAL STATEMENTS			105

Item 18	FINANCIAL STATEMENTS			106

Item 19	EXHIBITS			106

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 2016, the Group had 134,341 employees. Including all employees of associated companies, this figure was approximately 198,000. For the year ended 31 December 2016, the Group had revenue of £14,389 million and operating profit of £2,063 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 years ended 31 December 2016, 2015 and 2014 and the selected balance sheet data as at 31 December 2016 and 2015 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
	2016 £m			2015 £m			2014 £m			2013 £m			2012 £m
Revenue		14,388.9			12,235.2			11,528.9			11,019.4			10,373.1
Net sales¹		12,397.8			10,524.3			10,064.8			10,076.1			9,514.8
Operating profit		2,063.1			1,632.0			1,507.3			1,410.3			1,241.1
Profit for the year		1,501.6			1,245.1			1,151.5			1,012.1			894.7
Profit attributable to equity holders of the parent		1,400.1			1,160.2			1,077.2			936.5			822.7
Earnings per ordinary share:
Basic		109.6	p		90.0	p		82.4	p		72.4	p		66.2	p
Diluted		108.0	p		88.4	p		80.5	p		69.6	p		62.8	p
Earnings per ADS²:
Basic		548.0	p		450.0	p		412.0	p		362.0	p		331.0	p
Diluted		540.0	p		442.0	p		402.5	p		348.0	p		314.0	p
Dividends per ordinary share		48.33	p		42.49	p		35.27	p		30.27	p		25.94	p
Dividends per ADS (US dollars)³		352.41	¢		340.57	¢		280.73	¢		238.83	¢		207.14	¢

¹ The Group has previously used the term gross profit to refer to net sales. ² 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. ³ 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
	2016 £m		2015 £m		2014 £m		2013 £m		2012 £m
Total assets		34,568.3		28,749.2		26,622.9		24,975.5		24,877.6
Net assets		9,767.6		8,015.8		7,826.8		7,846.5		7,060.6
Called-up share capital		133.2		132.9		132.6		134.9		126.5
Number of shares (in millions)		1,331.9		1,329.4		1,325.7		1,348.7		1,265.4

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
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
2014		11.62		26.58		38.20		95.72		218.95		314.67
2015		15.91		28.78		44.69		121.62		219.99		341.61
2016		19.55		37.05		56.60		132.42		250.96		383.38

The 2016 interim dividend was paid on 7 November 2016 to share owners on the register at 7 October 2016. The 2016 final dividend will be paid on 3 July 2017 to share owners on the register at 9 June 2017.

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 26 April 2017, the closing exchange rate was 1.2831.


Month ended	High		Low
31 October 2016		1.2970		1.2158
30 November 2016		1.2601		1.2236
31 December 2016		1.2720		1.2226
31 January 2017		1.2607		1.2068
28 February 2017		1.2636		1.2417
31 March 2017		1.2563		1.2153

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
2012		1.5852
2013		1.5646
2014		1.6475
2015		1.5288
2016		1.3547

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, reputation 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.


Principal risk		Potential impact
Clients
The Group competes for clients in a highly-competitive and evolving industry and client loss to competitors or as a consequence of consolidation in client markets or a reduction in marketing budgets due to economic conditions may have a material adverse effect on the Group’s market share and its business, revenues, results of operations, financial condition or prospects.		The competitive landscape in the industry in which we operate is constantly evolving. Competitors include large multinational advertising and marketing communication companies and regional and national marketing services companies, database marketing and modelling companies, telemarketers, information and measurement, social media and professional services and advisory firms and consulting internet companies. Agreements with clients are generally terminable by the client on 90 days’ notice or are on an assignment basis and many clients put their 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 be impacted by loss of reputation and be limited by clients’ policies on conflicts of interest. The global economy continues to be volatile with uncertainties such as those caused by Brexit in the UK and Europe and technological disruption from disintermediators in certain sectors. In the past, clients have responded to weak economic and financial conditions by reducing their marketing budgets which are easier to reduce in the short term than their other operating expenses.
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 15.5% of revenues in the year ended 31 December 2016. 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.
Cyber and 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 stores, transmits and relies on critical and sensitive data such as strategic plans, personally identifiable information and trade secrets. Security of this type of data is exposed to escalating external threats that are increasing in sophistication as well as internal data breaches. Existing and new data protection laws, in particular the General Data Protection Regulation (GDPR) and E-privacy regulation in the EU, concerning user privacy, use of personal information, consent and online tracking may restrict some of the Group’s activities and increase costs. The Group is carrying out an IT Transformation project and is reliant on third parties for the performance of a significant portion of its worldwide information technology and operations functions. A failure to provide these functions could have an adverse effect on our business.		The Group may be subject to investigative or enforcement action or legal claims or incur fines, damages, or costs and client loss 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, prospects or reputation.


Principal risk		Potential impact
Financial
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 on behalf of those clients.
Operational
The Group’s performance could be adversely impacted if it failed to ensure adequate internal control procedures are in place in relation to the Group’s media trading.		Failure to ensure that media trading activities are compliant with client obligations where relevant could adversely impact client relationships and business volumes.
People and succession
The Group’s performance could be adversely affected if it were unable to attract and retain key diverse talent or had inadequate talent management and succession planning for key roles at the parent and operating companies, including but not limited to the founder CEO and long-serving members of the management team.		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. The founder CEO has over 30 years’ service with the Company and is identified with the success of the Group’s strategy and a failure to plan for his succession could impact investor confidence in the Company.
Regulatory, sanctions, anti-trust and taxation
The Group may be subject to regulations restricting its activities or effecting changes in taxation.		Changes in local or international tax rules, for example prompted by the OECD’s Base Erosion and Profit Shifting project (a global initiative to improve the fairness and integrity of tax systems), or new challenges by tax or competition authorities, may expose the Group to significant additional tax liabilities or impact the carrying value of our deferred tax assets, which would affect the future tax charge.
The Group is subject to strict anti-corruption, anti-bribery and anti-trust legislation and enforcement in the countries in which it operates.		The Group operates in a number of markets where the corruption risk has been identified as high by groups such as Transparency International. Failure to comply or to create a corporate environment opposed to corruption or failing to instil business practices that prevent corruption could expose the Group and senior officers to civil and criminal sanctions.
The Group is subject to the laws of the US, the EU and other jurisdictions that impose sanctions and regulate the supply of services to certain countries.		Failure to comply with these laws could expose the Group to civil and criminal penalties including fines and the imposition of economic sanctions against the Group and reputational damage which could materially impact the Group’s results.
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, J. Walter Thompson Worldwide, Y&R and Grey, as well as Media Investment Management companies such as GroupM, the parent to Mindshare, MEC, MediaCom, Maxus, Essence, Xaxis; also tenthavenue. Our other segments are Data Investment Management, 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 Branding & Identity, Healthcare and Specialist Communications, where our operations are conducted by Landor, Group XP, The Partnership, WPP Health & Wellness (the Group’s cross disciplinary practice comprising ghg, Ogilvy CommonHealth Worldwide, Sudler & Hennessey); Wunderman, Geometry Global, 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 26 April 2017 the Company had a market capitalisation of approximately £22.022 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 J. Walter Thompson Group, Inc. (now known as J. Walter Thompson Company LLC) in 1987, The Ogilvy Group, Inc. (now known as Ogilvy) in 1989, Young & Rubicam Inc. (Young & Rubicam or Y&R, 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, AKQA Holdings, Inc. (AKQA) in 2012, and IBOPE Participações Ltda (IBOPE) in 2015, Triad Digital Media, LLC and the merger of most of the Group’s Australian and New Zealand assets with STW Communications Group Limited in Australia (re-named WPP AUNZ) in 2016.

The Company spent £697.1 million, £693.1 million and £494.7 million for acquisitions and investments in 2016, 2015 and 2014, 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 £285.1 million, £246.4 million and £214.4 million, respectively, and cash spent on share repurchases and buy-backs was £427.4 million, £587.6 million and £510.8 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 112 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 digital, ecommerce & shopper marketing).

Approximately 46% of the Company’s reported revenues in 2016 were from Advertising and Media Investment Management, with the remaining 54% 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 tables show, for the last three fiscal years, reported revenue and net sales attributable to each business segment in which the Company operates.


Revenue¹	2016				2015				2014
	£m		% of total		£m		% of total		£m		% of total
Advertising and Media Investment Management		6,547.3		45.5		5,552.8		45.4		5,134.3		44.5
Data Investment Management		2,661.1		18.5		2,425.9		19.8		2,429.3		21.1
Public Relations & Public Affairs		1,101.3		7.7		945.8		7.7		891.9		7.7
Branding & Identity, Healthcare and Specialist Communications		4,079.2		28.3		3,310.7		27.1		3,073.4		26.7
Total		14,388.9		100.0		12,235.2		100.0		11,528.9		100.0

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


Net Sales	2016				2015				2014
	£m		% of total		£m		% of total		£m		% of total
Advertising and Media Investment Management		5,413.5		43.6		4,652.0		44.2		4,502.0		44.7
Data Investment Management		1,994.0		16.1		1,768.1		16.8		1,748.9		17.4
Public Relations & Public Affairs		1,078.8		8.7		929.7		8.8		880.4		8.7
Branding & Identity, Healthcare and Specialist Communications		3,911.5		31.6		3,174.5		30.2		2,933.5		29.2
Total		12,397.8		100.0		10,524.3		100.0		10,064.8		100.0

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


Revenue¹	2016				2015				2014
	£m		% of total		£m		% of total		£m		% of total
North America²		5,280.8		36.7		4,491.2		36.7		3,899.9		33.8
United Kingdom		1,866.3		13.0		1,777.4		14.5		1,640.3		14.2
Western Continental Europe		2,943.2		20.4		2,425.6		19.8		2,568.8		22.3
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe		4,298.6		29.9		3,541.0		29.0		3,419.9		29.7
Total		14,388.9		100.0		12,235.2		100.0		11,528.9		100.0

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

North America includes the US with revenue of £5,005.8 million (2015: £4,257.4 million, 2014: £3,664.9 million).


Net Sales	2016				2015				2014
	£m		% of total		£m		% of total		£m		% of total
North America¹		4,603.7		37.1		3,882.3		36.9		3,471.7		34.5
United Kingdom		1,587.6		12.8		1,504.5		14.3		1,396.0		13.9
Western Continental Europe		2,425.5		19.6		2,016.2		19.1		2,142.6		21.3
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe		3,781.0		30.5		3,121.3		29.7		3,054.5		30.3
Total		12,397.8		100.0		10,524.3		100.0		10,064.8		100.0

North America includes the US with net sales of £4,365.1 million (2015: £3,674.3 million, 2014: £3,254.2 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 media trading, content creation, sports, digital, finance, proprietary 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

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.

Digital, eCommerce & Shopper 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, 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.

•

The parent company encourages, enables and incentivises operating companies of different disciplines to work in close collaboration for the benefit of clients. The parent company calls this ‘horizontality’ – a way of working that unites diverse talents around a single client brief to forge a seamless solution.

•

The parent company can also function as the 21st-century equivalent of the full-service agency. For some clients, predominantly those with a global presence requiring a wide range of marketing services, WPP can itself provide a single contact point for both access and accountability.

•

And, finally, the parent company relieves the operating companies of much necessary but time-consuming administrative work. Financial matters (such as planning, budgeting, reporting, control, treasury, tax, mergers, acquisitions, investor relations, legal affairs and internal audit) are all coordinated centrally. It also plays an across-the-Group role in the management of talent, property, procurement, IT, knowledge-sharing, practice development and sustainability.

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 admired, creative and respected communications services advisor to global, multinational, regional and local companies.

The Group has four core strategic priorities.

•

Advance the practice of ‘horizontality’ (connected know-how) by ensuring our people work together for the maximum benefit of clients: through cross-Group Communities and Practices, Global Client Teams, and Regional, Sub-Regional and Country Managers.

•

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

•

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

•

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

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 net sales growth greater than the industry average.

•

Annual improvement in net sales margin of 0.3 margin points or more, excluding the impact of currency, depending on net sales growth and staff cost-to-net sales ratio improvement of 0.2 margin points or more.

Sustainability

Leading companies – the Group’s clients – are prioritising sustainability, looking to integrate improved social and environmental performance into their products, communications and operations. Our commitment to sustainability helps us to align with the interests of our clients and to respond to the growing number of client procurement processes that include sustainability criteria. It makes the Group a more attractive employer, enables us to improve efficiency, to be prepared for changes in regulation and to maintain positive relationships with our stakeholders.

Clients

•

Clients who engaged with us on sustainability represented over £1.6 billion in revenues to the Group in 2016, equivalent to over 11% of the total.

People

•

We invested £45.1 million on training in 2016 and offered over 6,400 paid internships and apprenticeships.

•

At year-end 2016, women comprised 29% of the WPP Board, 33% of non-executive directors, 34% of directors and executive leaders in our operating companies, and 54% of total employees.

Environment

•

We have cut our carbon footprint per employee to 1.86 tonnes of CO₂e, a 45% reduction from 2006.

Social contribution

•

In 2016, our social investment was worth £19.5 million, equivalent to over 1% of reported profit before tax.

•

In addition, WPP media agencies negotiated free media space worth £22.8 million on behalf of pro bono clients, representing over another 1% of reported profit before tax.

Clients

The Group services 360 of the Fortune Global 500 companies, all 30 of the Dow Jones 30, 78 of the NASDAQ 100, and 892 national or multinational clients in three or more disciplines. 596 clients are served in four disciplines and these clients account for over 53% of Group revenue. The Group also works with 462 clients in six or more countries.

The Company’s 10 largest clients accounted for 15.5% of the Company’s revenues in the year ended 31 December 2016. No client of the Company represented more than 5% of the Company’s aggregate revenues in 2016. 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 112 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 and Data Investment Management; Public Relations & Public Affairs; Branding & Identity; Healthcare Communications; Digital, eCommerce & Shopper Marketing; Specialist Communications; WPP Digital; WPP Digital partner companies; and Cross-Group Communities & Practices. A listing of the Group brands operating within these disciplines as at April 2017 is set forth below.

Advertising

ADK¹

Bates CHI&Partners⁹

Berlin Cameron

CHI&Partners¹

Cole & Weber

Grey

GTB

HS Ad¹

J. Walter Thompson Worldwide

Ogilvy

Santo

WPP-Scangroup

Scholz & Friends¹⁰

*S,C,P,F...

Sra. Rushmore

Soho Square

TAXI⁴

The Jupiter Drawing Room¹

WPP AUNZ

Y&R⁴

Media Investment Management

and Data Investment Management

GroupM:

Mindshare

MEC

MediaCom

Maxus

Essence

Catalyst

KR Media

MetaVision Media

Xaxis

tenthavenue:

Bookmark

Joule

Kinetic Worldwide

TMARC

Other media agencies

Gain Theory

m/SIX²

Kantar:

Kantar Added Value

Kantar Futures

Kantar Health

Kantar IMRB

Kantar Media

Kantar Millward Brown

Kantar Public

Kantar Retail

Kantar TNS

Kantar Vermeer

Kantar Worldpanel

Lightspeed

comScore³

Public Relations & Public Affairs

Benenson Strategy Group¹²

Blanc & Otus⁸

Buchanan Communications

Burson-Marsteller⁴

BWR¹²

Clarion Communications

Cohn & Wolfe⁴

Dewey Square Group

Finsbury

Global Counsel¹

Glover Park Group

HERING SCHUPPENER

Hill+Knowlton Strategies

Ogilvy

Ogilvy Government Relations

Penn Schoen Berland⁴

Prime Policy Group

QGA

SJR⁸

Wexler & Walker Public Policy Associates⁸

Branding & Identity

Addison Group⁷

BDG architecture + design

Brand Union⁶

CBA⁹

Coley Porter Bell⁹

FITCH⁶

Lambie-Nairn⁷

Landor⁴

PeclersParis⁷

The Partners⁷

SET⁶

VBAT⁷

Notes

¹ Associate

² Joint venture

³ Investment

⁴ A Y&R Group company

⁵ A Wunderman company

⁶ A member of Group XP

⁷ A member of The Partnership

⁸ A Hill+Knowlton Strategies company

⁹ An Ogilvy company

¹⁰ A Commarco company

¹¹ A J. Walter Thompson company

¹² A Burson-Marsteller company

Healthcare Communications

WPP Health & Wellness:

CMI/Compas

ghg

Ogilvy CommonHealth Worldwide

Sudler & Hennessey⁴

GCI Health

Wunderman World Health⁵

Digital, eCommerce &

Shopper Marketing

Acceleration⁵

A. Eicoff & Co⁹

AKQA

Barrows¹

Blast Radius⁵

Cerebra

deepblue networks¹⁰

EWA

FullSIX³

Geometry Global

gkk DialogGroup¹⁰

HighCo¹

iconmobile ⁴

Mando

Maxx Marketing⁹

Mirum¹¹

Ogilvy

Smollan¹

VML⁴

Wunderman ⁴

Specialist Communications

Demographic marketing

Bravo⁴

UniWorld¹

Wing

Employer branding/recruitment

JWT INSIDE¹¹

Event/face-to-face marketing

MJM

Metro

Richard Attias & Associates¹

Foodservice marketing

The Food Group

Sports marketing

Bruin Sports Capital³

Chime Communications¹

Courtside Ventures³

ESP Properties

PRISM Group

TSE Consulting¹²

Two Circles

Real estate marketing

PACE

Media & production services

The Farm Group

Imagina¹

United Visions¹⁰

WPP Digital

Blue State Digital

Cognifide

The Data Alliance

F.biz

Globant¹

Hogarth Worldwide

Johannes Leonardo¹

Mutual Mobile¹

POSSIBLE

Rockfish

Salmon

SYZYGY

WPP Digital partner companies

Ace Metrix³

All Def Digital³

AppNexus³

Domo³

Fullscreen³

HDT Holdings Technology³

Imagine Entertainment³

Indigenous Media³

Invidi³

Mitú³

mySupermarket³

Moment Systems³

MRC³

OrderDynamics³

Percolate³

Refinery29³

VICE Media³

The Weinstein Company³

WildTangent³

Cross-Group Communities & Practices

Government & Public Sector Practice

The Store

WPP Health & Wellness

WPP Sports Practice

Notes

¹ Associate

² Joint venture

³ Investment

⁴ A Y&R Group company

⁵ A Wunderman company

⁶ A member of Group XP

⁷ A member of The Partnership

⁸ A Hill+Knowlton Strategies company

⁹ An Ogilvy company

¹⁰ A Commarco company

¹¹ A J. Walter Thompson company

¹² A Burson-Marsteller company

D. Property, Plant 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 the sole owned property is the 214,000 square foot Y&R office condominium for their headquarters located at 3 Columbus Circle in New York, New York. The Company also leases an additional 160,700 square feet of space for Y&R 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
3 World Trade Center, New York, NY	GroupM, Kantar (Estimated 2018 Occupancy)	690,000
636 Eleventh Avenue, New York, NY	Ogilvy	564,000
399 Heng Feng Road, Zhabei, Shanghai	Ogilvy, GroupM, Kantar, Hill+Knowlton Strategies, Rice5, Bluehive, Sudler MDS, Burson-Marsteller, Peclars, Hogarth, J Walter Thompson Worldwide.	453,800
498 Seventh Avenue, New York, NY	GroupM, Mindshare, Maxus, Mediacom	394,000
Calle de Ríos Rosas, 26, Madrid, Spain	GroupM, Grey, BSB, Kantar, The Health Group, Ogilvy, JWT / RMG Connect, Hill + Knowlton, Labstore, Burson Marsteller, Axicom, WPP, Lambie Nairn, Cohn & Wolfe, Finance +, Brand Union, m/SIX, SCPF Tapsa Y&R, Wunderman (Estimated 2018 Occupancy)	382,402
200 Fifth Avenue and 23 West 23^rd Street, New York, NY	Grey, Cohn & Wolfe, ghg, GCI Health	349,000
230 Park Avenue South, New York, NY	Burson-Marsteller, Landor, Sudler & Hennessey, Hogarth	301,000
500/550 Town Center Drive, Dearborn, MI	Global Team Blue, PRISM, Burrows, Icon Mobile, Possible	282,900
222 Merchandise Mart / 350 N Orleans, Chicago IL	Ogilvy, J. Walter Thompson, Geometry, Millward Brown, GroupM, Burson-Marsteller, TNS, Hill+Knowlton Strategies, The Futures Company, Kinetic, Kantar Media, Team Detroit	277,400
Sea Containers House, Upper Ground, London SE1	Ogilvy, 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 2016, the fixed asset value (cost less depreciation) representing land, freehold buildings and leasehold buildings as reflected in the Company’s consolidated financial statements was £641.0 million.

In 2016, the Group’s property portfolio increased by approximately 1% to 24.2 million square feet, reflecting the impact of space acquired through acquisitions (including 0.4 million square feet following the merger of most of the Group’s Australian and New Zealand assets with STW Communications Group Limited in Australia), partly offset by the benefit of more ‘agile working’, supported by more technology in the office environment. Establishment costs increased by 15.2%, 5.8% on a constant currency basis (refer to Non-GAAP measures defined in Item 5), which compares with net sales growth on the same basis of over 7% and average headcount growth of over 6%. As a result, the establishment cost-to-net-sales ratio dropped by 0.2 margin points (for the second consecutive year) to 6.7%, contributing substantially to the Group’s overall margin improvement.

We have also ensured our new buildings are designed to focus on sustainability and we look to achieve BREEAM Very Good in the UK and LEED Gold in the US and similar standards elsewhere. Our operating companies’ workplaces continue to be cited for their creativity, innovation and effectiveness.

2016 saw the completion of our Shanghai WPP Campus colocation, housing more than 3,000 of our people, the shared space at Sea Containers House in London housing 2,300 people, and the renovation of our shared space on Lexington Avenue in New York. These new colocation projects all meet our new planning standards and support

our horizontality goal. Longer-term colocation projects are in the planning stage for New York, São Paulo, Amsterdam, Milan, Lisbon and central Madrid, where the former Telefónica building will house more than 30 Group companies and 2,500 people.

Our goal is to continue to deliver excellent workspace, while reducing the portfolio further and so mitigate the impact of property inflation. Our focus on continuing to reduce the establishment cost-to-net-sales ratio will help the Group achieve its margin targets for 2017, and beyond.

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 2016, 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), net sales margin, headline PBT (Profit Before Taxation), headline EBITDA (Earnings before Interest, Taxation, Depreciation and Amortisation), headline operating costs, billings, estimated net new billings, free cash flow and net debt and average net debt, which we define, explain the use of and reconcile to the nearest IFRS measure on pages 28 to 31.

Management believes that these measures are both useful and necessary to present herein because they are used by management for internal performance analyses; the presentation of these measures facilitates comparability with other companies, although management’s measures may not be calculated in the same way as similarly titled measures reported by other companies; and these measures are useful in connection with discussions with the investment community.

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;

•

Public Relations & Public Affairs; and

•

Branding & Identity, Healthcare and Specialist Communications.

In 2016, approximately 46% of the Company’s consolidated revenues were derived from Advertising and Media Investment Management, with the remaining 54% 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 net sales margins. In 2016, we achieved an industry-leading margin of 17.4% on net sales. We continue to believe a net sales margin 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 net sales margin of 18%.

Second, to increase flexibility in the cost structure. In 2016, flexible staff costs (including incentives, freelance and consultants) remained close to historical highs of above 8% of net sales 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, our focus is on the alternative uses of funds between acquisitions, share buy-backs and dividends. We have increasingly come to the view 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 small-to-medium sized 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 net sales growth more as margins improve through our acquisition activities, aimed at helping us position our portfolio in the faster-growing geographic and functional 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.

2016, the Company’s thirty first year, was another record year, the Company’s sixth record year in a row, despite a generally low growth, or tepid, global environment. Top line growth remained strong, with headline PBIT and net sales margins meeting and exceeding targets and all regions and sectors showing growth on almost all metrics. For the sixth successive year, WPP was named Creative Holding Company of the Year at the Cannes International Festival of Creativity, in recognition of the Company’s collective creative excellence; for the fifth consecutive year, WPP was ranked Most Effective Holding Company in the Effie Global Effectiveness Index; and, for the third year in a row, WPP was named the World’s Top Holding Company by Warc. At the same time, the Company responded to the changing competitive landscape by accelerating the implementation of its strategic goals, particularly following Brexit. Sector targets for fast-growth markets and new media have been raised from 35-40% to 40-45% over the next four to five years, with the quantitative revenue target of 50% already achieved.

The share price increased by over 16% in 2016, closing at 1,816.0p at year end. Since then it has fallen to 1,722.0p, down 5%, at 26 April 2017. Dividends increased by almost 27% to 56.60p, a new high.

Revenue was up well over 17% to £14.4 billion and up over 7% in constant currencies. Net sales were up almost 18% and over 7% in constant currencies. Billings were £55.2 billion, up well over 5% in constant currencies, reflecting good overall performance in net new business.

Group revenue is more weighted to the second half of the year across all regions and sectors, and, particularly in the faster-growing markets of Asia Pacific and Latin America. As a result, the Group’s headline PBIT and net sales margin continue to be skewed to the second half of the year, with the Group earning approximately one-third of its headline PBIT in the first half and two-thirds in the second half.

Reported profit before interest and tax rose almost 26% to £2.113 billion from £1.679 billion, up 12% in constant currencies. Headline PBIT was up almost 22% to £2.160 billion (over £2 billion for the first time) and up well over 8% in constant currencies. Net sales margins increased by 0.5 margin points to an industry-leading 17.4% and, on a like-for-like basis, were up 0.3 margin points, in line with target, adjusted for the merger of most of the Group’s Australian and New Zealand assets with STW Communications Group Limited in Australia.

Profit for the year increased by almost 21% to £1.502 billion. Headline EBITDA increased by almost 21% to £2.420 billion, up 8% in constant currencies. Reported profit before tax was up almost 27% to £1.891 billion and headline profit before tax was up well over 22% to £1.986 billion. Diluted earnings per share were up over 22% to 108.0p, reflecting like-for-like revenue and net sales growth, margin improvement and the benefit of acquisitions, along with the effect of currency tailwinds.

Net cash inflow from operating activities increased to £1.8 billion in the year. Free cash flow amounted to almost £1.6 billion in 2016. This free cash flow was absorbed by £0.7 billion of net cash acquisition payments and investments, £0.4 billion of share buy-backs and £0.6 billion of dividends, a total outflow of £1.7 billion. This resulted in a net cash outflow of £0.1 billion, before any changes in working capital. Debt financing was £6.6 billion at 31 December 2016, compared to £5.6 billion at 31 December 2015. Average net debt was £4.3 billion in 2016, compared to £4.0 billion in 2015, at 2016 exchange rates, and net debt at 31 December 2016 was £4.1 billion, against £3.2 billion at 31 December 2015, primarily reflecting the weakness of sterling.

Estimated net new business billings of £4.4 billion ($6.8 billion) were won in the year.

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 2016, 2015 and 2014 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 and net sales growth by geographical area and operating sector on a reported, constant currency, and like-for-like basis.

Geographical area


*Revenue Analysis*
	Reported revenue growth %+/(-)					Constant currency revenue growth %+/(-)				Like-for-like revenue growth %+/(-)
	2016		2015			2016		2015		2016		2015
North America		17.6		15.2			3.9		7.9		2.0		7.1
United Kingdom		5.0		8.4			5.0		8.4		1.8		4.1
Western Continental Europe		21.3		(5.6	)		8.0		4.7		4.8		4.7
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe		21.4		3.5			11.9		8.5		3.5		4.2
Total Group		17.6		6.1			7.2		7.5		3.0		5.3


*Net sales analysis*
	Reported net sales growth %+/(-)					Constant currency net sales growth %+/(-)				Like-for-like net sales growth %+/(-)
	2016		2015			2016		2015		2016		2015
North America		18.6		11.8			4.8		4.7		2.8		4.1
United Kingdom		5.5		7.8			5.5		7.8		2.1		2.9
Western Continental Europe		20.3		(5.9	)		7.2		4.3		3.6		2.5
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe		21.1		2.2			11.8		7.3		3.5		3.0
Total Group		17.8		4.6			7.4		5.8		3.1		3.3

North America constant currency revenue was down almost 1% in the final quarter and like-for-like down almost 3%, largely as a result of the particularly strong comparatives in the fourth quarter of 2015, when constant currency revenue grew over 11% and like-for-like revenue was up almost 10%, reflecting strong growth in Advertising and Media Investment Management, parts of the Group’s Public Relations & Public Affairs businesses and in the Branding & Identity, Healthcare Communications and direct, digital and interactive operations. On a full year basis, constant currency revenue was up almost 4%, with like-for-like up 2%. However, constant currency net sales grew almost 3% in the fourth quarter, with like-for-like up 0.5% and strong growth in the Group’s Branding & Identity and direct, digital and interactive businesses.

UK constant currency revenue was down almost 1% in the final quarter and like-for-like down well over 2%, again in part due to very strong comparatives for the final quarter of 2015, which saw growth of well over 6% and almost 3% respectively. Media Investment Management and Data Investment Management like-for-like revenue was up strongly, offset by weaker performance in Advertising, Public Relations & Public Affairs and direct, digital and interactive. Despite the slight slow-down in the rate of revenue growth, constant currency net sales were up almost 2% in the final quarter, with like-for-like down 0.6%. On a full year basis, constant currency revenue was up strongly at 5%, with like-for-like up almost 2%, with the second half weaker, perhaps reflecting Brexit uncertainties. Full year net sales were up well over 5% in constant currency, with like-for-like up over 2%.

Western Continental Europe, continued to grow at reasonable and stronger than average rates, although reflecting difficult political and macroeconomic conditions, with like-for-like revenue growth of over 3% and net sales growth of almost 3% in the fourth quarter, compared to well over 5% and over 3% in the third quarter. For the year, Western Continental Europe revenue grew almost 5% on a like-for-like basis (over 4% in the second half), compared with almost 5% in 2015, with net sales growth of well over 3% like-for-like (almost 3% in the second half), compared to well over 2% in 2015. Germany, Norway, Spain, Sweden and Switzerland all showed good growth in the final quarter, but Austria, France, Ireland, Italy, the Netherlands and Portugal were tougher.

In Asia Pacific, Latin America, Africa & the Middle East and Central & Eastern Europe, on a constant currency basis, revenue growth in the fourth quarter remained strong at almost 12%, the same as the first nine months growth, with like-for-like up almost 4%, the strongest quarter of the year, and well ahead of the first nine months growth of over 3%. Growth in the fourth quarter was driven principally by Latin America and Central & Eastern Europe, with Africa & the Middle East weaker. Constant currency net sales growth in the region was even stronger at almost 13% in the final quarter, with like-for-like net sales up almost 5%, the strongest quarter of the year, and well ahead of the almost 4% achieved in quarter two. There was strong net sales growth in all sub-regions except Africa & the Middle East. In Asia, Cambodia, India, Malaysia, Pakistan, the Philippines and Vietnam showed double-digit like-for-like growth, with Hong Kong, Singapore and Thailand, more challenging.

Latin America had its second strongest quarter of the year, with like-for-like revenue up almost 9%, compared with well over 9% in quarter two. Like-for-like net sales grew over 8% in quarter four, also the second highest

quarterly growth in 2016, with full year growth of well over 6% (well over 6% in the second half and similar in the first half). Africa slipped back in the fourth quarter, as it did in the third quarter, with like-for-like revenue down over 1% in quarter four and up 2% full year. Net sales growth was slightly weaker, down 1.9% like-for-like in quarter four and up 0.4% full year. In Central & Eastern Europe, like-for-like revenue was up over 10% in quarter four, the second highest quarter of the year, with the Czech Republic, Romania, Russia and the Ukraine up double digits. Croatia, Hungary, Poland and Serbia were tougher. Full-year revenue for the BRICs¹, which account for almost $2.4 billion of revenue, was up almost 2% on a like-for-like basis.

In 2016, 29.9% of the Group’s revenue came from Asia Pacific, Latin America, Africa & the Middle East and Central & Eastern Europe, up almost 1.0 percentage point from 29.0% in 2015. On a net sales basis there was a similar increase to 30.5% from 29.6% in 2015, which compares with the Group’s strategic objective of 40-45% in the next five years. Markets outside North America now account for over 63% of our revenue.

Operating Sector


*Revenue Analysis*
	Reported revenue growth %+/(-)					Constant currency revenue growth %+/(-)				Like-for-like revenue growth %+/(-)
	2016		2015			2016		2015		2016			2015
Advertising and Media Investment Management		17.9		8.2			7.7		9.9		4.7			8.4
Data Investment Management		9.7		(0.1	)		0.4		3.5		(0.9	)		(0.2	)
Public Relations & Public Affairs		16.4		6.0			5.0		4.7		2.5			3.0
Branding & Identity, Healthcare and Specialist Communications		23.2		7.7			11.8		7.3		3.0			5.3
Total Group		17.6		6.1			7.2		7.5		3.0			5.3


*Net sales analysis*
	Reported net sales growth %+/(-)				Constant currency net sales growth %+/(-)				Like-for-like net sales growth %+/(-)
	2016		2015		2016		2015		2016		2015
Advertising and Media Investment Management		16.4		3.3		6.5		5.3		3.7		3.8
Data Investment Management		12.8		1.1		3.2		4.6		0.9		0.3
Public Relations & Public Affairs		16.0		5.6		4.7		4.3		2.4		3.4
Branding & Identity, Healthcare and Specialist Communications		23.2		8.2		11.8		7.8		3.5		4.2
Total Group		17.8		4.6		7.4		5.8		3.1		3.3

Advertising and Media Investment Management was the second-strongest performing sector, with constant currency revenue growth of almost 8% for the year, and well over 4% in quarter four. On a like-for-like basis, Advertising and Media Investment Management was the strongest performing sector, with revenue up almost 5% for the year and up almost 1% in quarter four, reflecting the impact of a weaker net new business record. Advertising grew in Asia Pacific in quarter four and the full year, but softened in all other regions, as trading conditions became more difficult. Media Investment Management showed strong like-for-like revenue growth, up over 8% for the year, up just under 3% in quarter four, with strong growth in the UK, Continental Europe and Latin America.

Of the Group’s Advertising networks, Grey performed particularly well in 2016, especially in the US. As mentioned above, Asia Pacific was up, but elsewhere conditions were more challenging and overall Advertising

Brazil, Russia, India and China.

remained under pressure. Growth in the Group’s Media Investment Management businesses has been very consistent for most of 2016, with constant currency and like-for-like revenue up strongly for the year, but with a weaker second half, largely the result of a more difficult final quarter, as weaker net new business in the US impacted overall performance. Elsewhere, like-for-like revenue growth in Western Continental Europe, Media Investment Management’s second largest region, was up 8%, with the UK and Latin America up double digits. tenthavenue, the ‘engagement’ network focused on out-of-home media, also performed strongly in the fourth quarter, with like-for-like net sales up well over 5%, with strong growth of well over 6% in the second half. The strong revenue and net sales growth across most of the Group’s businesses, offset by slower growth in the Group’s Advertising businesses in most regions, resulted in the combined net sales margin of this sector up by 0.5 margin points to 19.0%, up 0.2 margin points in constant currency.

In 2016, J. Walter Thompson Worldwide, Ogilvy, Y&R and Grey generated net new business billings of £1.1 billion ($1.7 billion). In the same year, GroupM (the Group’s Media Investment Management company, which includes Mindshare, MEC, MediaCom, Maxus, GroupM Search, Xaxis and now, Essence), together with tenthavenue, generated net new business billings of £2.4 billion ($3.7 billion). The Group totalled £4.4 billion ($6.8 billion), compared with £5.6 billion ($8.6 billion) in 2015.

Data Investment Management revenue was down almost 2% on a like-for-like basis in the fourth quarter, but more importantly, net sales were up well over 1% on the same basis. On a full-year basis, constant currency revenue was up 0.4%, but down almost 1% like-for-like, with a weaker second half. Net sales, however, showed stronger growth with constant currency net sales up over 3%, up almost 1% like-for-like. The mature markets were more difficult, remaining under pressure, but the faster growth markets grew net sales 3%. Syndicated research continues to show resilience, with like-for-like net sales growth up well over 1%, but custom research, which accounts for almost half of Data Investment Management net sales, was down a similar amount. Kantar Worldpanel, Kantar Health, Kantar Public, Kantar Retail and Kantar IMRB all showed strong like-for-like net sales growth, with Kantar Insights more challenged. There seems to be a growing recognition of the value of ‘real’ first-party data businesses, rather than those that depend on third-party data. Net sales margins improved 1.4 margin points to 17.6% and by 1.0 margin points in constant currency. Good cost control and the continued benefits of restructuring contributed to the improvement in net sales margin. Although there has been further improvement during 2016, the slowest sub-sector continues to be like-for-like net sales growth in the custom businesses in mature markets, where discretionary spending remains under review by clients.

The Group’s Public Relations & Public Affairs businesses continued the growth shown earlier in the year, with a stronger second half, but slower fourth quarter, primarily the result of stronger comparatives in the specialist Public Relations businesses in the final quarter of 2015. Constant currency revenue grew well over 2% in quarter four with like-for-like net sales down almost 1%, with strong growth in Continental Europe and the Middle East & Africa, but North America was down over 2%, with the UK down significantly, as a result of lower M&A activity in the Group’s specialist financial Public Relations & Public Affairs businesses in the fourth quarter compared with 2015. Despite the slower growth in the final quarter, like-for-like net sales in the Group’s specialist Public Relations & Public Affairs businesses were up almost 7% for the year, and Cohn & Wolfe performed particularly well. Ogilvy and Hill+Knowlton Strategies also improved, with Burson-Marsteller less buoyant. An improving top-line and good control of costs resulted in the net sales margin improving by 1.1 margin points to 16.7% and by 0.8 margin points in constant currency.

At the Group’s Branding & Identity, Healthcare and Specialist Communications businesses (including direct, digital and interactive), constant currency revenue grew strongly at 8% in quarter four, the strongest performing sector, with like-for-like revenue up well over 1%. The Group’s direct, digital and interactive businesses, especially WPP Digital, VML and Wunderman performed strongly, with parts of the Group’s remaining Branding & Identity, Healthcare and Specialist Communications businesses also growing strongly. Net sales margins, for the sector as a whole, improved 0.2 margin points to 15.4% but fell 0.3 margin points in constant currency, with operating margins negatively affected as parts of the Group’s direct, digital and interactive businesses in Western Continental Europe, together with Branding & Identity and Healthcare Communications, slowed.

In 2016, 38.9% of the Group’s revenue came from direct, digital and interactive, up 1.4 percentage points from the previous year, with like-for-like revenue growth of almost 6% in 2016.

2016 compared with 2015

Revenues

Reported revenue growth for the year was 17.6%, and on a constant currency basis, which excludes the impact of currency movements, revenue was up 7.2%. This difference of 10.4% reflects the weakness of the pound sterling against most currencies, particularly in the second half, following the UK vote to exit the European Union.

On a like-for-like basis, which excludes the impact of currency and acquisitions, revenue was up 3.0%, with net sales up 3.1%. In the fourth quarter, like-for-like revenue was up 0.5%, the weakest quarter of the year, following like-for-like growth of well over 6% in the final quarter of 2015, which was that year’s strongest quarter. North America and the UK slowed in the fourth quarter, again partly the result of stronger comparatives, with Western Continental Europe and Asia Pacific, Latin America, Africa & the Middle East and Central & Eastern Europe continuing to perform well. Like-for-like net sales growth was stronger than revenue growth, over 2% in the fourth quarter, also against a strong comparative in 2015, with all regions, except the UK, showing growth.

Operating Cost

Operating costs increased by 16.2% in 2016 to £10,334.7 million from £8,892.3 million in 2015 on a reported basis and increased by 6.4% on a constant currency basis. During 2016, the Group continued to manage operating costs effectively, with improvements across most cost categories, particularly staff and property costs.

Headline operating costs rose by 16.8%, rose by 7.0% in constant currency and by 2.7% like-for-like. On all bases, the growth in costs was lower than the growth in revenue and net sales.

On a like-for-like basis, the average number of people in the Group, excluding associates, in 2016 was 132,657 compared to 132,315 in 2015, an increase of 0.3%. On the same basis, the total number of people in the Group, excluding associates, at 31 December 2016 was 134,341 compared to 134,479 at 31 December 2015, a decrease of 138 or 0.1%. This reflected the transfer of a further 250 staff to IBM in the first half of 2016, as part of the strategic partnership agreement and IT transformation program, together with the continuing sound management of headcount and staff costs in 2016 to balance revenue and costs. On the same basis, revenue increased 3.0% and net sales 3.1%.

Reported staff costs, excluding incentives, increased by 17.3%, up 7.5% in constant currency. Incentive payments amounted to £367 million ($486 million), which were 14.9% of headline PBIT, excluding share of results of associates (excluding exceptional gains/losses), before incentives compared with £331 million ($505 million) or 16.2% in 2015. Achievement of target, at an individual company level, generally generates 15% of headline PBIT, excluding share of results of associates (excluding exceptional gains/losses), before bonus as an incentive pool, 20% at maximum and 25% at super maximum.

Net sales margins, before all incentives and income from associates (excluding exceptional gains/losses), were 19.9%, up 0.6 margin points, compared with 19.3% last year. The Group’s staff costs-to-net sales ratio, including severance and incentives, decreased by 0.4 margin points to 62.8% compared to 63.2% in 2015, indicating increased productivity.

In 2016, the Group generated exceptional gains of £277 million, largely representing re-measurement gains in relation to the Group’s interest in Imagina and gains on the sale of the Group’s interest in Grass Roots. These were partly offset by investment write-downs of £86 million, resulting in a net gain of £191 million, which in accordance with prior practice, has been excluded from headline PBIT. The Group took a £27 million restructuring provision, primarily IT Transformation costs, resulting in a net exceptional gain of £164 million.

Profit before interest and taxation

As a result of all this, profit before interest and taxation was up over 25% to £2.113 billion and 12% in constant currencies. Headline PBIT was up almost 22% to £2.160 billion, over £2 billion for the first time, from £1.774 billion and up well over 8% in constant currencies.

Finance income, finance costs and revaluation of financial instruments

Finance income increased to £80.4 million in 2016 from £72.4 million in 2015. Finance costs increased to £254.5 million in 2016 from £224.1 million in 2015. Therefore, net finance costs were up 14.8% at £174.1 million, compared with £151.7 million in 2015, an increase of £22.4 million. This is due to the weakness in sterling resulting in higher translation costs on non-sterling debt, the cost of higher average net debt and lower income from investments, all partially offset by the beneficial impact of lower bond coupon costs resulting from refinancing maturing debt at cheaper rates. Revaluation of financial instruments resulted in a loss of £48.3 million in 2016 and a loss of £34.7 million in 2015.

Taxation

The Group’s tax rate on reported profit before tax was 20.6% in 2016 against 16.6% in 2015. The difference in the reported tax rate is due to the varying tax charges in the countries we operate, including the impact of a significant reduction in non-taxable gains on disposals of investments and subsidiaries and gains on remeasurement of equity interests recognised in the year. The tax charge includes the release of provisions following the successful resolution of a number of tax matters during the year. Given the Group’s geographic mix of profits and the changing international tax environment, the tax rate is expected to increase slightly over the next few years.

