YOUNG & RUBICAM INC, S-1/A, 1999-05-06

YOUNG & RUBICAM INC
S-1/A, 1999-05-06
ADVERTISING AGENCIES

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 6, 1999
REGISTRATION NO. 333-77235

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

AMENDMENT NO. 1
TO

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
YOUNG & RUBICAM INC.
(Exact name of Registrant as specified in its charter)

<TABLE>
<CAPTION>
DELAWARE 7311 13-1493710
<S> <C> <C>
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>

285 MADISON AVENUE
NEW YORK, NEW YORK 10017
(Address, including zip code, and telephone number, including area
code, of Registrant's principal executive offices)
STEPHANIE W. ABRAMSON, ESQ.
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL
YOUNG & RUBICAM INC.
285 MADISON AVENUE
NEW YORK, NEW YORK 10017
(212) 210-3000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

COPIES TO:

<TABLE>
<S> <C>
STEPHEN H. SHALEN, ESQ. MARK C. SMITH, ESQ.
CHRISTOPHER J. WALTON, ESQ. ALLISON R. SCHNEIROV, ESQ.
CLEARY, GOTTLIEB, STEEN & HAMILTON SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
ONE LIBERTY PLAZA 919 THIRD AVENUE
NEW YORK, NEW YORK 10006 NEW YORK, NEW YORK 10022
(212) 225-2000 (212) 735-3000
</TABLE>

----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]

----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

================================================================================

<PAGE>

EXPLANATORY NOTE

This Registration Statement contains two forms of prospectus; one to be
used in connection with an offering in the United States and Canada (the "U.S.
Prospectus") and one to be used in connection with a concurrent international
offering outside the United States and Canada (the "International Prospectus").
The U.S. Prospectus and the International Prospectus will be identical in all
respects except for the front cover pages and the back cover pages. The form of
the U.S. Prospectus is included herein; the form of the front cover page of the
International Prospectus follows the front cover page of the U.S. Prospectus and
the form of the back cover page of the International Prospectus follows the back
cover page of the U.S. Prospectus.

<PAGE>

SUBJECT TO COMPLETION, DATED MAY 6, 1999

PROSPECTUS

15,000,000 SHARES

[GRAPHIC OMITTED]

COMMON STOCK
-------------------
This is an offering of 15,000,000 shares of common stock of Young & Rubicam
Inc. This prospectus relates to an offering of 12,000,000 shares in the United
States and Canada. In addition, 3,000,000 shares are being offered in a
concurrent international offering outside the United States and Canada.

All of the 15,000,000 shares of common stock offered by this prospectus are
being sold by the selling stockholders named in this prospectus. Young & Rubicam
will not receive any of the proceeds from the sale of shares of common stock by
the selling stockholders.

The last reported sale price of the common stock, which is listed on the
New York Stock Exchange under the symbol "YNR", on May 5, 1999, was $41.06 per
share.

INVESTING IN COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 7 TO READ ABOUT RISKS THAT YOU SHOULD CONSIDER BEFORE BUYING SHARES OF THE
COMMON STOCK.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
-------------------

<TABLE>
<CAPTION>
Per
Share Total
----------- ----------
<S> <C> <C>
Public offering price ........................ $ $
Underwriting discount ........................ $ $
Proceeds to the selling stockholders ......... $ $
</TABLE>

-------------------

The U.S. underwriters may purchase up to an additional 2,250,000 shares
from selling stockholders to cover over-allotments. Young & Rubicam Inc. has
agreed to pay expenses incurred by the selling stockholders in connection with
the offerings, other than the underwriting discount.

The underwriters expect to deliver the shares in New York, New York on
, 1999.
-------------------

Joint Global Coordinators and Joint Book-Running Managers

BEAR, STEARNS & CO. INC. DONALDSON, LUFKIN & JENRETTE

-------------------
GOLDMAN, SACHS & CO.
ING BARING FURMAN SELZ LLC
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY

The date of this prospectus is , 1999

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD NOR MAY OFFERS BE ACCEPTED PRIOR TO THE TIME THIS
PROSPECTUS IS DELIVERED IN FINAL FORM. THIS PROSPECTUS IS NOT AN OFFER TO SELL
THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN
ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.

<PAGE>

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus.
This summary does not contain all of the information that you should consider
before investing in the common stock. You should read the entire prospectus
carefully, especially the risks of investing in the common stock discussed under
"Risk Factors."

YOUNG & RUBICAM INC.

Young & Rubicam Inc. is the fifth largest consolidated marketing and
communications organization in the world based on 1998 revenues. Since our
founding 75 years ago, we have evolved from a single New York-based advertising
agency to a diversified global marketing and communications company operating in
121 cities in 76 countries worldwide as of December 31, 1998. We operate through
recognized market leaders including:

o Young & Rubicam Advertising, full-service advertising;

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

o Wunderman Cato Johnson, direct marketing and sales promotion;

o Brand Dialogue, digital interactive branding and digital commerce;

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

o Burson-Marsteller, perception management and public relations;

o Cohn & Wolfe, full-service public relations;

o Landor Associates, branding consultation and design services; and

o Sudler & Hennessey, healthcare communications.

Our revenues in 1998 totaled $1.5 billion, representing a compound annual
growth rate of 12.2% from 1994 to 1998.

We are a single agency network, allowing us to centrally manage and utilize
our resources. Through multi-disciplinary, client-focused teams, we provide
clients with global access to fully integrated marketing and communications
solutions. Among our approximately 5,500 client accounts are a number of large
multinational organizations, including AT&T, Citibank, Colgate-Palmolive, Ford
and Philip Morris. We have maintained long-standing relationships with many of
our clients. The average length of relationship with our top 20 clients exceeds
20 years.

Our mission is to be our clients' most valued business partner in building,
leveraging, protecting and managing their brands for both short-term results and
long-term growth. Consistent with our mission, we have developed an
organizational and management structure designed to meet the diverse needs of
our large global clients as well as the more specialized needs of our other
clients. Our strategy combines this organizational and management structure with
the pursuit of new business opportunities and continued investment in our
business, personnel and superior consumer knowledge. As part of our strategy, we
seek to provide clients with superior creative services and extensive research
capabilities, including access to Y&R's proprietary research tool, BrandAsset
Valuator.

In late 1992, we created the Key Corporate Account, or KCA, program to
enhance the coordination of services sought by clients from both a global
coverage as well as an integrated solutions perspective. KCAs are large global
client accounts that, as a group, contribute the greatest share of our revenues
and profits, and are served on a multinational basis by two or more of our
businesses. Revenues from the 41 client accounts designated as KCAs accounted
for 48.6% of our consolidated revenues in 1998. In order to further strengthen
client relationships and reward us for meeting or

<PAGE>

exceeding performance targets, we are working with KCAs to adopt incentive
compensation arrangements that align our compensation with our performance and
our clients' business performance.

As part of our client focus, members of our senior management, including
Peter A. Georgescu, our Chairman and Chief Executive Officer, Edward H. Vick,
our Chief Operating Officer, and Thomas D. Bell, Jr., an Executive Vice
President of Y&R and the Chairman and Chief Executive Officer of Young & Rubicam
Advertising, retain ongoing responsibilities for individual KCAs in addition to
their managerial roles.

INDUSTRY TRENDS

The marketing and communications industry encompasses a wide range of
services used to develop and deliver messages to both broad and targeted
audiences through multiple communications channels. Several significant trends
are changing the dynamics of the marketing and communications industry,
including the following:

o GROWTH IN UNITED STATES MARKETING AND COMMUNICATIONS MARKETS.
Advertising expenditures in the United States have continued to grow,
increasing from approximately $140 billion in 1993 to approximately
$200 billion in 1998.

o GROWTH IN INTERNATIONAL MARKETING AND COMMUNICATIONS MARKETS. Since
1986, non-U.S. advertising expenditures have grown more rapidly than
U.S. expenditures and, according to industry sources, have increased
from approximately 44% of worldwide expenditures in 1986 to
approximately 52% in 1998.

o INVESTMENT IN BRAND DEVELOPMENT. Over the last several years,
advertisers have focused on the image or brand identity of their
organizations, products and services in an effort to differentiate
themselves from competitors and increase brand loyalty.

o DEMAND FOR INTEGRATED SERVICE OFFERINGS. Demand has increased for
globally integrated marketing and communications solutions as companies
seek consistent and effective delivery of their messages through
multiple communications channels and across a variety of geographic
markets.

STRATEGY

Our strategy consists of the following key components:

o INCREASE PENETRATION OF KEY CORPORATE ACCOUNTS. We believe that there
are significant opportunities to increase our share of the marketing
and communications expenditures of our KCAs by leveraging our global
network to provide integrated services. In recent years, we have
successfully increased our share of the marketing and communications
expenditures of some KCAs. KCAs also have increased their use of
multiple services offered by us over the same period. During 1998, our
20 largest KCAs used the capabilities of an average of five of our
marketing and communications services.

<PAGE>

o LEVERAGE EXISTING GLOBAL NETWORK. With a worldwide presence in 76
countries, we believe that we are well positioned to continue to
benefit from the trend towards the globalization of client marketing
and communications needs and the consolidation of those needs with a
single global network.

o CAPITALIZE ON EXISTING CAPABILITIES. We intend to continue the
development of our existing capabilities into more visible and
accessible client services. For example, we created our Brand Dialogue
unit in 1997 by combining the existing interactive capabilities of
Young & Rubicam Advertising and Wunderman Cato Johnson in the United
States, Latin America, Europe and Asia/Pacific.

o CULTIVATE CREATIVE EXCELLENCE. We intend to continue emphasizing the
importance of creative marketing and communications. We have created
numerous memorable marketing and communications programs for clients,
including "The Softer Side of Sears," "Everybody Needs a Little KFC,"
"It's All Within Your Reach" for AT&T, "The Document Company" for Xerox
and "Be All That You Can Be" for the United States Army. We have also
performed identity and design assignments, including the creation of
corporate identities, for Lucent Technologies, Netscape and the 2002
Salt Lake City Olympics.

o IMPROVE OPERATING EFFICIENCIES. We believe that opportunities exist to
improve operating efficiencies in order to expand margins and increase
future profitability. For example, we have implemented initiatives
which have both improved productivity and reduced compensation expense
as a percentage of consolidated revenues.