Profit for the year

Profit for the year increased by 20.6% to £1,501.6 million in 2016 from £1,245.1 million in 2015 on a reported basis and increased by 7.2% in constant currency. In 2016, £1,400.1 million of profit for the year was attributable to equity holders of the parent and £101.5 million attributable to non-controlling interests. Diluted earnings per share increased over 22% to 108.0p from 88.4p and increased well over 8% in constant currencies.

2015 compared with 2014

Revenues

Reported revenue growth for the year was 6.1%, and on a constant currency basis, which excludes the impact of currency movements, revenue was up 7.5%. This difference of 1.4% reflects strong foreign currency headwinds in the second half: chiefly due to the strength of the pound sterling, primarily against the euro, partly offset by the weakness of the pound sterling against the US dollar.

On a like-for-like basis, which excludes the impact of currency and acquisitions, revenue was up 5.3%, with net sales up 3.3%. In the fourth quarter, like-for-like revenue was up well over 6%, the strongest quarter of the year, following like-for-like growth in the third quarter of well over 4%, due to stronger growth in the fourth quarter in North America, the UK and Asia Pacific, Latin America, Africa & the Middle East and Central & Eastern Europe, partly offset by slightly slower growth in Western Continental Europe. Like-for-like net sales were up almost 5% in the fourth quarter, the strongest quarter of the year, with all regions, except the UK and Western Continental Europe, recording their strongest quarter of the year.

Operating Cost

Operating costs increased by 3.9% in 2015 to £8,892.3 million from £8,557.5 million in 2014 on a reported basis and increased by 4.8% on a constant currency basis. During 2015, the Group continued to manage operating

costs effectively, with improvements across most cost categories, particularly staff and property costs. On a like-for-like basis, headline operating costs rose by 2.6%, less than the rate of growth for revenue and net sales.

On a like-for-like basis, the average number of people in the Group decreased by 1.9% in 2015. On the same basis, the number of people in the Group at 31 December 2015 decreased by 1.6% compared with the end of 2014. These average and point-to-point figures partly reflect the transfer of almost 1,500 staff to IBM in the first half of 2015, as part of the strategic partnership agreement and IT transformation program, together with the continuing sound management of headcount and staff costs in 2015 to balance revenue and costs. On a like-for-like basis, revenue and net sales increased by 5.3% and 3.3% respectively.

Reported staff costs, excluding incentives, increased by 3.2% and rose by over 4% in constant currency. Staff costs included £24 million ($37 million) of severance costs compared with £37 million ($63 million) in 2014. Incentive costs amounted to £331 million ($505 million), which was 16.2% of headline PBIT, excluding share of results of associates (excluding exceptional gains/losses), before incentives compared with £313 million ($512 million) or 16.3% in 2014. Achievement of target objectives generates 15% of headline PBIT, excluding share of results of associates (excluding exceptional gains/losses) before bonus as an incentive pool.

Net sales margins, before all incentives and income from associates (excluding exceptional gains/losses), were 19.3%, up 0.2 margin points, compared with 19.1% last year. The Group’s staff cost-to-net sales ratio, including severance and incentives, decreased by 0.8 margin points to 63.2% compared to 64.0% in 2014, indicating an improvement in productivity.

In 2015 the Group generated exceptional gains of £296 million, largely representing gains on the sale of certain Kantar internet measurement businesses to comScore Inc., the sale of the Group’s interests in e-Rewards and Chime Communications plc, together with re-measurement gains of £165 million, which included a gain of £132 million in relation to the acquisition of a majority stake in IBOPE in Latin America. These were partly offset by investment write-downs of £79 million, resulting in a net gain of £217 million, which in accordance with prior practice, has been excluded from headline profit. The Group also incurred £106 million of restructuring costs which largely comprised £52 million of severance costs, primarily in relation to certain of the Group’s Data Investment Management businesses in Western Continental Europe, and £37 million of IT transformation costs. With £29 million of one-off IT asset write-downs, this all resulted in a net exceptional gain of £82 million.

Profit before interest and taxation

As a result of the above, reported PBIT rose 7% to £1.679 billion from £1.569 billion, up well over 10% in constant currencies. Headline PBIT rose by 5% to £1.774 billion from £1.681 billion, up 8% in constant currencies.

Finance income, finance costs and revaluation of financial instruments

Finance income decreased to £72.4 million in 2015 from £94.7 million in 2014. Finance costs decreased to £224.1 million in 2015 from £262.7 million in 2014. Therefore, net finance costs were £151.7 million, down almost 10% from £168.0 million last year, reflecting the beneficial impact of lower bond coupon costs resulting from refinancing maturing debt at cheaper rates, partially offset by lower income from investments. Revaluation of financial instruments resulted in a loss of £34.7 million in 2015 and a gain of £50.7 million in 2014.

Taxation

The Group’s tax rate on reported profit before tax was 16.6% in 2015 against 20.7% in 2014. The difference in the reported tax rate is primarily due to the corporation tax credit for prior years, which comprises the release of a number of provisions following the resolution of tax matters in various countries.

Profit for the year

Profit for the year increased by 8.1% to £1,245.1 million in 2015 from £1,151.5 million in 2014 on a reported basis and increased by 11.9% in constant currency. In 2015, £1,160.2 million of profit for the year was attributable to equity holders of the parent and £84.9 million attributable to non-controlling interests. Diluted earnings per share increased by almost 10% (over 13% in constant currencies) to 88.4p.

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 still a very significant pipeline of reasonably priced small- and medium-sized potential acquisitions, with the exception perhaps of digital in the US, where prices seem to have got ahead of themselves because of pressure on competitors to catch up. This is clearly reflected in some of the operational issues that are starting to surface elsewhere in the industry, particularly in fast-growing markets like China, Brazil and India.

The Group’s acquisition focus in 2016 was again on the triple play of faster-growing geographic markets, new media and data investment management, including the application of technology, data and content, totally consistent with our strategic priorities in the areas of geography, new communication services and measurability. In 2016, the Group spent over £600 million on initial acquisition payments, net of cash acquired and disposal proceeds.

Net acquisition spend is currently targeted at around £300 to £400 million per annum, excluding slightly more significant acquisitions like IBOPE in Latin America, comScore and Triad. The Group will continue to seize opportunities in line with our strategy.

•

Dividends. Given the Company’s strong progress, the Board proposes an increase of almost 29% in the final dividend to 37.05p per share, which, together with the interim dividend of 19.55p per share, makes a total of 56.60p per share for 2016, an overall increase of almost 27%. Dividends paid in respect of 2016 will total approximately £720 million for the year.

•

Share buy-backs. They continue to be targeted to absorb any share dilution from issues of options or restricted stock. However, given the net sales margin target of 0.3 margin points improvement, the targeted level of share buy-backs will be 2-3% of the outstanding share capital. In addition, the Company also has considerable free cash flow to take advantage of any anomalies in market values, particularly as the average 2016 net debt-to-EBITDA ratio was under 1.8 times, at the mid-point of our market guidance of 1.5-2.0 times. Share buy-backs in 2016 cost £427 million, representing 2.0% of issued share capital. In 2016, funds returned to share owners were over £1.0 billion. In the last five years, £4.2 billion has been returned to share owners and, over the last 10 years, £5.9 billion.

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 2016, billings were £55.2 billion, or 3.8 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 less 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 $2.5 billion due July 2021. 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 are 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 2016, net cash inflow from operating activities was £1,773.8 million. Free cash flow available for debt repayment, acquisitions, share buy-backs and dividends was £1,585.3 million. This free cash flow was absorbed by £697.1 million in net acquisitions and disposals, by £427.4 million in share repurchases and buy-backs and by £616.5 million in dividends, resulting in a net outflow of £155.7 million.

Net debt at 31 December 2016 was £4.1 billion, against £3.2 billion at 31 December 2015, primarily reflecting the weakness of sterling, and average net debt was £4.3 billion in 2016, compared to £4.0 billion in 2015, at 2016 exchange rates. The average net debt to headline EBITDA ratio in 2016 remains under 1.8 times, which is almost in the middle of the Group’s 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 2016 was 12.4 times. Average net debt in the first quarter of 2017 was £4.544 billion, compared to £4.091 billion in 2016, at 2017 exchange rates.

With an equity market capitalisation of approximately £22.022 billion at 26 April 2017, the total enterprise value of the Company is approximately £27.030 billion, a multiple of 11.2 times 2016 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 2016.

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 2017, reported revenue was up 16.9%, with constant currency growth of 3.6%, like-for-like growth of 0.2%, 3.4% growth from acquisitions and 13.3% from currency, primarily reflecting the weakness of sterling against the US dollar, the euro and other major currencies. Reported net sales were up 18.5%, with constant currency growth of 4.8%, like-for-like growth of 0.8%, 4.0% growth from acquisitions and 13.7% from currency.

The pattern of net sales growth in the first quarter of 2017, is similar in part, to the final quarter of 2016, except North America and data investment management were under more pressure. On a like-for-like basis, the United Kingdom and Western Continental Europe grew strongly, with Asia Pacific, Latin America, Africa & the Middle East and Central & Eastern Europe more or less flat and North America down. On the same basis, public relations and public affairs and branding & identity, healthcare and specialist communications (including digital, eCommerce & shopper marketing) were the strongest sectors, with advertising and media investment slightly down, following weaker comparative new business trends towards the end of 2016 and a strong comparative last year. Given the tepid economic growth prospects and the softer net new business trend late last year, our budgets for 2017 indicated like-for-like revenue and net sales growth at around 2%. For the first three months, actual performance was ahead of budget, due to the stronger than budgeted performance across all sectors, except data investment management. A preliminary look at our quarter one revised forecasts for the full year, again, indicates revenue and net sales growth similar to budget at around 2%, with a stronger second half primarily due to weaker comparatives, approximately 2% in the second half of last year and 4% in the first half. The Group gained a total of $2.103 billion in net new business wins (including all losses) in the first quarter, compared to $1.779 billion in the same period last year.

E. Off-Balance Sheet Arrangements

None.

F. Tabular Disclosure of Contractual Obligations

The following summarises the Company’s estimated contractual obligations at 31 December 2016, 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		2017		2018		2019		2020		2021		Beyond 2021
Debt financing under the Revolving Credit Facility and in relation to unsecured loan notes¹
Eurobonds		2,522.1		—		215.3		512.6		—		—		1,794.2
Sterling bonds		1,000.0		400.0		—		—		200.0		—		400.0
US$ bonds		2,318.5		—		—		—		—		658.0		1,660.5
A$ Bank revolver		206.8		—		—		206.8		—		—		—
Subtotal		6,047.4		400.0		215.3		719.4		200.0		658.0		3,854.7
Interest payable		2,144.7		182.9		174.2		173.6		169.1		154.9		1,290.0
Total		8,192.1		582.9		389.5		893.0		369.1		812.9		5,144.7
Operating leases²		3,977.5		565.2		484.0		427.7		403.4		374.7		1,722.5
Capital commitments³		22.1		19.3		2.8		—		—		—		—
Investment commitments³		89.2		89.2		—		—		—		—		—
Estimated obligations under acquisition earnouts and put option agreements		1,273.5		328.5		229.9		235.9		209.6		139.6		130.0
Total contractual obligations		13,554.4		1,585.1		1,106.2		1,556.6		982.1		1,327.2		6,997.2

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 2016 of £534.3 million. The Group’s net debt at 31 December 2016 was £4,130.5 million and is analysed in Item 5B.

Operating leases are net of sub-let rentals of £32.4 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 2016 amounted to £43.7 million (2015: £70.9 million, 2014: £68.2 million). Employer contributions and benefit payments in 2017 are expected to be approximately £70 million. Projections for years after 2017 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

As introduced on page 15, the following metrics are the Group’s Non-GAAP measures.

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 neutralize foreign exchange impact and 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 2016 exchange rates to local currency reported results for the current and prior year. This gives a US dollar-denominated income statement which excludes any variances attributable to foreign exchange rate movements.

Pro-forma (‘like-for-like’)

Management believes that discussing like-for-like contributes to the understanding of the Company’s performance and trends because it allows for 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 period in the prior year. The Group uses the terms ‘pro-forma’ and ‘like-for-like’ interchangeably.

The following table reconciles reported revenue and net sales growth for 2016 and 2015 to like-for-like revenue and net sales growth for the same period.


	Revenue				Net Sales
	£m				£m
2014 Reportable		11,529				10,065
Impact of exchange rate changes		(160	)	(1.4%)		(123	)	(1.2%)
Changes in scope of consolidation		254		2.2%		251		2.5%
Like-for-like growth		612		5.3%		331		3.3%
2015 Reportable		12,235		6.1%		10,524		4.6%
Impact of exchange rate changes		1,273		10.4%		1,095		10.4%
Changes in scope of consolidation		514		4.2%		453		4.3%
Like-for-like growth		367		3.0%		326		3.1%
2016 Reportable		14,389		17.6%		12,398		17.8%

Headline PBIT

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

Headline PBIT is calculated as profit before finance income/costs and revaluation of financial instruments, taxation, gains/losses on disposal of investments and subsidiaries, investment write-downs, goodwill impairment and other goodwill write-downs, amortisation and impairment of acquired intangible assets, Group restructuring costs, IT asset write-downs, share of exceptional gains/losses of associates and gains/losses on remeasurement of equity interests arising from a change in scope of ownership.

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

Net sales margin

Given the significance of Data Investment Management revenues to the Group, with none of the direct competitors present in that sector, net sales and net sales margin are meaningful measures 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. In addition, the Group’s Media Investment Management sub-sector is increasingly buying digital media for its own account on a transparent opt-in basis and, as a result, the subsequent billings to clients have to be accounted for as revenue, as well as billings.

Net sales margin is calculated as headline PBIT (defined above) as a percentage of net sales and is provided in note 31 to the consolidated financial statements.

Headline PBT

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

Headline PBT is calculated as profit before taxation, gains/losses on disposal of investments and subsidiaries, investment write-downs, goodwill impairment and other goodwill write-downs, amortisation and impairment of acquired intangible assets, Group restructuring costs, IT asset write-downs, share of exceptional gains/losses of associates, gains/losses arising from the revaluation of financial instruments, and gains/losses on remeasurement of equity interests arising from a change in scope of ownership.

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


	Year ended 31 December
	2016 £m			2015 £m			2014 £m
Profit before taxation		1,890.5			1,492.6			1,451.9
Amortisation and impairment of acquired intangible assets		168.4			140.1			147.5
Goodwill impairment		27.0			15.1			16.9
Gains on disposal of investments and subsidiaries		(44.3	)		(131.0	)		(186.3	)
Gains on remeasurement of equity interests arising from a change in scope of ownership		(232.4	)		(165.0	)		(9.2	)
Investment write-downs		86.1			78.7			7.3
Restructuring costs		27.4			106.2			127.6
IT asset write-downs		—			29.1			—
Share of exceptional losses of associates		15.2			21.8			7.6
Revaluation of financial instruments		48.3			34.7			(50.7	)
Headline PBT		1,986.2			1,622.3			1,512.6

Headline EBITDA

Headline EBITDA is a key metric that private equity firms, for example, use for valuing companies, and is one of the metrics that management uses to assess the performance of the business.

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, IT asset write-downs, share of exceptional losses/gains of associates, depreciation of property, plant and equipment, amortisation of other intangible assets, losses/gains on remeasurement of equity interests arising from a change in scope of ownership and Group restructuring costs.

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


	Year ended 31 December
	2016 £m			2015 £m			2014 £m
Profit for the year		1,501.6			1,245.1			1,151.5
Taxation		388.9			247.5			300.4
Finance income, finance cost and revaluation of financial instruments, net		222.4			186.4			117.3
Amortisation and impairment of acquired intangible assets		168.4			140.1			147.5
Depreciation of property, plant and equipment		220.8			194.7			197.3
Amortisation of other intangible assets		38.6			33.7			31.6
Goodwill impairment		27.0			15.1			16.9
Gains on disposal of investments and subsidiaries		(44.3	)		(131.0	)		(186.3	)
Gains on remeasurement of equity interests arising from a change in scope of ownership		(232.4	)		(165.0	)		(9.2	)
Investment write-downs		86.1			78.7			7.3
Restructuring costs		27.4			106.2			127.6
IT asset write-downs		—			29.1			—
Share of exceptional losses of associates		15.2			21.8			7.6
Headline EBITDA		2,419.7			2,002.4			1,909.5

Headline operating costs

Headline operating costs is one of the metrics that management uses to assess the performance of the business.

Headline operating costs is calculated as operating costs excluding goodwill impairment, amortisation and impairment of acquired intangibles, gains/losses on disposal of investments and subsidiaries, investment write-downs, gains/losses on remeasurement of equity interests arising from a change in scope of ownership, IT asset write-downs and Group restructuring costs.


	2016 £m			2015 £m			2014 £m
Operating costs		10,334.7			8,892.3			8,557.5
Amortisation and impairment of acquired intangible assets		(168.4	)		(140.1	)		(147.5	)
Goodwill impairment		(27.0	)		(15.1	)		(16.9	)
Gains on disposal of investments and subsidiaries		44.3			131.0			186.3
Gains on remeasurement of equity interests arising from a change in scope of ownership		232.4			165.0			9.2
Investment write-downs		(86.1	)		(78.7	)		(7.3	)
Restructuring costs		(27.4	)		(106.2	)		(127.6	)
IT asset write-downs		—			(29.1	)		—
Headline operating costs		10,302.5			8,819.1			8,453.7

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
	2016 £m			2015 £m			2014 £m
Net cash inflow from operating activities		1,773.8			1,359.9			1,703.7
Share option proceeds		27.2			27.6			25.0
Proceeds on disposal of property, plant and equipment		7.7			13.4			5.9
Movement in trade working capital and other receivables, payables and provisions		151.3			164.1			(295.0	)
Purchases of property, plant and equipment		(252.1	)		(210.3	)		(177.9	)
Purchase of other intangible assets (including capitalised computer software)		(33.0	)		(36.1	)		(36.5	)
Dividends paid to non-controlling interests in subsidiary undertakings		(89.6	)		(55.2	)		(57.7	)
Free cash flow		1,585.3			1,263.4			1,167.5

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.

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. Average net debt is calculated as the average daily net bank borrowings of the Group, derived from the Group’s automated banking system.

The following table is an analysis of net debt:


	2016 £m			2015 £m			2014 £m
Debt financing		(6,567.4	)		(5,593.2	)		(4,788.1	)
Cash and short-term deposits		2,436.9			2,382.4			2,512.7
Net debt		(4,130.5	)		(3,210.8	)		(2,275.4	)

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. The key assumptions used for estimating cash flow projections in the Group’s impairment testing are those relating to revenue growth and operating margin. The key assumptions take account of the businesses’ expectations for the projection period. These expectations consider the macroeconomic environment, industry and market conditions, the unit’s historical performance and any other circumstances particular to the unit, such as business strategy and client mix;

•

After the projection period, there is an assumed annual long-term growth rate of 3.0% (2015: 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 8.5% (2015: 8.5%).

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 2016, operating profit includes credits totalling £26.3 million (2015: £31.6 million, 2014: £24.9 million) relating to the release of excess provisions and other balances established in respect of acquisitions completed prior to 2015.

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. 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 initially at the present value of the redemption amount in accordance with IAS 32 Financial Instruments: Presentation and subsequently measured at fair value in accordance with IAS 39 Financial Instruments: Recognition and Measurement. 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. The assumptions and sensitivity to changes in these assumptions is shown in note 25 to the Consolidated Financial Statements.

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 2016.

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, Defined Benefit Plans, 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 £275.6 million at 31 December 2016, compared to £225.7 million at 31 December 2015. The increase in the deficit is primarily due to lower discount rates as a result of a decrease in high-quality corporate bond yields.

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. A sensitivity analysis for each significant actuarial assumption is shown in note 23 on page F-30.

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 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.

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, liabilities are classified as current. Any interest and penalties accrued are included in corporate 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 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 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 2016 no deferred tax asset has been recognised in respect of gross tax losses and other temporary differences of £4,048.8 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:

Roberto Quarta, Age 67: Non-executive chairman. Roberto Quarta was appointed as a director with effect from 1 January 2015 and became chairman of WPP in June 2015. He is Chairman of Smith & Nephew plc, a FTSE 100 listed global medical devices company and Partner of Clayton, Dubilier & Rice and Chairman of Clayton, Dubilier & Rice Europe, a private equity firm. Previously, he was Chief Executive and then Chairman of BBA Group plc, Chairman of Rexel SA and IMI plc and a Non-Executive Director at BAE Systems plc, Equant NV, Foster Wheeler AG and PowerGen plc.

Sir Martin Sorrell, Age 72: Chief executive. Sir Martin Sorrell joined WPP in 1986 as a director, becoming Group chief executive in the same year. He was a non-executive director of Arconic Inc. until 10 March 2017 and Delta Topco until 31 January 2017.

Paul Richardson, Age 59: 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.

Jacques Aigrain, Age 62: Non-executive director. Jacques Aigrain was appointed a director of WPP on 13 May 2013. He is currently a Senior Advisor at Warburg Pincus LLP. He was on the Executive Committee of Swiss Re AG from 2001 to 2009 including CEO from 2006, and prior to that, he spent 20 years with JPMorgan 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 LyondellBassell NV and Swiss International Airlines AG. He was Chairman of LCH Clearnet Group Ltd from 2010 to March 2015, and also was a Director of the Qatar Financial Center Authorities until March 2015 and Supervisory Board Member of Lufthansa AG until April 2015. 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 50: Non-executive director. Charlene T Begley was appointed a 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 and member of the Audit Committee of NASDAQ OMX and non-executive director and member of the Audit and Nominating Committees of Red Hat. Ms Begley was a director of Morpho Detection, Inc. and GE Fanuc JV. 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 BS Degree in Business Administration.

Tarek Farahat, Age 52: Non-executive director. Tarek Farahat was appointed a director with effect from 11 October 2016. He is JBS’ Global President for Marketing and Innovation and a member of the Board of Directors. JBS is the largest protein production company in the world by sales. He initially joined JBS S.A. in 2013 as an independent non-executive director before taking on his current executive role in 2015. Mr Farahat serves on the Board of Alpargatas S.A. Prior to JBS S.A., Mr Farahat spent 26 years at Procter & Gamble, in a range of marketing and general executive management roles, working across Europe, the Middle East, Africa and

Latin America, including the General Management/Vice President roles of the Latin America region from 2001. As the head of Procter & Gamble operations in Brazil (2006 – 2012) he led the company to a period of accelerated growth as well as successfully integrating the Gillette business. In 2012, he was elected by the board of directors of Procter & Gamble as President for Procter & Gamble Latin America and was also appointed to Procter & Gamble’s Global Leadership Council. Mr Farahat has a BA Business degree from the American University in Cairo and a degree in Finance from Cairo University. He is a joint Egyptian and Brazilian citizen.

Sir John Hood, Age 65: Non-executive director. Sir 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. Sir John currently serves as President & CEO of the Robertson Foundation, and as Chairman of Study Group Limited and BMT Group. He also serves as Chair of the Rhodes Trust. Sir John also serves on the board of Aurora Energy Research. Sir John 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. Sir John has been appointed a Knight Companion to the New Zealand Order of Merit.

Ruigang Li, Age 47: Non-executive director. Ruigang Li was appointed a director of WPP on 12 October 2010. He is the Founding Chairman of CMC Capital Partners and CMC Holdings (CMC), China’s most prestigious platforms for media and entertainment investment and operation with an extensive coverage across the entire spectrum of traditional and internet space. Ruigang Li has led CMC to create a number of champions and emerging leaders in key sub-sectors including television, film, animation, sports, music, location-based entertainment, financial media, financial and media data services, advertising, e-commerce, ticketing, mobile video social network, game and education. Ruigang Li was the Chairman and President of SMG (Shanghai Media Group) for more than 10 years and successfully transformed SMG from a Shanghai-based provincial broadcaster into China’s leading media conglomerate with the most diversified business scope.

Daniela Riccardi, Age 57: 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 also sits on the Board of Kering and on the Board of Comite Colbert. Ms Ricardi is a guest lecturer at Grenoble Ecole de Management in Paris. 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.

Nicole Seligman, Age 60: Non-executive director. Nicole Seligman was appointed a director on 1 January 2014. Most recently, Ms Seligman served as President of Sony Entertainment, Inc. and Sony Corporation of America and Sony Group Senior Legal Counsel. Until 2014, she was Executive Vice President and General Counsel of Sony Corporation. 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. Ms Seligman serves on the Board of Viacom Inc. She was a Magna Cum Laude graduate of both Harvard College and Harvard Law School.

Hugo Shong, Age 61: Non-executive director. Hugo Shong was appointed a director on 13 May 2013. He is the Global Chairman of IDG Capital 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 China’s first technology venture fund, IDG Capital, which now has $5 billion under management and an investment portfolio including Baidu, Tencent (QQ), Sohu, Ctrip, Soufun and Xiaomi. In January 2017, IDG Capital led the acquisition of IDG Ventures, the investment business under IDG. He currently serves on the board of 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 P. Shriver, Age 57: Non-executive director. Tim Shriver was appointed a director of WPP on 8 August 2007. He is Chairman of Special Olympics and in that capacity, he happily serves together with over 5.34 million Special Olympics athletes in 170 countries, all working to promote health, education, and a more unified world through the joy of sports. Before joining Special Olympics in 1996, Mr Shriver 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 school reform organization in the field of social and emotional learning. He is a member of the Council on Foreign Relations. Mr Shriver earned his undergraduate degree from Yale University, a Master’s degree from The Catholic University of America, and a Doctorate in Education from the University of Connecticut. He has produced four films, written for dozens of newspapers and magazines, founded an ice cream company, and been rewarded with degrees and honors which he didn’t deserve but happily accepted on behalf of others.

Sally Susman, Age 55: 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. Sally holds a BA in Government from Connecticut College in the US and has studied at the London School of Economics.

Sol Trujillo, Age 65: Non-executive director. Solomon D. (Sol) Trujillo was appointed a director of WPP on 12 October 2010. He is an international business executive with three decades’ experience as CEO of high-cap global companies in the US, EMEA and Asia Pacific. A digital pioneer and long-time practitioner of market-based management, Sol was an early champion of high-speed broadband and the mobile internet to stimulate productivity and innovation across all sectors of the economy. Sol currently sits on corporate boards in the US, EU, and China and has managed operations in more than 25 countries around the world – including developed as well as emerging markets from the EU and North America to China, Australasia, Africa and the Middle East.

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

B. Compensation

Introduction

The following includes an ‘at a glance’ snapshot of WPP’s performance and corresponding compensation for the year. The Compensation Committee then sets out for share owners’ consideration the Directors’ Compensation Policy incorporating proposed changes to the policy approved by 82% of share owners in 2014. This revised policy will be presented for approval at the 2017 Annual General Meeting (AGM).

Pay for performance in 2016

2016 was once again a record year for WPP. The Company achieved strong top-line growth with headline PBIT and net sales margins meeting and exceeding targets across all regions and sectors.

This sustained strong performance was reflected in the outcomes of the Company’s incentive plans for the year. Awards under the short-term incentive plan ranged from 95% - 120% of target. Shares awarded in 2012 under the last cycle of the Leadership Equity Acquisition Plan (LEAP) vested in full on 7 March 2017.

The 2012 LEAP award was the final instalment of the existing LEAP incentive program. WPP significantly out-paced all except one of its peers with five-year Total Shareholder Return (TSR) growth of 210%. In reviewing the outcome under the plan the committee noted:

•

WPP’s TSR ranked in the upper decile of the FTSE 100 during the same period and out-performed US indices and broader industry peer groups;

•

market capitalisation increased by £14.71 billion ($15.44 billion) or 172.0% from £8.55 billion ($13.27 billion) to £23.26 billion ($28.71 billion);

•

the share price increased from 675 pence at the start of 2012, to 1,816 pence by the end of 2016, a compound annual growth rate of 22%;

•

the Company’s dividend increased from 24.6p to 56.6p, a compound annual growth rate of 18%;

•

TSR was ahead of the Company’s most comparable competitors: Omnicom (180%), Dentsu (114%) and Publicis (106%); and

•

the Company’s strong underlying financial performance, including net sales growth of 34%, a 51% increase in headline PBIT and a 67% increase in diluted Earnings Per Share (EPS).

The committee acknowledges that the value created for share owners throughout the five-year term of the 2012 awards, and throughout the eight years of the LEAP III program, has been significant.

In 2013, in response to share owners’ concerns about the design of LEAP, the committee adopted a new long-term incentive plan, the Executive Performance Share Plan (EPSP). The design of the EPSP was strongly influenced by share owners’ views. This plan has granted awards at lower levels, with further reductions proposed in 2017, and measures performance equally across three critical areas: EPS growth, return on equity and relative TSR. We anticipate that the value of awards vesting in subsequent years will be substantially lower than the values realised under LEAP.

Highlights of the proposed 2017-2019 Compensation Policy

During the year, the Compensation Committee dedicated considerable time to the re-evaluation of its policy. This necessarily involved extensive dialogue with share owners and other interest groups. We are most grateful for their interest and input.

WPP has a long-standing history of embracing a philosophy of pay for performance. This philosophy is incorporated into the Company’s compensation programs in a range of different ways, for example: the five-year time horizon used since 1995 to measure performance in long-term incentive plans, and the use of challenging performance conditions to govern awards under all incentive plans.

Pay for performance and alignment with share owner interests remain central to the Group’s culture. The committee believes these cornerstone features have been most effective in driving exceptional performance, which has resulted (inter alia) in WPP becoming the most valuable, international, integrated communication services company. As a result, the committee concluded that this ethos should continue to be reflected in the Company’s compensation arrangements.

Notwithstanding the Company’s superior performance, the committee understands share owners’ increasing discomfort with the levels of the programs’ reward opportunities for outstanding performance. Similar feedback led to the changes introduced by the (then) committee earlier this decade that were subsequently incorporated in the 2014-2016 compensation policy. Based on the more recent share owner concerns, the committee is proposing further significant reductions in the compensation levels for the Company’s Executive Directors. The changes to the CEO’s compensation levels are set out below.

In summary:

•

The total incentive opportunity (the combination of short-term incentive maximum and the face value of an award under the EPSP) will reduce from 14.1 times to 10 times salary.

•

The maximum short-term incentive opportunity will reduce by 35 percentage points, from 435% to 400% of salary. 40% of the achieved bonus will be delivered in shares in the form of an Executive Share Award (ESA) and these shares must be held for a further two years.

•

The EPSP award will accordingly reduce by 374 percentage points, from 974% to 600% of salary.

•

The pension allowance will reduce by 10 percentage points from 40% to 30% of salary.

•

The range of benefits provided will be replaced by a fixed benefit allowance of £200,000, a 12% reduction on the 2016 benefits’ cost.

In aggregate, these changes will have the effect of reducing the Group CEO’s overall maximum pay opportunity, before any account is taken of share price appreciation or dividends, by 27% or £4.8 million. This brings the total reduction since 2011 to 58% or £18.1 million.

In addition to these changes our proposed policy also reflects the following:

•

In respect of the Group CFO, the total incentive opportunity will reduce by 150 percentage points from 700% to 550% of salary. The level of benefits provided will also be capped at $85,000.

•

The maximum incentive, short- and long-term, that could be offered to a new appointee to the Board, is being reduced by 20% from 10 times to 8 times salary.

•

The maximum pension contribution that could be offered to a new appointee to the Board is being reduced by 15 percentage points from 40% to 25% of salary.

•

The level of vesting associated with the threshold performance requirement under the EPSP will reduce from 20% of the award to 15% of the award.

The committee did not reach these decisions lightly. The process has proven to be challenging, reflecting the divergent views of share owners, the differences in competitive market practices in the UK (which may cause competitiveness issues in the US) and internationally where WPP competes, the imperative of retaining and motivating a high-performing leadership team, all while also maintaining the Company’s attractiveness to future leadership recruits.

Performance targets for 2017 incentive awards

The committee has approved performance targets for the 2017 short-term incentive awards. As previously, performance will be assessed against a mix of financial measures, for 70% of the award, with the balance being determined by achievements against individual strategic objectives.

The three financial measures are unchanged for 2017 and are headline PBT growth, net sales margin improvement and growth in net sales. The performance ranges and outcomes will be disclosed in next year’s report.

The committee has also reviewed the 2017-2021 EPSP measures and targets, concluding that they remain appropriate, stretching and aligned to the guidance issued to share owners. The targets that will apply are as follows:


Measure		Performance range
EPS		7% –14% compound annual growth
Return on Equity (ROE)		15% – 18% annual average
Relative TSR		Median to upper decile

Looking forward

We hope that you will recognise the significant steps the committee has taken in responding to any concerns in presenting its proposed policy. With the majority of compensation still contingent on the sustainable performance of WPP, we are confident that these proposals will continue to provide meaningful alignment between performance and reward. As in previous years, we extend our thanks to those share owners and advisors who helpfully engaged with us in formulating our proposed policy. We hope they will meet with your support at the 2017 AGM.

At a glance

How we performed in 2016

Group financial performance measures:

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Long-term total shareholder return performance¹




Source Datastream. TSR calculated up until 31 December 2016.		Source Datastream. TSR calculated up until 31 December 2016.

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Source: DataStream. TSR calculated up until 31 December 2016. ‘Peer Composite’ comprises Havas, IPG, Omnicom and Publicis, and from its date of listing in 2001; Dentsu. All data has been converted on a daily basis into GBP. It is assumed that an investment is made on a market-cap weighted basis across all companies, redistributed at the end of each day.

TSR calculated using an averaging period of one month (one-year TSR) or six months (longer-term TSR) in common currency.

How much the Executive Directors earned in 2016 (£000)

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How we will implement our proposed compensation policy in 2017


	Policy		Implementation¹
		2017	Sir Martin Sorrell	Paul Richardson²
Base salary	24-month review period	No change	£1,150,000	$1,080,470
Pension	Pension is provided by way of contribution to a defined contribution arrangement, or a cash allowance, determined as a percentage of base salary	Reduction/ No change	30%	30%
Benefits	A fixed benefits allowance will be provided as an alternative to the provision of itemised benefits, to be used at the executive’s discretion	Reduction	£200,000	$85,000
Short-term incentives	• 70% financial and 30% individual strategic objectives • One-year performance • 60% cash, 40% deferred WPP shares (two years)	Reduction	Opportunity: 0% – 400% Target: 200%	Opportunity: 0% – 250% Target: 165%
Long-term incentives	• TSR, EPS and ROE • Five-year performance • 100% WPP shares	Reduction	Opportunity: 0% – 600%	Opportunity: 0% – 300%

Opportunity and target expressed as a percentage of base salary.

Paul Richardson’s base salary figure is denominated in US dollars other than his fee for directorship of WPP plc which amounts to £100,000. Any sterling amounts have been converted into US dollar at an exchange rate of $1.3547 to £1.

Compensation Committee Report

Statement of share owner voting

In 2016, a significant number of share owners voted against the Implementation Report of the Compensation Committee. The committee understands that the majority of share owners voting against the Implementation Report did so because of the level of the 2015 single figure of the Executive Directors, which was driven largely by the maturity of a legacy five-year long-term incentive plan award under LEAP. The 2011 LEAP award vested in full, reflecting very strong relative TSR performance and an almost doubling of the Company share price over the five-year investment and performance period. The committee is content that LEAP has performed as intended and in the manner approved by share owners when the plan was implemented and when the last compensation policy was approved.

The committee would also like to remind share owners that the LEAP program was replaced in 2013 with a new long-term incentive plan, but that the first five-year awards under this plan will not vest until 2018.


	Votes for				Votes against				Votes cast		Votes withheld
Resolution	Number		%		Number		%		Number		Number
To approve the Implementation report of the Compensation Committee		649,465,421		66.55		326,385,527		33.45		975,850,948		11,128,256

Directors Compensation

For the fiscal year ended 31 December 2016 the aggregate compensation paid by WPP to all directors and officers of WPP as a group for services in all capacities was £62.0 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 compensation received

Single total figure of compensation

Base salary

Benefits³

DEPs⁴

Pension

Short-term
incentives⁵

Long-term

incentives⁶

Total annual
compensation

£000

Sir Martin Sorrell¹

2016

1,150

228

1,758

460

2,992

41,560

48,148

2015

1,150

193

1,545

460

4,278

62,783

70,409

Paul Richardson^1,2

2016

798

—

240

1,517

6,698

9,315

2015

718

—

216

1,648

8,859

11,508

Any US dollar amounts received in 2016 have been converted into sterling at an exchange rate of $1.3547 to £1.

Paul Richardson’s base salary figure is denominated in US dollars other than his fee for directorship of WPP plc which amounts to £100,000 which, per above, has been converted at an exchange rate of $1.3547 to £1. There has been no change in base salary over 2015 and the difference between the 2015 value is due to a change in exchange rates.

The benefits, and therefore total annual compensation, set out in the table above exclude the disclosable value of expenses related directly to attendance at Board meetings that would be chargeable to UK income tax. The expenses were for Sir Martin £2,578 (£6,938 in 2015) and Paul Richardson £13,826 (£14,502 in 2015). Details of benefits are set out on page 44.

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 2016 totalling £1,757,739 (£1,545,340 during 2015) in respect of the shares reflected in the UK and US Deferred Stock Units Awards Agreements, these agreements that now comprise the awards granted under the Capital Investment Plan in 1995.

⁵

This is the aggregate amount awarded for the 2016, and 2015, financial years’ performance. The awards are delivered equally in a deferred share bonus in the form of an ESA, which vests two years from the date of grant subject to continued employment, and cash.

⁶

This is the value of the 2012, and 2011, LEAP awards which vested in 2017, and 2016, following the end of the five-year performance period on 31 December 2016, and 31 December 2015, respectively.

Fixed elements of compensation

Base salary

Effective

date

Contractual salary

000

Base salary received
in 2016

000

Sir Martin Sorrell

1 January 2013

£1,150

Paul Richardson

1 July 2013

$945 and £100

$1,080¹

The WPP directorship fee for Paul Richardson has been converted into US dollars at a rate of $1.3547 to £1.

Each Executive Director receives a fee of £100,000 for their directorship of WPP plc, included in the base salary figure above. The base salary for the Executive Directors is reviewed, but not necessarily changed, every 24 months. There have been no changes in base salary for the Executive Directors since 2013.

Benefits, dividend equivalent payments and pension


	2016 Benefits £000		2016 DEPs £000
Sir Martin Sorrell¹		228		1,758
Paul Richardson¹		62		—

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. The value of benefits received that are detailed in the numbers above include car and/or car allowance, healthcare, life assurance, long-term disability allowance and a per diem housing allowance paid when the executive uses their own accommodation when travelling outside of their home country. The benefits set out exclude the disclosable value of expenses related directly to attendance at Board meetings that would be chargeable to UK income tax.

The table above also includes share owner-approved dividend equivalent payments of £1,757,739 (£1,545,340 during 2015) which are due on certain of Sir Martin Sorrell’s deferred share awards. The following table provides a breakdown of the key taxable benefits for 2016:


	Car benefits £000		Healthcare £000		Accommodation allowance £000		Other expenses £000
Sir Martin Sorrell¹		37		68		86		37
Paul Richardson¹		27		15		19		1

The benefits set out above exclude the disclosable value of expenses related directly to attendance at Board meetings that would be chargeable to UK income tax. The expenses were for Sir Martin £2,578 and Paul Richardson £13,826.


	Contractual pension (% of base salary)		2016 Pension £000
Sir Martin Sorrell		40%		460
Paul Richardson		30%		240

All pension benefits for the Executive Directors are provided on either a defined contribution or a cash allowance basis. Only base salary is pensionable. No changes have been made to pension contribution rates in the last year, but Sir Martin Sorrell’s contractual pension as a percentage of base salary will reduce to 30% in July 2017 subject to policy approval at the upcoming AGM.

Variable elements of pay

Short-term incentive

This section summarises the Compensation Committee’s assessment of the Executive Directors’ performance during 2016 under the short-term incentive plan.

2016 short-term incentive plan outcome (percentages expressed relative to base salary)


	Actual short-term incentive received	Attributed to financial objectives	Attributed to personal objectives	Total 2016 short-term incentives £000
Sir Martin Sorrell	260%	160%	100%	2,992
Paul Richardson	190%	140%	50%	1,517

In respect of the 2016 short-term incentive awards, half will be delivered in the form of shares as an ESA with a two-year deferral requirement. ESAs are subject to malus provisions. The cash bonuses are subject to clawback provisions.

Performance against financial objectives (70% of the award)

Performance against all financial objectives is calculated on a pro forma (‘like-for-like’) basis other than net sales margin that is calculated on a constant currency basis. The key financial short-term incentive plan objectives for all the Executive Directors are consistent with 2015 and provide a robust basis for assessing financial achievement.

2016 was another record year with the Company producing strong net sales and profit growth whilst margins performance was robust. The achievements against our stretching targets are illustrated below and demonstrates out-performance against the profit and net sales targets and a slight under-performance against the very ambitious margin improvement target.

Group performance (CEO and CFO)

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Performance against individual strategic objectives (30% of the award)


Executive Director	Personal measure 2016	Clarification of measures	Maximum potential (% of base salary)	Award received (% of maximum)
Sir Martin Sorrell	Leadership planning	Actively managing the process of strengthening the Group’s senior leadership teams through internal development, promotions, transfers and external hires.	131%	77%
	Strategic planning & execution	Key focus areas include maintaining creative excellence; driving strategy in the digital, data, analytics and new markets; improving the effectiveness of the WPP horizontality approach to enhance client service delivery.	131%	77%
Paul Richardson	Working capital management	Improving year-on-year rolling average net working capital as a percentage of the annual revenue trend.	90%	55%
	WPP IT transformation	Implementing a transformational program of outsourcing IT services to produce enhanced service and cost savings in future years.
	Financial control	Demonstrating measures taken to improve operating company balance sheet control and management.

2016 short-term incentive plan awards

Based on the performance set out above, the short-term incentive award for each executive was:


	Base salary 000			Target bonus % of base salary		Maximum bonus % of base salary		2016 award % against target/ maximum		Total 2016 short- term incentive award 000
Sir Martin Sorrell		£1,150			217.5%		435%		120%/60%	£	2,992
Paul Richardson		$1,080	¹		200%		300%		95%/63%	$	2,056

The fee for Paul Richardson has been converted into US dollars at a rate of $1.3547 to £1.

As noted above, 50% of the 2016 bonus is delivered in the form of WPP shares as an ESA. These shares are granted post determination of the annual bonus achievement and will vest, subject to continued employment, two years later.

Short-term incentive weightings and measures for 2017

The committee has reviewed the performance objectives and weightings for 2017 to ensure continued alignment with Company strategy. The weighting of financial objectives (70%) and individual strategic objectives (30%) will remain unchanged as will the Group financial measures of headline PBT growth, net sales margin improvement and net sales growth.