RECENT DEVELOPMENTS

On April 5, 1999, we entered into an agreement to acquire KnowledgeBase
Marketing, Inc. for consideration consisting of Y&R common stock and cash valued
at approximately $175 million. KnowledgeBase Marketing, headquartered in Chapel
Hill, North Carolina, is a leading customer relationship marketing service that
specializes in gathering and analyzing marketing data.

Our principal executive office is located at 285 Madison Avenue, New York,
New York 10017, and our telephone number is (212) 210-3000.

<PAGE>

THE OFFERINGS

Common stock offered:

U.S. offering........... 12,000,000 shares

International offering.. 3,000,000 shares
-----------------
Total.................. 15,000,000 shares

Common stock to be
outstanding after the common
stock offerings ........ 67,578,051 shares

This number excludes:

o 24,375,244 shares of common stock reserved for
issuance upon the exercise of outstanding employee
options at a weighted average exercise price of
$9.07 per share;

o 2,598,105 shares of common stock reserved for
issuance upon the exercise of outstanding options
issued to investors in Y&R at a weighted average
exercise price of $7.67 per share; and

o shares of common stock issuable and to be reserved
for issuance in connection with the acquisition of
KnowledgeBase Marketing, Inc., which we currently
estimate will total approximately 2,100,000 shares
and approximately 600,000 shares.

All information in this prospectus assumes that the
U.S. underwriters' over-allotment option is not
exercised.

Dividend Policy......... On April 29, 1999, we announced that our board of
directors declared a quarterly cash dividend of
$0.025 per share of common stock, payable on June
15, 1999 to all stockholders of record as of June 1,
1999. See "Price Range of Common Stock and Dividend
Policy" for further information on our dividend
policy.

Use of Proceeds........ We will not receive any of the proceeds from the
sale of common stock offered by this prospectus.

New York Stock Exchange
Symbol.................. YNR

RISK FACTORS

For a discussion of risks that you should consider before buying shares of
the common stock, see "Risk Factors."

<PAGE>

SUMMARY CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1998 1997 1996
-------------- -------------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues ................................................. $ 1,522,464 $ 1,382,740 $1,222,139
Compensation expense, including employee benefits ........ 903,948 836,150 730,261
General and administrative expenses ...................... 455,578 463,936 391,617
Other operating charges (1) .............................. 234,449 11,925 17,166
Recapitalization-related charges (1) ..................... -- -- 315,397
----------- ----------- ----------
Operating expenses ...................................... 1,593,975 1,312,011 1,454,441
----------- ----------- ----------
(Loss) income from operations ............................ (71,511) 70,729 (232,302)
Extraordinary charge for early retirement of debt (net
of tax benefit of $2,834)................................ (4,433) -- --
Net loss ................................................. $ (86,068) $ (23,938) $ (238,311)
Loss per share (basic and diluted) (2):
Loss before extraordinary charge ........................ $ (1.34) $ (0.51)
Extraordinary charge .................................... (0.08) --
----------- -----------
Net loss ................................................ $ (1.42) $ (0.51)
=========== ===========
Weighted average shares outstanding used to compute
basic and diluted loss per share ........................ 60,673,994 46,949,355

OTHER OPERATING DATA:
EBITDA (1)(3) ............................................ $ 223,548 $ 139,375 $ 147,221
Net cash provided by operating activities ................ 195,615 224,511 178,064
Net cash used in investing activities .................... 99,683 67,142 76,094
Net cash used in financing activities .................... 136,242 98,667 12,614
Capital expenditures ..................................... 76,378 51,899 51,792
International revenues as a % of total revenues .......... 49.1% 52.2% 53.3%
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
1998
-------------------
<S> <C>
BALANCE SHEET DATA:
Total assets (4) ................... $1,635,255
Total debt (5) ..................... 63,959
Total stockholders' equity ......... 114,969
</TABLE>

(footnotes on following page)

<PAGE>

- -----------
(1) For a discussion of other operating charges and recapitalization-related
charges for the years ended December 31, 1998, 1997 and 1996, see notes 4, 6
and 9 to the consolidated financial statements included in this prospectus.

(2) At December 31, 1998, Y&R had outstanding options to purchase 30,077,642
shares of common stock with a weighted average exercise price of $8.23 that
could potentially dilute basic earnings per share in the future. These
options were excluded from the computation of diluted net loss per common
share for the year ended December 31, 1998 because the effect would be
antidilutive. For a discussion of options outstanding, see note 18 to the
consolidated financial statements included in this prospectus.

Earnings per share for 1996 cannot be computed because Y&R's capital
structure prior to its recapitalization in December 1996 consisted of both
common shares and limited partnership units in predecessor entities. For a
discussion of the recapitalization, see note 6 to the consolidated financial
statements included in this prospectus.

(3) EBITDA is defined as (loss) income from operations before depreciation and
amortization, other non-cash charges and recapitalization-related charges.
EBITDA is presented because it is a widely accepted financial indicator and
is generally consistent with the definition used for covenant purposes
contained in Y&R's credit facilities; however, EBITDA may not be comparable
to other registrants' calculation of EBITDA or similarly titled items. You
should not consider EBITDA as an alternative to net income (loss) as a
measure of operating results in accordance with generally accepted
accounting principles or as an alternative to cash flows as a measure of
liquidity. EBITDA for 1998 is before $234,449 of non-cash compensation
charges related to the vesting of restricted stock taken at the time of our
initial public offering. EBITDA for 1997 and 1996 is before $11,925 and
$11,096, respectively, of non-cash charges primarily related to impairment
write-downs which are included in other operating charges. For a discussion
of other operating charges and recapitalization-related charges for the
years ended December 31, 1998, 1997 and 1996, see notes 4, 6 and 9 to the
consolidated financial statements included in this prospectus.

(4) Total assets as of December 31, 1998 include net deferred tax assets of
$205,449 consisting primarily of federal, state and foreign net operating
loss carryforwards.

(5) Total debt includes current and non-current loans and installment notes,
which are discussed in notes 14 and 15 to the consolidated financial
statements included in this prospectus.

<PAGE>

RISK FACTORS

An investment in the common stock involves a number of risks. You should
consider carefully the following information about these risks, together with
the other information contained in this prospectus, before buying shares of
common stock.

WE HAVE RECENTLY INCURRED SUBSTANTIAL NET LOSSES.

We reported net losses of $86.1 million for 1998 and $23.9 million for
1997. The net loss in 1998 includes a non-cash pre-tax compensation charge of
$234.4 million recorded in connection with the vesting of restricted stock upon
completion of our initial public offering, or IPO, in May 1998 and a $7.3
million pre-tax charge for unamortized deferred financing costs related to a
credit facility that we replaced in connection with the IPO.

WE MAY HAVE DIFFICULTY COMPETING IN THE HIGHLY COMPETITIVE MARKETING AND
COMMUNICATIONS INDUSTRY.

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

o creative reputation;

o knowledge of media;

o geographical coverage and diversity;

o relationships with clients;

o quality and breadth of services; and

o financial controls.

Recently, traditional advertising agencies also have been competing with
major consulting firms, which have developed practices in marketing and
communications. New competitors also include smaller companies such as systems
integrators, database marketing and modeling companies and telemarketers, which
offer technological solutions to marketing and communications issues faced by
clients.

When we represent a client, we do not necessarily handle all advertising or
public relations for that client. In addition, the ability of agencies within
marketing and communications organizations to acquire new clients or additional
assignments from existing clients may be limited by the conflicts policy
followed by many clients. This conflicts policy typically prohibits agencies
from performing similar services for competing products or companies. Our
principal international competitors are holding companies for more than one
global advertising agency network. As a result, in some situations separate
agency networks within these holding companies may be able to perform services
for competing products or for products of competing companies. We have one
global advertising agency network. Accordingly, our ability to compete for new
advertising assignments and, to a lesser extent, other marketing and
communications assignments, may be limited by these conflicts policies. Industry
practices in other areas of the marketing and communications business reflect
similar concerns with respect to client relationships. See
"Business--Competition" for a further discussion of the competition we face.

WE MAY BE ADVERSELY AFFECTED BY A DOWNTURN IN THE MARKETING AND COMMUNICATIONS
INDUSTRY, WHICH IS CYCLICAL.

The marketing and communications industry is cyclical and as a result it is
subject to downturns in general economic conditions and changes in client
business and marketing budgets. Our prospects, business, financial condition and
results of operations may be materially adversely affected by a downturn in
general economic conditions in one or more markets or changes in client business
and marketing budgets.

<PAGE>

WE MAY LOSE CLIENTS DUE TO CONSOLIDATION OF ACCOUNTS WITH OTHER GLOBAL MARKETING
AND COMMUNICATIONS AGENCIES.

We believe that large multinational companies will seek to consolidate
their accounts with one organization that can fulfill their marketing and
communications needs worldwide. We may not continue to benefit from this trend
towards consolidation of global accounts. In addition, this trend towards
consolidation of global accounts requires companies seeking to compete
effectively in the international marketing and communications industry to make
significant investments. These investments include additional offices and
personnel around the world and new and improved technology for linking these
offices and people. We are required to make significant capital expenditures for
maintenance, expansion and upgrades of the computer networks that link our
international network of employees and offices. To the extent that our
competitors may have broader geographic scope or greater financial resources to
invest in additional offices, personnel or technology, they may be better able
than we are to take advantage of an opportunity for the consolidation of a
global account. In those circumstances, our business and results of operations
could suffer.

WE ARE DEPENDENT UPON, AND RECEIVE A SIGNIFICANT PERCENTAGE OF OUR REVENUES
FROM, A LIMITED NUMBER OF LARGE CLIENTS.