The committee is of the view that the targets for the Short-term Incentive Plan (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

2012 – 2016 LEAP III awards vesting

The 2012 awards were the final awards granted under LEAP III, the long-term incentive plan which in 2013 was replaced by the EPSP. Vesting of LEAP awards 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, Nielsen and Publicis), weighted by their respective market capitalisation.

Over the five-year investment and performance period, WPP out-performed 95% of the weighted peer group including both Omnicom and Publicis, WPP’s largest and most comparable multi-line competitors. Over the period, WPP delivered TSR of 210% which means that a shareholding of £100 at the start of the period would be worth £310 at the end, including reinvested dividends. The underlying financial and operational performance was also strong over the five-year period, consistent with the TSR outcome.

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 previously established by the committee, the two companies were removed from the comparator group as neither company was listed for more than 40% of the investment and performance period.

WPP’s TSR performance relative to the comparator group resulted in a match of 500%, equating to the maximum award.


	Number of shares vesting		Share price on vesting		Value of match at grant price of £8.5975/$69.2492 000		Value added due to dividends 000		Value added due to share price appreciation 000		2016 Long-term incentives 000
Sir Martin Sorrell		2,406,380		£17.2708		£18,529		£4,339		£18,692		£41,560
Paul Richardson¹		86,690		$104.6617		$5,373		$953		$2,747		$9,073

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

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2016 EPSP awards granted

In 2016, the Executive Directors, along with a select number of senior executives within the Group, were granted awards under the EPSP. The 2016 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 2016 as follows:


Measure	Total Shareholder 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	15% – 18% annual average¹
Payout		Below threshold: 0% of element vests Threshold: 20%² of element vests Maximum of above: 100% of element vests Straight-line vesting between threshold and maximum
Performance period		Five-years ending on 31 December 2020

The ROE measure for EPSP awards issued in 2013 and 2014 was a 10% to 14% average return.

The Threshold level is proposed to move to 15% from 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 2016, the comparator group comprised Dentsu, GfK, Havas, Interpublic, Ipsos, Nielsen, Omnicom and Publicis. TSR performance is calculated on a market capitalisation-weighted basis in both common and local currency (weighted equally). Using a dual basis ensures that the interests of both local and international investors are reflected in the performance measures.

The following interests were awarded on 28 November 2016 at the preceding five-day average share price of £17.052 (ordinary shares) or $105.93092 (ADRs).

Basis and level of award

(% of salary)

Award over

Number of interests

awarded

Face value at date of grant

000

Sir Martin Sorrell

974%¹

Ordinary Shares

656,873

£11,201

Paul Richardson

400%¹

ADRs

41,536

$4,400

The basis level of award is proposed to be reduced as set out in the new Directors’ Compensation Policy.

EPSP measures and targets for 2017-2021

The committee have reviewed both the measures and the targets as part of the review of the Directors’ Compensation Policy that is being submitted to share owners for approval. The committee judge that the balance of measures remains appropriate and aligned to the Company’s business objectives and that the targets remain challenging and in line with financial forecasts.

Aligning pay and performance

As set out in the Directors’ Compensation Policy, the committee’s objective is to align variable compensation with the key strategic priorities of WPP, 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 relationship between pay and performance over the last eight years for the Group chief executive.

LOGO

Growth in the value of a hypothetical £100 holding of WPP ordinary shares over eight years against an equivalent holding in the FTSE 100 (the broad market equity index of which WPP is a constituent) 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.

⁵

The CEO total compensation figure has been restated to exclude the disclosable value of expenses related directly to attendance at Board meetings as per the single figure table on page 43.

Relative importance of spend on pay

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


	2016		2015		% change
Total staff costs		£7,784.9m		£6,652.6m	17.02%
Headcount – average over the year		132,657		124,930	6.19%
Dividends and share buy-backs		£1,043.9m		£1,133.4m	-7.90%

Relative change in pay for the Group chief executive

The following table summarises the change in the Group chief executive’s base salary, taxable benefits and annual bonus, compared to that of full-time employees within the Group. The higher level of taxable benefits of the chief executive officer is due to the increased cost of insured benefits. The cost of UK taxable benefits have reduced due to more effective and efficient management of benefit provision. The benefits received by employees has remained constant.


	Base salary¹		Taxable benefits^1,2		Annual bonus¹
Group chief executive		No change		18.1%	-30.1%
All employees		1.5%		-6.6%	-11.7%

The all employees numbers for the change in base salary, taxable benefits and annual bonus have been calculated based on the annual average amount received. The annual bonus data for the Group chief executive uses the short-term incentive figures set out on page 43.

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.

Non-executive directors’ fees

The fees due to non-executive directors, last reviewed on 1 July 2013, 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 compensation received

The single total figure of compensation table below details fee payments received by the non-executive directors while they held a position on the Board. During both 2015 and 2016, the Company met the cost (including national insurance and income tax, where relevant) of expenses incurred by the non-executive directors in performing their duties of office, in accordance with the policy set out on page 62.

In 2016, the disclosable value of the expenses that would be chargeable to UK income tax totalled £98,407 (including £32,314 of national insurance and income tax, where relevant).


	Fees £000
	2016		2015
Roberto Quarta¹		475		305
Roger Agnelli²		23		114
Jacques Aigrain		130		121
Charlene Begley		100		100
Tarek Farahat³		13		—
Sir John Hood		110		110
Ruigang Li		80		96
Daniela Riccardi		80		88
Nicole Seligman		85		86
Hugo Shong		80		112
Timothy Shriver		90		106
Sally Susman		80		80
Sol Trujillo		90		106

The 2015 fee reflects fees for the part-year Roberto Quarta served as chairman of the WPP Board.

Roger Agnelli tragically died on 19 March 2016.

Tarek Farahat was appointed to the WPP Board on 11 October 2016.

Past directors

During 2016, payments were made to past directors who continued to provide advisory services to the Company. A payment of £59,054 was made to John Quelch in respect of educational presentations he gave to companies within 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

ESAs held by Executive Directors

All Executive Share Awards granted 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 2016 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 granted²		Face value on grant date³ 000		Additional shares granted in lieu of dividends		Total shares vesting		Vesting date		Shares/ADR price on vesting		Value on vesting 000
Sir Martin Sorrell	2013 ESA		27.05.14		£12.8850		159,691		£2,058		9,311		169,002		06.03.16		£15.4962		£2,619
	2014 ESA		27.05.15		£15.8350		113,347		£1,795		—		—		06.03.17		—		—
	2015 ESA		07.06.16		£15.9850		133,817		£2,139		—		—		06.03.18		—		—
Paul Richardson¹	2013 ESA		27.05.14		$108.1000		12,970		$1,402		747		13,717		06.03.16	$	110.2500		$1,512
	2014 ESA		27.05.15		$121.7200		9,817		$1,195		—		—		06.03.17		—		—
	2015 ESA		07.06.16		$116.2700		10,837		$1,260		—		—		06.03.18		—		—

Paul Richardson’s ESAs were granted in respect of ADRs.

Dividend shares will be due on these awards.

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).

Long-term incentive plans – Leadership Equity Acquisition Plans

The following table summarises the awards outstanding under LEAP III. The last award under this plan vested on 7 March 2017, details can be found on pages 46 to 47.


Name	Award date			Investment and performance period		Number of investment shares/ ADRs		Share/ ADR price on grant date		Maximum number of matching units at 1 Jan 2016²		During 2016					Maximum number of matching units at 31 Dec 2016		Share/ ADR price on vesting		Value on vest/ deferral date 000
Name	Award date			Investment and performance period		Number of investment shares/ ADRs		Share/ ADR price on grant date					Granted/ (Lapsed units	)	Additional dividend shares	Vested or deferred shares			Share/ ADR price on vesting		Value on vest/ deferral date 000
Sir Martin Sorrell
		07.12.11			01.01.11-31.12.15		711,159		£6.6475		3,555,795		(0	)	426,810	3,982,605		—	£	15.7644	£	62,783
		10.12.12			01.01.12-31.12.16		431,034		£8.5975		2,155,170		—		—	—		2,155,170		—		—
Paul Richardson
		07.12.11			01.01.11-31.12.15		100,344		£6.6475		501,720		(0	)	60,220	561,940		—	£	15.7644		£8,859
		10.12.12	¹		01.01.12-31.12.16		15,517		$69.2500		77,585		—		—	—		77,585		—		—

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

Dividend shares will be due on these awards.

Long-term incentive plans – Executive Performance Share Plan

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


	Grant date		Performance period		Maximum number of nil cost options over shares/ADRs awarded²		Share/ ADR price on grant date		During 2016
	Grant date		Performance period				Share/ ADR price on grant date		Nil cost options vested/ (lapsed)		Additional dividend shares		Nil cost options exercised or deferred		Maximum number of nil cost options over shares/ADRs at 31 Dec 2016
Sir Martin Sorrell		28.06.13		01.01.13-31.12.17		1,032,540		£10.8480		—		—		—		1,032,540
		04.06.14		01.01.14-31.12.18		867,756		£12.9080		—		—		—		867,756
		09.06.15		01.01.15-31.12.19		738,267		£15.1720		—		—		—		738,267
		28.11.16		01.01.16-31.12.20		656,873		£17.0520		—		—		—		656,873
Paul Richardson¹		28.06.13		01.01.13-31.12.17		52,026		$83.4186		—		—		—		52,026
		04.06.14		01.01.14-31.12.18		40,927		$107.9960		—		—		—		40,927
		09.06.15		01.01.15-31.12.19		37,970		$115.8800		—		—		—		37,970
		28.11.16		01.01.16-31.12.20		41,536		$105.9309		—		—		—		41,536

Paul Richardson’s EPSP awards were granted in respect of ADRs.

Dividend shares will be due on these awards.

Full details of the 2016 EPSP award, including performance measures and targets, can be found on pages 47 to 48.

Implementation of reward policy for management outside the Board

As noted on pages 57 to 59, the Company uses share-based compensation programs across the Company to incentivise and retain employees, recruit new talent and to encourage a strong ownership culture among employees. The use of the core share plans in 2016 is described below.

The Restricted Stock Plan (RSP)

The WPP Leaders, Partners and High Potential program made awards to about 1,700 of our key executives in 2016. Awards will vest three years after grant, provided the participant is still employed within the Group. In addition, senior executives have part of their annual bonus paid in the form of executive or performance share awards that vest two years after grant. The Executive Directors do not participate in any other aspect of the RSP except for the deferred share bonus award. All awards granted under the RSP are subject to malus and clawback conditions.

WPP Share Option Plan 2015

During 2016, the WPP Share Option Plan 2015 was used to make awards to over 48,000 employees. By 31 December 2016, options under this plan, and its predecessor the Worldwide Ownership Plan, had been granted to approximately 157,000 employees over 78 million shares since March 1997.

During 2016, approximately 15,000 WPP employees who had received awards under the Worldwide Ownership Plan, took advantage of the strong share price and exercised their options.

While the Share Option Plan provides the authority to make executive option awards, in addition to all-employee awards, no awards were granted in 2016. The Executive Directors do not participate in this plan.

Share incentive dilution for 2006 to 2016

The share incentive dilution level, measured on a 10-year rolling basis, was at 3.0% at 31 December 2016 (2015: 2.9%). It is intended that awards under all plans, other than share options, will all be satisfied with purchased shares held either in the Employee Share Ownership Plans (ESOPs) or in treasury. ESOPs are discussed in note 26 to the consolidated financial statements.

Directors’ Compensation Policy

The Compensation Committee presents the proposed Directors’ Compensation Policy for 2017-2019. It is the intention of the committee that this policy will be maintained for three years from approval, assuming no changes are required. The committee believes that this policy continues to align with the Company’s mission statement and business objectives as well as being competitive for current and successor Executive Directors.

Proposed policy changes

The 2017 policy that is being presented to share owners for approval has been drafted to take into account the views of our share owners that have been received over the last policy period. The key changes from the 2014 policy, which are described on pages 39 and 40, can be summarised as follows:

•

The maximum annual bonus opportunity of the Group chief executive is reduced to 400% and for the Group chief financial officer to 250%. A minimum of 40% of the achieved bonus will be delivered in deferred shares (ESA).

•

The maximum annual EPSP opportunity of the Group chief executive is being reduced to 600% of base salary and for the Group chief financial officer to 300% of base salary. The EPSP plan will continue to operate over a five-year performance period and the performance measures of TSR, EPS and ROE remain unchanged.

•

The threshold vesting level of the EPSP award is being reduced to 15%.

•

The maximum level of annual pension contribution for the Group chief executive is being reduced to 30% of base salary.

•

The Executive Directors will be provided with a non-itemised fixed benefits allowance to enable them to procure benefits to enable them to undertake their role and ensure their security and wellbeing. The benefits allowance for the Group chief executive will be £200,000 and for the Group chief financial officer $85,000 per annum.

•

The maximum incentive award, the combination of short- and long-term incentives, for a new appointee to the Board, is being reduced to 8 times base salary.

•

The maximum pension contribution for a new appointee to the Board is being reduced to 25% of base salary. This amount may be delivered by either a contribution towards a defined contribution retirement plan or by way of a cash retirement allowance.

The above proposed changes to policy will be effective 1 January 2017, except for the pension contribution which will be effective 1 July 2017. The impact of these changes is demonstrated in the pay scenario charts on page 60.

WPP’s compensation philosophy

Our mission statement and our six business objectives shape our compensation philosophy. Broadly, our Directors’ Compensation Policy is determined by three long-standing guiding principles:

•

performance-driven reward;

•

competitiveness; and

•

alignment with share owner interests.

Specifically, our six business objectives (as set out on pages 15 and 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 net sales margins	Short-term incentive measure for the Group chief executive and Group chief financial officer
2	Increase flexibility in the cost structure	Short-term incentive measure for the Group chief financial officer
3	Use free cash flow to enhance share owner value and improve return on capital employed	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 chief executive and Group chief financial officer
5	Emphasise revenue and net sales growth more as margins improve	Short-term incentive measures for the Group chief executive and Group chief financial officer
6	Improve still further the creative capabilities and reputation of all our businesses	Short-term incentive measure for the Group chief executive

The Directors’ Compensation Policy is designed to attract and retain best-in-class talent. The policy looks to incentivise directors to develop the skills of the Group’s employees in order to consistently exceed our clients’ expectations, driving and rewarding 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 Directors’ Compensation Policy

Employment conditions at WPP

When reviewing changes to the compensation levels for the directors, the committee considers any changes in light of increases awarded across the Group over a relevant period of time, in conjunction with the other factors set out in the policy table. Due to the global nature of the business and the distribution of our 132,657 employees over 112 countries, it was not practical to consult them when drawing up our new policy.

Share owner views

During 2016, the main focus from WPP share owners as well as the media more generally was on executive compensation. WPP has worked diligently to listen to all views and create a policy that is both acceptable for share owners as well as attractive and retentive for Executive Directors.

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.

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
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)
RSP		Restricted Stock Plan
STIP		Short-term Incentive Plan – the annual incentive plan comprising a cash bonus and an ESA

Directors’ Compensation Policy table – Executive Directors

The following table sets out details of the proposed compensation elements for WPP’s Executive Directors.


Component and purpose	Operation	Performance	Maximum annual opportunity
Fixed elements of compensation
Base salary To maintain package competitiveness and reflect skills and experience.	Base salary levels are reviewed every two years or following a significant change in the scope of a role. The base salary number includes a director fee of £100,000. 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 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 the 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 pages 57 to 59)

Cash bonus,

ESA

To drive the achievement

of business priorities for

the financial year and to motivate, retain and reward executives over

the short and 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.

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 40% 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 compensation.

Clawback provisions

The committee has the ability to clawback cash bonus, earned in respect of the performance year 2016 or after, in the three years post payment in certain situations, including when fraud, breach of fiduciary duty or a material misstatement has affected the level of any performance-related compensation.

70% subject to financial performance, either at a Group and/or divisional level depending on the role.

30% subject to individual 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: 400% of base salary.

Other Executive Directors: 250% of base salary.

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

50%

Other Executive Directors

66%


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 pages 57 to 59)
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. 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. 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. Judgement The committee will use its judgement to set the performance measures and targets annually. 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 compensation. Clawback provisions The committee has the ability to clawback the amount net of tax received by an executive from the proceeds of the vesting of an award granted in 2016 or later years, in the three years post payment, in certain situations, including when fraud, breach of fiduciary duty or a material misstatement has affected the level of any performance-related compensation.	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 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 headline diluted EPS divided by the average balance sheet per share value of share owners’ equity during the year. Vesting schedule Awards will vest from 15% for threshold performance and 100% for maximum performance.	Conditional awards: Plan maximum: 9.75 times base salary. Group chief executive: 6 times base salary. Other Executive Directors: 3 times base salary. 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
Other items of compensation
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. This benefit will cease in November 2017.	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 Provide a fixed and non-itemised allowance, to enable the executive to procure benefits to enable them to undertake their role and ensure their wellbeing and security.	The fixed allowance will be reviewed periodically by the committee and any changes will be effective for the next fiscal year. The allowance is set with regard to the individual concerned and the role they undertake. Should the executive be required to relocate to a different country, a relocation benefit may be provided in addition to the allowance depending on the prevailing circumstances.	Not applicable.	Fixed benefit allowances are as follows: Group chief executive: £200,000 Group chief financial officer: $85,000
Pension To enable provision for retirement benefits.	Pension is provided by way of contribution to a defined contribution retirement arrangement, or a cash allowance, determined as a percentage of base salary.	Not applicable.	Group chief executive: 30% of base salary. Group chief financial officer: 30% of base salary. New Executive Director appointee to the Board: 25% of base salary.

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 Directors’ Compensation Policy table for Executive Directors 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 is the case for Executive Directors, 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 300 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. 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 this program, awards are made to participants that vest three years after grant, provided the participant is still employed within the Group.

Executive Directors, and other senior management employees, receive part of their annual bonus entitlement as a deferred share award (ESA) under the RSP. Executive Directors are ineligible to participate in any other aspect of the management share award program.

Share Option Plan 2015

The WPP plc Share Option Plan 2015 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. This plan replaced the legacy Worldwide Ownership Plan.

The WPP plc Share Option Plan 2015 has the capability to make grants of executive share options in order to attract or retain key talent. Such awards are made infrequently. There were no grants of executive share options in 2016 or 2015. The Executive Directors do not 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 pay policy that is being presented for approval at the 2017 AGM.

LOGO

DEP’s are dividend equivalent payments applicable to Sir Martin Sorrell only. Details of the payments are set out on page 61.

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

Fixed elements

Consists of base salary, benefits (including DEPs where indicated) and pension

Base salary reflects current levels (FY2017)

The DEPs are consistent with the single figure table for FY2016. Benefits reflect the fixed benefits allowances under the proposed policy

Pension reflects contributions under the proposed policy

£000²

Base salary

Benefits (inc. DEPs)

Pension

Total fixed

Sir Martin Sorrell

1,150

1,958¹

30%

3,453

Paul Richardson

798

30%

1,100

Short-term

incentives

On-plan scenario assumes target bonus is paid

Maximum scenario assumes the full bonus is paid

% of salary

Below threshold

On-plan

Maximum

Sir Martin Sorrell

200%

400%

Paul Richardson

165%

250%

Long-term

incentives

On-plan scenario assumes threshold vesting of an award at the proposed policy level

Maximum scenario assumes full vesting of an award at the proposed policy level

% of salary

Below threshold

On-plan

Maximum

Sir Martin Sorrell

90%

600%

Paul Richardson

45%

300%

The DEP component of the benefits number, £1,757,739, will cease in November 2017.

Any US dollar amounts have been converted into sterling at an exchange rate of $1.3547 to £1.

Other Executive Director policies

Legacy share awards and obligations

Under the Directors’ Compensation Policy, 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 (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

Executive Directors and other members of the senior management team are subject to share ownership guidelines which seek 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 (unchanged for 2017):


	% of base salary
Group chief executive		600%
Group chief financial officer		300%
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.

Directors’ Compensation Policy table – chairman and non-executive directors

The following table sets out details of the ongoing 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.
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. 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. The Company may provide additional allowances to facilitate the operation of the Board such as a travel allowances for attendance at international meetings. 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.

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 and risk management. 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 Group finance director. The list of matters reserved to the Board can be downloaded from the website wpp.com/wpp/investor. This Annual Report on Form 20-F does not incorporate by reference information on the Company’s website.

During 2016, the Board met eight times formally (six scheduled meetings and two meetings held at short notice) and held 16 committee meetings throughout the year.


Attendance of directors at meetings	Board		Audit Committee		Compensation Committee		Nomination and Governance Committee
Roberto Quarta (Chairman)		8		4		5		4
Sir Martin Sorrell		8		—		—		—
Paul Richardson		8		7		—		—
Roger Agnelli¹		1		2		—		—
Jacques Aigrain		7		7		5		—
Charlene Begley		8		7		—		3
Tarek Farahat²		2		—		—		—
Ruigang Li		6		—		—		3
Nicole Seligman		8		7		5		4
Daniela Riccardi		6		—		—		4
Hugo Shong		7		—		—		4
Sir John Hood		7		—		5		—
Tim Shriver		8		—		5		—
Sally Susman		8		—		—		4
Sol Trujillo		8		7		—		—

Roger Agnelli tragically died on 19 March 2016.

Tarek Farahat was appointed on 11 October 2016.

All of the directors attended the scheduled meetings of the Board in the year during their tenure with the exception of Jacques Aigrain and Ruigang Li who each missed one meeting.

⁴

Two unscheduled meetings of the Board took place which were attended by all the directors eligible to attend, except Hugo Shong, Sir John Hood and Ruigang Li who sent apologies for one unscheduled meeting and Daniela Riccardi who sent apologies for both unscheduled meetings owing to prior commitments.

The role of the chairman

The Board is chaired by Roberto Quarta, who chairs the Nomination and Governance Committee and is a member of the Compensation Committee and attended all meetings of the Audit Committee at the invitation of its chairman. The chairman provides the leadership of the Board and is the main point of contact between the Board and the CEO. The chairman represents the Board in discussions with share owners and investor bodies, ensures that systems are in place to provide directors with timely and accurate information, represents the Company in external gatherings, and is also responsible for the Board governance principles. He has led the ongoing emphasis on management development and CEO and senior management succession planning.

The role of the senior independent director

The senior independent director is Nicole Seligman 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 and this year the Board evaluation process. Nicole Seligman was appointed to the Board in January 2014 and has served on the Compensation Committee. As the senior independent director, Ms Seligman customarily attends all Board committee meetings at the invitation of the chairmen of those committees.

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, logistics and bioenergy, 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 composed of 14 directors. Two current members are Executive Directors and 12, including the chairman, are non-executive directors. Two non-executive directors will be retiring at the AGM in 2017, following which the Board will be composed of 12 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 election and re-election at the 2017 AGM continue to demonstrate the characteristics of independence.

Succession: Board and committee membership

The following changes to the Board’s roles and composition took place during 2016 and early 2017:

•

Tarek Farahat was appointed to the Board on 11 October 2016 and joined the Audit Committee on 24 February 2017.

•

Charlene Begley and Tim Shriver announced that they will both be retiring from the Board at the AGM in 2017.

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 Share Dealing 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. One Board meeting a year is held in a location other than London or New York. In 2016, the Board met in Berlin, where it received briefings from all the heads of the Group’s European operations. In 2017, in India, the Board will review the Group’s Asia Pacific operations.

Evaluation

WPP undertakes an annual review of the Board, its committees and individual directors. The annual evaluation of the Board’s and all committees’ effectiveness was externally facilitated by Dr Tracy Long of Boardroom Review Limited in 2015 and the results of the evaluation considered in the 2015 Sustainability Report. The annual evaluation for 2016 has been conducted internally by Nicole Seligman, the senior independent director.

Re-election

The directors submit themselves for annual re-election at each AGM, 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 AGM, 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 applicable UK and US standards, which is 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 all talented individuals. As at 31 December 2016, women comprised 29% of the WPP Board and 33% of non-executive directors, 34% of directors and executive leaders in our operating companies, 48% of senior managers and 54% of total employees.

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 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 is set at a lower initial level, contingent on individual performance, the committee retains the discretion to realign the base salary 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. A new appointment may require the committee to rely on the authorised discretion (as set out on page 57) 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 8 times base salary, 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 compensation 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, benefits and pension.

•

On termination, entitlements will lapse when classified as a bad leaver (defined within the incentive plans). Otherwise base salary, 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

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 contract of Paul Richardson provides for notice to be given on termination.

The fixed compensation elements of the contract 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 set out below.

Short- and long-term compensation elements

If the Executive Director is dismissed for cause, there is not an entitlement to a STIP award, and any unvested share-based awards will lapse. Otherwise, the table below summarises the relevant provisions from the directors’ service contracts (cash bonus) and the plan rules (RSP and EPSP), which apply in other leaver scenarios. As noted on page 57, 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.

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.

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 61) 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 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. This 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.

•

Settlement agreements: the committee is authorised to reach settlement 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 Directors’ Compensation 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
	Attendance at 5 meetings in 2016
Sir John Hood (Chairman)		5
Jacques Aigrain		5
Roberto Quarta		5
Tim Shriver		5

During 2016, the Compensation Committee met five times on a formal basis, with additional informal meetings held as needed.

The committee members do not have any personal financial interest (other than as a share owner as disclosed on page 76) 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, http://www.wpp.com/wpp/about/howwebehave/governance/, 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 invites 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 retains Willis Towers Watson to act as independent advisors. Willis Towers Watson is engaged to provide advice to the Compensation Committee and to work with management on matters related to our compensation policy and practices. Willis Towers Watson is a member of the Remuneration Consultants Group and has signed 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 objective and independent.

Willis Towers Watson provides limited other services at a Group level, however some of the operating companies may engage advisors, including Willis Towers Watson, at a local level.

In 2016, Willis Towers Watson received fees of £220,968 in relation to the provision of advice to the committee. The committee 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’ compensation are provided in Item 6B.

Review of the Audit Committee


Audit Committee members and attendance during 2016
	Meetings eligible to attend		Meetings attended
Jacques Aigrain (Chairman)		7		7
Sol Trujillo		7		7
Roger Agnelli¹		2		2
Charlene Begley		7		7

Roger Agnelli tragically died on 19 March 2016.

The audit committee held seven meetings during the year, which were attended by Deloitte LLP, the Company’s external auditor, the Company’s chairman, the senior independent director, the Group finance director, the director of internal audit, the Group chief counsel, the Group chief accountant and the Company Secretary. The committee also held separate private meetings with the external auditor, the director of internal audit and the Group chief accountant.

Committee responsibilities and how they were discharged in 2016

The discussion below addresses the main matters covered by the committee’s terms of reference as well as certain additional matters dealt with during 2016:

•

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

•

reviewing internal controls and internal audit activities;

•

assisting the Board in meeting its responsibilities in respect of carrying out a robust assessment of the principal risks affecting the Group and reviewing and reporting on the systems and key elements of risk management as they affect the Group and reviewing the risk map and framework for presentation to the Board;

•

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, the earnout payments profile review and integration processes and the debt financing by the Group;

•

reviewing GroupM’s media 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 and changes to the UK Corporate Governance Code;

•

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

•

reviewing the Group’s IT Transformation project and shared services initiatives; and

•

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

Fair, balanced and understandable

A sub-committee of the Board including members of the audit committee examined whether the Annual Report and Accounts for 2016 was fair, balanced and understandable and provided the information necessary for share owners to assess the Group’s position, performance, business model and strategy. The sub-committee received an early final draft of the report for review and comment, as well as a report from the Disclosure Committee as to the governance relating to compilation of the report.

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 2016 which were then examined by the committee and discussed with management.

The areas of significant judgement considered by the committee and how these were addressed are set out below and reflect a number of the principal risk areas identified by the Board in item 3D:

•

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 2016;

•

the judgements made in determining the gain on investment made in 2016 on Imagina. The committee agreed that the approach adopted by management is appropriate;

•

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

•

the judgements made in respect of the release of provisions related to other media income. The committee considered the information from management to support the change in approach and agreed the change where supported is appropriate;

•

the valuations of non-controlled investments and listed associates, which are based on local management forecasts, recent third-party investment and other supporting information such as industry valuation multiples. The committee examined the valuations with management and agreed that the valuations 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 agreed that earnouts have been accounted for on a consistent basis to previous periods;

•

the approach taken by management to accounting for exceptional expenses incurred in relation to the ongoing IT Transformation project, 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 the level of central 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 viability statement 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 have been WPP’s auditors since 2002. The lead partner rotates every five years and the latest rotation took effect during 2015. In 2016, 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 2016 evaluations concluded that there continued to be 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 and noted the principal findings of the FRC 2016 Audit Quality Review on the audit file of WPP for the year ended 31 December 2015 as part of their 2016 review cycle. The committee recommends the reappointment of Deloitte at the AGM on 7 June 2017.

The committee considered the Group’s position on its audit services contract in the context of the regulations concerning the audit market. Although there is no immediate intention to tender the audit contract, the Company will re-tender at the latest by the 2022 year end in compliance with the transitional arrangements for competitive tender that require mandatory rotation after the 2023 fiscal year-end.

The Company confirms that it has complied with the Competition and Markets Authority final order on mandatory tendering and audit committee responsibilities.

Internal audit

The annual internal audit plan is approved by the committee at the beginning of the financial year. Progress against the plan is monitored through the year and any changes require committee approval. Significant issues identified within audit reports are considered in detail along with the mitigation plans to resolve those issues. The committee also considers the level of internal audit resource to ensure it is appropriate to provide the right level of assurance over the principal risks and controls throughout the Group.

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 SEC. The policy was reviewed by the committee in 2014 and advice on remuneration was included in the prohibited category with effect from the beginning of 2015 allowing for a transition period. Further review in 2016 has resulted in a prohibition on tax services being provided by Deloitte in the EU and a general default to an alternative provider elsewhere subject to adherence to regulations. 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 2016 is shown in note 3 of the financial statements on page F-16.

Committee evaluation

The committee and its members were formally assessed by the Nomination and Governance Committee as part of the review of committee composition in 2016 and as part of the evaluation process described on page 65 for their technical suitability to be members and also for its overall effectiveness. The Board has designated Jacques Aigrain as the committee’s financial expert for Sarbanes-Oxley Act (SOX) purposes and together with Charlene Begley 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.

Terms of reference

The committee’s terms of reference, are reviewed annually and most recently were reviewed and updated in October 2016 and can be viewed on the Company’s website at http://www.wpp.com/about/howwebehave/governance. This Annual Report on Form 20-F does not incorporate by reference information on the Company’s website.

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 2016, the Group, including all employees of associated undertakings, had approximately 198,000 employees located in over 3,000 offices in 112 countries compared with 190,000 and 179,000 as at 31 December 2015 and 2014, respectively. Excluding all employees of associated undertakings, this figure is 134,341 (2015: 128,123, 2014: 123,621). The average number of employees in 2016 was 132,657 compared to 124,930 and 121,397 in 2015 and 2014, respectively, including acquisitions.

Their geographical distribution was as follows:


	2016		2015		2014
North America		27,246		26,224		26,809
United Kingdom		14,070		13,401		12,838
Western Continental Europe		24,996		23,506		23,376
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe		66,345		61,799		58,374
		132,657		124,930		121,397

Their operating sector distribution was as follows:


	2016		2015		2014
Advertising and Media Investment Management		55,120		53,227		52,329
Data Investment Management		29,279		28,395		28,240
Public Relations & Public Affairs		9,054		8,492		8,392
Branding & Identity, Healthcare and Specialist Communications		39,204		34,816		32,436
		132,657		124,930		121,397

E. Share Ownership

Executive Directors’ interests

Executive Directors’ interests in the Company’s ordinary share capital are shown in the following table. Other than 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 the LEAP program and the EPSP in addition to outstanding ESAs. As at 31 December 2016, the Company’s ESOPs (which are entirely independent of the Company and have waived their rights to receive dividends) held in total 13,857,706 shares in the Company (17,154,359 in 2015).


						Outstanding scheme interests
Director		Total share interests (including charitable foundation)		Total beneficial interests and deferred awards¹		Deferred awards (without performance conditions- vested but unexercised, included in Total beneficial)²		Shares without performance conditions (unvested)^3,4		Shares with performance conditions (unvested)^5,6		Total unvested shares
Sir Martin Sorrell⁷	At 31 Dec 2016		24,547,301		21,021,365		8,773,456		247,164		5,450,606		5,697,770
	At 19 Apr 2017		25,859,089		21,283,153		8,773,456		133,817		3,295,436		3,429,253
Paul Richardson	At 31 Dec 2016		1,000,265		1,000,265		—		103,270		1,250,220		1,353,490
	At 19 Apr 2017		1,068,240		1,068,240		—		54,185		862,295		916,480

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 2).

Shares (1) pursuant to the vesting of awards under Renewed LEAP (namely the 2004 and 2005 awards, part of the 2006 award, the 2007 award, the UK portion of the 2009 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.

Shares due pursuant to the 2014 and 2015 Executive Stock Awards, full details of which can be found on page 50. Additional dividend shares will be due on vesting.

⁴

Shares due pursuant to the 2015 Executive Stock Awards, full details of which can be found on page 50. Additional dividend shares will be due on vesting.

⁵

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 51. Additional dividend shares will be due on vesting.

⁶

As noted in footnote 5 above, less the maximum due under the 2012 LEAP III Award, which vested on 7 March 2017 (full details can be found on pages 46 and 47).

⁷

On 24 March 2017, Sir Martin Sorrell gifted 1,050,000 ordinary shares to The JMCMRJ Sorrell Charitable Foundation. At 19 April 2017, The JMCMRJ Sorrell Charitable Foundation is interested in 4,575,936 ordinary shares. Sir Martin Sorrell has no beneficial interest in these shares.

Share ownership guidelines

As detailed in the Directors’ Compensation Policy, the Executive Directors are required to achieve a minimum level of share ownership of WPP shares. The Group chief executive and Group chief financial officer are required to hold shares to the value of 600% and 300% of base salary respectively.

At the end of 2016, and at the date of this Compensation Committee report, both Executive Directors exceeded their respective share ownership guidelines by a substantial margin.

Non-executive directors’ interests

Non-executive directors’ interests in the Company’s ordinary share capital are shown in the following table. Except 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 December 2016		Total interests at 19 April 2017
Roberto Quarta		27,500		27,500
Jacques Aigrain		9,000		9,000
Charlene Begley		2,140		2,140
Tarek Farahat¹		—		—
Sir John Hood		3,000		3,000
Ruigang Li		4,000		4,000
Daniela Riccardi		—		4,100
Nicole Seligman		6,250		6,250
Hugo Shong		—		22,915
Timothy Shriver		10,070		10,070
Sally Susman		5,000		5,000
Sol Trujillo		10,000		10,000

Tarek Farahat was appointed to the WPP Board on 11 October 2016.

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:


			26 April 2017				27 April 2016				22 April 2015
MFS	6.64	%		84,917,360	6.6	%		85,122,255	6.55	%		85,962,954
BlackRock Inc.	5.62	%		71,872,825	5.1	%		66,364,311	4.9	%		64,931,340

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 2016 was 1,331,880,730 which included at such date the underlying ordinary shares represented by 13,979,641 ADSs. 222 share owners of record of WPP ordinary shares were US residents at 31 December 2016.

The geographic distribution of our share ownership as at 31 December 2016 is presented below:


United Kingdom			33%
United States			33%
Rest of world			34%
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
2012		8.95		6.69
2013		13.83		9.06

2014		13.83		11.17

2015
First Quarter		15.86		13.08
Second Quarter		16.11		14.26
Third Quarter		15.19		13.04
Fourth Quarter		15.77		13.72

2016
First Quarter		16.35		13.38
Second Quarter		16.78		14.76
Third Quarter		18.32		16.01
October		18.50		16.93
November		17.58		16.43
December		18.17		16.47
Fourth Quarter		18.50		16.43

2017
January		18.92		18.12
February		19.01		18.31
March		19.21		16.46
First Quarter		19.21		16.46

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
2012		72.90		52.14
2013		114.86		72.81

2014		113.58		89.95

2015
First Quarter		118.73		99.22
Second Quarter		123.10		112.25
Third Quarter		119.01		99.53
Fourth Quarter		116.89		104.32

2016
First Quarter		117.25		97.52
Second Quarter		120.46		98.12
Third Quarter		120.34		105.24
October		117.55		103.00
November		107.31		103.15
December		111.23		104.34
Fourth Quarter		117.55		103.00

2017
January		117.36		111.90
February		118.92		114.51
March		117.78		102.98
First Quarter		118.92		102.98

The Depositary held 69,898,205 ordinary shares as at 31 December 2016, approximately 5.25% of the outstanding ordinary shares, represented by 13,979,641 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 £3,000,000 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 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 of 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 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 and WPP Air 3 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;

(ii) On 6 November 2007, WPP Finance S.A. issued £200,000,000 6.375% guaranteed bonds due 2020. The 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 and WPP Air 3 acceded as additional guarantors to the bonds. In a supplemental trust deed 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 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, 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. 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 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;

(iv) On 18 July 2014, WPP CP LLC and WPP Finance Co. Limited (as borrowers), guaranteed by WPP plc, WPP 2005 Limited, WPP Jubilee Limited and WPP CP LLC entered into an agreement for a seven-year multi-currency revolving credit facility (with a US Dollar swingline option) for US$2.5 billion with a syndicate of banks and Citibank International plc as facility agent due July 2021. 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$1.1 billion. 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, 0.275% per annum. If the Credit Rating is BBB+ or Baa1, the rate of margin for the facility shall be 0.35% per annum. If the Credit Rating is BBB or Baa2, the rate of margin for the facility is 0.45% per annum. If the Credit Rating is BBB- or Baa3, the rate of margin for the facility is 0.60% per annum. If the Credit Rating is BB+ or Ba1 or lower, the rate of margin for the facility is 0.9% 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 0.1% per annum is payable on outstandings on any day on which the amount of outstandings exceed 0% of the total facility commitments but is less than or equal to 33% of the total facility commitments. A utilisation fee of 0.20% per annum is payable on outstandings on any day on which the amount of outstandings exceed 33% of the total facility commitments but is less than or equal to 66% of the total facility commitments. A utilisation fee of 0.40% per annum is payable on outstandings on any day on which the amount of outstandings exceed 66% of the total 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;

(v) 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, 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. 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;

(vi) 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;

(vii) 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 $812,387,000 4.75% notes due November 2021 described above;

(viii) 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;

(ix) On 19 September 2014, WPP Finance 2010 issued US$ 750,000,000 3.750% guaranteed senior notes due September 2024. These notes were issued under the Indenture dated as at 19 September 2014, as supplemented by the Supplemental Indenture dated as at 19 September 2014, 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 $500,000,000 5.625% notes due November 2043 described above;

(x) On 22 September 2014, WPP Finance S.A. issued EUR 750,000,000 2.250% guaranteed senior bonds due September 2026. 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 S.A., the guarantors, and Citicorp Trustee Company Limited. The administration of payments to bondholders is provided for in an Agency Agreement dated 11 November 2013 between WPP Finance

S.A., 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;

(xi) On 23 March 2015, WPP Finance Deutschland GmbH issued EUR 600,000,000 1.625% guaranteed senior bonds due March 2030. 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 as supplemented by a First Supplemental Trust Deed dated 14 November 2014 between, inter alia, WPP Finance Deutschland GmbH, the guarantors, and Citicorp Trustee Company Limited. The administration of payments to bondholders is provided for in an Agency Agreement dated 11 November 2013 between, inter alia, WPP Finance Deutschland GmbH, 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;

(xii) On 23 March 2015, WPP Finance 2013 issued EUR 251,910,000 0.43% guaranteed senior bonds due March 2018. 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 as supplemented by a First Supplemental Trust Deed dated 14 November 2014 between, inter alia, 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 November 2013 between, inter alia, 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;

(xiii) On 18 November 2015, WPP Finance 2013 issued EUR 600,000,000 0.75% guaranteed senior bonds due November 2019. 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 as supplemented by a First Supplemental Trust Deed dated 14 November 2014 between, inter alia, 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 November 2013 between, inter alia, 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.

(xiv) On 17 March 2016, STW Communications Group Limited (subsequently renamed WPP AUNZ Limited) entered into an agreement for a 3 year revolving credit facility for AUD$520 million with a syndicate of banks and Westpac Banking Corporation acting as Agent due 5 April 2019. Joint and several guarantees are provided by subsidiaries of WPP AUNZ that represent at least 80% of EBITDA and at least 70% of total tangible assets. The facility is available for drawing by way of cash advances in Australian Dollars or New Zealand Dollars on a revolving basis. The rate of margin is determined by the ratio of Net Debt to EBITDA. If the ratio is greater than 2.5 the rate of margin for the facility shall be 1.8%. If the ratio is greater than 2.0 and less than or equal to 2.5 the rate of margin for the facility shall be 1.5%. If the ratio is greater than 1.5 and less than or equal to 2.0 the rate of margin for the facility shall be 1.35%. If the ratio is greater than 1.0 and less than or equal to 1.5 the rate of margin for the facility shall be 1.2%. If the ratio is less than or equal to 1.0 the rate of margin for the facility shall be 1.05%. The commitment fee payable on undrawn commitments is equal to 45% of the then applicable margin. The facility contains customary representations, covenants and events of default.

(xv) On 14 September 2016, WPP Finance 2013 issued GBP 400,000,000 2.875% fixed rate guaranteed senior bonds due 14 September 2046 under the EUR 4,000,000,000 Euro Medium Term Note Programme. The bonds are guaranteed by WPP plc, WPP 2005 Limited and WPP Jubilee Limited, and are constituted by a Trust Deed dated 14 November 2014 between, inter alia, 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 November 2013 between, inter alia, WPP Finance 2013, the guarantors and Citibank, N.A., London Branch. The bonds are admitted to the Official List of the Irish Stock Exchange and to trading on the Global Exchange Market. The terms and conditions of the bonds contain a redemption provision at the option of the bondholders on a Change of Control, a negative pledge provision and a cross-default event of 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 paid before 6 April 2016, 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. From 6 April 2016, the dividend tax credit previously available to UK resident individuals is replaced by a Dividend Allowance for UK taxpayers.

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 percent.

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.

(c)

Holders of WPP ADSs

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)

(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 with 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 percent 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 percent 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

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 with 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 if the US Holder receives a dividend that exceeds 10% of the US Holder’s tax basis in its WPP Shares or WPP ADSs and to the extent such dividend qualifies for the reduced rate described above under the section entitled “Tax on Dividends”. 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.

Net Investment Tax

In addition, the net investment income of individuals and certain trusts (including income realised through certain pass-through entities), subject to certain thresholds, will be subject to an additional net investment tax of 3.8%. “Net investment income” is the excess of certain types of passive income, including dividends on and capital gains from distributions on or dispositions of a WPP Share or a WPP ADS, over certain related investment expenses. Thus, both dividends and capital gains realised directly or indirectly by an individual or trust will generally be added in computing the net investment income of such individual or trust subject to this additional tax. Taxpayers are urged to consult their own tax advisors with respect to the applicability of this tax.

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 2016 is estimated to be a net asset of £17.1 million (£23.0 million with respect to derivative assets and £5.9 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.

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;

(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 2016

WPP did not receive any payments from Citibank, N.A., the Depositary for its American Depositary Receipt program, in 2016.