A significant reduction in the marketing and communications spending by, or
the loss of one or more of, our largest clients could weaken our financial
condition and cause our business and results of operations to suffer. A
relatively small number of clients contribute a significant percentage of our
consolidated revenues. In 1998, our KCAs contributed 48.6% of consolidated
revenues, and our largest client account, Ford Motor Company, contributed 10.5%
of consolidated revenues. Our dependence on revenues from these client accounts
may increase in the future as we pursue our strategy of increasing penetration
of existing large clients. In addition, clients' conflicts policies typically
prohibit us from performing similar services for competing products or
companies.

These major clients, and our other clients, may not continue to use our
services to the same extent, or at all, in the future. Most of our agreements
with U.S.-based clients are cancelable on 90 days' notice, and our agreements
with non-U.S. clients typically are cancelable on 90 to 180 days' notice. In
addition, clients generally are able to reduce marketing and communications
spending or cancel projects at any time for any reason.

WE MAY LOSE SOME OF OUR EXISTING CLIENTS AND MAY NOT BE ABLE TO ATTRACT NEW
CLIENTS FOR OUR MARKETING AND COMMUNICATIONS SERVICES.

The loss of one or more of our largest clients could weaken our financial
condition and cause our business and results of operations to suffer. Our
success, like the success of other marketing and communications organizations,
depends on our continuing ability to attract and retain clients. We have
approximately 5,500 client accounts worldwide. Although historically we have
maintained long-term relationships with many of our largest clients, clients may
move their advertising and other communications assignments from agency to
agency, or may divide their assignments among two or more agencies, with
relative ease. In addition, in order to maintain and increase revenues, we must
obtain new assignments in areas of our business that are project-based, such as
the perception management and public relations business, and the branding
consultation and design business. As is typical in the marketing and
communications industry, we have lost or resigned client accounts and
assignments, including Blockbuster Video, International Home Foods and Molson,
for a variety of reasons, including conflicts with newly acquired clients. We
may not be successful in replacing clients or revenues when a client
significantly reduces the amount of work given to Y&R.

STRENGTHENING OF THE U.S. DOLLAR AGAINST OTHER MAJOR CURRENCIES COULD
MATERIALLY ADVERSELY AFFECT US.

Our financial statements are denominated in U.S. dollars. In 1998,
operations outside the United States represented 49.1% of our revenues. Currency
fluctuations may give rise to translation gains or losses when financial
statements of foreign operating units are translated into U.S. dollars.
Significant strengthening of the U.S. dollar against other major foreign
currencies could harm our results

<PAGE>

of operations and weaken our financial position. With limited exceptions, we do
not actively hedge our foreign currency exposure. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Market Risk
Management--Foreign Exchange Rate Risk" for a further discussion of our exposure
to currency fluctuations.

THE MARKET PRICE OF OUR COMMON STOCK MAY DECLINE DUE TO THE LARGE NUMBER OF
SHARES ELIGIBLE FOR FUTURE SALE.

Following the common stock offerings, we will have 67,578,051 shares of
common stock outstanding. Of these, 48,942,383 shares will be freely
transferable by persons other than "affiliates" of Y&R without restriction or
further registration under the Securities Act. The remaining 18,635,668
outstanding shares of common stock will be "restricted securities" within the
meaning of Rule 144 under the Securities Act.

Following the common stock offerings and subject to the 120-day lock-up
agreements described in this prospectus, Hellman & Friedman Capital Partners
III, L.P., H&F Orchard Partners III, L.P. and H&F International Partners III,
L.P., whom we refer to as the H&F investors, and two other investors
unaffiliated with Y&R will have demand and piggyback registration rights with
respect to an aggregate of 8,178,069 shares of common stock. In addition,
subject to these lock-up agreements those shares will be eligible for sale in
the public market without registration under the Securities Act, subject to
compliance with the resale volume limitations and other restrictions of Rule 144
under the Securities Act.

Following the common stock offerings, an aggregate of 28,502,222 shares of
common stock and shares subject to vested options held by current or former
managers of Y&R, whom we refer to as management investors, will be eligible for
sale in the public market without registration under the Securities Act,
subject, in some instances, to compliance with the resale and volume limitations
and other restrictions of Rule 144 under the Securities Act. Of this number,
26,604,293 shares and shares subject to vested options will be subject to the
120-day lock-up agreements described in this prospectus or held in a deferral
trust and not transferable prior to the expiration of this 120-day period.

Future sales of common stock, or the perception that future sales could
occur, could adversely affect prevailing market prices for the common stock. See
"Shares Eligible for Future Sale" and "Underwriting" for a discussion of future
sales of common stock that could occur.

WE ARE CONTROLLED BY OUR PRINCIPAL STOCKHOLDERS, INCLUDING MANAGEMENT
STOCKHOLDERS, WHOSE INTERESTS MAY DIFFER FROM THOSE OF OTHER STOCKHOLDERS.