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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 Officer and our Group Chief Financial Officer, 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 2016. 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 Officer and Group Chief Financial Officer, 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 Officer and our Group Chief Financial Officer, carried out an assessment of the effectiveness of our internal control over financial reporting as at 31 December 2016. The assessment was performed using the criteria for effective internal control reflected in the Internal Control-Integrated Framework (2013) 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 2016 our internal control over financial reporting was effective.

The Company’s internal control over financial reporting as at 31 December 2016 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 102.

101

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 2016, based on criteria established in Internal Control—Integrated Framework (2013) 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 2016, based on the criteria established in Internal Control—Integrated Framework (2013) 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 2016 of the Company and our report dated 28 April 2017 expressed an unqualified opinion on those consolidated financial statements.

/s/ Deloitte LLP

Deloitte LLP

London, United Kingdom

28 April 2017

102

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 2016, 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 Jacques Aigrain, Charlene Begley, and Sol Trujillo at 31 December 2016. As at the date of this report the audit committee consisted of Jacques Aigrain, Charlene Begley, Tarek Farahat and Sol Trujillo. 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 has two audit committee financial experts, Jacques Aigrain, serving as Chairman of the audit committee, and Charlene Begley, a member of the committee. See the biographies of Jacques Aigrain and Charlene Begley 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 2016, sets out the principal obligations of all employees. Directors and senior executives throughout the Group are required each year to sign this Code. The WPP Code of Business Conduct is available on the Company’s website, http://www.wpp.com/about/howwebehave/governance.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES


	2016 £m	2015 £m
Audit fees	24.5	21.0
Tax fees¹	2.9	2.8
All other fees²	5.8	6.7
	33.2	30.5

Tax fees comprise tax advisory, planning and compliance services.

Other fees comprise assurance services, including fees for due diligence 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 2016, 2015 and 2014.

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.

103

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 9 June 2015 a special resolution was passed authorising WPP plc to make market purchases of its own shares up to a maximum number of 131,037,653 ordinary shares. This authority expired at the Annual General Meeting of WPP plc on 8 June 2016 and was replaced by a new authority to purchase up to a maximum number of 129,365,131 ordinary shares until the earlier of the conclusion of the Annual General Meeting of WPP plc in 2017 and 1 September 2017.


	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		1,741		£14.35		1,741			113,961,123
February		1,741		£14.32		1,741			113,959,382
March		3,935,985		£15.81		3,935,985			110,023,397
April		400,000		£16.28		400,000			109,623,397
May		2,646,728		£15.86		2,646,728			106,976,669
June		5,546,778		£15.51		5,546,778	¹		125,668,353
July		3,378,500		£16.49		3,378,500			122,289,853
August		3,050,000		£17.46		3,050,000			119,239,853
September		2,014,127		£17.87		2,014,127			117,225,726
October		2,551,857		£17.96		2,551,857			114,673,869
November		2,362,543		£16.86		2,362,543			112,311,326
December		—		—		—			112,311,326
Total		25,890,000		£16.51		25,890,000

1,850,000 of the shares purchased were under the authority granted at the Annual General Meeting on 9 June 2015.

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

104

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)(1) requires that compensation committee charters provide that the chief executive officer may not be present during voting or deliberations on his or her compensation. The terms of reference of the Compensation Committee provide that no executive has the right to attend committee meetings without the invitation of the Committee Chairman or to take part in decisions on his or her own remuneration, but do not require the Committee to exclude the Company’s chief executive officer from any meeting at which his compensation is deliberated or voted upon.

•

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 33¹/₃% 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

(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.

PART III

ITEM 17.

FINANCIAL STATEMENTS

Not applicable.

105

ITEM 18.

FINANCIAL STATEMENTS

The Consolidated Financial Statements of WPP plc at 31 December 2016, 2015 and 2014 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 £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).

	2.4	U.S. $2,500,000,000 Revolving Credit Facility Agreement, dated 30 November 2011 (as amended and restated pursuant to an amendment and restatement agreement, dated 14 December 2012, an amendment and restatement agreement, dated 25 April 2013 and an amendment and restatement agreement, dated 14 July 2014), by and among WPP CP LLC and WPP Finance Co. Limited, as Borrowers, and the Guarantors, Facility Agent, Swingline Agent, Bookrunners and Lenders thereto (incorporated by reference to Exhibit (b) to a Schedule TO-T filed by the Registrant on February 20, 2015).

	2.5	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).

	2.6	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).

	2.7	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 (incorporated herein by reference to Exhibit 2.14 of the Registrant’s Annual Report on Form 20-F filed for the year ended 31 December 2013).

	2.8	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 (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 2013).

	2.9	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to $750,000,000 of 3.750% Senior Notes Due 2024 (incorporated herein by reference to Exhibit 2.13 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2014).

106


Exhibit No.		Exhibit Title

	2.10	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to €750,000,000 of 2.250% of Senior Notes Due 2026 (incorporated herein by reference to Exhibit 2.14 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2014).

	2.11	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to €600 million of 1.625% Notes due March 2030 (incorporated herein by reference to Exhibit 2.15 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2014).

	2.12	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to €251,910,000 of 0.43% Notes due March 2018 (incorporated herein by reference to Exhibit 2.16 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2014).

	2.13	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to €600 million of 0.75% Notes due November 2019 (incorporated herein by reference to Exhibit 2.16 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2015).

	2.14	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to £400 million of 2.875% Notes due September 2046.*

	2.15	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to an A$547 million and NZ$3 million Syndicated Facility Agreement entered into by STW Communications Group Limited (subsequently renamed WPP AUNZ Limited), dated 17 March 2016.*

	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).

	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).

107


Exhibit No.		Exhibit Title

	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	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).

	4.20	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).

	4.21	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).

	4.22	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).

	4.23	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).

108


Exhibit No.		Exhibit Title

	4.24	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).

	4.25	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).

	4.26	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).

	4.27	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).

	4.28	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).

	4.29	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).

	4.30	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).

	4.31	WPP plc Executive Performance Share Plan (incorporated herein by reference to Exhibit 4.33 of the Registrant’s Annual Report on Form 20-F filed for the year ended 31 December 2013).

	4.32	WPP Share Option Plan 2015.*

	8.1	List of subsidiaries.*

	12.1	Certification of Group Chief Executive Officer.*

	12.2	Certification of Group Chief Financial Officer.*

	13.1	Certification of Group Chief Executive Officer under 18 U.S.C. Section 1350.*

	13.2	Certification of Group Chief Financial Officer under 18 U.S.C. Section 1350.*

	14.1	Consent of Independent Registered Public Accounting Firm (for WPP plc and subsidiaries).*

Filed herewith.

109

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 Chief Financial Officer
		28 April 2017

110

Item 18

INDEX TO FINANCIAL STATEMENTS


Financial Statement Number			Page

	A.	Financial Statements of WPP plc as at 31 December 2016 and 2015 and for the years ended 31 December 2016, 2015 and 2014

		(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 2016, 2015, 2014		F-8

		(iv) Consolidated statement of comprehensive income for the years ended 31 December 2016, 2015, 2014		F-9

		(v) Consolidated cash flow statement for the years ended 31 December 2016, 2015, 2014		F-10

		(vi) Consolidated balance sheet at 31 December 2016, 2015		F-11

		(vii) Consolidated statement of changes in equity for the years ended 31 December 2016, 2015, 2014		F-12

		(viii) Notes to the consolidated financial statements		F-13

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 2016 and 2015, and the related consolidated income statements, consolidated statements of comprehensive income, consolidated cash flow statements, and consolidated statements of changes in equity for each of the three years in the period ended 31 December 2016. 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 2016 and 2015, and the results of its operations and cash flows for each of the three years in the period ended 31 December 2016, 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 2016, based on the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated 28 April 2017 expressed an unqualified opinion on the Company’s internal control over financial reporting.

/s/ Deloitte LLP

Deloitte LLP

London, United Kingdom

28 April 2017

F-1

Our 2016 financial statements

Accounting policies

The consolidated financial statements of WPP plc and its subsidiaries (the Group) for the year ended 31 December 2016 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 2016.

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 authorised for issue on 28 April 2017.

Basis of consolidation

The consolidated financial statements include the results of the Company and all its subsidiary undertakings made up to the same accounting date. 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. Contingent consideration only applies to situations where contingent payments are not dependent on future employment of vendors and any such payments are expensed when they relate to future employment.

Subsequent adjustments to the fair value are recorded in the consolidated income statement within revaluation of financial instruments.

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

F-2

Accounting policies (continued)

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 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

F-3

Accounting policies (continued)

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 initially at the present value of the redemption amount in accordance with IAS 32 Financial Instruments: Presentation and subsequently measured at fair value in accordance with IAS 39 Financial Instruments: Recognition and Measurement. 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.

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.

F-4

Accounting policies (continued)

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.

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.

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

F-5

Accounting policies (continued)

taxable profits will be available against which deductible temporary differences can be utilised, which can require the use of accounting estimation and the exercise of judgement. 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 taxable 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.

Retirement benefit costs

The Group accounts for retirement benefit costs in accordance with IAS 19 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. Net interest expense 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 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.

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.

F-6

Accounting policies (continued)

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, which have not been applied in these financial statements, were in issue but not yet effective:

•

IFRS 9: Financial Instruments;

•

IFRS 15: Revenue from Contracts with Customers; and

•

IFRS 16: Leases

With the exception of IFRS 15 and IFRS 16, the Group does not consider that these Standards will have a significant impact on the financial statements of the Group except for additional disclosures when the relevant standards come into effect.

IFRS 15 is effective from 1 January 2018. It provides for one of two methods of transition: retrospective application to each prior period presented or recognition of the cumulative effect of retrospective application of the new standard as of the beginning of the period of initial application. We have not yet decided which transition method we will use. While we continue to assess the impacts of the standard, based on our initial assessment, we do not expect the adoption of IFRS 15 to have a significant impact on the timing of the Group’s revenue recognition. We do expect an acceleration of revenue recognition for certain incentive-based revenues; however, incentive-based revenues are not material to the Group’s revenue. In April 2016, the IASB issued clarification guidance on principal versus agent considerations. We are currently evaluating the impact of the principal versus agent guidance on certain of our revenues and direct costs; however, we do not expect any change to have a material effect on our results of operations.

IFRS 16 is effective from 1 January 2019. The standard eliminates the classification of leases as either operating or finance leases and introduces a single accounting model. Lessees will be required to recognise a right-of-use asset and related lease liability for the majority of their operating leases and show depreciation of leased assets and interest on lease liabilities separately in the income statement. IFRS 16 will require the Group to recognise substantially all of its current operating lease commitments on the balance sheet and the financial impact of this, together with other implications of the standard, are currently being assessed.

In the current year, the following Standards and Interpretations became effective:

•

IFRS 14: Regulatory Deferral Accounts;

The adoption of these Standards and Interpretations has not led to any changes in the Group’s accounting policies.

Critical judgements and estimation uncertainty in applying accounting policies

Management is required to make key decisions and judgements whilst acknowledging there is estimation uncertainty in the process of applying the Group’s accounting policies. The most significant areas where such judgements and estimation uncertainty apply are revenue recognition, goodwill and other intangibles, payments due to vendors (earnout agreements), liabilities in respect of put option agreement with vendors, acquisition reserves, taxation and accounting for pension liabilities. Where judgement has been applied or estimation uncertainty exists, the key factors taken into consideration are disclosed in the accounting policies and the appropriate note in these financial statements.

F-7

Consolidated income statement

For the years ended 31 December 2016, 2015, 2014


	Notes		2016 £m			2015 £m			2014 £m
Revenue		2		14,388.9			12,235.2			11,528.9
Direct costs				(1,991.1	)		(1,710.9	)		(1,464.1	)
Net sales		2		12,397.8			10,524.3			10,064.8
Operating costs		3		(10,334.7	)		(8,892.3	)		(8,557.5	)
Operating profit				2,063.1			1,632.0			1,507.3
Share of results of associates		4		49.8			47.0			61.9
Profit before interest and taxation				2,112.9			1,679.0			1,569.2
Finance income		6		80.4			72.4			94.7
Finance costs		6		(254.5	)		(224.1	)		(262.7	)
Revaluation of financial instruments		6		(48.3	)		(34.7	)		50.7
Profit before taxation				1,890.5			1,492.6			1,451.9
Taxation		7		(388.9	)		(247.5	)		(300.4	)
Profit for the year				1,501.6			1,245.1			1,151.5

Attributable to:
Equity holders of the parent				1,400.1			1,160.2			1,077.2
Non-controlling interests				101.5			84.9			74.3
				1,501.6			1,245.1			1,151.5

Earnings per share
Basic earnings per ordinary share		9		109.6p			90.0p			82.4p
Diluted earnings per ordinary share		9		108.0p			88.4p			80.5p

Note

The accounting policies on pages F-2 to F-7 and the accompanying notes on pages F-13 to F-55 form an integral part of this consolidated income statement.

F-8

Consolidated statement of comprehensive income

For the years ended 31 December 2016, 2015, 2014


	2016 £m			2015 £m			2014 £m
Profit for the year		1,501.6			1,245.1			1,151.5
Items that may be reclassified subsequently to profit or loss:
Exchange adjustments on foreign currency net investments		1,378.0			(275.9	)		(221.2	)
(Loss)/gain on revaluation of available for sale investments		(93.1	)		206.0			64.6
		1,284.9			(69.9	)		(156.6	)
Items that will not be reclassified subsequently to profit or loss:
Actuarial (loss)/gain on defined benefit pension plans		(15.9	)		33.5			(86.6	)
Deferred tax on defined benefit pension plans		(0.4	)		(5.2	)		62.1
		(16.3	)		28.3			(24.5	)
Other comprehensive income/(loss) for the year		1,268.6			(41.6	)		(181.1	)
Total comprehensive income for the year		2,770.2			1,203.5			970.4
Attributable to:
Equity holders of the parent		2,600.6			1,121.6			893.0
Non-controlling interests		169.6			81.9			77.4
		2,770.2			1,203.5			970.4

Note

The accounting policies on pages F-2 to F-7 and the accompanying notes on pages F-13 to F-55 form an integral part of this consolidated statement of comprehensive income.

F-9

Consolidated cash flow statement

For the years ended 31 December 2016, 2015, 2014


	Notes		2016 £m			2015 £m			2014 £m
Net cash inflow from operating activities		11		1,773.8			1,359.9			1,703.7
Investing activities
Acquisitions and disposals		11		(638.8	)		(669.5	)		(489.1	)
Purchases of property, plant and equipment				(252.1	)		(210.3	)		(177.9	)
Purchases of other intangible assets (including capitalised computer software)				(33.0	)		(36.1	)		(36.5	)
Proceeds on disposal of property, plant and equipment				7.7			13.4			5.9
Net cash outflow from investing activities				(916.2	)		(902.5	)		(697.6	)
Financing activities
Share option proceeds				27.2			27.6			25.0
Cash consideration for non-controlling interests		11		(58.3	)		(23.6	)		(5.6	)
Share repurchases and buy-backs		11		(427.4	)		(587.6	)		(510.8	)
Net (decrease)/increase in borrowings		11		(22.5	)		492.0			465.2
Financing and share issue costs				(6.4	)		(11.4	)		(27.5	)
Equity dividends paid				(616.5	)		(545.8	)		(460.0	)
Dividends paid to non-controlling interests in subsidiary undertakings				(89.6	)		(55.2	)		(57.7	)
Net cash outflow from financing activities				(1,193.5	)		(704.0	)		(571.4	)
Net (decrease)/increase in cash and cash equivalents				(335.9	)		(246.6	)		434.7
Translation differences				291.9			(54.4	)		(70.3	)
Cash and cash equivalents at beginning of year				1,946.6			2,247.6			1,883.2
Cash and cash equivalents at end of year		11		1,902.6			1,946.6			2,247.6

Note

The accounting policies on pages F-2 to F-7 and the accompanying notes on pages F-13 to F-55 form an integral part of this consolidated cash flow statement.

F-10

Consolidated balance sheet

At 31 December 2016, 2015


	Notes		2016 £m			2015 £m
Non-current assets
Intangible assets:
Goodwill		12		13,214.3			10,670.6
Other		12		2,217.3			1,715.4
Property, plant and equipment		13		968.7			797.7
Interests in associates and joint ventures		14		1,069.4			758.6
Other investments		14		1,310.3			1,158.7
Deferred tax assets		15		140.4			94.1
Trade and other receivables		17		204.9			178.7
				19,125.3			15,373.8
Current assets
Inventory and work in progress		16		400.4			329.0
Corporate income tax recoverable				231.2			168.6
Trade and other receivables		17		12,374.5			10,495.4
Cash and short-term deposits				2,436.9			2,382.4
				15,443.0			13,375.4
Current liabilities
Trade and other payables		18		(15,010.4	)		(12,685.0	)
Corporate income tax payable				(752.3	)		(598.5	)
Bank overdrafts and loans		20		(1,002.5	)		(932.0	)
				(16,765.2	)		(14,215.5	)
Net current liabilities				(1,322.2	)		(840.1	)
Total assets less current liabilities				17,803.1			14,533.7
Non-current liabilities
Bonds and bank loans		20		(5,564.9	)		(4,661.2	)
Trade and other payables		19		(1,273.8	)		(891.5	)
Deferred tax liabilities		15		(692.4	)		(552.3	)
Provision for post-employment benefits		23		(276.5	)		(229.3	)
Provisions for liabilities and charges		21		(227.9	)		(183.6	)
				(8,035.5	)		(6,517.9	)
Net assets				9,767.6			8,015.8
Equity
Called-up share capital		26		133.2			132.9
Share premium account				562.2			535.3
Other reserves		27		1,185.2			(9.7	)
Own shares				(962.0	)		(719.6	)
Retained earnings				8,405.9			7,698.5
Equity share owners’ funds				9,324.5			7,637.4
Non-controlling interests				443.1			378.4
Total equity				9,767.6			8,015.8

Note

The accounting policies on pages F-2 to F-7 and the accompanying notes on pages F-13 to F-55 form an integral part of this consolidated balance sheet.

F-11

Consolidated statement of changes in equity

For the year ended 31 December 2016, 2015, 2014


	Called- up share capital £m			Share premium account £m		Shares to be issued £m			Other reserves¹ £m			Own shares £m			Retained earnings £m			Total equity share owners’ funds £m			Non- controlling interests £m			Total £m
Balance at 1 January 2014		134.9			483.4		0.5			317.3			(253.0	)		6,903.7			7,586.8			259.7			7,846.5
Ordinary shares issued		0.4			24.6		(0.2	)		–			–			0.2			25.0			–			25.0
Treasury share additions		–			–		–			–			(412.5	)		–			(412.5	)		–			(412.5	)
Treasury share allocations		–			–		–			–			0.6			(0.6	)		–			–			–
Treasury share cancellations		(2.7	)		–		–			2.7			332.5			(332.5	)		–			–			–
Net profit for the year		–			–		–			–			–			1,077.2			1,077.2			74.3			1,151.5
Exchange adjustments on foreign currency net investments		–			–		–			(224.3	)		–			–			(224.3	)		3.1			(221.2	)
Gain on revaluation of available for sale investments		–			–		–			64.6			–			–			64.6			–			64.6
Actuarial loss on defined benefit pension plans		–			–		–			–			–			(86.6	)		(86.6	)		–			(86.6	)
Deferred tax on defined benefit pension plans		–			–		–			–			–			62.1			62.1			–			62.1
Comprehensive (loss)/income		–			–		–			(159.7	)		–			1,052.7			893.0			77.4			970.4
Dividends paid		–			–		–			–			–			(460.0	)		(460.0	)		(57.7	)		(517.7	)
Non-cash share-based incentive plans (including share options)		–			–		–			–			–			102.2			102.2			–			102.2
Tax adjustment on share-based payments		–			–		–			–			–			(0.6	)		(0.6	)		–			(0.6	)
Net movement in own shares held by ESOP Trusts		–			–		–			–			48.7			(147.0	)		(98.3	)		–			(98.3	)
Recognition/remeasurement of financial instruments		–			–		–			(44.1	)		–			(4.1	)		(48.2	)		–			(48.2	)
Share purchases – close period commitments		–			–		–			(80.0	)		–			(3.9	)		(83.9	)		–			(83.9	)
Acquisition of subsidiaries²		–			–		–			–			–			(3.4	)		(3.4	)		47.3			43.9
Balance at 31 December 2014		132.6			508.0		0.3			36.2			(283.7	)		7,106.7			7,500.1			326.7			7,826.8
Ordinary shares issued		0.3			27.3		(0.3	)		–			–			0.2			27.5			–			27.5
Treasury share additions		–			–		–			–			(406.0	)		–			(406.0	)		–			(406.0	)
Treasury share allocations		–			–		–			–			3.6			(3.6	)		–			–			–
Net profit for the year		–			–		–			–			–			1,160.2			1,160.2			84.9			1,245.1
Exchange adjustments on foreign currency net investments		–			–		–			(272.9	)		–			–			(272.9	)		(3.0	)		(275.9	)
Gain on revaluation of available for sale investments		–			–		–			206.0			–			–			206.0			–			206.0
Actuarial gain on defined benefit pension plans		–			–		–			–			–			33.5			33.5			–			33.5
Deferred tax on defined benefit pension plans		–			–		–			–			–			(5.2	)		(5.2	)		–			(5.2	)
Comprehensive (loss)/income		–			–		–			(66.9	)		–			1,188.5			1,121.6			81.9			1,203.5
Dividends paid		–			–		–			–			–			(545.8	)		(545.8	)		(55.2	)		(601.0	)
Non-cash share-based incentive plans (including share options)		–			–		–			–			–			99.0			99.0			–			99.0
Tax adjustment on share-based payments		–			–		–			–			–			18.0			18.0			–			18.0
Net movement in own shares held by ESOP Trusts		–			–		–			–			(33.5	)		(148.1	)		(181.6	)		–			(181.6	)
Recognition/remeasurement of financial instruments		–			–		–			(59.0	)		–			(0.7	)		(59.7	)		–			(59.7	)
Share purchases – close period commitments		–			–		–			80.0			–			2.9			82.9			–			82.9
Acquisition of subsidiaries²		–			–		–			–			–			(18.6	)		(18.6	)		25.0			6.4
Balance at 31 December 2015		132.9			535.3		–			(9.7	)		(719.6	)		7,698.5			7,637.4			378.4			8,015.8
Ordinary shares issued		0.3			26.9		–			–			–			–			27.2			–			27.2
Treasury share additions		–			–		–			–			(274.5	)		–			(274.5	)		–			(274.5	)
Treasury share allocations		–			–		–			–			3.9			(3.9	)		–			–			–
Net profit for the year		–			–		–			–			–			1,400.1			1,400.1			101.5			1,501.6
Exchange adjustments on foreign currency net investments		–			–		–			1,309.9			–			–			1,309.9			68.1			1,378.0
Loss on revaluation of available for sale investments		–			–		–			(93.1	)		–			–			(93.1	)		–			(93.1	)
Actuarial loss on defined benefit pension plans		–			–		–			–			–			(15.9	)		(15.9	)		–			(15.9	)
Deferred tax on defined benefit pension plans		–			–		–			–			–			(0.4	)		(0.4	)		–			(0.4	)
Comprehensive income		–			–		–			1,216.8			–			1,383.8			2,600.6			169.6			2,770.2
Dividends paid		–			–		–			–			–			(616.5	)		(616.5	)		(89.6	)		(706.1	)
Non-cash share-based incentive plans (including share options)		–			–		–			–			–			106.5			106.5			–			106.5
Tax adjustment on share-based payments		–			–		–			–			–			3.9			3.9			–			3.9
Net movement in own shares held by ESOP Trusts		–			–		–			–			28.2			(181.1	)		(152.9	)		–			(152.9	)
Recognition/remeasurement of financial instruments		–			–		–			(21.9	)		–			26.8			4.9			–			4.9
Share purchases – close period commitments		–			–		–			–			–			8.6			8.6			–			8.6
Acquisition of subsidiaries²		–			–		–			–			–			(20.7	)		(20.7	)		(15.3	)		(36.0	)
Balance at 31 December 2016		133.2			562.2		–			1,185.2			(962.0	)		8,405.9			9,324.5			443.1			9,767.6

Notes

The accounting policies on pages F-2 to F-7 and the accompanying notes on pages F-13 to F-55 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.

F-12

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, JE1 1ES 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 & 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:


Income statement	Revenue¹		Net sales		Headline PBIT^2,4		Net sales margin^3,4
	£m		£m		£m		%
2016
Advertising and Media Investment Management		6,547.3		5,413.5		1,027.2		19.0
Data Investment Management		2,661.1		1,994.0		351.5		17.6
Public Relations & Public Affairs		1,101.3		1,078.8		179.8		16.7
Branding & Identity, Healthcare and Specialist Communications		4,079.2		3,911.5		601.8		15.4
		14,388.9		12,397.8		2,160.3		17.4
2015
Advertising and Media Investment Management		5,552.8		4,652.0		859.7		18.5
Data Investment Management		2,425.9		1,768.1		286.1		16.2
Public Relations & Public Affairs		945.8		929.7		145.2		15.6
Branding & Identity, Healthcare and Specialist Communications		3,310.7		3,174.5		483.0		15.2
		12,235.2		10,524.3		1,774.0		16.9
2014
Advertising and Media Investment Management		5,134.3		4,502.0		837.6		18.6
Data Investment Management		2,429.3		1,748.9		272.7		15.6
Public Relations & Public Affairs		891.9		880.4		135.6		15.4
Branding & Identity, Healthcare and Specialist Communications		3,073.4		2,933.5		434.7		14.8
		11,528.9		10,064.8		1,680.6		16.7

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.

Net sales margin is defined in note 31.

⁴

Prior year headline PBIT and net sales margins have been restated to reflect a reclassification between sectors of one of the Group’s associates.

F-13

Notes to the consolidated financial statements (continued)

2. Segment information (continued)


Other information	Share-based payments		Capital additions¹		Depreciation and amortisation²		Goodwill impairment		Share of results of associates		Interests in associates and joint ventures
	£m		£m		£m		£m		£m		£m
2016
Advertising and Media Investment Management		60.7		126.2		105.4		20.9		8.3		285.6
Data Investment Management		13.0		61.5		60.9		–		13.2		109.4
Public Relations & Public Affairs		7.5		10.3		11.6		–		3.2		108.1
Branding & Identity, Healthcare and Specialist Communications		25.3		87.1		81.5		6.1		25.1		566.3
		106.5		285.1		259.4		27.0		49.8		1,069.4
2015
Advertising and Media Investment Management		55.4		119.7		96.9		15.1		26.8		377.0
Data Investment Management		13.7		58.1		51.8		–		0.8		86.4
Public Relations & Public Affairs		6.7		9.1		9.8		–		2.3		92.0
Branding & Identity, Healthcare and Specialist Communications		23.2		59.5		69.9		–		17.1		203.2
		99.0		246.4		228.4		15.1		47.0		758.6
2014
Advertising and Media Investment Management		48.6		91.0		102.6		16.9		25.1		395.5
Data Investment Management		18.8		48.1		50.9		–		18.4		119.3
Public Relations & Public Affairs		7.9		7.4		12.6		–		3.9		60.1
Branding & Identity, Healthcare and Specialist Communications		26.9		67.9		62.8		–		14.5		185.0
		102.2		214.4		228.9		16.9		61.9		759.9

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.


					Assets								Liabilities
Balance sheet	Segment assets		Unallocated corporate assets¹		Consolidated total assets		Segment liabilities			Unallocated corporate liabilities¹			Consolidated total liabilities
	£m		£m		£m		£m			£m			£m
2016
Advertising and Media Investment Management		15,984.9						(12,409.6	)
Data Investment Management		3,167.2						(1,272.0	)
Public Relations & Public Affairs		3,222.5						(542.1	)
Branding & Identity, Healthcare and Specialist Communications		9,385.2						(2,564.9	)
		31,759.8		2,808.5		34,568.3		(16,788.6	)		(8,012.1	)		(24,800.7	)
2015
Advertising and Media Investment Management		12,911.4						(10,506.9	)
Data Investment Management		3,713.3						(1,067.0	)
Public Relations & Public Affairs		1,839.2						(425.1	)
Branding & Identity, Healthcare and Specialist Communications		7,640.2						(1,990.4	)
		26,104.1		2,645.1		28,749.2		(13,989.4	)		(6,744.0	)		(20,733.4	)
2014
Advertising and Media Investment Management		12,250.5						(9,803.5	)
Data Investment Management		3,427.1						(1,045.7	)
Public Relations & Public Affairs		1,744.7						(400.0	)
Branding & Identity, Healthcare and Specialist Communications		6,433.5						(1,622.3	)
		23,855.8		2,767.1		26,622.9		(12,871.5	)		(5,924.6	)		(18,796.1	)

Notes

Included in unallocated corporate assets and liabilities are corporate income tax, deferred tax and net interest-bearing debt.

F-14

Notes to the consolidated financial statements (continued)

2. Segment information (continued)

Contributions by geographical area were as follows:


	2016 £m		2015 £m		2014 £m
Revenue¹
North America²		5,280.8		4,491.2		3,899.9
UK		1,866.3		1,777.4		1,640.3
Western Continental Europe		2,943.2		2,425.6		2,568.8
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe		4,298.6		3,541.0		3,419.9
		14,388.9		12,235.2		11,528.9
Net sales
North America²		4,603.7		3,882.3		3,471.7
UK		1,587.6		1,504.5		1,396.0
Western Continental Europe		2,425.5		2,016.2		2,142.6
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe		3,781.0		3,121.3		3,054.5
		12,397.8		10,524.3		10,064.8
Headline PBIT³
North America²		895.4		728.2		621.8
UK		261.4		243.1		221.2
Western Continental Europe		351.7		277.2		277.2
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe		651.8		525.5		560.4
		2,160.3		1,774.0		1,680.6

	Margin		Margin		Margin
Net sales margin⁴
North America²		19.4%		18.8%		17.9%
UK		16.5%		16.2%		15.8%
Western Continental Europe		14.5%		13.7%		12.9%
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe		17.2%		16.8%		18.3%
		17.4%		16.9%		16.7%
	£m		£m
Non-current assets⁵
North America²		8,189.3		6,225.3
UK		2,138.5		2,106.4
Western Continental Europe		4,321.6		3,558.6
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe		4,327.2		3,349.7
		18,976.6		15,240.0

Notes

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

North America includes the US with revenue of £5,005.8 million (2015: £4,257.4 million, 2014: £3,664.9 million), net sales of £4,365.1 million (2015: £3,674.3 million, 2014: £3,254.2 million), headline PBIT of £849.4 million (2015: £697.3 million, 2014: £588.2 million) and non-current assets of £6,849.0 million (2015: £5,202.6 million).

See note 31 for a reconciliation of PBIT to headline PBIT.

⁴

Net sales margin is defined in note 31.

⁵

Non-current assets excluding financial instruments and deferred tax.

3. Operating costs


	2016 £m			2015 £m			2014 £m
Staff costs (note 5)		7,784.9			6,652.6			6,440.5
Establishment costs		836.5			726.3			711.3
Other operating costs (net)		1,713.3			1,513.4			1,405.7
Total operating costs		10,334.7			8,892.3			8,557.5
Operating costs include:
Goodwill impairment (note 12)		27.0			15.1			16.9
Investment write-downs		86.1			78.7			7.3
Restructuring costs		27.4			106.2			127.6
IT asset write-downs		–			29.1			–
Amortisation and impairment of acquired intangible assets (note 12)		168.4			140.1			147.5
Amortisation of other intangible assets (note 12)		38.6			33.7			31.6
Depreciation of property, plant and equipment		215.2			190.0			191.7
Losses/(gains) on sale of property, plant and equipment		0.8			1.1			(0.8	)
Gains on disposal of investments and subsidiaries		(44.3	)		(131.0	)		(186.3	)
Gains on remeasurement of equity interests arising from a change in scope of ownership		(232.4	)		(165.0	)		(9.2	)
Net foreign exchange gains		(17.0	)		(10.7	)		(2.5	)
Operating lease rentals:
Land and buildings		556.1			476.6			466.1
Sublease income		(11.6	)		(11.3	)		(11.2	)
		544.5			465.3			454.9
Plant and machinery		10.6			18.3			19.9
		555.1			483.6			474.8

In 2016, operating profit includes credits totalling £26.3 million (2015: £31.6 million, 2014: £24.9 million) relating to the release of excess provisions and other balances established in respect of acquisitions completed prior to 2015. 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 £86.1 million (2015: £78.7 million, 2014: £7.3 million) includes £79.6 million in relation to comScore Inc, which has not released any financial statements in relation to its 2015 or 2016 results due to an internal investigation by their Audit Committee. Following the announcement of this internal investigation, the market value of comScore Inc fell below the Group’s carrying value. Other investment write-downs 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.

In 2016, restructuring costs of £27.4 million (2015: £106.2 million, 2014: £127.6 million) comprise £27.4 million (2015: £36.7 million, 2014: 38.9 million) of costs resulting from the project to transform and rationalise the Group’s IT services and infrastructure. Included within the restructuring costs in 2015 and 2014 were £69.5 million and £88.7 million, respectively, arising from a structural reassessment of certain of the Group’s operations, primarily in the mature markets of Western Europe.

Gains on disposal of investments and subsidiaries of £44.3 million (2015: £131.0 million, 2014: £186.3 million) include £26.5 million of gains arising on the sale of the Group’s equity interest in Grass Roots Group.

Gains on remeasurement of equity interests arising from a change in scope of ownership of £232.4 million in 2016 primarily comprise gains of £260.0 million in relation to the reclassification of the Group’s interest in the Imagina Group in Spain from other investments to interests in associates, resulting from WPP attaining significant influence in the period; and losses of £23.2 million in relation to the merger of most of the Group’s Australian and New Zealand assets with STW Communications Group Limited in Australia. The re-named WPP AUNZ became a listed subsidiary of the Group on 8 April 2016.

All of the operating costs of the Group are related to administrative expenses.

F-15

Notes to the consolidated financial statements (continued)

3. Operating costs (continued)

Auditors’ remuneration:


	2016 £m		2015 £m		2014 £m
Fees payable to the Company’s auditors for the audit of the Company’s annual accounts		1.4		1.5		1.4
The audit of the Company’s subsidiaries pursuant to legislation		19.4		16.2		14.5
		20.8		17.7		15.9
Other services pursuant to legislation		3.7		3.3		3.1
Fees payable to the auditors pursuant to legislation		24.5		21.0		19.0
Tax advisory services		1.6		1.8		2.1
Tax compliance services		1.3		1.0		1.0
		2.9		2.8		3.1
Corporate finance services		0.1		0.2		0.3
Other services¹		5.7		6.5		5.4
Total non-audit fees		8.7		9.5		8.8
Total fees		33.2		30.5		27.8

Note

Other services include audits for earnout purposes.

Minimum committed annual rentals

Amounts payable in 2017 under leases will be as follows:


	Plant and machinery						Land and buildings
	2017 £m		2016 £m		2015 £m		2017 £m		2016 £m		2015 £m
In respect of operating leases which expire:
– within one year		4.0		4.3		5.3		85.1		57.6		66.7
– within two to five years		10.5		9.7		10.8		287.9		240.3		223.9
– after five years		–		0.3		0.1		187.0		163.1		139.4
		14.5		14.3		16.2		560.0		461.0		430.0

Future minimum annual amounts payable under all lease commitments in existence at 31 December 2016 are as follows:


	Minimum rental payments £m		Less sub- let rentals £m			Net payment £m
Year ending 31 December
2017		574.5		(9.3	)		565.2
2018		491.1		(7.1	)		484.0
2019		432.6		(4.9	)		427.7
2020		406.3		(2.9	)		403.4
2021		377.3		(2.6	)		374.7
Later years		1,728.1		(5.6	)		1,722.5
		4,009.9		(32.4	)		3,977.5

4. Share of results of associates

Share of results of associates include:


	2016 £m			2015 £m			2014 £m
Share of profit before interest and taxation		97.1			95.2			101.8
Share of exceptional losses		(15.2	)		(21.8	)		(7.6	)
Share of interest and non-controlling interests		(4.7	)		(1.7	)		(3.1	)
Share of taxation		(27.4	)		(24.7	)		(29.2	)
		49.8			47.0			61.9

5. Our people

Our staff numbers averaged 132,657 for the year ended 31 December 2016 against 124,930 in 2015 and 121,397 in 2014. Their geographical distribution was as follows:


	2016		2015		2014
North America		27,246		26,224		26,809
UK		14,070		13,401		12,838
Western Continental Europe		24,996		23,506		23,376
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe		66,345		61,799		58,374
		132,657		124,930		121,397

Their operating sector distribution was as follows:


	2016		2015		2014
Advertising and Media Investment Management		55,120		53,227		52,329
Data Investment Management		29,279		28,395		28,240
Public Relations & Public Affairs		9,054		8,492		8,392
Branding & Identity, Healthcare and Specialist Communications		39,204		34,816		32,436
		132,657		124,930		121,397

At the end of 2016 staff numbers were 134,341 (2015: 128,123, 2014: 123,621). Including all employees of associated undertakings, this figure was approximately 198,000 at 31 December 2016 (2015: 190,000, 2014: 179,000).

Staff costs include:


	2016 £m			2015 £m			2014 £m
Wages and salaries		5,395.6			4,578.4			4,467.8
Cash-based incentive plans		260.2			231.8			210.7
Share-based incentive plans (note 22)		106.5			99.0			102.2
Social security costs		658.1			578.4			567.8
Pension costs (note 23)		178.1			160.0			148.9
Severance		34.5			24.0			37.4
Other staff costs¹		1,151.9			981.0			905.7
		7,784.9			6,652.6			6,440.5
Staff cost to net sales ratio		62.8	%		63.2	%		64.0	%

Note

Freelance and temporary staff costs are included in other staff costs.

Included above are charges of £15.5 million (2015: £16.7 million, 2014: £16.9 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 2016 was £57.5 million (2015: £84.2 million, 2014: £57.6 million) of which £0.7 million (2015: £0.7 million, 2014: £0.7 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-16

Notes to the consolidated financial statements (continued)

6. Finance income, finance costs and revaluation of financial instruments

Finance income includes:


	2016 £m		2015 £m		2014 £m
Income from available for sale investments		12.5		18.9		26.0
Interest income		67.9		53.5		68.7
		80.4		72.4		94.7

Finance costs include:


	2016 £m		2015 £m		2014 £m
Net interest expense on pension plans (note 23)		6.7		7.3		8.0
Interest on other long-term employee benefits		2.7		2.5		1.9
Interest payable and similar charges¹		245.1		214.3		252.8
		254.5		224.1		262.7

Revaluation of financial instruments²include:


	2016 £m			2015 £m			2014 £m
Movements in fair value of treasury instruments		(19.5	)		(3.7	)		31.3
Movements in fair value of other derivatives		–			15.9			15.0
Revaluation of put options over non-controlling interests		(17.2	)		(11.3	)		(8.8	)
Revaluation of payments due to vendors (earnout agreements)		(11.6	)		(35.6	)		13.2
		(48.3	)		(34.7	)		50.7

Notes

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 $2,862 million of US dollar bonds at an average interest rate of 4.48%, €2,952 million of Eurobonds at an average interest rate of 1.85% and £1,000 million of Sterling bonds at an average interest rate of 4.83%.

Average borrowings under the US Dollar Revolving Credit Facilities (note 10) amounted to the equivalent of $109 million at an average interest rate of 0.82%.

Average borrowings under the Australian dollar Revolving Credit Facilities, acquired as part of the merger of most of the Group’s Australian and New Zealand assets with STW Communications Group Limited in Australia, amounted to A$336 million at an average rate of 3.69%.

Average borrowings under the US Commercial Paper Program for 2016 amounted to $293 million at an average interest rate of 0.75% inclusive of margin.

7. Taxation

In 2016, the effective tax rate on profit before taxation was 20.6% (2015: 16.6%, 2014: 20.7%)

The tax charge comprises:


	2016 £m			2015 £m			2014 £m
Corporation tax
Current year		569.4			403.0			394.9
Prior years		(80.3	)		(108.4	)		4.4
		489.1			294.6			399.3
Deferred tax
Current year		(88.0	)		(35.8	)		(93.2	)
Prior years		(12.2	)		(11.3	)		(5.7	)
		(100.2	)		(47.1	)		(98.9	)
Tax charge		388.9			247.5			300.4

The corporation tax credit for prior years in 2016, and also 2015, mainly comprises the release of a number of provisions following the resolution of tax matters in various countries. In 2014 the deferred tax credit primarily related to the recognition of temporary differences that were previously unrecognised.

7. Taxation (continued)

The tax charge for the year can be reconciled to profit before taxation in the consolidated income statement as follows:


	2016 £m			2015 £m			2014 £m
Profit before taxation		1,890.5			1,492.6			1,451.9
Tax at the corporation tax rate of 20%¹		378.1			302.3			312.2
Tax effect of share of results of associates		(10.0	)		(9.5	)		(13.3	)
Irrecoverable withholding taxes		36.3			25.7			24.2
Items that are not deductible in determining taxable profit		9.4			25.4			14.2
Effect of different tax rates of subsidiaries operating in other jurisdictions		60.4			49.9			12.9
Origination and reversal of unrecognised temporary differences		(4.3	)		0.4			10.6
Tax losses not recognised or utilised in the year		52.2			4.0			52.1
Utilisation of tax losses not previously recognised		(11.3	)		(10.4	)		(42.2	)
Recognition of temporary differences not previously recognised		(29.4	)		(20.6	)		(69.0	)
Net release of prior year provisions in relation to acquired businesses		(23.3	)		(22.9	)		(17.4	)
Other prior year adjustments		(69.2	)		(96.8	)		16.1
Tax charge		388.9			247.5			300.4
Effective tax rate on profit before tax		20.6	%		16.6	%		20.7	%

Note

The parent company of the Group is tax resident in the UK. As such, the tax rate in the tax reconciliation for 2016 is the UK corporation tax rate of 20% (2015: 20.25%, 2014: 21.5%).

Factors affecting the tax charge in future years

Factors that may affect the Group’s future tax charge include the levels and mix of profits in the many countries in which we operate, the prevailing tax rates in each of those countries and also the foreign exchange rates that apply to those profits. The tax charge may also be affected by the impact of acquisitions, disposals and other corporate restructurings, the resolution of open tax issues, future planning, and the ability to use brought forward tax losses. Furthermore, changes in local or international tax rules, for example prompted by the OECD’s Base Erosion and Profit Shifting project (a global initiative to improve the fairness and integrity of tax systems), or new challenges by tax or competition authorities, may expose us to significant additional tax liabilities or impact the carrying value of our deferred tax assets, which would affect the future tax charge.

The Group has a number of open tax returns and is subject to various ongoing tax audits in respect of which it has recognised potential liabilities, none of which are individually material. The Group does not currently expect any material additional charges, or credits, to arise in respect of these matters, beyond the amounts already provided. Liabilities relating to these open and judgemental matters are based upon estimates of whether additional taxes will be due after taking into account external advice where appropriate. Where the final tax outcome of these matters is different from the amounts which were initially recorded then such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.

Tax risk management

We maintain constructive engagement with the tax authorities and relevant government representatives, as well as active engagement with a wide range of international companies and business organisations with similar issues. We engage advisors and legal counsel to obtain opinions on tax legislation and principles. We have a Tax Risk Management Strategy in place which sets out the controls established and our assessment procedures for decision-making and how we monitor tax risk. We monitor proposed changes in taxation legislation and ensure these are taken into account when we consider our future business plans. Our directors are informed by management of any tax law changes, the nature and status of any significant ongoing tax audits, and other developments that could materially affect the Group’s tax position.

F-17

Notes to the consolidated financial statements (continued)

8. Ordinary dividends

Amounts recognised as distributions to equity holders in the year:


	2016			2015			2014			2016		2015		2014
Per share	Pence per share									£m		£m		£m
2015 Final dividend		28.78	p		26.58	p		23.65	p		368.5		343.2		309.5
2016 Interim dividend		19.55	p		15.91	p		11.62	p		248.0		202.6		150.5
		48.33	p		42.49	p		35.27	p		616.5		545.8		460.0

Proposed final dividend for the year ended 31 December 2016:

2016

2015

2014

Per share

Pence per share

Final dividend

37.05

28.78

26.58

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:


	2016			2015			2014
Earnings¹(£m)		1,400.1			1,160.2			1,077.2
Average shares used in basic EPS calculation (m)		1,277.8			1,288.5			1,307.4
EPS		109.6	p		90.0	p		82.4	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:


	2016			2015			2014
Diluted earnings (£m)		1,400.1			1,160.2			1,077.2
Average shares used in diluted EPS calculation (m)		1,296.0			1,313.0			1,337.5
Diluted EPS		108.0	p		88.4	p		80.5	p

Diluted EPS has been calculated based on the diluted earnings amounts above. At 31 December 2016, options to purchase 8.4 million ordinary shares (2015: 7.0 million, 2014: 10.7 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:


	2016 m		2015 m		2014 m
Average shares used in basic EPS calculation		1,277.8		1,288.5		1,307.4
Dilutive share options outstanding		2.4		3.5		4.8
Other potentially issuable shares		15.8		21.0		25.3
Shares used in diluted EPS calculation		1,296.0		1,313.0		1,337.5

At 31 December 2016 there were 1,331,880,730 (2015: 1,329,366,024, 2014: 1,325,747,724) 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

2016
£m

2015
£m

2016
£m

2015
£m

Analysis of changes in financing

Beginning of year

668.2

640.6

5,157.4

4,523.0

Ordinary shares issued

27.2

27.6

–

Net (decrease)/increase in drawings on bank loans and corporate bonds

–

(22.5

)

492.0

Amortisation of financing costs included in debt less cash position

–

9.0

7.5

Debt acquired

–

144.4

–

Other movements

–

(13.1

)

105.0

Exchange adjustments

–

757.9

29.9

End of year

695.4

668.2

6,033.1

5,157.4

Note

The table above excludes bank overdrafts which fall within cash and cash equivalents for the purposes of the consolidated cash flow statement.

Shares

At 31 December 2016, the Company’s share base was entirely composed of ordinary equity share capital and share premium of £695.4 million (2015: £668.2 million), further details of which are disclosed in note 26.

Debt

US$ bonds The Group has in issue $812 million of 4.75% bonds due November 2021, $500 million of 3.625% bonds due September 2022, $750 million of 3.75% bonds due September 2024, $300 million of 5.125% bonds due September 2042 and $500 million of 5.625% bonds due November 2043.

Eurobonds The Group has in issue €252 million of 0.43% bonds due March 2018, €600 million of 0.75% bonds due November 2019, €750 million of 3% bonds due November 2023, €750 million of 2.25% bonds due September 2026 and €600 million of 1.625% bonds due March 2030.

Sterling bonds In September 2016, the Group issued £400 million of 2.875% bonds due September 2046. 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 Facility The Group has a five-year Revolving Credit Facility of $2.5 billion due July 2021. The Group’s borrowing under these facilities, which are drawn down predominantly in US dollars and pounds sterling, averaged the equivalent of $109 million in 2016. In April 2016, the Group entered into a A$520 million Revolving Credit Facility due April 2019. The Group’s borrowings under the Australian dollar facilities were drawn down in Australian dollars and New Zealand dollars, averaged the equivalent of A$336 million in 2016. The Group had available undrawn committed credit facilities of £2,122.3 million at December 2016 (2015: £1,696.8 million).

Borrowings under the $2.5 billion Revolving Credit Facility are governed by certain financial covenants based on the results and financial position of the Group. Borrowings under the A$520 million Revolving Credit Facility are governed by certain financial covenants based on the results and financial position of WPP AUNZ.

US Commercial Paper Program

The Group operates a commercial paper program using its Revolving Credit Facility as a backstop. The average commercial paper outstanding in 2016 was $293 million. There was no US Commercial Paper outstanding at 31 December 2016.

F-18

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:


	2016 £m			2015 £m
Within one year		(582.9	)		(541.7	)
Between one and two years		(389.5	)		(548.2	)
Between two and three years		(893.0	)		(325.4	)
Between three and four years		(369.1	)		(581.6	)
Between four and five years		(812.9	)		(335.0	)
Over five years		(5,144.7	)		(4,459.5	)
Debt financing (including interest) under the Revolving Credit Facility and in relation to unsecured loan notes		(8,192.1	)		(6,791.4	)
Short-term overdrafts – within one year		(534.3	)		(435.8	)
Future anticipated cash flows		(8,726.4	)		(7,227.2	)
Effect of discounting/financing rates		2,159.0			1,634.0
Debt financing		(6,567.4	)		(5,593.2	)

Analysis of fixed and floating rate debt by currency including the effect of interest rate and cross-currency swaps:

2016

Currency

£m

Fixed
rate¹

Floating
basis

Period
(months)¹

– fixed

1,255.6

4.62%

n/a

212

– floating

1,063.1

n/a

LIBOR

n/a

– fixed

800.0

4.53%

n/a

193

– floating

200.0

n/a

LIBOR

n/a

€

– fixed

2,521.9

1.85%

n/a

Other

192.5

n/a

6,033.1

2015

Currency

£m

Fixed
rate¹

Floating
basis

Period
(months)¹

– fixed

1,052.0

4.62%

n/a

224

– floating

890.7

n/a

LIBOR

n/a

– fixed

400.0

6.19%

n/a

– floating

200.0

n/a

LIBOR

n/a

€

– fixed

2,544.4

2.54%

n/a

Other

70.3

n/a

5,157.4

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.

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
2016	Payable £m		Receivable £m		Payable £m		Receivable £m
Within one year		183.2		183.0		282.5		302.2
Between one and two years		19.2		20.6		51.7		55.4
Between two and three years		18.8		18.1		57.5		58.5
Between three and four years		20.0		18.1		61.2		60.5
Between four and five years		20.7		18.1		1,687.3		1,686.1
Over five years		521.3		518.1		–		–
		783.2		776.0		2,140.2		2,162.7


	Financial liabilities				Financial assets
2015	Payable £m		Receivable £m		Payable £m		Receivable £m
Within one year		55.2		50.6		72.4		102.7
Between one and two years		40.7		39.4		277.1		298.1
Between two and three years		17.4		17.6		52.8		56.7
Between three and four years		18.4		19.1		55.6		56.7
Between four and five years		20.3		20.8		58.1		56.7
Over five years		834.1		834.2		1,393.6		1,387.2
		986.1		981.7		1,909.6		1,958.1

F-19

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-10.

Net cash from operating activities:


	2016 £m			2015 £m			2014 £m
Profit for the year		1,501.6			1,245.1			1,151.5
Taxation		388.9			247.5			300.4
Revaluation of financial instruments		48.3			34.7			(50.7	)
Finance costs		254.5			224.1			262.7
Finance income		(80.4	)		(72.4	)		(94.7	)
Share of results of associates		(49.8	)		(47.0	)		(61.9	)
Adjustments for:
Non-cash share-based incentive plans (including share options)		106.5			99.0			102.2
Depreciation of property, plant and equipment		220.8			194.7			197.3
Impairment of goodwill		27.0			15.1			16.9
Amortisation and impairment of acquired intangible assets		168.4			140.1			147.5
Amortisation of other intangible assets		38.6			33.7			31.6
Investment write-downs		86.1			78.7			7.3
Gains on disposal of investments and subsidiaries		(44.3	)		(131.0	)		(186.3	)
Gains on remeasurement of equity interests arising from a change in scope of ownership		(232.4	)		(165.0	)		(9.2	)
Losses/(gains) on sale of property, plant and equipment		0.8			1.1			(0.8	)
(Increase)/decrease in inventories and work in progress		(16.7	)		7.8			(9.7	)
Increase in trade receivables and accrued income		(53.7	)		(882.7	)		(132.5	)
Increase in trade payables and deferred income		188.7			713.4			449.8
Decrease/(increase) in other receivables		77.4			(39.0	)		48.5
(Decrease)/increase in other payables – short term		(303.7	)		74.5			(58.9	)
Increase in other payables – long-term		4.5			24.2			36.5
Decrease in provisions		(47.8	)		(62.3	)		(38.7	)
Corporation and overseas tax paid		(414.2	)		(301.2	)		(289.9	)
Interest and similar charges paid		(242.1	)		(212.0	)		(249.1	)
Interest received		73.9			61.3			69.8
Investment income		12.5			4.9			11.9
Dividends from associates		60.4			72.6			52.2
Net cash inflow from operating activities		1,773.8			1,359.9			1,703.7

11. Analysis of cash flows (continued)

Acquisitions and disposals:


	2016 £m			2015 £m			2014 £m
Initial cash consideration		(424.1	)		(463.5	)		(382.7	)
Cash and cash equivalents acquired (net)		57.3			57.7			74.4
Earnout payments		(92.3	)		(43.9	)		(34.3	)
Purchase of other investments (including associates)		(260.2	)		(283.2	)		(188.8	)
Proceeds on disposal of investments and subsidiaries		80.5			63.4			42.3
Acquisitions and disposals		(638.8	)		(669.5	)		(489.1	)
Cash consideration for non-controlling interests		(58.3	)		(23.6	)		(5.6	)
Net cash outflow		(697.1	)		(693.1	)		(494.7	)

Share repurchases and buy-backs:
	2016 £m			2015 £m			2014 £m
Purchase of own shares by ESOP Trusts	(152.9)			(181.6)			(98.3)
Shares purchased into treasury		(274.5	)		(406.0	)		(412.5	)
Net cash outflow		(427.4	)		(587.6	)		(510.8	)

Net (decrease)/increase in borrowings:
	2016 £m			2015 £m			2014 £m
Proceeds from issue of £400 million bonds	400.0			–			–
Repayment of €498 million bonds		(392.1	)		–			–
Proceeds from issues of €600 million bonds	–			858.7			–
Repayment of €500 million bonds		–			(481.9	)		–
Premium on exchange of €252 million bonds		–			(13.7	)		–
Repayment of $369 million bonds		–			–			(235.3	)
Repayment of $600 million bonds		–			–			(333.7	)
Repayment of $25 million TNS private placements		–			–			(14.6	)
Proceeds from issue of €750 million bonds		–			–			588.7
Proceeds from issue of $750 million bonds		–			–			460.1
(Decrease)/increase in drawings on bank loans		(30.4	)		128.9			–
Net cash (outflow)/inflow		(22.5	)		492.0			465.2

Cash and cash equivalents:
	£	2016 m		£	2015 m		£	2014 m
Cash at bank and in hand	2,256.2			2,227.8			1,967.0
Short-term bank deposits	180.7			154.6			545.7
Overdrafts¹		(534.3	)		(435.8	)		(265.1	)
		1,902.6			1,946.6			2,247.6

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-20

Notes to the consolidated financial statements (continued)

12. Intangible assets

Goodwill

The movements in 2016 and 2015 were as follows:


	£m
Cost:
1 January 2015		10,583.0
Additions¹		763.6
Revision of earnout estimates		19.9
Exchange adjustments		(72.3	)
31 December 2015		11,294.2
Additions¹		796.6
Revision of earnout estimates		28.4
Exchange adjustments		1,820.2
31 December 2016		13,939.4

Accumulated impairment losses and write-downs:
1 January 2015		603.6
Impairment losses for the year		15.1
Exchange adjustments		4.9
31 December 2015		623.6
Impairment losses for the year		20.0
Exchange adjustments		81.5
31 December 2016		725.1

Net book value:
31 December 2016		13,214.3
31 December 2015		10,670.6
1 January 2015		9,979.4

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 are:


	2016 £m		2015 £m
GroupM		2,966.2		2,390.7
Kantar		2,573.0		2,223.4
Wunderman		1,297.1		1,083.3
Y&R Advertising		1,140.3		946.9
Burson-Marsteller		590.3		482.6
Other		4,647.4		3,543.7
Total goodwill		13,214.3		10,670.6

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 2016 and 2015 were as follows:


	Brands with an indefinite useful life £m			Acquired intangibles £m			Other £m			Total £m
Cost:
1 January 2015		969.3			1,784.2			313.0			3,066.5
Additions		–			–			36.1			36.1
Disposals		–			–			(19.2	)		(19.2	)
New acquisitions		–			230.7			2.4			233.1
Other movements¹		–			6.7			(4.1	)		2.6
Exchange adjustments		(1.2	)		(14.5	)		2.8			(12.9	)
31 December 2015		968.1			2,007.1			331.0			3,306.2
Additions		–			–			33.0			33.0
Disposals		–			(0.8	)		(42.2	)		(43.0	)
New acquisitions		–			319.1			10.5			329.6
Other movements¹		–			11.6			4.7			16.3
Exchange adjustments		173.2			198.5			67.1			438.8
31 December 2016		1,141.3			2,535.5			404.1			4,080.9
Amortisation and impairment:
1 January 2015		–			1,187.3			210.3			1,397.6
Charge for the year		–			135.7			33.7			169.4
Disposals		–			–			(18.3	)		(18.3	)
IT asset write-downs		–			–			29.1			29.1
Other movements		–			–			(7.3	)		(7.3	)
Exchange adjustments		–			16.5			3.8			20.3
31 December 2015		–			1,339.5			251.3			1,590.8
Charge for the year		–			163.3			38.6			201.9
Disposals		–			(0.4	)		(39.5	)		(39.9	)
Other movements		–			–			2.0			2.0
Exchange adjustments		–			60.6			48.2			108.8
31 December 2016		–			1,563.0			300.6			1,863.6
Net book value:
31 December 2016		1,141.3			972.5			103.5			2,217.3
31 December 2015		968.1			667.6			79.7			1,715.4
1 January 2015		969.3			596.9			102.7			1,668.9

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 2016 include brand names of £486.2 million (2015: £401.0 million), customer-related intangibles of £448.9 million (2015: £239.9 million), and other assets (including proprietary tools) of £37.4 million (2015: £26.7 million).

The total amortisation and impairment of acquired intangible assets of £168.4 million (2015: £140.1 million) includes £5.1 million (2015: £4.4 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.

F-21

Notes to the consolidated financial statements (continued)

12. Intangible assets (continued)

The goodwill impairment review is undertaken annually on 30 September. The review assessed whether the carrying value of goodwill was supported by the net present value of future cash flows, using a pre-tax discount rate of 8.5% (2015: 8.5%) and management forecasts for a projection period of up to five years, followed by an assumed annual long-term growth rate of 3.0% (2015: 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 £27.0 million (2015: £15.1 million) relates to a number of under-performing businesses in the Group, of which £7.0 million (2015: £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. The key assumptions used for estimating cash flow projections in the Group’s impairment testing are those relating to revenue growth and operating margin. The key assumptions take account of the businesses’ expectations for the projection period. These expectations consider the macroeconomic environment, industry and market conditions, the unit’s historical performance and any other circumstances particular to the unit, such as business strategy and client mix.

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 2016 and 2015 were as follows:


	Land £m		Freehold buildings £m			Leasehold buildings £m			Fixtures, fittings and equipment £m			Computer equipment £m			Total £m
Cost:
1 January 2015		37.1		110.3			784.7			334.7			598.4			1,865.2
Additions		–		0.4			107.2			39.4			63.3			210.3
New acquisitions		–		1.2			2.2			13.3			4.4			21.1
Disposals		–		(12.6	)		(68.2	)		(37.7	)		(55.9	)		(174.4	)
Exchange adjustments		–		2.9			11.5			(11.4	)		(7.3	)		(4.3	)
31 December 2015		37.1		102.2			837.4			338.3			602.9			1,917.9
Additions		–		1.3			107.9			55.9			87.0			252.1
New acquisitions		–		–			7.9			6.5			6.2			20.6
Disposals		–		(0.3	)		(83.2	)		(46.1	)		(106.4	)		(236.0	)
Exchange adjustments		–		23.2			142.5			48.0			153.7			367.4
31 December 2016		37.1		126.4			1,012.5			402.6			743.4			2,322.0

Depreciation:
1 January 2015		–		22.5			412.4			203.4			454.4			1,092.7
Charge for the year		–		5.2			70.5			40.9			78.1			194.7
Disposals		–		(7.7	)		(64.8	)		(29.5	)		(54.5	)		(156.5	)
Exchange adjustments		–		(0.8	)		5.1			(5.9	)		(9.1	)		(10.7	)
31 December 2015		–		19.2			423.2			208.9			468.9			1,120.2
Charge for the year		–		4.3			81.1			45.7			89.7			220.8
Disposals		–		(0.6	)		(77.8	)		(49.2	)		(101.4	)		(229.0	)
Exchange adjustments		–		2.3			83.3			34.6			121.1			241.3
31 December 2016		–		25.2			509.8			240.0			578.3			1,353.3

Net book value:
31 December 2016		37.1		101.2			502.7			162.6			165.1			968.7
31 December 2015		37.1		83.0			414.2			129.4			134.0			797.7
1 January 2015		37.1		87.8			372.3			131.3			144.0			772.5

At the end of the year, capital commitments contracted, but not provided for in respect of property, plant and equipment were £22.1 million (2015: £61.3 million).

F-22

Notes to the consolidated financial statements (continued)

14. Interests in associates, joint ventures and other investments

The movements in 2016 and 2015 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 2015		419.2			340.7			759.9			669.2
Additions		(18.7	)		–			(18.7	)		357.1
Goodwill arising on acquisition of new associates		–			124.8			124.8			–
Share of results of associate undertakings (note 4)		47.0			–			47.0			–
Dividends		(75.1	)		–			(75.1	)		–
Other movements		5.1			5.7			10.8			–
Exchange adjustments		(7.9	)		(5.8	)		(13.7	)		18.9
Disposals		(46.7	)		(1.6	)		(48.3	)		(13.8	)
Reclassification from/(to) subsidiaries		11.2			(34.9	)		(23.7	)		–
Revaluation of other investments		–			–			–			206.0
Amortisation of other intangible assets		–			(4.4	)		(4.4	)		–
Write-downs		–			–			–			(78.7	)
31 December 2015		334.1			424.5			758.6			1,158.7
Additions		(1.3	)		–			(1.3	)		233.5
Goodwill arising on acquisition of new associates		–			292.2			292.2			–
Share of results of associate undertakings (note 4)		49.8			–			49.8			–
Dividends		(60.4	)		–			(60.4	)		–
Other movements		(45.3	)		52.4			7.1			–
Reclassification from other investments to associates		43.6			30.7			74.3			(74.3	)
Exchange adjustments		61.6			50.1			111.7			170.4
Disposals		(12.7	)		–			(12.7	)		(3.4	)
Reclassification to subsidiaries		(44.2	)		(88.8	)		(133.0	)		(0.2	)
Revaluation of other investments		–			–			–			(93.1	)
Amortisation of other intangible assets		–			(5.1	)		(5.1	)		–
Goodwill impairment		–			(7.0	)		(7.0	)		–
Write-downs		(4.8	)		–			(4.8	)		(81.3	)
31 December 2016		320.4			749.0			1,069.4			1,310.3

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 2016 included:


	% owned		Country of incorporation
Asatsu-DK Inc.		24.6		Japan
Barrows Design and Manufacturing (Pty) Limited		35.0		South Africa
Chime Communications Ltd		24.9		UK
CTR Market Research Company Limited		46.0		China
CVSC Sofres Media Co Limited		40.0		China
GIIR Inc		30.0		Korea
Globant S.A.¹		19.5		Argentina
Haworth Marketing & Media Company		49.0		USA
High Co SA		34.1		France
Imagina		23.5		Spain
Marktest Investimentos SGPS S.A.		43.1		Portugal
Smollan Holdings (Pty) Ltd		24.8		South Africa

Note

Although the Group holds less than 20% of Globant S.A, it is considered to be an associate as the Group exercises significant influence over the entity.

The market value of the Group’s shares in its principal listed associate undertakings at 31 December 2016 was as follows: Asatsu-DK Inc: £202.9 million, GIIR Inc: £26.9 million, Globant SA: £180.7 million and High Co SA: £21.0 million (2015: Asatsu-DK Inc: £171.6 million, GIIR Inc: £25.2 million, Globant SA: £170.3 million and High Co SA: £27.2 million).

The carrying value (including goodwill and other intangibles) of these equity interests in the Group’s consolidated balance sheet at 31 December 2016 was as follows: Asatsu-DK Inc: £134.5 million, GIIR Inc: £37.9 million, Globant SA: £78.5 million and High Co SA: £31.4 million (2015: Asatsu-DK Inc: £120.1 million, GIIR Inc: £30.4 million, Globant SA: £61.9 million and High Co SA: £28.6 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-23

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 2016.


	2016 £m			2015 £m			2014 £m
Income statement
Revenue		2,254.5			2,049.5			2,246.5
Operating profit		308.3			283.7			280.6
Profit before taxation		237.2			236.5			267.0
Profit for the year		156.7			162.0			183.0


	2016 £m			2015 £m			2014 £m
Balance sheet
Assets		4,223.1			3,912.4			4,380.3
Liabilities		(1,900.0	)		(1,906.2	)		(1,823.9	)
Net assets		2,323.1			2,006.2			2,556.4

The application of equity accounting is ordinarily discontinued when the investment is reduced to zero and additional losses are not provided for unless the Group 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 £89.2 million (2015: £93.1 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 Income taxes. 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.

15. Deferred tax (continued)

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.

F-24

Notes to the consolidated financial statements (continued)

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 2016 £m			Offset 2016 £m			As reported 2016 £m			Gross 2015 £m			Offset 2015 £m			As reported 2015 £m
Deferred tax assets		598.0			(457.6	)		140.4			410.7			(316.6	)		94.1
Deferred tax liabilities		(1,150.0	)		457.6			(692.4	)		(868.9	)		316.6			(552.3	)
		(552.0	)		–			(552.0	)		(458.2	)		–			(458.2	)

The following are the major gross deferred tax assets recognised by the Group and movements thereon in 2016 and 2015:


	Deferred compensation £m			Accounting provisions & accruals £m			Retirement benefit obligations £m			Property, plant & equipment £m		Tax losses & credits £m		Share- based payments £m			Restructuring provisions £m			Other temporary differences £m			Total £m
1 January 2015		45.5			51.5			106.4			41.4		48.1		71.5			20.4			22.0			406.8
(Charge)/credit to income		(5.8	)		(2.9	)		(12.0	)		2.1		20.4		(3.3	)		11.2			(5.1	)		4.6
Charge to other comprehensive income		–			–			(5.2	)		–		–		–			–			–			(5.2	)
Credit to equity		–			–			–			–		–		6.4			–			–			6.4
Exchange differences		2.2			0.9			1.8			1.2		2.8		4.2			(0.5	)		(0.3	)		12.3
Transfer to current tax creditor		–			–			–			–		–		–			(14.2	)		–			(14.2	)
31 December 2015		41.9			49.5			91.0			44.7		71.3		78.8			16.9			16.6			410.7
Acquisition of subsidiaries		–			7.1			–			–		–		0.2			–			15.0			22.3
Credit/(charge) to income		39.5			8.5			28.3			19.2		6.2		(1.8	)		(11.7	)		7.7			95.9
Credit to other comprehensive income		–			–			1.8			–		–		–			–			–			1.8
Charge to equity		–			–			–			–		–		(15.0	)		–			–			(15.0	)
Exchange differences		14.2			15.5			20.3			6.9		12.2		13.6			0.7			(1.1	)		82.3
31 December 2016		95.6			80.6			141.4			70.8		89.7		75.8			5.9			38.2			598.0

Other temporary differences comprise a number of items including tax deductible goodwill, none of which is individually significant to the Group’s consolidated balance sheet.

In addition the Group has recognised the following gross deferred tax liabilities and movements thereon in 2016 and 2015:


	Brands and other intangibles £m			Associate earnings £m		Goodwill £m		Property, plant & equipment £m			Financial instruments £m			Other temporary differences £m			Total £m
1 January 2015		558.2			19.6		163.7		30.8			49.7			12.7			834.7
Acquisition of subsidiaries		73.4			–		–		–			–			0.4			73.8
(Credit)/charge to income		(44.2	)		2.7		4.7		(1.6	)		(1.8	)		(2.4	)		(42.6	)
Exchange adjustments		(10.3	)		0.2		8.3		1.7			2.8			0.3			3.0
31 December 2015		577.1			22.5		176.7		30.9			50.7			11.0			868.9
Acquisition of subsidiaries		114.8			–		–		–			–			–			114.8
(Credit)/charge to income		(51.3	)		3.1		23.5		(0.4	)		3.5			17.3			(4.3	)
Charge to other comprehensive income		–			–		–		–			–			2.2			2.2
Exchange differences		115.3			2.7		32.3		5.7			9.8			2.6			168.4
31 December 2016		755.9			28.3		232.5		36.2			64.0			33.1			1,150.0

At the balance sheet date, the Group has gross tax losses and other temporary differences of £5,153.2 million (2015: £4,581.9 million) available for offset against future profits. Deferred tax assets have been recognised in respect of the tax benefit of £1,104.4 million (2015: £1,186.3 million) of such tax losses and other temporary differences. No deferred tax asset has been recognised in respect of the remaining £4,048.8 million (2015: £3,395.6 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 £42.4 million that will expire within 1-10 years, and £3,489.3 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 £3,270.8 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.

F-25

Notes to the consolidated financial statements (continued)

16. Inventory and work in progress

The following are included in the net book value of inventory and work in progress:


	2016 £m		2015 £m
Work in progress		383.1		315.1
Inventory		17.3		13.9
		400.4		329.0

17. Trade and other receivables

The following are included in trade and other receivables:

Amounts falling due within one year:


	2016 £m		2015 £m
Trade receivables (net of bad debt provision)		8,054.2		6,799.4
VAT and sales taxes recoverable		157.2		154.9
Prepayments		310.0		235.0
Accrued income		3,353.8		2,853.8
Fair value of derivatives		14.7		4.6
Other debtors		484.6		447.7
		12,374.5		10,495.4

The ageing of trade receivables and other financial assets is as follows:


2016	Carrying amount at 31 December 2016 £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		8,054.2		5,545.6		1,611.0		683.6		156.6		37.2		20.2
Other financial assets		504.5		335.0		91.3		16.3		6.7		11.9		43.3
		8,558.7		5,880.6		1,702.3		699.9		163.3		49.1		63.5

2015	Carrying amount at 31 December 2015 £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		6,799.4		4,290.7		1,704.0		631.9		133.0		35.4		4.4
Other financial assets		453.5		265.7		107.6		23.8		5.1		19.1		32.2
		7,252.9		4,556.4		1,811.6		655.7		138.1		54.5		36.6

Other financial assets are included in other debtors.

Past due amounts are not impaired where collection is considered likely.

Amounts falling due after more than one year:


	2016 £m		2015 £m
Prepayments		3.7		1.5
Accrued income		9.5		5.8
Fair value of derivatives		8.3		39.7
Other debtors		183.4		131.7
		204.9		178.7

17. Trade and other receivables (continued)

Bad debt provisions:


	2016 £m			2015 £m			2014 £m
Balance at beginning of year		85.4			85.3			92.8
New acquisitions		1.8			1.0			3.2
Charged to operating costs		15.5			21.6			18.9
Exchange adjustments		13.7			0.2			0.3
Utilisations and other movements		(22.6	)		(22.7	)		(29.9	)
Balance at end of year		93.8			85.4			85.3

The allowance for bad and doubtful debts is equivalent to 1.2% (2015: 1.2%, 2014: 1.3%) of gross trade accounts receivables.

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:


	2016 £m		2015 £m
Trade payables		10,308.3		8,538.3
Deferred income		1,312.7		1,081.0
Payments due to vendors (earnout agreements)		277.5		126.0
Liabilities in respect of put option agreements with vendors		51.0		51.1
Fair value of derivatives		4.1		0.7
Other creditors and accruals		3,056.8		2,887.9
		15,010.4		12,685.0

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:


	2016 £m		2015 £m
Payments due to vendors (earnout agreements)		699.0		455.3
Liabilities in respect of put option agreements with vendors		246.0		183.3
Fair value of derivatives		1.8		2.3
Other creditors and accruals		327.0		250.6
		1,273.8		891.5

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:


	2016 £m			2015 £m
Within one year		277.5			126.0
Between one and two years		220.1			104.9
Between two and three years		170.2			105.1
Between three and four years		176.6			110.9
Between four and five years		122.4			122.5
Over five years		9.7			11.9
		976.5			581.3

	2016 £m			2015 £m
At beginning of year		581.3			311.4
Earnouts paid (note 11)		(92.3	)		(43.9	)
New acquisitions		359.5			262.2
Revision of estimates taken to goodwill (note 12)		28.4			19.9
Revaluation of payments due to vendors (note 6)		11.6			35.6
Exchange adjustments		88.0			(3.9	)
At end of year		976.5			581.3

As of 31 December 2016, 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 £453 million (2015: £nil to £378 million) and £nil to £2,108 million (2015: £nil to £1,645 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 and exchange adjustments, 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:


	2016 £m		2015 £m
Bank overdrafts		534.3		435.8
Corporate bonds and bank loans		468.2		496.2
		1,002.5		932.0

The Group considers that the carrying amount of bank overdrafts approximates their fair value.

Amounts falling due after more than one year:


	2016 £m		2015 £m
Corporate bonds and bank loans		5,564.9		4,661.2

The Group estimates that the fair value of corporate bonds is £6,101.4 million at 31 December 2016 (2015: £5,207.4 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, bank loans and overdrafts included within liabilities fall due for repayment as follows:


	2016 £m		2015 £m
Within one year		1,002.5		932.0
Between one and two years		208.0		413.6
Between two and three years		717.2		174.7
Between three and four years		195.7		440.6
Between four and five years		660.9		194.2
Over five years		3,783.1		3,438.1
		6,567.4		5,593.2

21. Provisions for liabilities and charges

The movements in 2016 and 2015 were as follows:


	Property £m			Other £m			Total £m
1 January 2015		44.5			121.9			166.4
Charged to the income statement		9.2			15.6			24.8
Acquisitions¹		13.3			11.2			24.5
Utilised		(7.2	)		(11.4	)		(18.6	)
Released to the income statement		(2.8	)		(10.9	)		(13.7	)
Transfers		(3.0	)		2.5			(0.5	)
Exchange adjustments		(1.3	)		2.0			0.7
31 December 2015		52.7			130.9			183.6
Charged to the income statement		5.8			14.5			20.3
Acquisitions¹		11.1			3.9			15.0
Utilised		(14.7	)		(18.1	)		(32.8	)
Released to the income statement		(2.9	)		(3.7	)		(6.6	)
Transfers		(1.6	)		14.6			13.0
Exchange adjustments		8.1			27.3			35.4
31 December 2016		58.5			169.4			227.9

Note

Acquisitions include £3.4 million (2015: £13.5 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:

2016
£m

2015
£m

2014
£m

Share-based payments (note 5)

106.5

99.0

102.2

Share-based payments comprise charges for stock options and restricted stock awards to employees of the Group.

As of 31 December 2016, there was £175.9 million (2015: £162.0 million) of total unrecognised compensation cost related to the Group’s restricted stock plans. That cost is expected to be recognised over an average 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:

Leadership Equity Acquisition Plan III (LEAP III)

Under 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 Shareholder Return (TSR)) of the Company over that period against a comparator group of other listed communications services companies. The 2012 LEAP III plan vested in March 2017 at a match of 5.0 shares for each investment share, the maximum match possible. 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. The vest date will usually be 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 performance of 10% average annual ROE and maximum performance of 14%, with a sliding scale 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. 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
2016
number

Granted
number

Lapsed
number

Vested
number

Non-vested
31 December

2016

number

LEAP III¹

2.1

5.4

(0.1

)

(6.6

)

0.8

Executive Performance Share Plan (EPSP)

6.7

1.8

(0.5

)

–

8.0

Performance Share Awards (PSA)

1.7

1.1

(0.1

)

(1.5

)

1.2

Leaders, Partners and High Potential Group

5.7

2.9

(0.4

)

(1.8

)

6.4

Weighted average fair value (pence per share):

LEAP III¹

749p

665p

860p

665p

860p

Executive Performance Share Plan (EPSP)

1,271p

1,705p

1,179p

–

1,373p

Performance Share Awards (PSA)

1,343p

1,490p

1,596p

1,225p

1,596p

Leaders, Partners and High Potential Group

1,401p

1,603p

1,410p

1,242p

1,534p

Note

The number of shares granted represents the matched shares awarded on vest date for the 2011 LEAP III plan which vested in March 2016. The actual number of shares that vest for each 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 2016 was £116.8 million (2015: £111.7 million, 2014: £107.2 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:


	2016 £m		2015 £m		2014 £m
Defined contribution plans		153.5		135.0		129.8
Defined benefit plans charge to operating profit		24.6		25.0		19.1
Pension costs (note 5)		178.1		160.0		148.9
Net interest expense on pension plans (note 6)		6.7		7.3		8.0
		184.8		167.3		156.9

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 2016.

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 2016 amounted to £43.7 million (2015: £70.9 million, 2014: £68.2 million). Employer contributions and benefit payments in 2017 are expected to be approximately £70 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 judgments 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:


	2016 % pa		2015 % pa		2014 % pa		2013 % pa
UK
Discount rate¹		2.5		3.7		3.4		4.5
Rate of increase in salaries		3.5		3.1		3.1		3.6
Rate of increase in pensions in payment		4.1		3.9		3.9		4.2
Inflation		2.8		2.4		2.4		2.9
North America
Discount rate¹		3.8		4.0		3.7		4.5
Rate of increase in salaries		3.1		3.0		3.0		3.0
Inflation		4.0		2.5		2.5		2.5
Western Continental Europe
Discount rate¹		1.7		2.5		2.1		3.7
Rate of increase in salaries		2.0		2.3		2.2		2.4
Rate of increase in pensions in payment		1.3		1.6		2.0		2.0
Inflation		1.7		2.0		2.0		2.0
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe
Discount rate¹		4.2		4.2		4.2		4.4
Rate of increase in salaries		5.9		5.8		6.1		5.9
Inflation		4.0		4.0		3.9		4.5

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.

23. Provision for post-employment benefits (continued)

At 31 December 2016, 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		Other¹
– current pensioners (at age 65) – male		22.8		22.8		23.6		21.0		19.6
– current pensioners (at age 65) – female		24.5		24.4		24.8		24.2		24.8
– future pensioners (current age 45) – male		24.7		24.4		25.6		23.4		19.6
– future pensioners (current age 45) – female		26.5		26.0		27.0		26.6		24.8

Note

Includes Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe.

The life expectancies after age 65 at 31 December 2015 were 22.9 years and 24.7 years for male and female current pensioners (at age 65) respectively, and 24.8 years and 26.7 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		Other¹
Weighted average duration of the defined benefit obligation (years)		12.5		9.3		13.8		17.1		9.1
Expected benefit payments over the next 10 years (£m)
Benefits expected to be paid within 12 months		71.4		43.4		17.1		8.1		2.8
Benefits expected to be paid in 2018		65.7		38.3		17.3		7.8		2.3
Benefits expected to be paid in 2019		66.5		37.9		17.4		8.4		2.8
Benefits expected to be paid in 2020		65.4		36.7		17.7		8.5		2.5
Benefits expected to be paid in 2021		65.7		35.1		18.2		8.9		3.5
Benefits expected to be paid in the next five years		315.5		150.5		95.2		49.5		20.3

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.


	Increase/(decrease) in benefit obligation
Sensitivity analysis of significant actuarial assumptions	2016 £m			2015 £m
Discount rate
Increase by 25 basis points
UK		(13.3	)		(10.9	)
North America		(10.9	)		(9.4	)
Western Continental Europe		(10.1	)		(7.8	)
Other¹		(0.6	)		(0.5	)
Decrease by 25 basis points
UK		14.1			11.5
North America		11.2			9.7
Western Continental Europe		10.6			8.2
Other¹		0.6			0.5
Rate of increase in salaries
Increase by 25 basis points
UK		0.2			0.2
North America		–			0.1
Western Continental Europe		1.4			1.3
Other¹		0.6			0.5
Decrease by 25 basis points
UK		(0.2	)		(0.1	)
North America		–			–
Western Continental Europe		(1.4	)		(1.3	)
Other¹		(0.6	)		(0.5	)
Rate of increase in pensions in payment
Increase by 25 basis points
UK		2.3			2.1
Western Continental Europe		6.8			5.3
Decrease by 25 basis points
UK		(2.3	)		(2.0	)
Western Continental Europe		(6.4	)		(5.0	)
Life expectancy
Increase in longevity by one additional year
UK		17.7			13.3
North America		6.2			5.1
Western Continental Europe		7.4			5.6
Other¹		–			–

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:


	2016 £m			%		2015 £m			%		2014 £m			%
Equities		161.9			17.3		132.5			16.3		151.1			17.8
Bonds		566.0			60.6		479.5			58.9		496.2			58.4
Insured annuities		63.5			6.8		60.5			7.4		68.0			8.0
Property		1.6			0.2		1.5			0.2		1.4			0.2
Cash		44.9			4.8		65.1			8.0		52.2			6.1
Other		96.3			10.3		75.1			9.2		80.6			9.5
Total fair value of assets		934.2			100.0		814.2			100.0		849.5			100.0
Present value of liabilities		(1,209.8	)				(1,039.9	)				(1,144.8	)
Deficit in the plans		(275.6	)				(225.7	)				(295.3	)
Irrecoverable surplus		(0.9	)				(3.6	)				(0.9	)
Net liability¹		(276.5	)				(229.3	)				(296.2	)
Plans in surplus		28.0					31.4					17.2
Plans in deficit		(304.5	)				(260.7	)				(313.4	)

Note

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.


Surplus/(deficit) in plans by region	2016 £m			2015 £m			2014 £m
UK		20.0			30.9			11.4
North America		(133.8	)		(123.4	)		(150.1	)
Western Continental Europe		(116.9	)		(97.4	)		(126.2	)
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe		(44.9	)		(35.8	)		(30.4	)
Deficit in the plans		(275.6	)		(225.7	)		(295.3	)

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 between funded and unfunded pension plans.


	2016 Surplus/ (deficit) £m			2016 Present value of liabilities £m			2015 Surplus/ (deficit) £m			2015 Present value of liabilities £m			2014 Surplus/ (deficit) £m			2014 Present value of liabilities £m
Funded plans by region
UK		20.0			(406.4	)		30.9			(352.6	)		11.4			(385.8	)
North America		(56.0	)		(420.4	)		(45.5	)		(364.5	)		(70.6	)		(402.5	)
Western Continental Europe		(48.9	)		(180.9	)		(42.3	)		(143.9	)		(67.8	)		(178.4	)
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe		(5.8	)		(17.2	)		(4.9	)		(15.0	)		(5.4	)		(15.2	)
Deficit/liabilities in the funded plans		(90.7	)		(1,024.9	)		(61.8	)		(876.0	)		(132.4	)		(981.9	)
Unfunded plans by region
UK		–			–			–			–			–			–
North America		(77.8	)		(77.8	)		(77.9	)		(77.9	)		(79.5	)		(79.5	)
Western Continental Europe		(68.0	)		(68.0	)		(55.1	)		(55.1	)		(58.4	)		(58.4	)
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe		(39.1	)		(39.1	)		(30.9	)		(30.9	)		(25.0	)		(25.0	)
Deficit/liabilities in the unfunded plans		(184.9	)		(184.9	)		(163.9	)		(163.9	)		(162.9	)		(162.9	)
Deficit/liabilities in the plans		(275.6	)		(1,209.8	)		(225.7	)		(1,039.9	)		(295.3	)		(1,144.8	)

In accordance with IAS 19, 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):


	2016 £m			2015 £m			2014 £m
Service cost¹		22.4			23.0			17.3
Administrative expenses		2.2			2.0			1.8
Charge to operating profit		24.6			25.0			19.1
Net interest expense on pension plans		6.7			7.3			8.0
Charge to profit before taxation for defined benefit plans		31.3			32.3			27.1
Return on plan assets (excluding interest income)		66.3			(31.7	)		68.9
Changes in demographic assumptions underlying the present value of the plan liabilities		6.7			13.8			(12.3	)
Changes in financial assumptions underlying the present value of the plan liabilities		(92.6	)		55.4			(141.4	)
Experience gain/(loss) arising on the plan liabilities		1.0			(1.3	)		(1.8	)
Change in irrecoverable surplus		2.7			(2.7	)		–
Actuarial (loss)/gain recognised in OCI		(15.9	)		33.5			(86.6	)

Note

Includes current service cost, past service costs related to plan amendments and (gain)/loss on settlements and curtailments.

23. Provision for post-employment benefits (continued)

(d) Movement in plan liabilities

The following table shows an analysis of the movement in the pension plan liabilities for each accounting period:


	2016 £m			2015 £m			2014 £m
Plan liabilities at beginning of year		1,039.9			1,144.8			972.8
Service cost¹		22.4			23.0			17.3
Interest cost		37.2			34.6			40.7
Actuarial (gain)/loss
Effect of changes in demographic assumptions		(6.7	)		(13.8	)		12.3
Effect of changes in financial assumptions		92.6			(55.4	)		141.4
Effect of experience adjustments		(1.0	)		1.3			1.8
Benefits paid		(92.4	)		(112.6	)		(57.7	)
Loss due to exchange rate movements		124.2			13.4			14.8
Settlement payments		(4.8	)		–			–
Other²		(1.6	)		4.6			1.4
Plan liabilities at end of year		1,209.8			1,039.9			1,144.8

Notes

Includes current service cost, past service costs related to plan amendments and (gain)/loss on settlements and curtailments.

Other includes acquisitions, disposals, 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:


	2016 £m			2015 £m			2014 £m
Fair value of plan assets at beginning of year		814.2			849.5			726.2
Interest income on plan assets		30.5			27.3			32.7
Return on plan assets (excluding interest income)		66.3			(31.7	)		68.9
Employer contributions		43.7			70.9			68.2
Benefits paid		(92.4	)		(112.6	)		(57.7	)
Gain due to exchange rate movements		78.8			12.4			12.6
Settlement payments		(4.8	)		–			–
Administrative expenses		(2.2	)		(2.0	)		(1.8	)
Other¹		0.1			0.4			0.4
Fair value of plan assets at end of year		934.2			814.2			849.5
Actual return on plan assets		96.8			(4.4	)		101.6

Note

F-31

Notes to the consolidated financial statements (continued)

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.