A substantial percentage of our common stock is owned by management
investors and by the H&F investors, as described more fully in "Management." All
common stock held at any time by management investors is required to be
deposited in a voting trust, which we refer to as the management voting trust,
that is controlled by six members of Y&R's senior management, in their
capacities as voting trustees. Following the common stock offerings, this trust
will hold voting power over 36.7% of the outstanding shares of common stock,
assuming the exercise of all currently vested options held by the management
investors. As a result, this voting trust will continue to be able to exercise
substantial control over any matters requiring the vote of stockholders,
including the election of directors, which could delay or prevent a change in
control of Y&R. Furthermore, the vote of Peter A. Georgescu, or any other person
duly elected chief executive officer of Y&R with the prior approval of the
voting trust, will bind the voting trust unless he or his successor is outvoted
by the five other voting trustees. As a result of the foregoing, Peter A.
Georgescu or his successor will be able to exercise a significant degree of
control over business decisions affecting Y&R. This voting trust will terminate
no later than May 15, 2000. In the event that, following the termination of the
voting trust, Y&R management continues to own collectively a significant
percentage of the outstanding shares of common stock, management acting together
will be able to exercise a significant degree of control over business decisions
affecting Y&R.

Following the common stock offerings, the H&F investors will beneficially
own an aggregate of 11.4% of the outstanding shares of

<PAGE>

common stock, assuming the exercise of all currently vested options that they
hold. As a result of their stock ownership, the H&F investors will continue to
be able to influence matters requiring the vote of stockholders, including the
election of directors. In addition, pursuant to a stockholders' agreement
entered into in connection with our IPO, the H&F investors have the right to
nominate and have elected two members of Y&R's board of directors for so long as
they continue to hold, in the aggregate, at least 10% of the outstanding shares,
and one member of the board of directors for so long as they continue to hold,
in the aggregate, at least 5% of the outstanding shares. Should the management
voting trust and the H&F investors act together, they would be able to elect the
members of the board of directors and exercise a controlling influence over the
business and affairs of Y&R. In addition, the management voting trust and the
H&F investors could, acting together, delay or prevent a change in control of
us. See "--Our organizational documents, the provisions of Delaware law and our
stockholder rights plan may delay, deter or prevent a change in control of us."
and "Description of Capital Stock--The Stockholders' Agreement" for a further
discussion of events that may prevent a change in control of us.

OUR COMPETITIVE POSITION DEPENDS ON OUR ABILITY TO ATTRACT AND RETAIN KEY
MARKETING AND COMMUNICATIONS PERSONNEL.

Our ability to maintain our competitive position depends on retaining the
services of our senior management. The loss of the services of key members of
senior management could harm our business and results of operations. In
addition, our success has been, and is expected to continue to be, highly
dependent upon the skills of our creative, research, media and account personnel
and practice group specialists, and their relationships with our clients.
Employees generally are not subject to employment contracts and are, therefore,
typically able to move within the industry with relative ease. Although the
agreement establishing the management voting trust and other stock option and
restricted stock agreements contain non-competition and non-solicitation
covenants, these covenants may not be effective in helping us retain qualified
personnel. We may be adversely affected by the failure to retain qualified
personnel.

If we were unable to continue to attract and retain additional key
personnel, or if we were unable to retain and motivate our existing key
personnel, our prospects, business, financial condition and results of
operations would be materially adversely affected.

WE ARE EXPOSED TO VARIOUS RISKS FROM OPERATING A MULTINATIONAL BUSINESS.

If we were unable to remain in compliance with local laws in developing
countries in which we conduct business, our prospects, business and results of
operations could be harmed, and our financial condition could be weakened. We
conduct business in various developing countries in Asia, Latin America, Eastern
Europe and Africa, where the systems and bodies of commercial law and trade
practices are evolving. Commercial laws in many of these countries are often
vague, arbitrary, contradictory, inconsistently administered and retroactively
applied. Under these circumstances, it is difficult for us to determine with
certainty at all times the exact requirements of these local laws. In addition,
the global nature of our operations poses various challenges to our management
and our financial, accounting and other systems which, if not satisfactorily
met, also could harm our prospects, business and results of operations and
weaken our financial condition. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Results of Operations" for a
further discussion of the risks we are exposed to from operating a multinational
business.

WE MAY NOT BE SUCCESSFUL IN IDENTIFYING APPROPRIATE ACQUISITION CANDIDATES OR
INVESTMENT OPPORTUNITIES, COMPLETING ACQUISITIONS OR INVESTMENTS ON
SATISFACTORY TERMS OR INTEGRATING NEWLY ACQUIRED COMPANIES.

Our business strategy includes increasing our share of clients' marketing
expenditures by adding to or enhancing our existing marketing and communications
capabilities, and expanding our geographic reach. We intend to implement this
strategy in part by making acquisitions and investments. We may not be
successful in identifying appropriate acquisition candidates or

<PAGE>

investment opportunities or consummating acquisitions or investments on terms
satisfactory to us. In addition, we may not be successful in integrating any
newly acquired companies into our existing global network. We may use common
stock, which could result in dilution to purchasers of common stock, incur
indebtedness, which may be long-term, expend cash or use any combination of
common stock, indebtedness and cash for all or part of the consideration to be
paid in future acquisitions. While we regularly evaluate potential acquisition
opportunities, we have no present commitments, agreements or understandings with
respect to any material acquisition.

WE ARE EXPOSED TO POTENTIAL LIABILITIES, INCLUDING LIABILITIES ARISING FROM
ALLEGATIONS THAT OUR CLIENTS' ADVERTISING CLAIMS ARE FALSE OR MISLEADING OR
OUR CLIENTS' PRODUCTS ARE DEFECTIVE.

From time to time, we may be, or may be joined as, a defendant in
litigation brought against our clients by third parties, including our clients'
competitors, governmental or regulatory bodies or consumers. These litigations
could include claims alleging that:

o advertising claims made with respect to our clients' products or services
are false, deceptive or misleading;

o our clients' products are defective or injurious; or

o marketing and communications materials created for our clients infringe
on the proprietary rights of third parties.

If, in those circumstances, we are not insured under the terms of our
insurance policies or are not indemnified under the terms of our agreements with
clients or this indemnification is unavailable for these claims, then the
damages, costs, expenses or attorneys' fees arising from any of these claims
could have an adverse effect on our prospects, business, results of operations
and financial condition. In addition, our contracts with clients generally
require us to indemnify clients for claims brought by competitors or others
claiming that advertisements or other communications infringe on intellectual
property rights. Although we maintain an insurance program, including insurance
for advertising agency liability, this insurance may not be available, or if
available may not be sufficient to cover any claim, if a significant adverse
claim is made.

OUR COMPUTER SYSTEMS, AND THOSE OF THIRD PARTIES ON WHOM WE RELY, MAY NOT
ACHIEVE YEAR 2000 READINESS.

We are working to resolve the potential impact of the year 2000 on the
ability of our computer systems to accurately process information with dates
later than December 31, 1999, or to process date-sensitive information
accurately after the turn of the century, which we refer to as the "Year 2000"
issue. We have completed an assessment of our computer systems and are in the
process of completing the modification or replacement of all affected systems
for compliance with the Year 2000 issue. We are also monitoring the adequacy of
the processes and progress of third-party vendors of systems and applications
that may be affected by the Year 2000 issue. We are dependent in part on
third-party computer systems and applications, particularly with respect to
critical tasks such as accounting, billing and buying, planning and paying for
media, as well as on our own computer systems.

While we believe our process is designed to be successful, because of the
complexity of the Year 2000 issue and the interdependence of organizations using
computer systems, we may not satisfactorily complete our Year 2000 program in a
timely fashion. In addition, third parties with whom we interact and on whom we
rely may not satisfactorily complete their own Year 2000 programs in a timely
fashion. Our failure to satisfactorily address the Year 2000 issue could harm
our business and results of operations and weaken our financial condition.

We do not expect the costs of our Year 2000 compliance program to be
material, and we have funded all identified remedial projects in connection with
our program. However, we may experience cost overruns and delays as we replace
or modify systems, which could harm our business and results of operations and
weaken our financial condition.

We have not yet determined the extent of contingency planning that may be
required. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Year 2000 Compliance" for a further discussion of our
exposure to the Year 2000 issue.

<PAGE>

THE MARKET PRICE OF THE COMMON STOCK WILL FLUCTUATE, AND COULD FLUCTUATE
SIGNIFICANTLY.

The market price of the common stock will fluctuate, and could fluctuate
significantly, in response to various factors and events, including the
following:

o the liquidity of the market for the common stock;

o differences between Y&R's actual financial or operating results and those
expected by investors and analysts;

o changes in analysts' recommendations or projections;

o changes in marketing and communications budgets of clients;

o new statutes or regulations or changes in interpretations of existing
statutes and regulations affecting our business;

o changes in general economic or market conditions; and

o broad market fluctuations.

OUR ORGANIZATIONAL DOCUMENTS, PROVISIONS OF DELAWARE LAW AND OUR STOCKHOLDER
RIGHTS PLAN MAY DELAY, DETER OR PREVENT A CHANGE IN CONTROL OF US.

Various provisions of organizational documents, and of the law of Delaware,
where we are incorporated, may delay, deter or prevent a change in control of
Y&R not approved by our board of directors. These provisions include:

o a classified board of directors;

o a requirement that no action required or permitted to be taken at any
annual or special meeting of stockholders may be taken without a meeting;

o a requirement that special meetings of stockholders be called only by the
chairman of the board of directors or the board of directors;

o advance notice requirements for stockholder proposals and nominations;

o limitations on the ability of stockholders to amend, alter or repeal
provisions of our organizational documents;

o authorization for the board of directors to issue without stockholder
approval preferred stock with terms as the board of directors may
determine; and

o authorization for the board of directors to consider the interests of
clients and other customers, creditors, employees and other
constituencies of Y&R and its subsidiaries and the effect upon
communities in which Y&R and its subsidiaries do business, in evaluating
proposed corporate transactions.

Section 203 of the Delaware general corporation law imposes restrictions on
mergers and other business combinations between Y&R and any holder of 15% or
more of the common stock. These restrictions do not apply to the H&F investors
and their permitted transferees, who have been exempted from these restrictions
by the board of directors.