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. The Group’s borrowings at 31 December 2016 were primarily made up of $2,862 million, £1,000 million and €2,952 million. The Group’s average gross debt during the course of 2016 was $3,182 million, £781 million and €3,132 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 arising from its operations. 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, 54.2% of the year-end US dollar debt is at fixed rates averaging 4.62% for an average period of 212 months; 80.0% of the sterling debt is at a fixed rate of 4.53% for an average period of 193 months; and 100% of the euro debt is at fixed rates averaging 1.85% for an average period of 93 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 2016 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 2016, the Group has access to £8.2 billion of committed facilities with maturity dates spread over the years 2017 to 2046 as illustrated below:

£m

2017

£m

2018

£m

2019

£m

2020
£m

2021+

£m

£ bonds £400m (2.875% ’46)

400.0

400.0

US bond $500m (5.625% ’43)

405.0

405.0

US bond $300m (5.125% ’42)

243.0

243.0

Eurobonds €600m (1.625% ’30)

512.6

512.6

Eurobonds €750m (2.25% ’26)

640.8

640.8

US bond $750m (3.75% ’24)

607.5

607.5

Eurobonds €750m (3.0% ’23)

640.8

640.8

US bond $500m (3.625% ’22)

405.0

405.0

US bond $812m (4.75% ’21)

658.0

658.0

Bank revolver ($2,500m)

2,025.1

2,025.1

£ bonds £200m (6.375% ’20)

200.0

200.0

Eurobonds €600m (0.75% ’19)

512.6

512.6

Bank revolver (A$520m)

304.0

304.0

Eurobonds €252m (0.43% ’18)

215.3

215.3

£ bonds £400m (6.0% ’17)

400.0

400.0

Total committed facilities available

8,169.7

400.0

215.3

816.6

200.0

6,537.8

Drawn down facilities at 31 December 2016

6,047.4

400.0

215.3

719.4

200.0

4,512.7

Undrawn committed credit facilities

2,122.3

24. Risk management policies (continued)

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 less 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 5% of total trade receivables as at 31 December 2016.

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

At 31 December 2016, the Group’s major foreign currency denominated borrowings are held in individual entities with the same financial reporting currencies as borrowings. Therefore a weakening or strengthening of sterling against the Group’s major currencies would not result in any gains or losses. In 2015, a 10% weakening of sterling would have resulted in a £40.8m loss being 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 have been 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.

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 2016 would increase profit before tax by approximately £4.5 million (2015: £7.9 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.

F-32

Notes to the consolidated financial statements (continued)

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.

During 2016, the Group held no currency derivatives. In 2015, the amounts taken to and deferred in equity during the year for currency derivatives that are designated and effective hedges was a charge of £73.5 million for cash flow hedges. In 2015 and 2014, changes in the fair value relating to the ineffective portion of the currency derivatives amounted to a gain of £3.2 million and £23.0 million, respectively, which is included in the revaluation of financial instruments for the year.

The Group 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 £122.0 million (2015: £86.5 million). The Group estimates the fair value of these contracts to be a net asset of £0.1 million (2015: £3.9 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 3.63% until September 2022 and have floating interest payments averaging LIBOR plus 1.52%. Contracts with a nominal value of $812 million have fixed interest receipts of 4.75% until November 2021 and have floating rate payments averaging LIBOR plus 2.17% (set in arrears). 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%. Contracts with a nominal value of A$30 million have fixed interest receipts of 2.59% until December 2017 and have floating rate payments based on the Australian bank bill swap bid rate (BBSY). Contracts with a nominal value of A$30 million have fixed interest rate receipts of 2.85% until August 2017 and have floating rate payments based on the Australian bank bill swap reference rate (BBSW).

The fair value of interest rate swaps entered into at 31 December 2016 is estimated to be a net asset of approximately £17.0 million (2015: £37.4 million). These amounts are based on market values of equivalent instruments at the balance sheet date, comprising £20.0 million (2015: £39.7 million) assets included in trade and other receivables and £3.0 million (2015: £2.3 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 £5.2 million (2015: loss of £6.8 million, 2014: gain of £5.3 million) which is included in the revaluation of financial instruments for the year. This loss resulted from a £19.3 million loss on hedging instruments and a £14.1 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
2016
Other investments		–			–			–		1,310.3		–			1,310.3
Cash and short-term deposits		–			–			2,436.9		–		–			2,436.9
Bank overdrafts and loans		–			–			–		–		(1,002.5	)		(1,002.5	)
Bonds and bank loans		–			–			–		–		(5,564.9	)		(5,564.9	)
Trade and other receivables: amounts falling due within one year		–			–			8,468.8		–		–			8,468.8
Trade and other receivables: amounts falling due after more than one year		–			–			89.9		–		–			89.9
Trade and other payables: amounts falling due within one year		–			–			–		–		(10,398.9	)		(10,398.9	)
Trade and other payables: amounts falling due after more than one year		–			–			–		–		(8.4	)		(8.4	)
Derivative assets		20.0			3.0			–		–		–			23.0
Derivative liabilities		(3.0	)		(2.9	)		–		–		–			(5.9	)
Payments due to vendors (earnout agreements) (note 19)		–			(976.5	)		–		–		–			(976.5	)
Liabilities in respect of put options		–			(297.0	)		–		–		–			(297.0	)
		17.0			(1,273.4	)		10,995.6		1,310.3		(16,974.7	)		(5,925.2	)

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
2015
Other investments		–			–			–		1,158.7		–			1,158.7
Cash and short-term deposits		–			–			2,382.4		–		–			2,382.4
Bank overdrafts and loans		–			–			–		–		(932.0	)		(932.0	)
Bonds and bank loans		–			–			–		–		(4,661.2	)		(4,661.2	)
Trade and other receivables: amounts falling due within one year		–			–			7,184.4		–		–			7,184.4
Trade and other receivables: amounts falling due after more than one year		–			–			68.5		–		–			68.5
Trade and other payables: amounts falling due within one year		–			–			–		–		(8,595.5	)		(8,595.5	)
Trade and other payables: amounts falling due after more than one year		–			–			–		–		(5.3	)		(5.3	)
Derivative assets		39.7			4.6			–		–		–			44.3
Derivative liabilities		(2.3	)		(0.7	)		–		–		–			(3.0	)
Payments due to vendors (earnout agreements) (note 19)		–			(581.3	)		–		–		–			(581.3	)
Liabilities in respect of put options		–			(234.4	)		–		–		–			(234.4	)
		37.4			(811.8	)		9,635.3		1,158.7		(14,194.0	)		(4,174.4	)

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

2016

Derivatives in designated hedge relationships

Derivative assets

–

20.0

–

Derivative liabilities

–

(3.0

)

–

Held for trading

Derivative assets

–

3.0

–

Derivative liabilities

–

(2.9

)

–

Payments due to vendors (earnout agreements) (note 19)

–

(976.5

)

Liabilities in respect of put options

–

(297.0

)

Available for sale

Other investments

429.3

–

881.0

Level 1
£m

Level 2
£m

Level 3
£m

2015

Derivatives in designated hedge relationships

Derivative assets

–

39.7

–

Derivative liabilities

–

(2.3

)

–

Held for trading

Derivative assets

–

4.6

–

Derivative liabilities

–

(0.7

)

–

Payments due to vendors (earnout agreements) (note 19)

–

(581.3

)

Liabilities in respect of put options

–

(234.4

)

Available for sale

Other investments

311.4

–

847.3

Reconciliation of level 3 fair value measurements¹:


	Liabilities in respect of put options £m			Other investments £m
1 January 2015		(184.9	)		534.4
Losses recognised in the income statement		(11.3	)		(2.2	)
Gain recognised in other comprehensive income		–			196.4
Exchange adjustments		21.4			13.3
Additions		(86.8	)		113.5
Disposals		–			(8.1	)
Cancellations		25.3			–
Settlements		1.9			–
31 December 2015		(234.4	)		847.3
Losses recognised in the income statement		(17.2	)		(1.6	)
Gain recognised in other comprehensive income		–			(105.6	)
Exchange adjustments		(47.4	)		112.9
Additions		(42.9	)		105.7
Disposals		–			(3.4	)
Reclassifications from other investments to interests in associates		–			(74.3	)
Settlements		44.9			–
31 December 2016		(297.0	)		881.0

Note

The reconciliation of payments due to vendors (earnout agreements) is presented in note 19.

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) are recorded at fair value, which is the present value of the expected cash outflows of the obligations. Liabilities in respect of put option agreements are initially recorded at the present value of the redemption amount in accordance with IAS 32 and subsequently measured at fair value in accordance with IAS 39. Both types of 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 2016, the weighted average growth rate in estimating future financial performance was 25.0% (2015: 20.3%), which reflects the prevalence of recent acquisitions in the faster-growing markets and new media sectors. The risk adjusted discount rate applied to these obligations at 31 December 2016 was 1.5% (2015: 1.7%).

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 £13.4 million (2015: £11.9 million) and £17.9 million (2015: £19.0 million), respectively. A 0.5 percentage point increase or decrease in the risk adjusted discount rate would decrease or increase the combined liabilities by approximately £16.0 million (2015: £11.6 million) and £16.4 million (2015: £11.9 million), respectively. An increase in the liability would result in a loss in the revaluation of financial instruments, while a decrease would result in a 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 2014		1,750,000,000			175.0
At 31 December 2014		1,750,000,000			175.0
At 31 December 2015		1,750,000,000			175.0
At 31 December 2016		1,750,000,000			175.0

Issued and fully paid
At 1 January 2014		1,348,733,317			134.9
Exercise of share options		3,914,407			0.4
Treasury share cancellations		(26,900,000	)		(2.7	)
At 31 December 2014		1,325,747,724			132.6
Exercise of share options		3,618,300			0.3
At 31 December 2015		1,329,366,024			132.9
Exercise of share options		2,514,706			0.3
At 31 December 2016		1,331,880,730			133.2

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 2016 was 13,857,706 (2015: 17,154,359), and £251.7 million (2015: £268.1 million) respectively. The number and market value of ordinary shares held in treasury at 31 December 2016 was 51,026,358 (2015: 34,619,468) and £926.6 million (2015: £541.1 million) respectively.

26. Authorised and issued share capital (continued)

Share options

WPP Executive Share Option Scheme

As at 31 December 2016, unexercised options over ordinary shares of 6,741 and unexercised options over ADRs of 422 have been granted under the WPP Executive Share Option Scheme as follows:


Number of ordinary shares under option	Exercise price per share (£)		Exercise dates
3,696		8.333		2015 - 2022
3,045		10.595		2016 - 2023

Number of ADRs

under option

Exercise price
per ADR ($)

Exercise dates

422

59.170

2011 - 2018

WPP Worldwide Share Ownership Program

As at 31 December 2016, unexercised options over ordinary shares of 4,447,052 and unexercised options over ADRs of 672,573 have been granted under the WPP Worldwide Share Ownership Program as follows:


Number of ordinary shares under option	Exercise price per share (£)		Exercise dates
2,750		4.819		2011 - 2018
50,250		5.483		2012 - 2019
26,500		5.483		2013 - 2019
1,750		5.608		2012 - 2019
1,200		5.913		2011 - 2018
875		5.917		2011 - 2018
24,425		6.028		2011 - 2018
8,875		6.268		2014 - 2018
158,050		6.268		2014 - 2021
64,125		6.268		2015 - 2021
125		6.668		2009 - 2017
1,300		7.005		2010 - 2017
750		7.113		2013 - 2017
102,050		7.113		2013 - 2020
41,500		7.113		2014 - 2020
500		7.478		2011 - 2017
4,500		7.543		2014 - 2020
9,050		7.718		2010 - 2017
390,820		8.458		2015 - 2022
75,000		13.145		2017 - 2021
2,472,576		13.145		2017 - 2024
5,625		13.145		2018 - 2024
970,706		13.505		2016 - 2023
33,750		13.505		2017 - 2023


Number of ADRs under option	Exercise price per ADR ($)		Exercise dates
19,610		44.560		2012 - 2019
46,650		49.230		2014 - 2021
30,495		56.560		2013 - 2020
12,270		59.500		2011 - 2018
71,134		67.490		2015 - 2022
4,915		75.760		2010 - 2017
266,516		102.670		2017 - 2024
220,983		110.760		2016 - 2023

F-35

Notes to the consolidated financial statements (continued)

26. Authorised and issued share capital (continued)

WPP Share Option Plan 2015

As at 31 December 2016, unexercised options over ordinary shares of 6,599,650 and unexercised options over ADRs of 734,760 have been granted under the WPP Share Option Plan 2015 as follows:


Number of ordinary shares under option	Exercise price per share (£)		Exercise dates
102,625		15.150		2018 - 2022
2,878,700		15.150		2018 - 2025
6,875		15.150		2019 - 2025
3,591,825		17.055		2019 - 2026
19,625		17.055		2019 - 2023


Number of ADRs under option	Exercise price per ADR ($)		Exercise dates
417,770		105.490		2020 - 2026
316,990		115.940		2018 - 2025

The aggregate status of the WPP Share Option Plans during 2016 was as follows:

Movements on options granted (represented in ordinary shares)


	1 January 2016		Granted		Exercised			Lapsed			Outstanding 31 December 2016		Exercisable 31 December 2016
WPP		22,473		–		(12,842	)		(780	)		8,851		8,851
WWOP		11,881,717		–		(2,488,979	)		(1,582,821	)		7,809,917		3,890,386
WSOP		5,678,475		5,776,275		(5,700	)		(1,175,600	)		10,273,450		–
24/7		9,420		–		(7,185	)		(2,235	)		–		–
		17,592,085		5,776,275		(2,514,706	)		(2,761,436	)		18,092,218		3,899,237

Weighted-average exercise price for options over


	1 January 2016		Granted		Exercised		Lapsed		Outstanding 31 December 2016		Exercisable 31 December 2016
Ordinary shares (£)
WPP		7.950		–		6.679		–		9.355		9.355
WWOP		11.859		–		11.137		12.475		12.059		10.542
WSOP		15.150		17.055		–		15.243		16.192		–
ADRs ($)
WPP	66.270		–		69.387		63.900		59.170		59.170
WWOP		90.449		–		61.647		96.402		93.131		86.871
WSOP		115.940		105.490		–		115.006		109.998		–
24/7		57.635		–		56.688		60.679		–		–

Options over ordinary shares

Outstanding

Range of

exercise prices

Weighted average
exercise price

Weighted average
contractual life
Months

4.819 - 17.055

14.525

Options over ADRs

Outstanding

Range of

exercise prices

Weighted average
exercise price

Weighted average
contractual life
Months

44.56 - 115.94

101.925

26. Authorised and issued share capital (continued)

As at 31 December 2016 there was £9.9 million (2015: £10.4 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 (2015: 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:


	2016		2015		2014
Fair value of UK options (shares)		135.0p		144.0p		155.0p
Fair value of US options (ADRs)		$9.94		$11.34		$12.23
Weighted average assumptions:
UK Risk-free interest rate		0.44%		1.04%		1.12%
US Risk-free interest rate		1.60%		1.45%		1.28%
Expected life (months)		48		48		48
Expected volatility		16%		17%		20%
Dividend yield		2.8%		2.8%		2.8%

Options are issued at an exercise price equal to market value on the date of grant.

The average share price of the Group for the year ended 31 December 2016 was £16.45 (2015: £14.74, 2014: £12.65) and the average ADR price for the same period was $111.20 (2015: $112.88, 2014: $104.21).

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

In 2015, the Group introduced the Share Option Plan 2015 to replace both the ‘all-employee’ Worldwide Share Ownership Plan and the discretionary Executive Stock Option Plan. Two kinds of options over ordinary shares can be granted, both with a market value exercise price. Firstly, options can be granted to employees who have worked at a company owned by WPP plc for at least two years which are not subject to performance conditions. Secondly, options may be granted on a discretionary basis subject to the satisfaction of performance conditions.

The Worldwide Share Ownership Program was open for participation to employees with at least two years’ employment in the Group. It was 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 Shareholder Return) and EPS (Earnings Per Share) objectives, as well as continued employment.

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.

F-36

Notes to the consolidated financial statements (continued)

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 2014		–		(122.1	)		93.8			345.6			317.3
Exchange adjustments on foreign currency net investments		–		–			–			(224.3	)		(224.3	)
Gain on revaluation of available for sale investments		–		–			64.6			–			64.6
Recognition and remeasurement of financial instruments		–		(44.1	)		–			–			(44.1	)
Treasury share cancellations		2.7		–			–			–			2.7
Share purchases – close period commitments		–		(80.0	)		–			–			(80.0	)
31 December 2014		2.7		(246.2	)		158.4			121.3			36.2
Exchange adjustments on foreign currency net investments		–		–			–			(272.9	)		(272.9	)
Gain on revaluation of available for sale investments		–		–			206.0			–			206.0
Recognition and remeasurement of financial instruments		–		(59.0	)		–			–			(59.0	)
Share purchases – close period commitments		–		80.0			–			–			80.0
31 December 2015		2.7		(225.2	)		364.4			(151.6	)		(9.7	)
Exchange adjustments on foreign currency net investments		–		–			–			1,309.9			1,309.9
Loss on revaluation of available for sale investments		–		–			(93.1	)		–			(93.1	)
Recognition and remeasurement of financial instruments		–		(21.9	)		–			–			(21.9	)
31 December 2016		2.7		(247.1	)		271.3			1,158.3			1,185.2

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 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.

28. Acquisitions (continued)

Acquisitions in 2016

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		10.5			319.1			329.6
Property, plant and equipment		20.6			–			20.6
Cash		57.1			–			57.1
Trade receivables due within one year		249.5			–			249.5
Other current assets		78.0			–			78.0
Total assets		415.7			319.1			734.8
Current liabilities		(299.4	)		(2.8	)		(302.2	)
Trade and other payables due after one year		(40.4	)		(59.5	)		(99.9	)
Deferred tax liabilities		–			(96.1	)		(96.1	)
Provisions		(0.1	)		(11.5	)		(11.6	)
Bank loans		(144.4	)		–			(144.4	)
Total liabilities		(484.3	)		(169.9	)		(654.2	)
Net assets		(68.6	)		149.2			80.6
Non-controlling interests								(15.0	)
Fair value of equity stake in associate undertakings before acquisition of controlling interest								(98.5	)
Goodwill								799.3
Consideration								766.4
Consideration satisfied by:
Cash								423.3
Payments due to vendors								343.1

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 £54.8 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 2016 and the date the financial statements have been authorised for issue.

F-37

Notes to the consolidated financial statements (continued)

28. Acquisitions (continued)

Acquisitions in 2015


	Book value at acquisition £m			Fair value adjustments £m			Fair value to Group £m
Intangible assets		2.4			230.7			233.1
Property, plant and equipment		21.1			–			21.1
Cash		57.7			–			57.7
Trade receivables due within one year		115.4			–			115.4
Other current assets		75.1			–			75.1
Total assets		271.7			230.7			502.4
Current liabilities		(207.9	)		–			(207.9	)
Trade and other payables due after one year		(16.8	)		(49.5	)		(66.3	)
Deferred tax liabilities		–			(70.3	)		(70.3	)
Provisions		(3.3	)		(7.7	)		(11.0	)
Total liabilities		(228.0	)		(127.5	)		(355.5	)
Net assets		43.7			103.2			146.9
Non-controlling interests								(47.2	)
Fair value of equity stake in associate undertakings before acquisition of controlling interest								(208.6	)
Goodwill								778.9
Consideration								670.0
Consideration satisfied by:
Cash								411.6
Payments due to vendors								258.4

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.

28. Acquisitions (continued)

Acquisitions in 2014


	Book value at acquisition £m			Fair value adjustments £m			Fair value to Group £m
Intangible assets		2.7			136.3			139.0
Property, plant and equipment		20.6			–			20.6
Cash		74.4			–			74.4
Trade receivables due within one year		197.3			(4.0	)		193.3
Other current assets		189.4			–			189.4
Total assets		484.4			132.3			616.7
Current liabilities		(352.6	)		(3.0	)		(355.6	)
Trade and other payables due after one year		(16.9	)		(31.8	)		(48.7	)
Deferred tax liabilities		–			(35.5	)		(35.5	)
Provisions		(5.1	)		(4.2	)		(9.3	)
Total liabilities		(374.6	)		(74.5	)		(449.1	)
Net assets		109.8			57.8			167.6
Non-controlling interests								(37.5	)
Fair value of equity stake in associate undertakings before acquisition of controlling interest								(102.2	)
Goodwill								485.2
Consideration								513.1
Consideration satisfied by:
Cash								378.6
Payments due to vendors								134.5

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.

29. Principal subsidiary undertakings

The principal subsidiary undertakings of the Group are:


		Country of incorporation
Grey Global Group LLC		US
J. Walter Thompson Company LLC		US
GroupM Worldwide LLC		US
The Ogilvy Group LLC		US
Young & Rubicam, Inc		US
TNS Group Holdings Ltd		UK

All of these subsidiaries are operating companies and are 100% owned by the Group.

F-38

Notes to the consolidated financial statements (continued)

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 of profit before interest and taxation to headline PBIT

Reconciliation of profit before interest and taxation to headline PBIT:


	2016 £m			2015 £m			2014 £m
Profit before interest and taxation		2,112.9			1,679.0			1,569.2
Amortisation and impairment of acquired intangible assets		168.4			140.1			147.5
Goodwill impairment		27.0			15.1			16.9
Gains on disposal of investments and subsidiaries	(44.3)			(131.0)			(186.3)
Gains on remeasurement of equity interests arising from a change in scope of ownership		(232.4	)		(165.0	)		(9.2	)
Investment write-downs		86.1			78.7			7.3
Restructuring costs		27.4			106.2			127.6
IT asset write-downs		–			29.1			–
Share of exceptional losses of associates		15.2			21.8			7.6
Headline PBIT		2,160.3			1,774.0			1,680.6
Net sales margin¹		17.4	%		16.9	%		16.7	%

Note

Headline PBIT as a percentage of net sales.

32. Condensed consolidating financial information for bonds issued by WPP Finance 2010 with WPP plc as parent guarantor and WPP Air 1, WPP 2008 Limited, WPP 2005 Limited, WPP 2012 Limited, and WPP Jubilee Limited as subsidiary guarantors

WPP Finance 2010 has in issue $500 million of 3.625% bonds due September 2022, $300 million of 5.125% bonds due September 2042 and $812 million of 4.75% bonds due November 2021 with WPP plc as parent guarantor and WPP Air 1, WPP 2008 Limited, WPP 2005 Limited, WPP 2012 Limited and WPP Jubilee Limited as subsidiary guarantors.

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. In accordance with SEC Regulation S-X Rule 3-10, condensed consolidating financial information containing financial information for WPP Finance 2010 and the guarantors is presented. Condensed consolidating financial information is prepared in accordance with IFRS as issued by the IASB. 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 Air 1, WPP 2008 Limited, WPP 2005 Limited, WPP 2012 Limited or WPP Jubilee Limited to make payment pursuant to the terms of their full and unconditional, and joint and several guarantee of those securities, there is no impediment to WPP plc, WPP Air 1, WPP 2008 Limited, WPP 2005 Limited, WPP 2012 Limited or WPP Jubilee Limited in obtaining reimbursement for any such payments from WPP Finance 2010.

F-39

Notes to the consolidated financial statements (continued)

Condensed consolidating income statement information

For the year ended 31 December 2016, £m


	WPP plc			Subsidiary Guarantors			WPP Finance 2010			Other Subsidiaries			Reclassifications / Eliminations			Consolidated WPP plc
Revenue		—			—			—			14,388.9			—			14,388.9
Direct costs		—			—			—			(1,991.1	)		—			(1,991.1	)
Net sales		—			—			—			12,397.8			—			12,397.8
Operating costs		13.8			(828.2	)		(0.1	)		(9,520.2	)		—			(10,334.7	)
Operating profit/(loss)		13.8			(828.2	)		(0.1	)		2,877.6			—			2,063.1
Share of results of subsidiaries		1,497.4			2,518.2			—			—			(4,015.6	)		—
Share of results of associates		—			—			—			49.8			—			49.8
Profit/(loss) before interest and taxation		1,511.2			1,690.0			(0.1	)		2,927.4			(4,015.6	)		2,112.9
Finance income		—			28.8			121.1			231.9			(301.4	)		80.4
Finance costs		(102.5	)		(222.1	)		(98.8	)		(132.5	)		301.4			(254.5	)
Revaluation of financial instruments		(8.6	)		—			7.0			(46.7	)		—			(48.3	)
Profit before taxation		1,400.1			1,496.7			29.2			2,980.1			(4,015.6	)		1,890.5
Taxation		—			0.7			—			(389.6	)		—			(388.9	)
Profit for the year		1,400.1			1,497.4			29.2			2,590.5			(4,015.6	)		1,501.6
Attributable to:
Equity holders of the parent		1,400.1			1,497.4			29.2			2,489.0			(4,015.6	)		1,400.1
Non-controlling interests		—			—			—			101.5			—			101.5
		1,400.1			1,497.4			29.2			2,590.5			(4,015.6	)		1,501.6

For the year ended 31 December 2015, £m


	WPP plc			Subsidiary Guarantors			WPP Finance 2010			Other Subsidiaries			Reclassifications / Eliminations			Consolidated WPP plc
Revenue		—			—			—			12,235.2			—			12,235.2
Direct costs		—			—			—			(1,710.9	)		—			(1,710.9	)
Net sales		—			—			—			10,524.3			—			10,524.3
Operating costs		10.6			(83.0	)		(0.1	)		(8,819.8	)		—			(8,892.3	)
Operating profit/(loss)		10.6			(83.0	)		(0.1	)		1,704.5			—			1,632.0
Share of results of subsidiaries		1,298.5			1,507.3			—			—			(2,805.8	)		—
Share of results of associates		—			—			—			47.0			—			47.0
Profit/(loss) before interest and taxation		1,309.1			1,424.3			(0.1	)		1,751.5			(2,805.8	)		1,679.0
Finance income		1.2			32.0			88.4			166.0			(215.2	)		72.4
Finance costs		(146.1	)		(161.6	)		(87.4	)		(44.2	)		215.2			(224.1	)
Revaluation of financial instruments		(4.0	)		—			—			(30.7	)		—			(34.7	)
Profit before taxation		1,160.2			1,294.7			0.9			1,842.6			(2,805.8	)		1,492.6
Taxation		—			3.8			—			(251.3	)		—			(247.5	)
Profit for the year		1,160.2			1,298.5			0.9			1,591.3			(2,805.8	)		1,245.1
Attributable to:
Equity holders of the parent		1,160.2			1,298.5			0.9			1,506.4			(2,805.8	)		1,160.2
Non-controlling interests		—			—			—			84.9			—			84.9
		1,160.2			1,298.5			0.9			1,591.3			(2,805.8	)		1,245.1

F-40

Notes to the consolidated financial statements (continued)

Condensed consolidating income statement information (continued)

For the year ended 31 December 2014, £m


	WPP plc			Subsidiary Guarantors			WPP Finance 2010			Other Subsidiaries			Reclassifications / Eliminations			Consolidated WPP plc
Revenue		—			—			—			11,528.9			—			11,528.9
Direct costs		—			—			—			(1,464.1	)		—			(1,464.1	)
Net sales		—			—			—			10,064.8			—			10,064.8
Operating costs		9.9			(161.9	)		(0.1	)		(8,405.4	)		—			(8,557.5	)
Operating profit/(loss)		9.9			(161.9	)		(0.1	)		1,659.4			—			1,507.3
Share of results of subsidiaries		1,140.1			1,367.6			—			—			(2,507.7	)		—
Share of results of associates		—			—			—			61.9			—			61.9
Profit/(loss) before interest and taxation		1,150.0			1,205.7			(0.1	)		1,721.3			(2,507.7	)		1,569.2
Finance income		2.4			27.5			52.7			146.6			(134.5	)		94.7
Finance costs		(94.2	)		(139.0	)		(67.5	)		(96.5	)		134.5			(262.7	)
Revaluation of financial instruments		19.0			41.4			—			(9.7	)		—			50.7
Profit/(loss) before taxation		1,077.2			1,135.6			(14.9	)		1,761.7			(2,507.7	)		1,451.9
Taxation		—			4.5			4.1			(309.0	)		—			(300.4	)
Profit/(loss) for the year		1,077.2			1,140.1			(10.8	)		1,452.7			(2,507.7	)		1,151.5
Attributable to:
Equity holders of the parent		1,077.2			1,140.1			(10.8	)		1,378.4			(2,507.7	)		1,077.2
Non-controlling interests		—			—			—			74.3			—			74.3
		1,077.2			1,140.1			(10.8	)		1,452.7			(2,507.7	)		1,151.5

F-41

Notes to the consolidated financial statements (continued)

Condensed consolidating statement of comprehensive income

For the year ended 31 December 2016, £m


	WPP plc			Subsidiary Guarantors			WPP Finance 2010			Other Subsidiaries			Reclassifications / Eliminations			Consolidated WPP plc
Profit for the year		1,400.1			1,497.4			29.2			2,590.5			(4,015.6	)		1,501.6
Items that may be reclassified subsequently to profit or loss:
Exchange adjustments on foreign currency net investments		1,309.9			1,309.9			(1.2	)		1,379.2			(2,619.8	)		1,378.0
Loss on revaluation of available for sale investments		(93.1	)		(93.1	)		—			(93.1	)		186.2			(93.1	)
		1,216.8			1,216.8			(1.2	)		1,286.1			(2,433.6	)		1,284.9
Items that will not be reclassified subsequently to profit or loss:
Actuarial loss on defined benefit pension plans		(15.9	)		(15.9	)		—			(15.9	)		31.8			(15.9	)
Deferred tax on defined benefit pension plans		(0.4	)		(0.4	)		—			(0.4	)		0.8			(0.4	)
		(16.3	)		(16.3	)		—			(16.3	)		32.6			(16.3	)
Other comprehensive income/(loss) for the year		1,200.5			1,200.5			(1.2	)		1,269.8			(2,401.0	)		1,268.6
Total comprehensive income for the year		2,600.6			2,697.9			28.0			3,860.3			(6,416.6	)		2,770.2
Attributable to:
Equity holders of the parent		2,600.6			2,697.9			28.0			3,690.7			(6,416.6	)		2,600.6
Non-controlling interests		—			—			—			169.6			—			169.6
		2,600.6			2,697.9			28.0			3,860.3			(6,416.6	)		2,770.2

For the year ended 31 December 2015, £m


	WPP plc			Subsidiary Guarantors			WPP Finance 2010			Other Subsidiaries			Reclassifications / Eliminations			Consolidated WPP plc
Profit for the year		1,160.2			1,298.5			0.9			1,591.3			(2,805.8	)		1,245.1
Items that may be reclassified subsequently to profit or loss:
Exchange adjustments on foreign currency net investments		(272.9	)		(272.9	)		(0.9	)		(275.0	)		545.8			(275.9	)
Gain on revaluation of available for sale investments		206.0			206.0			—			206.0			(412.0	)		206.0
		(66.9	)		(66.9	)		(0.9	)		(69.0	)		133.8			(69.9	)
Items that will not be reclassified subsequently to profit or loss:
Actuarial gain on defined benefit pension plans		33.5			33.5			—			33.5			(67.0	)		33.5
Deferred tax on defined benefit pension plans		(5.2	)		(5.2	)		—			(5.2	)		10.4			(5.2	)
		28.3			28.3			—			28.3			(56.6	)		28.3
Other comprehensive loss for the year		(38.6	)		(38.6	)		(0.9	)		(40.7	)		77.2			(41.6	)
Total comprehensive income for the year		1,121.6			1,259.9			—			1,550.6			(2,728.6	)		1,203.5
Attributable to:
Equity holders of the parent		1,121.6			1,259.9			—			1,468.7			(2,728.6	)		1,121.6
Non-controlling interests		—			—			—			81.9			—			81.9
		1,121.6			1,259.9			—			1,550.6			(2,728.6	)		1,203.5

F-42

Notes to the consolidated financial statements (continued)

Condensed consolidating statement of comprehensive income (continued)

For the year ended 31 December 2014, £m


	WPP plc			Subsidiary Guarantors			WPP Finance 2010			Other Subsidiaries			Reclassifications / Eliminations			Consolidated WPP plc
Profit/(loss) for the year		1,077.2			1,140.1			(10.8	)		1,452.7			(2,507.7	)		1,151.5
Items that may be reclassified subsequently to profit or loss:
Exchange adjustments on foreign currency net investments		(224.3	)		(220.0	)		(1.0	)		(188.3	)		412.4			(221.2	)
Gain on revaluation of available for sale investments		64.6			64.6			—			64.6			(129.2	)		64.6
		(159.7	)		(155.4	)		(1.0	)		(123.7	)		283.2			(156.6	)
Items that will not be reclassified subsequently to profit or loss:
Actuarial loss on defined benefit pension plans		(86.6	)		(86.6	)		—			(86.6	)		173.2			(86.6	)
Deferred tax on defined benefit pension plans		62.1			62.1			—			62.1			(124.2	)		62.1
		(24.5	)		(24.5	)		—			(24.5	)		49.0			(24.5	)
Other comprehensive loss for the year		(184.2	)		(179.9	)		(1.0	)		(148.2	)		332.2			(181.1	)
Total comprehensive income/(loss) for the year		893.0			960.2			(11.8	)		1,304.5			(2,175.5	)		970.4
Attributable to:
Equity holders of the parent		893.0			960.2			(11.8	)		1,227.1			(2,175.5	)		893.0
Non-controlling interests		—			—			—			77.4			—			77.4
		893.0			960.2			(11.8	)		1,304.5			(2,175.5	)		970.4

F-43

Notes to the consolidated financial statements (continued)

Condensed consolidating cash flow statement information

For the year ended 31 December 2016, £m


	WPP plc			Subsidiary Guarantors			WPP Finance 2010			Other Subsidiaries			Reclassifications/ Eliminations		Consolidated WPP plc
Net cash inflow/(outflow) from operating activities		963.1			1,002.2			65.5			(257.0	)		—		1,773.8
Investing activities
Acquisitions and disposals		—			—			—			(638.8	)		—		(638.8	)
Purchases of property, plant and equipment		—			(1.1	)		—			(251.0	)		—		(252.1	)
Purchases of other intangible assets (including capitalised computer software)		—			—			—			(33.0	)		—		(33.0	)
Proceeds on disposal of property, plant and equipment		—			—			—			7.7			—		7.7
Net cash outflow from investing activities		—			(1.1	)		—			(915.1	)		—		(916.2	)
Financing activities
Share option proceeds		27.2			—			—			—			—		27.2
Cash consideration for non-controlling interests		—			(1.3	)		—			(57.0	)		—		(58.3	)
Share repurchases and buy-backs		(274.5	)		—			—			(152.9	)		—		(427.4	)
Net (decrease)/increase in borrowings		(392.1	)		—			—			369.6			—		(22.5	)
Financing and share issue costs		—			—			—			(6.4	)		—		(6.4	)
Equity dividends paid		(616.5	)		—			—			—			—		(616.5	)
Dividends paid to non-controlling interests in subsidiary undertakings		—			—			—			(89.6	)		—		(89.6	)
Net cash (outflow)/inflow from financing activities		(1,255.9	)		(1.3	)		—			63.7			—		(1,193.5	)
Net (decrease)/increase in cash and cash equivalents		(292.8	)		999.8			65.5			(1,108.4	)		—		(335.9	)
Translation differences		(5.7	)		(154.6	)		(13.1	)		465.3			—		291.9
Cash and cash equivalents at beginning of year		(926.5	)		(2,468.9	)		(67.5	)		5,409.5			—		1,946.6
Cash and cash equivalents at end of year		(1,225.0	)		(1,623.7	)		(15.1	)		4,766.4			—		1,902.6

For the year ended 31 December 2015, £m


	WPP plc			Subsidiary Guarantors			WPP Finance 2010			Other Subsidiaries			Reclassifications/ Eliminations		Consolidated WPP plc
Net cash inflow/(outflow) from operating activities		983.6			(658.3	)		(5.6	)		1,040.2			—		1,359.9
Investing activities
Acquisitions and disposals		—			(16.9	)		—			(652.6	)		—		(669.5	)
Purchases of property, plant and equipment		—			(2.0	)		—			(208.3	)		—		(210.3	)
Purchases of other intangible assets (including capitalised computer software)		—			—			—			(36.1	)		—		(36.1	)
Proceeds on disposal of property, plant and equipment		—			—			—			13.4			—		13.4
Net cash outflow from investing activities		—			(18.9	)		—			(883.6	)		—		(902.5	)
Financing activities
Share option proceeds		27.6			—			—			—			—		27.6
Cash consideration for non-controlling interests		—			—			—			(23.6	)		—		(23.6	)
Share repurchases and buy-backs		(406.0	)		—			—			(181.6	)		—		(587.6	)
Net increase/(decrease) in borrowings		(13.7	)		—			—			505.7			—		492.0
Financing and share issue costs		—			—			—			(11.4	)		—		(11.4	)
Equity dividends paid		(545.8	)		—			—			—			—		(545.8	)
Dividends paid to non-controlling interests in subsidiary undertakings		—			—			—			(55.2	)		—		(55.2	)
Net cash (outflow)/inflow from financing activities		(937.9	)		—			—			233.9			—		(704.0	)
Net (decrease)/increase in cash and cash equivalents		45.7			(677.2	)		(5.6	)		390.5			—		(246.6	)
Translation differences		10.4			2.3			(3.3	)		(63.8	)		—		(54.4	)
Cash and cash equivalents at beginning of year		(982.6	)		(1,794.0	)		(58.6	)		5,082.8			—		2,247.6
Cash and cash equivalents at end of year		(926.5	)		(2,468.9	)		(67.5	)		5,409.5			—		1,946.6

F-44

Notes to the consolidated financial statements (continued)

Condensed consolidating cash flow statement information (continued)

For the year ended 31 December 2014, £m


	WPP plc			Subsidiary Guarantors			WPP Finance 2010			Other Subsidiaries			Reclassifications/ Eliminations		Consolidated WPP plc
Net cash inflow/(outflow) from operating activities		1,370.0			(229.8	)		(832.3	)		1,395.8			—		1,703.7
Investing activities
Acquisitions and disposals		—			(0.3	)		—			(488.8	)		—		(489.1	)
Purchases of property, plant and equipment		—			(4.0	)		—			(173.9	)		—		(177.9	)
Purchases of other intangible assets (including capitalised computer software)		—			—			—			(36.5	)		—		(36.5	)
Proceeds on disposal of property, plant and equipment		—			—			—			5.9			—		5.9
Net cash outflow from investing activities		—			(4.3	)		—			(693.3	)		—		(697.6	)
Financing activities
Share option proceeds		25.0			—			—			—			—		25.0
Cash consideration for non-controlling interests		—			—			—			(5.6	)		—		(5.6	)
Share repurchases and buy-backs		(412.5	)		—			—			(98.3	)		—		(510.8	)
Net increase/(decrease) in borrowings		—			(18.3	)		460.1			23.4			—		465.2
Financing and share issue costs		—			(3.5	)		(12.6	)		(11.4	)		—		(27.5	)
Equity dividends paid		(460.0	)		—			—			—			—		(460.0	)
Dividends paid to non-controlling interests in subsidiary undertakings		—			—			—			(57.7	)		—		(57.7	)
Net cash (outflow)/inflow from financing activities		(847.5	)		(21.8	)		447.5			(149.6	)		—		(571.4	)
Net increase/(decrease) in cash and cash equivalents		522.5			(255.9	)		(384.8	)		552.9			—		434.7
Translation differences		13.7			49.6			39.3			(172.9	)		—		(70.3	)
Cash and cash equivalents at beginning of year		(1,518.8	)		(1,587.7	)		286.9			4,702.8			—		1,883.2
Cash and cash equivalents at end of year		(982.6	)		(1,794.0	)		(58.6	)		5,082.8			—		2,247.6

F-45

Notes to the consolidated financial statements (continued)

Condensed consolidating balance sheet information

At 31 December 2016, £m


	WPP plc			Subsidiary Guarantors			WPP Finance 2010			Other Subsidiaries			Reclassifications/ Eliminations			Consolidated WPP plc
Non-current assets
Intangible assets:
Goodwill		—			—			—			13,214.3			—			13,214.3
Other		—			—			—			2,217.3			—			2,217.3
Property, plant and equipment		—			7.1			—			961.6			—			968.7
Investment in subsidiaries		13,356.0			24,162.9			—			—			(37,518.9	)		—
Interests in associates and joint ventures		—			—			—			1,069.4			—			1,069.4
Other investments		—			—			—			1,310.3			—			1,310.3
Deferred tax assets		—			—			—			140.4			—			140.4
Trade and other receivables		—			—			7.0			197.9			—			204.9
Intercompany receivables		—			238.9			2,276.8			7,626.3			(10,142.0	)		—
		13,356.0			24,408.9			2,283.8			26,737.5			(47,660.9	)		19,125.3
Current assets
Inventory and work in progress		—			—			—			400.4			—			400.4
Corporate income tax recoverable		—			—			—			231.2			—			231.2
Trade and other receivables		11.5			377.9			0.1			11,985.0			—			12,374.5
Intercompany receivables		1,628.7			1,690.2			45.9			2,651.1			(6,015.9	)		—
Cash and short-term deposits		13.7			151.8			—			5,300.5			(3,029.1	)		2,436.9
		1,653.9			2,219.9			46.0			20,568.2			(9,045.0	)		15,443.0
Current liabilities
Trade and other payables		(21.0	)		(69.5	)		(21.3	)		(14,898.6	)		—			(15,010.4	)
Intercompany payables		(2,659.2	)		(3,141.1	)		—			(215.6	)		6,015.9			—
Corporate income tax payable		—			—			—			(752.3	)		—			(752.3	)
Bank overdrafts and loans		(1,641.8	)		(1,775.5	)		(15.1	)		(599.2	)		3,029.1			(1,002.5	)
		(4,322.0	)		(4,986.1	)		(36.4	)		(16,465.7	)		9,045.0			(16,765.2	)
Net current (liabilities)/assets		(2,668.1	)		(2,766.2	)		9.6			4,102.5			—			(1,322.2	)
Total assets less current liabilities		10,687.9			21,642.7			2,293.4			30,840.0			(47,660.9	)		17,803.1
Non-current liabilities
Bonds and bank loans		—			—			(2,282.9	)		(3,282.0	)		—			(5,564.9	)
Trade and other payables		—			—			—			(1,273.8	)		—			(1,273.8	)
Intercompany payables		(1,363.4	)		(8,286.7	)		—			(491.9	)		10,142.0			—
Deferred tax liabilities		—			—			—			(692.4	)		—			(692.4	)
Provision for post-employment benefits		—			—			—			(276.5	)		—			(276.5	)
Provisions for liabilities and charges		—			—			—			(227.9	)		—			(227.9	)
		(1,363.4	)		(8,286.7	)		(2,282.9	)		(6,244.5	)		10,142.0			(8,035.5	)
Net assets		9,324.5			13,356.0			10.5			24,595.5			(37,518.9	)		9,767.6
Attributable to:
Equity share owners’ funds		9,324.5			13,356.0			10.5			24,152.4			(37,518.9	)		9,324.5
Non-controlling interests		—			—			—			443.1			—			443.1
Total equity		9,324.5			13,356.0			10.5			24,595.5			(37,518.9	)		9,767.6

F-46

Notes to the consolidated financial statements (continued)

Condensed consolidating balance sheet information (continued)

At 31 December 2015, £m


	WPP plc			Subsidiary Guarantors			WPP Finance 2010			Other Subsidiaries			Reclassifications/ Eliminations			Consolidated WPP plc
Non-current assets
Intangible assets:
Goodwill		—			—			—			10,670.6			—			10,670.6
Other		—			—			—			1,715.4			—			1,715.4
Property, plant and equipment		—			8.3			—			789.4			—			797.7
Investment in subsidiaries		10,716.4			20,437.3			—			—			(31,153.7	)		—
Interests in associates and joint ventures		—			—			—			758.6			—			758.6
Other investments		—			—			—			1,158.7			—			1,158.7
Deferred tax assets		—			—			—			94.1			—			94.1
Trade and other receivables		19.1			—			—			159.6			—			178.7
Intercompany receivables		—			276.3			1,907.7			4,856.1			(7,040.1	)		—
		10,735.5			20,721.9			1,907.7			20,202.5			(38,193.8	)		15,373.8
Current assets
Inventory and work in progress		—			—			—			329.0			—			329.0
Corporate income tax recoverable		—			—			—			168.6			—			168.6
Trade and other receivables		0.7			292.6			0.1			10,202.0			—			10,495.4
Intercompany receivables		1,685.4			1,605.9			70.1			2,655.2			(6,016.6	)		—
Cash and short-term deposits		83.8			951.0			—			5,845.3			(4,497.7	)		2,382.4
		1,769.9			2,849.5			70.2			19,200.1			(10,514.3	)		13,375.4
Current liabilities
Trade and other payables		(41.7	)		(105.1	)		(18.0	)		(12,520.2	)		—			(12,685.0	)
Intercompany payables		(2,436.5	)		(3,378.7	)		—			(201.4	)		6,016.6			—
Corporate income tax payable		—			—			—			(598.5	)		—			(598.5	)
Bank overdrafts and loans		(1,377.5	)		(3,419.9	)		(67.5	)		(564.8	)		4,497.7			(932.0	)
		(3,855.7	)		(6,903.7	)		(85.5	)		(13,884.9	)		10,514.3			(14,215.5	)
Net current (liabilities)/assets		(2,085.8	)		(4,054.2	)		(15.3	)		5,315.2			—			(840.1	)
Total assets less current liabilities		8,649.7			16,667.7			1,892.4			25,517.7			(38,193.8	)		14,533.7
Non-current liabilities
Bonds and bank loans		(411.8	)		—			(1,909.8	)		(2,339.6	)		—			(4,661.2	)
Trade and other payables		—			—			—			(891.5	)		—			(891.5	)
Intercompany payables		(600.5	)		(5,951.3	)		—			(488.3	)		7,040.1			—
Deferred tax liabilities		—			—			—			(552.3	)		—			(552.3	)
Provision for post-employment benefits		—			—			—			(229.3	)		—			(229.3	)
Provisions for liabilities and charges		—			—			—			(183.6	)		—			(183.6	)
		(1,012.3	)		(5,951.3	)		(1,909.8	)		(4,684.6	)		7,040.1			(6,517.9	)
Net assets/(liabilities)		7,637.4			10,716.4			(17.4	)		20,833.1			(31,153.7	)		8,015.8
Attributable to:
Equity share owners’ funds		7,637.4			10,716.4			(17.4	)		20,454.7			(31,153.7	)		7,637.4
Non-controlling interests		—			—			—			378.4			—			378.4
Total equity		7,637.4			10,716.4			(17.4	)		20,833.1			(31,153.7	)		8,015.8

F-47

Notes to the consolidated financial statements (continued)

33. Condensed consolidating financial information for bonds issued by WPP Finance 2010 with WPP plc as parent guarantor and WPP Jubilee Limited and WPP 2005 Limited as subsidiary guarantors

WPP Finance 2010 has in issue $750 million of 3.750% bonds due September 2024 and $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.

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 their 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.

Condensed consolidating income statement information

For the year ended 31 December 2016, £m


	WPP plc			Subsidiary Guarantors			WPP Finance 2010			Other Subsidiaries			Reclassifications / Eliminations			Consolidated WPP plc
Revenue		—			—			—			14,388.9			—			14,388.9
Direct costs		—			—			—			(1,991.1	)		—			(1,991.1	)
Net sales		—			—			—			12,397.8			—			12,397.8
Operating costs		13.8			(828.2	)		(0.1	)		(9,520.2	)		—			(10,334.7	)
Operating profit/(loss)		13.8			(828.2	)		(0.1	)		2,877.6			—			2,063.1
Share of results of subsidiaries		1,497.4			2,518.2			—			—			(4,015.6	)		—
Share of results of associates		—			—			—			49.8			—			49.8
Profit/(loss) before interest and taxation		1,511.2			1,690.0			(0.1	)		2,927.4			(4,015.6	)		2,112.9
Finance income		—			28.8			121.1			231.9			(301.4	)		80.4
Finance costs		(102.5	)		(222.1	)		(98.8	)		(132.5	)		301.4			(254.5	)
Revaluation of financial instruments		(8.6	)		—			7.0			(46.7	)		—			(48.3	)
Profit before taxation		1,400.1			1,496.7			29.2			2,980.1			(4,015.6	)		1,890.5
Taxation		—			0.7			—			(389.6	)		—			(388.9	)
Profit for the year		1,400.1			1,497.4			29.2			2,590.5			(4,015.6	)		1,501.6
Attributable to:
Equity holders of the parent		1,400.1			1,497.4			29.2			2,489.0			(4,015.6	)		1,400.1
Non-controlling interests		—			—			—			101.5			—			101.5
		1,400.1			1,497.4			29.2			2,590.5			(4,015.6	)		1,501.6

For the year ended 31 December 2015, £m


	WPP plc			Subsidiary Guarantors			WPP Finance 2010			Other Subsidiaries			Reclassifications / Eliminations			Consolidated WPP plc
Revenue		—			—			—			12,235.2			—			12,235.2
Direct costs		—			—			—			(1,710.9	)		—			(1,710.9	)
Net sales		—			—			—			10,524.3			—			10,524.3
Operating costs		10.6			(83.0	)		(0.1	)		(8,819.8	)		—			(8,892.3	)
Operating profit/(loss)		10.6			(83.0	)		(0.1	)		1,704.5			—			1,632.0
Share of results of subsidiaries		1,298.5			1,507.3			—			—			(2,805.8	)		—
Share of results of associates		—			—			—			47.0			—			47.0
Profit/(loss) before interest and taxation		1,309.1			1,424.3			(0.1	)		1,751.5			(2,805.8	)		1,679.0
Finance income		1.2			32.0			88.4			166.0			(215.2	)		72.4
Finance costs		(146.1	)		(161.6	)		(87.4	)		(44.2	)		215.2			(224.1	)
Revaluation of financial instruments		(4.0	)		—			—			(30.7	)		—			(34.7	)
Profit before taxation		1,160.2			1,294.7			0.9			1,842.6			(2,805.8	)		1,492.6
Taxation		—			3.8			—			(251.3	)		—			(247.5	)
Profit for the year		1,160.2			1,298.5			0.9			1,591.3			(2,805.8	)		1,245.1
Attributable to:
Equity holders of the parent		1,160.2			1,298.5			0.9			1,506.4			(2,805.8	)		1,160.2
Non-controlling interests		—			—			—			84.9			—			84.9
		1,160.2			1,298.5			0.9			1,591.3			(2,805.8	)		1,245.1

F-48

Notes to the consolidated financial statements (continued)

33. Condensed consolidating financial information for bonds issued by WPP Finance 2010 with WPP plc as parent guarantor and WPP Jubilee Limited and WPP 2005 Limited as subsidiary guarantors (continued)

Condensed consolidating income statement information (continued)

For the year ended 31 December 2014, £m


	WPP plc			Subsidiary Guarantors			WPP Finance 2010			Other Subsidiaries			Reclassifications / Eliminations			Consolidated WPP plc
Revenue		—			—			—			11,528.9			—			11,528.9
Direct costs		—			—			—			(1,464.1	)		—			(1,464.1	)
Net sales		—			—			—			10,064.8			—			10,064.8
Operating costs		9.9			(161.9	)		(0.1	)		(8,405.4	)		—			(8,557.5	)
Operating profit/(loss)		9.9			(161.9	)		(0.1	)		1,659.4			—			1,507.3
Share of results of subsidiaries		1,140.1			1,367.6			—			—			(2,507.7	)		—
Share of results of associates		—			—			—			61.9			—			61.9
Profit/(loss) before interest and taxation		1,150.0			1,205.7			(0.1	)		1,721.3			(2,507.7	)		1,569.2
Finance income		2.4			27.5			52.7			146.6			(134.5	)		94.7
Finance costs		(94.2	)		(139.0	)		(67.5	)		(96.5	)		134.5			(262.7	)
Revaluation of financial instruments		19.0			41.4			—			(9.7	)		—			50.7
Profit/(loss) before taxation		1,077.2			1,135.6			(14.9	)		1,761.7			(2,507.7	)		1,451.9
Taxation		—			4.5			4.1			(309.0	)		—			(300.4	)
Profit/(loss) for the year		1,077.2			1,140.1			(10.8	)		1,452.7			(2,507.7	)		1,151.5
Attributable to:
Equity holders of the parent		1,077.2			1,140.1			(10.8	)		1,378.4			(2,507.7	)		1,077.2
Non-controlling interests		—			—			—			74.3			—			74.3
		1,077.2			1,140.1			(10.8	)		1,452.7			(2,507.7	)		1,151.5

F-49

Notes to the consolidated financial statements (continued)

Condensed consolidating statement of comprehensive income

For the year ended 31 December 2016, £m


	WPP plc			Subsidiary Guarantors			WPP Finance 2010			Other Subsidiaries			Reclassifications / Eliminations			Consolidated WPP plc
Profit for the year		1,400.1			1,497.4			29.2			2,590.5			(4,015.6	)		1,501.6
Items that may be reclassified subsequently to profit or loss:
Exchange adjustments on foreign currency net investments		1,309.9			1,309.9			(1.2	)		1,379.2			(2,619.8	)		1,378.0
Loss on revaluation of available for sale investments		(93.1	)		(93.1	)		—			(93.1	)		186.2			(93.1	)
		1,216.8			1,216.8			(1.2	)		1,286.1			(2,433.6	)		1,284.9
Items that will not be reclassified subsequently to profit or loss:
Actuarial loss on defined benefit pension plans		(15.9	)		(15.9	)		—			(15.9	)		31.8			(15.9	)
Deferred tax on defined benefit pension plans		(0.4	)		(0.4	)		—			(0.4	)		0.8			(0.4	)
		(16.3	)		(16.3	)		—			(16.3	)		32.6			(16.3	)
Other comprehensive income/(loss) for the year		1,200.5			1,200.5			(1.2	)		1,269.8			(2,401.0	)		1,268.6
Total comprehensive income for the year		2,600.6			2,697.9			28.0			3,860.3			(6,416.6	)		2,770.2
Attributable to:
Equity holders of the parent		2,600.6			2,697.9			28.0			3,690.7			(6,416.6	)		2,600.6
Non-controlling interests		—			—			—			169.6			—			169.6
		2,600.6			2,697.9			28.0			3,860.3			(6,416.6	)		2,770.2

For the year ended 31 December 2015, £m


	WPP plc			Subsidiary Guarantors			WPP Finance 2010			Other Subsidiaries			Reclassifications / Eliminations			Consolidated WPP plc
Profit for the year		1,160.2			1,298.5			0.9			1,591.3			(2,805.8	)		1,245.1
Items that may be reclassified subsequently to profit or loss:
Exchange adjustments on foreign currency net investments		(272.9	)		(272.9	)		(0.9	)		(275.0	)		545.8			(275.9	)
Gain on revaluation of available for sale investments		206.0			206.0			—			206.0			(412.0	)		206.0
		(66.9	)		(66.9	)		(0.9	)		(69.0	)		133.8			(69.9	)
Items that will not be reclassified subsequently to profit or loss:
Actuarial gain on defined benefit pension plans		33.5			33.5			—			33.5			(67.0	)		33.5
Deferred tax on defined benefit pension plans		(5.2	)		(5.2	)		—			(5.2	)		10.4			(5.2	)
		28.3			28.3			—			28.3			(56.6	)		28.3
Other comprehensive loss for the year		(38.6	)		(38.6	)		(0.9	)		(40.7	)		77.2			(41.6	)
Total comprehensive income for the year		1,121.6			1,259.9			—			1,550.6			(2,728.6	)		1,203.5
Attributable to:
Equity holders of the parent		1,121.6			1,259.9			—			1,468.7			(2,728.6	)		1,121.6
Non-controlling interests		—			—			—			81.9			—			81.9
		1,121.6			1,259.9			—			1,550.6			(2,728.6	)		1,203.5

F-50

Notes to the consolidated financial statements (continued)

Condensed consolidating statement of comprehensive income (continued)

For the year ended 31 December 2014, £m


	WPP plc			Subsidiary Guarantors			WPP Finance 2010			Other Subsidiaries			Reclassifications / Eliminations			Consolidated WPP plc
Profit/(loss) for the year		1,077.2			1,140.1			(10.8	)		1,452.7			(2,507.7	)		1,151.5
Items that may be reclassified subsequently to profit or loss:
Exchange adjustments on foreign currency net investments		(224.3	)		(220.0	)		(1.0	)		(188.3	)		412.4			(221.2	)
Gain on revaluation of available for sale investments		64.6			64.6			—			64.6			(129.2	)		64.6
		(159.7	)		(155.4	)		(1.0	)		(123.7	)		283.2			(156.6	)
Items that will not be reclassified subsequently to profit or loss:
Actuarial loss on defined benefit pension plans		(86.6	)		(86.6	)		—			(86.6	)		173.2			(86.6	)
Deferred tax on defined benefit pension plans		62.1			62.1			—			62.1			(124.2	)		62.1
		(24.5	)		(24.5	)		—			(24.5	)		49.0			(24.5	)
Other comprehensive loss for the year		(184.2	)		(179.9	)		(1.0	)		(148.2	)		332.2			(181.1	)
Total comprehensive income/(loss) for the year		893.0			960.2			(11.8	)		1,304.5			(2,175.5	)		970.4
Attributable to:
Equity holders of the parent		893.0			960.2			(11.8	)		1,227.1			(2,175.5	)		893.0
Non-controlling interests		—			—			—			77.4			—			77.4
		893.0			960.2			(11.8	)		1,304.5			(2,175.5	)		970.4

F-51

Notes to the consolidated financial statements (continued)

Condensed consolidating cash flow statement information

For the year ended 31 December 2016, £m


	WPP plc			Subsidiary Guarantors			WPP Finance 2010			Other Subsidiaries			Reclassifications/ Eliminations		Consolidated WPP plc
Net cash inflow/(outflow) from operating activities		963.1			1,002.2			65.5			(257.0	)		—		1,773.8
Investing activities
Acquisitions and disposals		—			—			—			(638.8	)		—		(638.8	)
Purchases of property, plant and equipment		—			(1.1	)		—			(251.0	)		—		(252.1	)
Purchases of other intangible assets (including capitalised computer software)		—			—			—			(33.0	)		—		(33.0	)
Proceeds on disposal of property, plant and equipment		—			—			—			7.7			—		7.7
Net cash outflow from investing activities		—			(1.1	)		—			(915.1	)		—		(916.2	)
Financing activities
Share option proceeds		27.2			—			—			—			—		27.2
Cash consideration for non-controlling interests		—			(1.3	)		—			(57.0	)		—		(58.3	)
Share repurchases and buy-backs		(274.5	)		—			—			(152.9	)		—		(427.4	)
Net (decrease)/increase in borrowings		(392.1	)		—			—			369.6			—		(22.5	)
Financing and share issue costs		—			—			—			(6.4	)		—		(6.4	)
Equity dividends paid		(616.5	)		—			—			—			—		(616.5	)
Dividends paid to non-controlling interests in subsidiary undertakings		—			—			—			(89.6	)		—		(89.6	)
Net cash (outflow)/inflow from financing activities		(1,255.9	)		(1.3	)		—			63.7			—		(1,193.5	)
Net (decrease)/increase in cash and cash equivalents		(292.8	)		999.8			65.5			(1,108.4	)		—		(335.9	)
Translation differences		(5.7	)		(154.6	)		(13.1	)		465.3			—		291.9
Cash and cash equivalents at beginning of year		(926.5	)		(2,472.7	)		(67.5	)		5,413.3			—		1,946.6
Cash and cash equivalents at end of year		(1,225.0	)		(1,627.5	)		(15.1	)		4,770.2			—		1,902.6

For the year ended 31 December 2015, £m


	WPP plc			Subsidiary Guarantors			WPP Finance 2010			Other Subsidiaries			Reclassifications/ Eliminations		Consolidated WPP plc
Net cash inflow/(outflow) from operating activities		983.6			(658.3	)		(5.6	)		1,040.2			—		1,359.9
Investing activities
Acquisitions and disposals		—			(16.9	)		—			(652.6	)		—		(669.5	)
Purchases of property, plant and equipment		—			(2.0	)		—			(208.3	)		—		(210.3	)
Purchases of other intangible assets (including capitalised computer software)		—			—			—			(36.1	)		—		(36.1	)
Proceeds on disposal of property, plant and equipment		—			—			—			13.4			—		13.4
Net cash outflow from investing activities		—			(18.9	)		—			(883.6	)		—		(902.5	)
Financing activities
Share option proceeds		27.6			—			—			—			—		27.6
Cash consideration for non-controlling interests		—			—			—			(23.6	)		—		(23.6	)
Share repurchases and buy-backs		(406.0	)		—			—			(181.6	)		—		(587.6	)
Net increase/(decrease) in borrowings		(13.7	)		—			—			505.7			—		492.0
Financing and share issue costs		—			—			—			(11.4	)		—		(11.4	)
Equity dividends paid		(545.8	)		—			—			—			—		(545.8	)
Dividends paid to non-controlling interests in subsidiary undertakings		—			—			—			(55.2	)		—		(55.2	)
Net cash (outflow)/inflow from financing activities		(937.9	)		—			—			233.9			—		(704.0	)
Net (decrease)/increase in cash and cash equivalents		45.7			(677.2	)		(5.6	)		390.5			—		(246.6	)
Translation differences		10.4			2.2			(3.3	)		(63.7	)		—		(54.4	)
Cash and cash equivalents at beginning of year		(982.6	)		(1,797.7	)		(58.6	)		5,086.5			—		2,247.6
Cash and cash equivalents at end of year		(926.5	)		(2,472.7	)		(67.5	)		5,413.3			—		1,946.6

F-52

Notes to the consolidated financial statements (continued)

Condensed consolidating cash flow statement information (continued)

For the year ended 31 December 2014, £m


	WPP plc			Subsidiary Guarantors			WPP Finance 2010			Other Subsidiaries			Reclassifications/ Eliminations		Consolidated WPP plc
Net cash inflow/(outflow) from operating activities		1,370.0			(229.8	)		(832.3	)		1,395.8			—		1,703.7
Investing activities
Acquisitions and disposals		—			(0.3	)		—			(488.8	)		—		(489.1	)
Purchases of property, plant and equipment		—			(4.0	)		—			(173.9	)		—		(177.9	)
Purchases of other intangible assets (including capitalised computer software)		—			—			—			(36.5	)		—		(36.5	)
Proceeds on disposal of property, plant and equipment		—			—			—			5.9			—		5.9
Net cash outflow from investing activities		—			(4.3	)		—			(693.3	)		—		(697.6	)
Financing activities
Share option proceeds		25.0			—			—			—			—		25.0
Cash consideration for non-controlling interests		—			—			—			(5.6	)		—		(5.6	)
Share repurchases and buy-backs		(412.5	)		—			—			(98.3	)		—		(510.8	)
Net increase/(decrease) in borrowings		—			(18.3	)		460.1			23.4			—		465.2
Financing and share issue costs		—			(3.5	)		(12.6	)		(11.4	)		—		(27.5	)
Equity dividends paid		(460.0	)		—			—			—			—		(460.0	)
Dividends paid to non-controlling interests in subsidiary undertakings		—			—			—			(57.7	)		—		(57.7	)
Net cash (outflow)/inflow from financing activities		(847.5	)		(21.8	)		447.5			(149.6	)		—		(571.4	)
Net increase/(decrease) in cash and cash equivalents		522.5			(255.9	)		(384.8	)		552.9			—		434.7
Translation differences		13.7			49.6			39.3			(172.9	)		—		(70.3	)
Cash and cash equivalents at beginning of year		(1,518.8	)		(1,591.4	)		286.9			4,706.5			—		1,883.2
Cash and cash equivalents at end of year		(982.6	)		(1,797.7	)		(58.6	)		5,086.5			—		2,247.6

F-53

Notes to the consolidated financial statements (continued)

Condensed consolidating balance sheet information

At 31 December 2016, £m


	WPP plc			Subsidiary Guarantors			WPP Finance 2010			Other Subsidiaries			Reclassifications/ Eliminations			Consolidated WPP plc
Non-current assets
Intangible assets:
Goodwill		—			—			—			13,214.3			—			13,214.3
Other		—			—			—			2,217.3			—			2,217.3
Property, plant and equipment		—			7.1			—			961.6			—			968.7
Investment in subsidiaries		13,356.0			23,994.3			—			—			(37,350.3	)		—
Interests in associates and joint ventures		—			—			—			1,069.4			—			1,069.4
Other investments		—			—			—			1,310.3			—			1,310.3
Deferred tax assets		—			—			—			140.4			—			140.4
Trade and other receivables		—			—			7.0			197.9			—			204.9
Intercompany receivables		—			238.9			2,276.8			7,626.3			(10,142.0	)		—
		13,356.0			24,240.3			2,283.8			26,737.5			(47,492.3	)		19,125.3
Current assets
Inventory and work in progress		—			—			—			400.4			—			400.4
Corporate income tax recoverable		—			—			—			231.2			—			231.2
Trade and other receivables		11.5			377.9			0.1			11,985.0			—			12,374.5
Intercompany receivables		1,628.7			1,690.2			45.9			2,651.1			(6,015.9	)		—
Cash and short-term deposits		13.7			148.0			—			5,304.3			(3,029.1	)		2,436.9
		1,653.9			2,216.1			46.0			20,572.0			(9,045.0	)		15,443.0
Current liabilities
Trade and other payables		(21.0	)		(69.5	)		(21.3	)		(14,898.6	)		—			(15,010.4	)
Intercompany payables		(2,659.2	)		(2,968.7	)		—			(388.0	)		6,015.9			—
Corporate income tax payable		—			—			—			(752.3	)		—			(752.3	)
Bank overdrafts and loans		(1,641.8	)		(1,775.5	)		(15.1	)		(599.2	)		3,029.1			(1,002.5	)
		(4,322.0	)		(4,813.7	)		(36.4	)		(16,638.1	)		9,045.0			(16,765.2	)
Net current (liabilities)/assets		(2,668.1	)		(2,597.6	)		9.6			3,933.9			—			(1,322.2	)
Total assets less current liabilities		10,687.9			21,642.7			2,293.4			30,671.4			(47,492.3	)		17,803.1
Non-current liabilities
Bonds and bank loans		—			—			(2,282.9	)		(3,282.0	)		—			(5,564.9	)
Trade and other payables		—			—			—			(1,273.8	)		—			(1,273.8	)
Intercompany payables		(1,363.4	)		(8,286.7	)		—			(491.9	)		10,142.0			—
Deferred tax liabilities		—			—			—			(692.4	)		—			(692.4	)
Provision for post-employment benefits		—			—			—			(276.5	)		—			(276.5	)
Provisions for liabilities and charges		—			—			—			(227.9	)		—			(227.9	)
		(1,363.4	)		(8,286.7	)		(2,282.9	)		(6,244.5	)		10,142.0			(8,035.5	)
Net assets		9,324.5			13,356.0			10.5			24,426.9			(37,350.3	)		9,767.6
Attributable to:
Equity share owners’ funds		9,324.5			13,356.0			10.5			23,983.8			(37,350.3	)		9,324.5
Non-controlling interests		—			—			—			443.1			—			443.1
Total equity		9,324.5			13,356.0			10.5			24,426.9			(37,350.3	)		9,767.6

F-54

Notes to the consolidated financial statements (continued)

Condensed consolidating balance sheet information (continued)

At 31 December 2015, £m


	WPP plc			Subsidiary Guarantors			WPP Finance 2010			Other Subsidiaries			Reclassifications/ Eliminations			Consolidated WPP plc
Non-current assets
Intangible assets:
Goodwill		—			—			—			10,670.6			—			10,670.6
Other		—			—			—			1,715.4			—			1,715.4
Property, plant and equipment		—			8.3			—			789.4			—			797.7
Investment in subsidiaries		10,716.4			20,268.7			—			—			(30,985.1	)		—
Interests in associates and joint ventures		—			—			—			758.6			—			758.6
Other investments		—			—			—			1,158.7			—			1,158.7
Deferred tax assets		—			—			—			94.1			—			94.1
Trade and other receivables		19.1			—			—			159.6			—			178.7
Intercompany receivables		—			276.3			1,907.7			4,856.1			(7,040.1	)		—
		10,735.5			20,553.3			1,907.7			20,202.5			(38,025.2	)		15,373.8
Current assets
Inventory and work in progress		—			—			—			329.0			—			329.0
Corporate income tax recoverable		—			—			—			168.6			—			168.6
Trade and other receivables		0.7			292.6			0.1			10,202.0			—			10,495.4
Intercompany receivables		1,685.4			1,605.9			70.1			2,655.2			(6,016.6	)		—
Cash and short-term deposits		83.8			947.2			—			5,849.1			(4,497.7	)		2,382.4
		1,769.9			2,845.7			70.2			19,203.9			(10,514.3	)		13,375.4
Current liabilities
Trade and other payables		(41.7	)		(105.1	)		(18.0	)		(12,520.2	)		—			(12,685.0	)
Intercompany payables		(2,436.5	)		(3,206.3	)		—			(373.8	)		6,016.6			—
Corporate income tax payable		—			—			—			(598.5	)		—			(598.5	)
Bank overdrafts and loans		(1,377.5	)		(3,419.9	)		(67.5	)		(564.8	)		4,497.7			(932.0	)
		(3,855.7	)		(6,731.3	)		(85.5	)		(14,057.3	)		10,514.3			(14,215.5	)
Net current (liabilities)/assets		(2,085.8	)		(3,885.6	)		(15.3	)		5,146.6			—			(840.1	)
Total assets less current liabilities		8,649.7			16,667.7			1,892.4			25,349.1			(38,025.2	)		14,533.7
Non-current liabilities
Bonds and bank loans		(411.8	)		—			(1,909.8	)		(2,339.6	)		—			(4,661.2	)
Trade and other payables		—			—			—			(891.5	)		—			(891.5	)
Intercompany payables		(600.5	)		(5,951.3	)		—			(488.3	)		7,040.1			—
Deferred tax liabilities		—			—			—			(552.3	)		—			(552.3	)
Provision for post-employment benefits		—			—			—			(229.3	)		—			(229.3	)
Provisions for liabilities and charges		—			—			—			(183.6	)		—			(183.6	)
		(1,012.3	)		(5,951.3	)		(1,909.8	)		(4,684.6	)		7,040.1			(6,517.9	)
Net assets/(liabilities)		7,637.4			10,716.4			(17.4	)		20,664.5			(30,985.1	)		8,015.8
Attributable to:
Equity share owners’ funds		7,637.4			10,716.4			(17.4	)		20,286.1			(30,985.1	)		7,637.4
Non-controlling interests		—			—			—			378.4			—			378.4
Total equity		7,637.4			10,716.4			(17.4	)		20,664.5			(30,985.1	)		8,015.8

F-55

Exhibit Index


Exhibit No.		Exhibit Title

2.14		Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to £400 million of 2.875% Notes due September 2046.

2.15		Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to an A$547 million and NZ$3 million Syndicated Facility Agreement entered into by STW Communications Group Limited (subsequently renamed WPP AUNZ Limited), dated 17 March 2016.

4.32		WPP Share Option Plan 2015

8.1		List of subsidiaries.

12.1		Certification of Group Chief Executive Officer.

12.2		Certification of Group Chief Financial Officer.

13.1		Certification of Group Chief Executive Officer under 18 U.S.C. Section 1350.

13.2		Certification of Group Chief Financial Officer under 18 U.S.C. Section 1350.

14.1		Consent of Independent Registered Public Accounting Firm (for WPP plc and subsidiaries).

Exhibit 2.14

WPP plc

27 Farm Street

London W1J 5RJ, England

28 April 2017

Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C. 20549

Dear Sir or Madam:

In 2016 WPP Finance 2013, a subsidiary of the Registrant, issued £400 million 2.875% Notes due 14 September 2046 (the “Notes”). The Notes are guaranteed by WPP plc, WPP 2005 Limited and WPP Jubilee Limited.

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 Notes upon request.


Very truly yours,

WPP plc

By:		/s/ Paul W.G. Richardson
		Paul W.G. Richardson
		Group Chief Financial Officer

Exhibit 2.15

WPP plc

27 Farm Street

London W1J 5RJ, England

28 April 2017

Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C. 20549

Dear Sir or Madam:

On 17 March 2016, STW Communications Group Limited (subsequently renamed WPP AUNZ Limited) entered into an A$547 million and NZ$3 million Syndicated Facility Agreement (the “Syndicated Facility Agreement”).


Very truly yours,

WPP plc

By:		/s/ Paul W.G. Richardson
		Paul W.G. Richardson
		Group Chief Financial Officer

Exhibit 4.32

WPP PLC

SHARE OPTION PLAN 2015

Adopted by the board of directors of the Company on 14 April 2015

and approved by share owners in general meeting on 9 June 2015

SQUIRE PATTON BOGGS (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.002-1586

CONTENTS


GLOSSARY			3

1 HOW THE PLAN WORKS AND HOW OPTIONS ARE GRANTED			5

2 RIGHTS OF A PARTICIPANT AFTER GRANT BUT BEFORE EXERCISE			7

3 EXERCISE OF OPTIONS			7

4 LEAVING EMPLOYMENT			9

5 REDUCTION OF AN OPTION			10

6 TRANSACTIONS AFFECTING THE COMPANY			10

7 CHANGING THE PLAN			12

8 GENERAL			12

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.

“Basic Salary” means the person’s gross salary and fees. 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 the Company’s budget rate applicable at the relevant date unless the Compensation Committee determines otherwise.

“Business” means a functional business unit of the Company operating in any of the following ways:

(a)

within a Subsidiary;

(b)

across one or more Members of the Group; or

(c)

as a sector, operating brand or operating company (as referred to in the Company’s report and accounts).

“Business Day” means a day on which both the London Stock Exchange and NASDAQ are open for the transaction of business.

“Cash Value” means the value of a Share as determined by the Compensation Committee based on the price at which Shares are sold on or around the date of exercise of Options (and in the case of sales of Shares on more than one Business Day, the average of those prices).

“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, by means of holding voting rights in relation to the Company’s share capital or powers conferred by any document regulating the Company, that the affairs of the Company 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.

“Eligible Employee” means:

(a)

in respect of an Executive Option, an executive director or an employee of a Member of the Group; and

(b)

in respect of any other Option, an employee whose working time for one or more Members of the Group equals or exceeds a period determined by the Compensation Committee at the relevant Grant Date.

“Exercise Date” means the first Business Day on or after:

(a)

the third anniversary of the Grant Date, or any other date after the Grant Date that the Compensation Committee decides on the grant of an Option should be the exercise date;

(b)

cessation of the Participant’s employment if either of rules 4.3 or 4.4 applies; or

(c)

the date that a transaction as described in rule 6 occurs;

whichever occurs first.

“Executive Option” means an Option granted to an individual on bespoke terms.

“Grant Date” means the date specified in the deed or other document produced in accordance with rule 1.13.

“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 value determined by the Compensation Committee that must be at least equal to:

(a)

in the case of Shares of the same class as shares listed in the Official List, the closing mid-market price, which is half way between the closing bid and offer prices shown in the quotations for those shares in the Official List on the Business Day immediately preceding the Grant Date; or

(b)

in the case of ADSs, the closing price of an ADS on NASDAQ on the Business Day immediately preceding the Grant Date;

and in the case of an Option that is intended to qualify for any favourable tax treatment, as determined in accordance with any other formula that will enable the Option to qualify for that favourable tax treatment.

“Member of the Group” means:

(a)

the Company; or

(b)

any Subsidiary from time to time; or

(c)

any other company that 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 of the Listing Rules of the United Kingdom Listing Authority issued by the Financial Conduct Authority, which govern companies whose shares are traded on the London Stock Exchange.

“NASDAQ” means the US screen-based system for the quotation and transfer of equity securities.

“Official List” means the daily list maintained by the Financial Conduct Authority for the purposes of section 74(1) of the Financial Services and Markets Act 2000 setting out the quoted prices of shares traded on the London Stock Exchange.

“Option” means a right to acquire Shares under the Plan.

“Participant” means a person holding an Option or in the event of death, the Participant’s personal representatives.

“Performance Condition” means any performance condition imposed under rule 1.10.

“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 Share Option Plan 2015 as changed from time to time.

“Regulatory Information Service” means a service that is approved by the Financial Conduct Authority as meeting the Primary Information Provider criteria and is on the list of Regulatory Information Services maintained by the Financial Conduct Authority.

“Shares” means fully paid ordinary shares (including treasury shares) in the capital of the Company or ADSs.

“Subsidiary” means a company that 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.

1	HOW THE PLAN WORKS AND HOW OPTIONS ARE GRANTED

1.1

How the Plan works

The Plan gives a Participant the right to buy Shares at an exercise price set in accordance with rule 1.5 below, subject to the satisfaction of certain conditions and continued employment.

1.2

Granting Options

Options will be granted by the Company but the Compensation Committee will decide who gets an Option, over how many Shares and on what terms.

1.3

Participation

The Company can grant an Option to any Eligible Employee selected by the Compensation Committee. However, unless the Compensation Committee considers that special circumstances exist, an Option may not be granted to an employee who, on the Grant Date, has given or received notice of termination of employment, whether or not that termination is lawful.

1.4

Timing of Option grants

Options can only be granted within 42 days 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 that justify the grant of Options;

(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 that prevented the granting of Options during any period specified above.

1.5	Exercise price

The exercise price per Share must be set by the Compensation Committee when the Option is granted and must be at least Market Value.

1.6

Expiry of the Plan

Options 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 Options granted to a Participant in the preceding twelve months cannot be more than:

(a)

one times; or

(b)

in the case of an Executive Option, four times; that Participant’s Basic Salary.

1.8

Other limits

There are also limits on the number of Shares that 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 Option that is inconsistent with either of rules 1.7 or 1.8, the Option will be limited on a basis consistent with those rules with effect from the Grant Date.

1.10

Performance condition

The exercise of an Option may be made conditional on the satisfaction of one or more conditions linked to the performance of the Company, the Participant or the Business or Member of the Group for which the Participant works. A Performance Condition must be objective and may provide that an Option will lapse to the extent it is not satisfied. The Compensation Committee may impose other conditions when granting an Option.

1.11

Options granted to directors of the Company

The exercise of an Option granted to a director of the Company must be conditional on the satisfaction of one or more performance conditions to be prescribed after consultation with key share owners of the Company.

1.12

Option certificates

As soon as practicable after granting an Option, the Company will provide evidence to the Participant of the grant.

1.13

Grant requirements

Options must be granted by deed or other legally-binding document. The terms of the Option, 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 Option;

(b)

the exercise price;

(c)

the Grant Date;

(d)

the Performance Condition (if any); and

(e)

the Exercise Date.

1.14

Right to decline

Participants will be notified of the grant of Options. An Option may be declined by a Participant within 30 days after the Grant Date by notice in writing to any person nominated by the Compensation Committee.

If this happens, the Option will be treated as if it had never been granted under the Plan. A Participant is not required to make any payment to decline an Option.

RIGHTS OF A PARTICIPANT AFTER GRANT BUT BEFORE EXERCISE

2.1

Effect of transferring an Option

If a Participant, whether voluntarily or involuntarily, transfers, assigns, charges or otherwise disposes of an Option or any rights in respect of it, the Option will immediately lapse unless the Compensation Committee decides to the contrary.

2.2

Right to transfer on death

Rights under an Option are transferred to the personal representatives of a Participant after the Participant’s death as set out rule 4.4.

2.3

No share rights before exercise of Options

A Participant cannot vote and is not entitled to receive dividends in respect of the Shares subject to an Option until after exercise, as described in rule 3.7.

EXERCISE OF OPTIONS

3.1

When can an Option be exercised?

An Option can be exercised on or after the Exercise Date and:

(a)

before the tenth anniversary of the Grant Date, or any earlier date determined by the Compensation Committee at the time the Option is granted;

(b)

during the period of six months after the Participant ceases to be an employee in one of the circumstances set out in rule 4.3;

(c)

during the period of twelve months after the date of death of the Participant as set out in rule 4.4; or

(d)

during the period of one month after a transaction affecting the Company as set out in rule 6.1.

The Compensation Committee may specify that an Option can only be exercised at particular times within the relevant period. Any Option not exercised by the end of the relevant period will lapse.

3.2

Method of exercise

Exercise of an Option is conditional on the Participant paying to the Company:

(a)

the exercise price; and

(b)

any tax arising on exercise (see rules 3.9 and 3.10),

or other arrangements being agreed between the Participant and the Company for the payment of these amounts.

3.3

Satisfaction of any Performance Conditions

If the Option is subject to a Performance Condition, as soon as reasonably practicable after the Exercise Date, the Compensation Committee will determine the extent to which the Performance Condition has been satisfied.

3.4

Exercisable proportion of an Option and lapse

(a)

If the Option is subject to a Performance Condition and granted to a director of the Company, it will be exercisable to the extent the Performance Condition is satisfied and the balance of the Option will

lapse. The Compensation Committee may decide otherwise in respect of an Option granted to a Participant who is not a director of the Company.

(b)

For all Options, the number of Shares that can be acquired on exercise earlier than the third anniversary of the Grant Date will be adjusted under rule 6.2 and the balance will lapse.

3.5

Effect of a Dealing Restriction

An Option may not be exercised if a Dealing Restriction applies but it will become exercisable after the Exercise Date once the Dealing Restriction ceases to apply.

3.6

Satisfaction of Options after exercise

Subject to rule 5 and any consents under rule 8.10 being obtained, as soon as reasonably practicable after an Option has been exercised, 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 Option has been exercised (or the settlement of the Option in cash under rule 3.8).

3.7

Share rights after exercise

The Participant will be entitled to all rights attaching to the Shares that are transferred or issued following exercise by reference to a record date on or after the date of the transfer or issue.

3.8

Cash settlement of Options and cash awards

Subject to rules 3.9 and 3.10, the Company may decide:

(a)

after the exercise of an Option that instead of transferring or issuing Shares, to pay to, or to the order of, the Participant an amount equal to the Cash Value of the Shares that would have been transferred or issued on exercise of the Option less the exercise price of the Shares; or

(b)

on the Grant Date that an Eligible Employee will be granted, instead of an Option (but otherwise on the same terms as an Option), a right to receive (on the Exercise Date) an amount equal to the Cash Value of the Shares that would have been transferred or issued on exercise of an Option less the exercise price of the Shares.

3.9

Responsibility for tax

The Participant must pay all tax, social security contributions and other levies in respect of the exercise of an Option. 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 Option.

3.10

Methods of paying the tax

If any Member of the Group or any Trustee has to pay or account for any item referred to in rule 3.9, 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 Option 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 Option or the number of Shares (or cash under rule 3.8) to which the Participant is entitled on exercise; and/or

(c)

deduct the amount from any amount to which the Participant is entitled under the Plan, the Participant’s employment contract or otherwise.

4	LEAVING EMPLOYMENT

4.1

Meaning of leaving employment

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. They will not be treated as leaving if they recommence an employment or office with a Member of the Group within 1 calendar month or any longer period that the Compensation Committee determines for a particular Participant, as long as that determination is made within 6 months of the date when the Participant ceased to be an employee or director.

4.2

Leaving within six months of the grant of an Option

If a Participant leaves employment within the first six months after the Grant Date, the relevant Option will lapse.

4.3

Good leavers

If the Participant leaves employment for one of the following reasons:

(a)

ill-health, injury or disability, established to the satisfaction of the Compensation Committee;

(b)

retirement on any basis acceptable to the Compensation Committee;

(c)

the Participant’s employing company ceasing to be a Subsidiary;

(d)

a transfer of the Business, or the part of the Business, in which the Participant works to a person that 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;

unless the Compensation Committee decides otherwise, the Option will not lapse but will become exercisable but only to the extent that any applicable Performance Condition has been satisfied. The Compensation Committee will reduce the number of Shares in respect of which an Executive Option may be exercised to reflect the period from the Grant Date to the date of leaving (calculated using the number of complete calendar months since the Grant Date) as a proportion of the period between the Grant Date and the Exercise Date. In exceptional circumstances, the Compensation Committee may determine that an Option will be exercisable on a different basis.

4.4

Death of a Participant

Unless the Compensation Committee decides otherwise, the Option of a deceased Participant will be exercisable by the Participant’s personal representatives but only to the extent that any applicable Performance Condition has been satisfied (as determined by the Compensation Committee) up to the date of death. Shares will be issued or transferred (or cash paid under rule 3.8) to the Participant’s personal representatives. The Compensation Committee may:

(a)

reduce the number of Shares in respect of which an Executive Option may be exercised to reflect the number of complete calendar months between the Grant Date and the date of death as a proportion of the period between the Grant Date and the Exercise Date; and

(b)

in exceptional circumstances, determine that an Option may be exercised on any other terms that it considers appropriate.

4.5

Other leavers

Other than in a case where the Participant is a good leaver (see rule 4.3) or dies (see rule 4.4), if a Participant leaves employment before the Exercise Date of an Option, that Option will lapse.

4.6

Interaction of leaving employment and Company transactions

If a Participant leaves employment or dies and the relevant Option has not been exercised under this rule 4 and the Option is or becomes exercisable under rule 6, the Option will lapse on the earlier of the end of the period allowed for exercise under this rule 4 and the end of the period allowed for exercise under rule 6.

REDUCTION OF AN OPTION

5.1

Overpayment of Performance Remuneration

If a Participant:

(a)

commits an act of fraud, dishonesty or deceit that affected an amount of Performance Remuneration paid to the Participant;

(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 the Participant’s 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 Executive Option or part of an Executive Option will lapse to compensate the Company for that overpayment, provided that the Compensation Committee will act reasonably in exercising this power.

5.2

Reduction in working hours

If a Participant’s working hours are materially reduced before the Exercise Date of an Option, the Compensation Committee may reduce the number of Shares in respect of which that Option may be exercised, as it considers appropriate.

TRANSACTIONS AFFECTING THE COMPANY

6.1

Early exercise

Subject to rules 6.2 to 6.4, Options will become exercisable 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)

a person becomes bound or entitled to acquire Shares under Part 18 of the Companies (Jersey) Law 1991 (“squeeze-out”);

(c)

the court sanctions a scheme of arrangement under Part 18A of the Companies (Jersey) Law 1991 involving the acquisition of Shares; or

(d)

the Company passes a resolution for its voluntary winding up or an order is made for its compulsory winding up or it is declared en desastre.

6.2

Pro-rating on early exercise

Where an Option becomes exercisable under rule 6.1:

(a)

if it is an Executive Option, the number of Shares in respect of which it may be exercised will be reduced to reflect the number of complete calendar months between the Grant Date and the date of the relevant event as a proportion of the period between the Grant Date and the Exercise Date; and

(b)

it will only become exercisable if and to the extent that any applicable Performance Condition has been satisfied as at the Exercise Date.

6.3

Applying the Performance Condition on early exercise

The extent to which the Performance Condition is satisfied will be calculated as required by its terms or, if those terms do not specify the outcome in sufficient detail, in the manner that the Compensation Committee considers reasonable.

6.4

Exchanging Options rather than early exercise

An Option will not become exercisable under rule 6.1 to the extent that:

(a)

an offer to exchange the Option is made by the Acquiring Company and accepted by the 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 Option will be automatically exchanged.

6.5

Terms of exchanged Options

Where an Option is 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 a new option in exchange for the existing Option. The new option:

(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 in value to the existing Option;

(c)

will be treated as having been granted on the same Grant Date and will become exercisable in the same manner and at the same time as the Option it replaces;

(d)

may, at the discretion of the Compensation Committee, be subject to a Performance Condition that will be, so far as possible, equivalent to any Performance Condition applying to the Option it replaces; and

(e)

will be governed by the Plan as if references to Shares were references to the shares over which the new Option 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 Options will become exercisable, in which case rules 6.2 and 6.3 will apply as if the Options had become exercisable under rule 6.1; or

(b)

adjust the number, class or identity of Shares comprised in all existing Options.

6.7

Variations of capital

If the Company carries out:

(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 Option and/or the exercise price accordingly.

CHANGING THE PLAN

7.1

Compensation Committee’s right to change the Plan or Options

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 Option (but not the Performance Condition applicable to an Option) in any way; or

(b)

amend the Performance Condition that applies to an Option 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 materially no more or 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 or any Option to the advantage of present or future Participants that relates to the following:

(a)

the persons to or for whom Shares may be provided under the Plan;

(b)

the limits on the number of Shares that 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

The Compensation Committee can make minor changes to the Plan or any Option without the approval of the Company in general meeting to:

(a)

benefit the administration of the Plan;

(b)

comply with or take account of the provisions of any proposed or existing legislation;

(c)

take account of any changes to legislation; or

(d)

obtain or maintain favourable tax, exchange control or regulatory treatment of any Member of the Group or any present or future Participant.

GENERAL

8.1

Company limits

The Company must not grant an Option if the number of Shares committed to be issued under that Option 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 Options, 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 that have been issued or committed to be issued to satisfy Options, 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 Options or options or awards under any other employee share plan adopted by the Company 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 Options or options or awards that have lapsed or been surrendered.

8.2

Serving notice on a Participant

Any notice or other document which has to be given to a person who is or, is eligible to be, a Participant under or in connection with the Plan may be:

(a)

delivered or sent by post to the Participant’s home address according to the records of the employing company; or

(b)

sent by e-mail to any e-mail address that 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

Serving notice on the Company

Any notice or other document that 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 to any e-mail address or by other electronic means notified to the Participant.

8.4

Timing of delivery of notices

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, 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 Option 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 Option 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)

The rules and the operation of the Plan do not form part of the contract of employment of an Employee. The rights and obligations arising from the employment relationship between the Employee and any 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)

An Employee does not have a right to participate in the Plan. Participation in the Plan or the grant of Options on a particular basis in any year does not create any right to or expectation of participation in the Plan or the grant of Options on the same basis, or at all, in any future year. Benefits received under the Plan are not pensionable.

(e)

The terms and operation of the Plan do not entitle Employees to the exercise of any discretion in their favour.

(f)

An Employee will not have a claim or right of action in respect of any decision, omission or exercise of discretion relating to the Plan or an Option that 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)

An Employee will not have 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 Option 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 (or cash under rule 3.8) subject to and in accordance with the express terms of the Plan and any Performance Condition, in consideration for, and as a condition of, the grant of an Option.

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, 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 Options as soon as practicable.

8.14

Governing law

The laws of England and Wales govern the Plan and all Options and their construction. The courts of England and Wales have exclusive jurisdiction in respect of disputes arising under or in connection with the Plan or any Option.

APPENDIX 1

Australia

The Plan will apply to Options granted to residents in Australia with the following modifications:

Under rule 1.2, the grant of an Option over Shares to which this appendix applies will include a term that it cannot be exercised at a time when Shares of the same class as the Shares subject to the Option are listed in the London Stock Exchange Daily Official List unless Shares could be sold in the market at that time for a price that is equal to at least 110% of the exercise price as determined in accordance with rule 1.5.

Under rule 1.2, the grant of an Option over Shares to which this appendix applies will include a term that it cannot be exercised at a time when Shares of the same class as the Shares subject to the Option are not listed in the London Stock Exchange Daily Official List unless at the time of exercise the market value (within the meaning of Part VIII of the Taxation of Chargeable Gains Act 1992) of a Share at that time is equal to at least 110% of the exercise price determined in accordance with rule 1.5.

Under rule 1.2, the grant of an Option over ADSs to which this appendix applies will include a term that it cannot be exercised at a time when WPP ADSs are quoted on the NASDAQ National Market System unless the price for which WPP ADSs could be sold in the market at that time is equal to at least 110% of the exercise price determined in accordance with Rule 1.5.

In Rule 3.1, delete clause (a) in its entirety and replace with:

“(a) after the date immediately preceding the seventh anniversary of the Grant Date;”

APPENDIX 2

Belgium

The Plan will apply to Options granted to residents of Belgium with the following modifications:

In Rule 1.14, delete the words “30 days after the Grant Date” and substitute the words “60 days of the date of the Company’s notification of the grant of that Option.”

A new rule 1.15 will apply, worded as follows: “An Option will lapse if a Participant fails to accept the grant of an Option within 60 days of the date of the Company’s notification of the grant of that Option.”

APPENDIX 3

People’s Republic of China (“PRC”)

The Plan will apply to Options granted to the holders of PRC identity cards in the PRC with the following modification:

Rule 3.1(c) shall be amended to read “during the period of six months after the date of death of the Participant as set out in rule 4.4; or”

APPENDIX 4

Denmark

The Plan will apply to options granted to residents of Denmark with the following modification:

Where the provisions of rule 4.1, 4.3 and 4.6 conflict with Danish law, Danish law will prevail and the terms of these rules will be taken to be amended accordingly but only in respect of Options granted to employees in Denmark.

APPENDIX 5

France

The Plan will apply to Options granted to residents of France subject to the following modifications:

Eligible Employees can be either the employees, the Chairman of the Board (Président du Conseil), the Managing Directors (Directeurs Généraux) or Managers (Gérants) as defined in Section L 225-185 of the French Commercial Code, of a French company satisfying the conditions mentioned in Section L 225-180 of the same Code.

Notwithstanding any other provision of the Plan, an Option cannot be granted to any Eligible Employee who owns more than 10% of the ordinary share capital of the Company then in issue.

In the case of an Option over Shares, the exercise price determined under rule 1.5 must be at least equal to 80% of the arithmetical average of the middle market quotations of a Share (as derived from the London Stock Exchange Daily Official List) on the 20 Business Days last preceding the Grant Date, rounded to the nearest whole penny.

In the case of an Option over ADSs, the price at which ADSs may be acquired by the exercise of an Option shall be at least equal to 80% of the fair market value of an ADS as quoted on NASDAQ on the 20 Business Days last preceding the Grant Date.

Notwithstanding rule 6.7 of the Plan, the price at which Shares may be acquired by the exercise of the Option shall be adjusted only upon the occurrence of the events specified under Section L 225-181 of the French Commercial Code.

Notwithstanding rule 4.6 of the Plan, on the death of a Participant at a time when the Option in question has not lapsed, the Option may not be exercised later than six months after the date of his death.

Notwithstanding what is set out under Exercise date of the Glossary (but subject to Rules 4.3, 4.4 and 6.1 (a), an Option granted under the Plan may not be exercised before the day after the third anniversary of the Grant Date.

A Director within the meaning of Section L225-185 of the French Commercial Code shall be required to retain (either registered in his own name or deposited with a nominee on his behalf) a proportion of the Shares received as a result of exercising an Option as determined by the Compensation Committee, until he ceases his role as a Director. If no other proportion is determined when the relevant Option is granted, the proportion required to be retained will be 10%.

Notwithstanding any other provision of the Plan, an Option granted more than 76 months after the Plan was last approved by shareholders as required by Rule 9.4.1 of the Listing Rules of the UK Listing Authority cannot be satisfied by any means involving the issue of new Shares or the transfer of Treasury Shares.

A director of the Company cannot be granted an Option.

APPENDIX 6

Hong Kong

The Plan will apply to Options granted to residents of Hong Kong with the addition of the following rules:

Any Shares acquired by a Participant under the Plan cannot be traded within Hong Kong within 6 months of the date of exercise of the relevant Option and, by receiving those Shares, each Participant shall be taken to have agreed to observe this restriction.

Notwithstanding any other provision of the Plan, the grant of Options under and the operation of the Plan does not constitute an offer or invitation to the public within the meaning of the Companies Ordinance or the Securities and Futures Ordinance.

APPENDIX 7

Ireland

The Plan will apply to Options granted to residents of the Republic of Ireland with the following modification:

In Rule 3.1(a), delete “tenth” and substitute “seventh” and delete “or any earlier date determined by the Compensation Committee at the time the Option is granted”.

APPENDIX 8

Russia

The Plan will apply to Options granted to residents in Russia with the following modification:

For the purposes of the securities laws of Russia, all transactions carried out and contracts entered into in connection with the Plan and any Shares acquired by Participants will be carried out or entered into outside Russia.

APPENDIX 9

UK tax-advantaged Options

Options granted under this appendix (which will be referred to as “CSOP Options” in this appendix) will be UK tax-advantaged options under a “Schedule 4 CSOP scheme” for the purposes of Schedule 4 to the Income Tax (Earnings and Pensions) Act 2003. In the event of any conflict between the Plan and the provisions of this appendix 9 (“Appendix 9”), the latter will prevail. The terms of Appendix 9 will be identical to those of the other parts of the Plan (excluding all appendices other than Appendix 9), except as follows:

1	Purpose

(a)

The purpose of Appendix 9 is to provide CSOP Options for Eligible Employees in accordance with Schedule 4 and not otherwise.

(b)

Any provision of the Plan will not be effective with respect to a CSOP Option if the effect of that provision would be to prevent that CSOP Option from meeting the requirements of Schedule 4, including rules 3.8 (cash settlement of options and cash awards), 5.1 (overpayment of performance remuneration), 6.1(b) (early exercise on a “squeeze-out”), 6.1(c) (early exercise on a scheme of arrangement), 6.4 (exchanging Options rather than early exercise) and 6.5 (terms of exchanged Options).

2	Glossary

In the glossary before rule 1:

(a)

a new definition will be added, worded as follows:

“Schedule 4” means Schedule 4 to the Income Tax (Earnings and Pensions) Act 2003;

(b)

the definition of “Eligible Employee” will be:

“a person who is not prohibited from participating in the Plan by virtue of paragraph 9 of Schedule 4 (material interest) and is:

(a)

in respect of a CSOP Option that is an Executive Option, a full-time executive director or an employee (without being a director) of the Company or a Subsidiary; and

(b)

in respect of any other CSOP Option, an employee whose working time for one or more of the Company and its Subsidiaries equals or exceeds a period determined by the Compensation Committee at the relevant Grant Date;”

(c)

at the end of the definition of “Market Value” will be added:

“If Shares are not quoted on the Official List, before the Grant Date the value of a Share must be agreed with Shares and Assets Valuation at HM Revenue & Customs”;

(d)

the definition of “Shares” will be:

“fully paid ordinary shares (including treasury shares) in the capital of the Company which satisfy the requirements of paragraphs 16-18 and 20 of Schedule 4”; and

(e)

the definition of “Subsidiary” will be:

“a company that is a subsidiary of the Company within the meaning of Articles 2 and 2A of the Companies (Jersey) Law 1991 and is under the control of the Company within the meaning of Section 719 of the Income Tax (Earnings and Pensions) Act 2003”.

3	No CSOP Options over ADSs

CSOP Options may only be granted over Shares, and not over ADSs, and therefore references to ADSs or Options over ADSs will not apply to a CSOP Option.

4	Personal limit

Add the following to the end of rule 1.7:

“provided that a Participant cannot be granted CSOP Options which would, at the time they are granted cause the aggregate market value (determined as at the date of each relevant grant) of the Shares which that Participant may acquire from unexercised CSOP Options granted to that Participant and any other Schedule 4 CSOP scheme established by the Company or by any associated company of the Company to exceed or further exceed £30,000 (or any other limit that may be prescribed by paragraph 6 of Schedule 4)”.

5	Grant requirements

To rule 1.13 (terms to be specified in grant documents) will be added:

“(f)

the description of the Shares;

(g)

any restrictions to which the Shares may be subject;

(h)

the times at which the CSOP Option may be exercised (in whole or in part);

(i)

any Performance Condition (which must be determined on or before the Grant Date) applicable to the CSOP Option; and

(j)

the circumstances under which the CSOP Option will lapse or be cancelled (in whole or in part) including any conditions to which the exercise of the CSOP Option is subject (in whole or in part),

and these terms, together with any mechanism for the variation of the terms of CSOP Options under rules 7.1 or 7.3, must be notified to the Participant as soon as practicable after the Grant Date.”

6	Transferability of CSOP Options

Rule 2.1 be amended to read:

“CSOP Options are not capable of being transferred, but the personal representatives of a Participant who has died may exercise a CSOP Option under rule 3.1(c).”

7	Death of a Participant

To the start of rule 3.1(a), add the words “Subject to rule 3.1(c)”.

Add the following to the start of rule 3.1(c): “at any time” and the following at the end of rule 3.1(c): “even if that period ends after the tenth anniversary of the Grant Date or after any period for exercise that would otherwise be allowed under the Plan, except in the case of exercise under rule 6.1(d) (early exercise on winding up)”.

In rule 4.4, the words “Unless the Compensation Committee decides otherwise” and rule 4.4(b) will be deleted.

8	Timing of exercise

Add the following to the end of rule 3.1:

“A Participant cannot exercise a CSOP Option at any time when ineligible to participate in the Plan by virtue of paragraph 9 of Schedule 4 (material interest)”.

9	Responsibility for tax

Rule 3.9 will not apply to employer’s National Insurance contributions relating to CSOP Options and, in respect of any non-UK taxation of a Participant relating to a CSOP Option, will only be operated in such a way as to ensure that it does not cease to be a CSOP Option.

10	Methods of paying tax

Rule 3.10 will be worded as follows:

“If any Member of the Group or any Trustee has to pay or account for any item referred to in rule 3.9, the relevant Participant must be offered the opportunity to pay or repay that amount on demand. Instead, or in addition, the Participant can authorise the Member of the Group or Trustee to do any one or more of the following:

(a)

sell sufficient of the Shares subject to the CSOP Option on behalf of the Participant and retain the proceeds or pay them to any tax authority; and/or

(b)

deduct the amount from any amount to which the Participant is entitled under the Participant’s employment contract or otherwise.”

11	Good leavers

In Rule 4.3 the words “unless the Compensation Committee decides otherwise,” and the last sentence are deleted.

12	Early exercise on company events

Rule 6.1 will read as follows:

“Subject to rules 6.2 to 6.4, CSOP Options will become exercisable 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 a general offer to acquire:

(i)

the whole of the issued ordinary share capital of the Company (ignoring any already held by the person or group of persons making the offer) which is made on condition such that, if it met, the person making the offer will have Control of the Company; or

(ii)

all the shares of the Company which are of the same class as the Shares (ignoring any Shares already held by the person or group of persons making the offer)

and for these purposes, it does not matter whether the general offer is made to different share owners by different means; or

(b)

a person becomes bound or entitled to acquire Shares under Part 18 of the Companies (Jersey) Law 1991 (“squeeze-out”); or

(c)

the court sanctions a scheme of arrangement under Part 18A of the Companies (Jersey) Law 1991 being a compromise or arrangement applicable to or affecting:

(i)

all the ordinary share capital of the Company or all shares of the same class as the Shares; or

(ii)

all the Shares, or all the shares of that same class, which are held by a class of share owners identified other than by reference to their employment or directorships or their participation in a Schedule 4 CSOP Scheme; or

(d)

a non-UK company reorganisation arrangement (as defined from time to time in paragraph 35ZA of Schedule 4) applicable to or affecting:

(i)

all the ordinary share capital of the Company or all shares of the same class to which a CSOP Option relates; or

(ii)

all the shares, or all the shares of that same class, which are held by a class of shareholders identified otherwise than by their employments or directorships or their participation in a Schedule 4 CSOP Scheme;

becomes binding on the shareholders covered by it.

13	Shares ceasing to qualify

If in consequence of a transaction affecting the Company specified in rule 6.1 (change of Control etc.), the Shares subject to outstanding CSOP Options cease to satisfy the requirements of Schedule 4, those CSOP Options may, if the Compensation Committee so determines, instead be exercised within 20 days of the relevant transaction as if those requirements were still satisfied and the CSOP Options will be treated as having been exercised in accordance with the relevant requirements of paragraph 25A of Schedule 4 (company events). If the Compensation Committee exercises this power, any unexercised CSOP Options will lapse at the end of this period.

14	Exchange of CSOP Options

Rules 6.4 and 6.5 (exchanging Options rather than early exercise on a transaction affecting the Company) will be read and interpreted, and if necessary amended, in such a way that the requirements of Part 6 of Schedule 4 are complied with (company over whose shares the replacement options are granted and equivalence of original and replacement options).

15	Demerger

Rule 6.6 will be worded as follows:

“If the Company is affected by a demerger (in whatever form) or a special dividend or distribution, which in the opinion of the Compensation Committee would affect the current or future value of any CSOP Options, the Compensation Committee may decide that CSOP Options will become exercisable, in which case rules 6.2 and 6.3 will apply as if the CSOP Options had become exercisable under rule 6.1.”

16	Adjustment of CSOP Options

At the end of rule 6.7 (adjustment of Options on a variation in capital) the words “provided that any adjustment must:

(i)

ensure that both the aggregate market value of the Shares subject to the CSOP Option and the total exercise price for that CSOP Option are substantially the same after the adjustment as they were immediately before the adjustment; and

(ii)

not result in the requirements of Schedule 4 ceasing to be satisfied” will be added.

In rule 6.7(b) the word “class” is deleted.

17	Variation of terms of CSOP Option

A new rule 7.4 will be added, worded as follows:

“7.4 The terms of a CSOP Option may only be varied:

(a)

in the case of exercise price, only under rule 6.7;

(b)

in the case of the number or description of Shares, only under rule 6.7 or by way of a mechanism stated at the Grant Date; and

(c)

in the case of any other term, by way of a mechanism stated at the Grant Date;

and any mechanism used for (b) or (c) must be applied in a way that is fair and reasonable”

18	Amendments

A new rule 7.5 will be added, worded as follows:

“7.5 Appendix 9 may not be amended if the amendment would cause Appendix 9 to cease to be a “Schedule 4 CSOP scheme” within the meaning of paragraph 1(A1) of Schedule 4 and in respect of any amendment to a key feature of Appendix 9 (being a provision that is necessary in order to meet the requirements of Schedule 4) the Company will make a declaration to HM Revenue & Customs in the next annual return relating to Appendix 9 that the alteration has not caused Appendix 9 to cease to meet the requirements of Schedule 4.”

APPENDIX 10

USA

Special Rules Applicable to Grants of Incentive Stock Options

Options granted in accordance with the Plan may be designated as “Incentive Stock Options” (“ISOs”) within the meaning of section 422 of the United States Internal Revenue Code of 1986, as amended (the “US Tax Code”).

The aggregate number of Shares (including Shares comprised in any WPP ADS) over which ISOs may be granted under this appendix will not exceed .

Eligible Employees who may receive ISOs will, in addition to the limitations imposed by rule 1.3 of the Plan, be limited to employees of the Company or its “parent” or “subsidiary” corporations within the meaning of sections 424(f) and (g), respectively, of the US Tax Code.

In addition to any other restrictions contained in the Plan, ISOs will not be transferable otherwise than by will or the laws of descent and distribution. During the lifetime of the Participant to whom an ISO is granted, the ISO will be exercisable only by that Participant.

To the extent that the aggregate market value of Shares (including Shares comprised in any WPP ADS) with respect to which ISOs are exercisable (determined without regard to this sentence) for the first time by a Participant during any calendar year (under all plans or schemes of the Company or its “parent” and “subsidiary” corporations within the meaning of sections 424(f) and (g), respectively, of the US Tax Code) exceeds US $100,000, those Options will to the extent of the excess be treated as Options which are not ISOs. For this purpose, the market value of any Shares (including Shares comprised in any ADS) subject to an ISO will be determined at the time that ISO is granted.

This appendix will be deemed to be included within the Plan as adopted by shareholders for the purpose of any ISO grants.

Taxpayers Subject to Section 409A of the United States Internal Revenue Code

The Plan will apply to participants who are taxpayers subject to Section 409A of the United States Internal Revenue Code (“Section 409A”), with the following modifications:

Options granted under the Plan are intended to be exempt from the requirements of Section 409A by satisfying the requirements of the exemption under Section 1.409A-1(b)(5)(i)(A) of the United States Treasury Regulations or other applicable guidance (the “Exemption”). The Plan will be construed and interpreted in accordance with that intent. Any discretion afforded to any person or entity under the Plan the existence of which itself would cause an Option to fail to satisfy the requirements of the Exemption will not apply.

At the end of paragraph (b) of the definition of “Market Value” after the words “Grant Date”, add the words “provided that the price will not be less than fair market value determined in accordance with Section 409A.”

Add the following paragraph to the end of Rule 6.7:

“Notwithstanding the foregoing, only adjustments permitted by Section 409A will be permitted to be made under this Rule 6.7, including pro rata adjustments necessary to reflect a stock split, reverse stock split, and stock dividend.”

Exhibit 8.1

Our principal subsidiaries as of December 31, 2016, 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
Added Value LLC		California
AKQA, Inc.		California
Mirum LLC		California
Possible Worldwide, LLC		California
141 Worldwide Boomerang LLC		Delaware
A. Eicoff & Company, Inc.		Delaware
Acceleration eMarketing Inc		Delaware
Action Exchange, Inc.		Delaware
AKQA Corporation		Delaware
ARCTOUCH LLC		Delaware
Benenson Strategy Group, LLC		Delaware
Blue State Digital Inc		Delaware
Bottle Rocket LLC		Delaware
Burson-Marsteller, LLC		Delaware
Catalyst Online LLC		Delaware
CMI Media, LLC		Delaware
Competitive Media Reporting, LLC		Delaware
coretech USA, LLC		Delaware
Dewey Square Group, LLC		Delaware
effectiveUI, Inc.		Delaware
Finsbury LLC		Delaware
Gain Theory, LLC		Delaware
Glover Park Group, LLC		Delaware
Grey Global Group LLC		Delaware
Group M Movie Entertainment Holdings Inc.		Delaware
Group M Worldwide, LLC		Delaware
Group SJR LLC		Delaware
GTB Agency, LLC		Delaware
Hill and Knowlton Strategies LLC		Delaware
Hogarth Worldwide Inc.		Delaware
International Meetings & Science LLC		Delaware
J. Walter Thompson Company LLC		Delaware
J. Walter Thompson U.S.A., LLC		Delaware
Kantar Health LLC		Delaware
Kantar LLC		Delaware
Kantar Retail, LLC		Delaware
KBM Group LLC		Delaware
Landor, LLC		Delaware
Lightspeed, LLC		Delaware
Marketing and Planning Systems LLC		Delaware
Marketing Direct LLC		Delaware
Maxus Communications LLC		Delaware
Mediacom Worldwide LLC		Delaware
Mediaedge:cia, LLC		Delaware
Metavision Media, LLC		Delaware


COMPANY NAME		JURISDICTION UNDER WHICH ORGANISED

Ogilvy CommonHealth Market Access, LLC		Delaware
Ogilvy CommonHealth Worldwide LLC		Delaware
Ogilvy Healthworld, LLC		Delaware
Ogilvy Public Relations Worldwide Inc.		Delaware
OgilvyOne, LLC		Delaware
Penn, Schoen & Berland Associates, LLC		Delaware
PERQ/HCI, LLC		Delaware
Phase Five Communications LLC		Delaware
Possible Mobile, LLC		Delaware
Poster Publicity LLC		Delaware
Rasor Holdings LLC		Delaware
RB/TDM Holdings, LLC		Delaware
Red Fuse New York, LLC		Delaware
Rockfish Interactive LLC		Delaware
Spafax Networks LLC		Delaware
Sudler & Hennessey, LLC		Delaware
Swift Possible, LLC		Delaware
Taxi Inc.		Delaware
Team Garage LLC		Delaware
The Exchange Lab Inc		Delaware
The Futures Company Worldwide LLC		Delaware
The Lacek Group LLC		Delaware
Viscira, LLC		Delaware
WPP Group Holdings Corp. II		Delaware
WPP Group U.S. Finance LLC		Delaware
WPP Group USA, Inc		Delaware
WPPIH 2001, Inc		Delaware
Wunderman Data Management, LLC		Delaware
Xaxis US, LLC		Delaware
Xaxis, Inc.		Delaware
Young & Rubicam Inc.		Delaware
iStrategyLabs, LLC		District of Columbia
Reese Communications, Inc.		District of Columbia
VML, Inc.		Missouri
Wunderman Worldwide, LLC		Nevada
Essence Digital, Inc		New York
Geometry Global LLC		New York
GHG GreyHealth Group LLC		New York
Mindshare USA, LLC		New York
Ogilvy & Mather Worldwide, LLC		New York
GWE LLC		New York
The Ogilvy Group, LLC		New York
TNS US, LLC		Pennsylvania
Public Strategies, Inc.		Texas


COMPANY NAME	JURISDICTION UNDER WHICH ORGANISED
Non-US
Mediacom Argentina S.A.		Argentina
MindShare Argentina S.A.		Argentina
Active Sites Alive Pty Limited		Australia
George Patterson Y&R Pty Limited		Australia
GroupM Communications Pty Ltd		Australia
M Media Group Pty Ltd		Australia
Mediacom Australia Pty Limited		Australia
Mediaedge:cia Pty Ltd		Australia
Taylor Nelson Sofres Australia Pty Limited		Australia
WPP AUNZ LIMITED		Australia
MediaCom – die Kommunikationsagentur GmbH		Austria
MindShare GmbH & Co KG		Austria
J Walter Thompson - Bahrain WLL		Bahrain
J Walter Thompson Middle East and North Africa E.C.		Bahrain
Mediacom Middle East & North Africa Holding W.L.L.		Bahrain
MediaCom Belgium SA		Belgium
FBZ Participacoes S.A.		Brazil
GPAT S.A. - Propaganda e Publicidade		Brazil
IBOPE Monitor de Meios Publicitários Ltda.		Brazil
IBOPE Monitor de Verificação Publicitária Ltda		Brazil
J Walter Thompson Publicidade Ltda		Brazil
KANTAR IBOPE Pesquisa de Mídia Ltda.		Brazil
Maristela Mafei Participações S.A.		Brazil
Mídia 123 Serviços de Publicidade Via Internet Ltda.		Brazil
Newdesign Participações Ltda		Brazil
Ogilvy & Mather Brasil Comunicação Ltda		Brazil
WPP Ideal Participações Ltda		Brazil
WPP Kantar Participações Ltda.		Brazil
Blast Radius Inc.		Canada
Entreprise de Communications Tank Inc.		Canada
J. Walter Thompson Company Limited La Compagnie J. Walter Thompson Limitee		Canada
Maxus Canada Ltd		Canada
Media Buying Services ULC		Canada
MindShare Canada		Canada
The Young & Rubicam Group of Companies ULC		Canada
WPP Group Canada Finance, Inc.		Canada
Always (Shanghai) Marketing Services Co Ltd		China
Beijing Benpao Century Technology Development Co.,Ltd.		China
Beijing WDT Advertising Co. Ltd		China
Blue Hive Shanghai Advertising Co Ltd		China


COMPANY NAME		JURISDICTION UNDER WHICH ORGANISED
GroupM (Shanghai) Advertising Co. Ltd		China
GroupM Market Advertising Co. Ltd.		China
Guangzhou Dawson Marketing Communication Co. Ltd		China
Hill & Knowlton (China) Public Relations Co Ltd		China
J.Walter Thompson Bridge Advertising Co. Ltd.		China
Kinetic Advertising (Shanghai) Co. Ltd		China
Liaoning Ogilvy Jiasheng Advertising Co. Ltd		China
Millward Brown ACSR Co. Ltd		China
Shanghai Linjie Marketing Services Co. Ltd.		China
Shanghai Ogilvy & Mather Advertising Ltd		China
Shanghai SocialThink Advertising Co., Ltd.		China
Sinotrust International Information & Consulting (Beijing) Co. Ltd.		China
TNS China Co., Ltd		China
GroupM s.r.o.		Czech Republic
MAXUS Czech Republic s.r.o.		Czech Republic
MediaCom Praha s.r.o.		Czech Republic
MediaCom Danmark A/S		Denmark
Millward Brown Denmark ApS		Denmark
WPP Holding Denmark A/S		Denmark
Mirum Agency Oy		Finland
Argonautes SA		France
Conexance MD SAS		France
Grey Paris SAS		France
Kantar SAS		France
KR MEDIA France SAS		France
Le Lab Consulting SAS		France
Mediacom Paris SA		France
Ogilvy & Mather S.A.S		France
Poster Conseil SAS		France
Regional Management Group SAS		France
Screenbase SAS		France
Sofres Asia Pacific SAS		France
Taylor Nelson Sofres SAS		France
Advanced Techniques Group (ATG) GmbH		Germany
Commarco GmbH 120274		Germany
EMNID Gesellschaft mit beschränkter Haftung		Germany
gkk DialogGroup GmbH		Germany
GREY Düsseldorf GmbH		Germany
GroupM Competence Center GmbH		Germany
GTB Germany GmbH		Germany
HERING SCHUPPENER Healthcare Unternehmensberatung für Gesundheitskommunikation GmbH		Germany


COMPANY NAME		JURISDICTION UNDER WHICH ORGANISED
Hirschen Group GmbH		Germany
iconmobile GmbH		Germany
L’Équipe L’Oréal GmbH		Germany
Mather Direct GmbH		Germany
Maxus Communications GmbH		Germany
MEC GmbH		Germany
MediaCom Agentur für Media-Beratung GmbH		Germany
PATH GmbH		Germany
POSSIBLE Worldwide GmbH		Germany
Quisma GmbH		Germany
Syzygy AG		Germany
WPP Deutschland Holding GmbH & Co. KG		Germany
WPP Marketing Communications Germany GmbH		Germany
WPP Media Holdings GmbH		Germany
Young & Rubicam Group Germany GmbH		Germany
ZEG-Zentrum für Epidemiologie und Gesundheitsforschung Berlin GmbH		Germany
Agenda Group (Asia) Limited		Hong Kong
BATES CHINA LIMITED		Hong Kong
David Communications Group Limited		Hong Kong
GroupM Limited		Hong Kong
Maxus Communications Limited (Hong Kong)		Hong Kong
Mediacom Limited		Hong Kong
Mediaedge:CIA Hong Kong Pte Limited		Hong Kong
MindShare Hong Kong Limited		Hong Kong
Ogilvy & Mather Marketing Communications Limited		Hong Kong
WPP Marketing Communications (Hong Kong) Limited		Hong Kong
Maxus Hungary Kft		Hungary
AnalyticsQuotient Services India Private Limited		India
Encompass Events Private Ltd		India
GroupM Media India Pvt Ltd		India
Hindustan Thompson Associates Private Limited		India
Kinetic Advertising India Private Limited		India
MediaCom Communications Pvt Ltd		India
Mediaedge:cia India Pvt Ltd		India
Millward Brown Market Research Services India Private Ltd		India
Ogilvy & Mather Pvt Ltd		India
TNS India Private Limited		India
PT Indo-Ad Inc		Indonesia
Lansdowne Market Research Ltd		Ireland
WPP Ireland Limited		Ireland


COMPANY NAME		JURISDICTION UNDER WHICH ORGANISED
FAST Srl		Italy
GroupM plus Srl		Italy
GroupM Srl		Italy
Maximize Srl		Italy
MAXUS MC2 Spa		Italy
Maxus Srl		Italy
MEC Italia srl		Italy
Mediacom Italia Srl		Italy
Xtel Srl		Italy
David Communications KK		Japan
Geometry Global Japan GK		Japan
Grey Worldwide Inc (Japan)		Japan
GroupM Japan KK		Japan
J Walter Thompson Japan GK		Japan
Kantar Japan KK		Japan
Scanad Kenya Limited		Kenya
WPP Scangroup Limited		Kenya
WPP Luxembourg Gamma Sarl		Luxembourg
WPP Luxembourg Gamma Three Sarl		Luxembourg
WPP Luxembourg Sarl		Luxembourg
Geometry Global Sdn Bhd		Malaysia
WPP Marketing Communications (Malaysia) Sdn Bhd		Malaysia
MindShare de México, S.A. de C.V.		Mexico
Mirum, S.A. de C.V.		Mexico
The GroupM ESP Clever Company S.R.L. de C.V.		Mexico
The Media Edge, S. de R.L. de C.V.		Mexico
Worldwide Mediacom México, S.A. de C.V.		Mexico
WPP México, S. de R.L. de C.V.		Mexico
Bannerconnect B.V.		Netherlands
Berkeley Square Holding BV		Netherlands
Cavendish Square Holding BV		Netherlands
Dolphin Square Holding B.V.		Netherlands
Greenhouse Group B.V.		Netherlands
GroupM B.V.		Netherlands
Lightspeed Research B.V.		Netherlands
MediaCom B.V.		Netherlands
Millward Brown/Centrum BV		Netherlands
Russell Square Holding BV		Netherlands
Taylor Nelson Sofres BV		Netherlands
TNS Nipo BV		Netherlands
WPP Holdings (Holland) B.V.		Netherlands
WPP Lincoln Square B.V.		Netherlands
WPP Minotaur B.V.		Netherlands
WPP Purgos Two B.V.		Netherlands
WPP Square one B.V		Netherlands
WPP US Investments BV		Netherlands
TNS New Zealand Ltd		New Zealand


COMPANY NAME		JURISDICTION UNDER WHICH ORGANISED
WPP Holdings (New Zealand) Limited		New Zealand
MediaCom AS (Norway)		Norway
GroupM Pakistan (Private) Ltd		Pakistan
Memac Ogilvy & Mather Holding Inc.		Panama
Circus Grey Peru S.A.C.		Peru
Kantar Philippines, Inc.		Philippines
MEC Sp.z.o.o		Poland
MediaCom - Warszawa Sp.z.o.o.		Poland
Millward Brown S.A.		Poland
MindShare Polska Sp. z.o.o.		Poland
Media Insight - Tempo e Meios Publicitarios, Lda		Portugal
Mediaedge:CIA - Servicos Publicitarios Ltda		Portugal
Diamond Ogilvy LLC		Republic of Korea
Grey Worldwide Korea Inc.		Republic of Korea
Taylor Nelson Sofres Korea Ltd		Republic of Korea
Vinyl I-Co. Ltd.		Republic of Korea
Grape LLC		Russia
LLC ‘GroupM’		Russia
LLC ‘Maxus’		Russia
LLC ‘MEC’		Russia
LLC ‘Mindshare’		Russia
Mediacom LLC (Russia)		Russia
Millward Brown ARMI-Marketing LLC		Russia
Mindshare For Advertising and Promotion Company L.L.C		Saudi Arabia
GroupM Asia Pacific Holdings Pte Ltd		Singapore
GroupM Singapore Pte Ltd		Singapore
J Walter Thompson (Singapore) Pte Ltd		Singapore
Ogilvy & Mather (Singapore) Private Ltd		Singapore
Scotts Road Management Services LLP		Singapore
Geometry Global Johannesburg (Pty) Ltd		South Africa
Grey Group South Africa (Proprietary) Limited		South Africa
Mediaedge:cia (Proprietary) Limited		South Africa
Mindshare South Africa (Cape) (Proprietary) Limited		South Africa
Quirk Cape Town (Pty) Ltd		South Africa
The Customer Equity Company (SA) (PTY) Limited		South Africa
GroupM Publicidad Worldwide SA		Spain
Kantar Media S.A.		Spain
Maxus Spain SL		Spain
MEC Publicidad Iberia SL		Spain
Mediacom Iberia SA		Spain
Millward Brown Spain SAU		Spain
Mindshare Spain SA		Spain


COMPANY NAME		JURISDICTION UNDER WHICH ORGANISED
Taylor Nelson Sofres S.A. (in Spain)		Spain
WPP Holdings Spain, S.L.		Spain
Mediacommunications Sverige I Stockholm AB		Sweden
Mediaedge:cia Sweden AB		Sweden
The Core Company AB		Sweden
Mediacom AG		Switzerland
Mediaedge:cia Taiwan Ltd		Taiwan
WPP (Thailand) Ltd		Thailand
GroupM Medya Hizmetleri Ltd Sti		Turkey
MEC Ýletiþim Planlama Hizmetleri Limited Þirketi		Turkey
MediaCom Istanbul Medya Hizmetleri A.S.		Turkey
Mindshare Medya Hizmetleri A.S.		Turkey
Asdaa Advertising FZ LLC		United Arab Emirates
CB’a Memac FZ LLC		United Arab Emirates
MEC MENA FZ LLC		United Arab Emirates
Mindshare Advertising LLC		United Arab Emirates
Team Gulf Advertising LLC		United Arab Emirates
Added Value Limited		United Kingdom
Addison Corporate Marketing Limited		United Kingdom
AKQA Limited		United Kingdom
Art Company (Creative Services) Limited (The)		United Kingdom
Axicom Limited		United Kingdom
Beaumont Square		United Kingdom
Bisqit Design Limited		United Kingdom
Bookmark Communciations Ltd		United Kingdom
Chi & Partners Limited		United Kingdom
Cognifide Limited		United Kingdom
Cordiant Communications Group Limited		United Kingdom
Creative Services Unit Limited		United Kingdom
Dialogue Marketing Partnership Limited		United Kingdom
EffectiveBrands Limited		United Kingdom
Enduring Organisation Three		United Kingdom
Essence Digital Group Limited		United Kingdom
Fitch Design Consultants Limited		United Kingdom
G2 Branding and Design Limited		United Kingdom
GroupM Entertainment Limited		United Kingdom
GROUPM UK Ltd		United Kingdom
Hogarth Worldwide Limited		United Kingdom
J. Walter Thompson Company Limited (UK)		United Kingdom
J. Walter Thompson Group Limited		United Kingdom
Kantar Media UK Ltd		United Kingdom
Kinetic Worldwide Limited		United Kingdom
KR Media UK Limited		United Kingdom


COMPANY NAME		JURISDICTION UNDER WHICH ORGANISED
Lightspeed Research Ltd		United Kingdom
Mando Corporation Limited		United Kingdom
Maxus Communications (UK) Limited		United Kingdom
MediaCom Group Limited		United Kingdom
Mediacom North Limited		United Kingdom
Mediaedge:cia International Limited		United Kingdom
Mediaedge:CIA UK Limited		United Kingdom
Mediaedge:CIA Worldwide Limited		United Kingdom
Millward Brown UK Limited		United Kingdom
Mindshare Media UK Limited		United Kingdom
Mortimer Square Limited		United Kingdom
MSIX Communications Limited		United Kingdom
Newcrosse Limited		United Kingdom
Ogilvy & Mather Group (Holdings) Limited		United Kingdom
Ogilvyone Business Limited		United Kingdom
OgilvyOne Limited		United Kingdom
Outrider Limited		United Kingdom
Permanent Organisation Two		United Kingdom
Potato London Ltd		United Kingdom
Precise Media Monitoring Limited		United Kingdom
ReadySquare Limited		United Kingdom
Research International Group Limited		United Kingdom
Salmon Limited		United Kingdom
Sampson Tyrrell Corporate Marketing Limited		United Kingdom


COMPANY NAME		JURISDICTION UNDER WHICH ORGANISED
SCI Scientific Communications and Information UK Ltd		United Kingdom
Spafax Airline Network Limited		United Kingdom
Stickleback Limited		United Kingdom
The Farm Post Production Limited		United Kingdom
The Finsbury Group Limited		United Kingdom
TNS Group Holdings Limited		United Kingdom
TNS UK Limited		United Kingdom
TNS-NFO US		United Kingdom
WPP 2005 Limited		United Kingdom
WPP AMC Holdings		United Kingdom
WPP Beans Limited		United Kingdom
WPP Finance Co. Limited		United Kingdom
WPP Group (UK) Ltd		United Kingdom
WPP Investments Limited		United Kingdom
WPP Jubilee Limited		United Kingdom
WPP Ottawa Ltd		United Kingdom
WPP Sparkle Limited		United Kingdom
WPP Toronto Ltd		United Kingdom
WPP Unicorn Limited		United Kingdom
Xaxis Technology Limited		United Kingdom
Young & Rubicam Group Limited		United Kingdom
Young & Rubicam Holdings (UK) Limited		United Kingdom
WPP Media Ltd		Vietnam

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: 28 April 2017

/s/ Sir Martin Sorrell

Sir Martin Sorrell

Group Chief Executive Officer

(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: 28 April 2017

/s/ Paul W.G. Richardson

Paul W.G. Richardson

Group Chief Financial Officer

(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 2016 (the “Report”), I, Sir Martin Sorrell, 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:

1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2)	The information contained in the Report fairly presents, in all material respects, the Company’s financial position and results of operations.

Date: 28 April 2017

/s/ Sir Martin Sorrell

Sir Martin Sorrell

Group Chief Executive Officer

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 2016 (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:

1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2)	The information contained in the Report fairly presents, in all material respects, the Company’s financial position and results of operations.

Date: 28 April 2017

/s/ Paul W.G. Richardson

Paul W.G. Richardson

Group Chief Financial Officer

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, No. 333-185890, No. 333-208658, No. 333-208660 and No. 333-208661 each on Form S-8, and Registration Statement No. 333-192115-03 on Form F-3 of our reports dated 28 April 2017 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 2016.

/s/ Deloitte LLP

Deloitte LLP

London, United Kingdom

28 April 2017