In addition, we have adopted a stockholder rights plan under which each
holder of common stock also receives rights. Under the stockholder rights plan,
if any person acquires beneficial ownership of 15% or more of the outstanding
shares of common stock (with exceptions, including the management voting trust),
that person will become an "acquiring person". As a result, holders of rights
other than the acquiring person and some other transferees and related persons
will be entitled to purchase shares of common stock at one-half their market
price. In general, the H&F investors and their permitted transferees will not
become an acquiring person unless they acquire beneficial ownership of
additional shares of common stock under circumstances described in the
stockholder rights plan. While the stockholder rights plan is designed to
protect stockholders in the event of an unsolicited offer and other takeover
tactics which, in the opinion of the board of directors, could impair Y&R's
ability to represent stockholder interests, the provisions of the stockholder
rights plan may render an unsolicited takeover of Y&R more difficult or less
likely to occur or might prevent such a takeover. See "Description of Capital
Stock--Rights Plan" for a description of the rights plan.

These provisions of our organizational documents, Delaware law and the
stockholder rights plan, together with the control of 36.7% of the outstanding
shares of common stock by the

<PAGE>

management voting trust upon completion of the common stock offerings (assuming
the exercise of all currently vested options held by management investors) could
discourage potential acquisition proposals and could delay, deter or prevent a
change in control of Y&R, although a majority of Y&R's stockholders might
consider these acquisition proposals, if made, to be desirable. These provisions
also could make it more difficult for third parties to remove and replace the
members of the board of directors. Moreover, these provisions could diminish the
opportunities for a stockholder to participate in tender offers, including
tender offers at prices above the then-current market price of the common stock,
and may also inhibit increases in the market price of the common stock that
could result from takeover attempts or speculation. In addition, some options
issued to our employees contain change in control provisions that could have the
effect of delaying, deterring or preventing a change in control of us. See
"Management--Executive Compensation--1997 ICP--Acceleration of Vesting" and
"Description of Capital Stock--Anti-Takeover Effects of Provisions of the
Certificate of Incorporation, the By-Laws, the Rights Plan and Delaware Law" for
a further discussion of how our organizational documents and provisions of
Delaware law, our stockholder rights plan and some of the options that we have
granted to our employees may delay, deter or prevent a change in control of us.

OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM RESULTS ANTICIPATED IN
FORWARD-LOOKING STATEMENTS WE MAKE.

Some of the statements in this prospectus are forward-looking statements.
These forward-looking statements include statements in the "Business--Industry
Overview," "--Industry Trends" and "--Strategy" sections of this prospectus
relating to trends in the advertising and marketing and communications
industries, including anticipated advertising expenditures, and the growth
thereof, in the world's advertising markets. These forward-looking statements
also include statements relating to Y&R's performance in the "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business" sections of this prospectus. In addition, we may make forward-looking
statements in future filings with the Securities and Exchange Commission, and in
written material, press releases and oral statements issued by or on behalf of
us. Forward-looking statements include statements regarding the intent, belief
or current expectations of Y&R or its officers. Forward-looking statements
include statements preceded by, followed by or that include forward-looking
terminology such as "may," "will," "should," "believes," "expects,"
"anticipates," "estimates," "continues" or similar expressions.

It is important to note that our actual results could differ materially
from those anticipated in these forward-looking statements depending on various
important factors. These important factors include the following:

o revenues received from clients, including under incentive compensation
arrangements entered into by us with clients;

o gains or losses of clients and client business and projects, as well as
changes in the marketing and communications budgets of clients;

o the overall level of economic activity in the principal markets in
which we conduct business and other trends affecting our financial
condition or results of operations;

o the impact of competition in the marketing and communications industry;

o our liquidity and financing plans; and

o risks associated with our efforts to comply with Year 2000
requirements.

All forward-looking statements in this prospectus are based on information
available to us on the date hereof. We do not undertake to update any
forward-looking statements that may be made by or on behalf of us, in this
prospectus or otherwise. In addition, the matters set forth above in this "Risk
Factors" section constitute cautionary statements identifying important factors
with respect to these forward-looking statements, including risks and
uncertainties that could cause actual results to differ materially from those
included in these forward-looking statements.

<PAGE>

RECENT DEVELOPMENTS

On April 5, 1999, we entered into an agreement to acquire KnowledgeBase
Marketing, Inc. for consideration consisting of Y&R common stock and cash valued
at approximately $175 million. KnowledgeBase Marketing is a leading customer
relationship marketing service that specializes in gathering and analyzing
marketing data. KnowledgeBase Marketing creates information marketing solutions
for companies engaged in consumer and business-to-business direct marketing by
creating a consolidated database and then designing, implementing and evaluating
database marketing programs. KnowledgeBase Marketing is headquartered in Chapel
Hill, North Carolina and has eight offices in North America.

In connection with the acquisition, which we expect to close prior to the
closing of the common stock offerings, the stockholders of KnowledgeBase
Marketing will elect to receive a combination of Y&R common stock and cash.
Based on current market prices and depending upon the elections of the
KnowledgeBase Marketing stockholders, we anticipate that we will issue
approximately 2.1 million shares of Y&R common stock and grant options to
purchase approximately 600,000 additional shares of Y&R common stock to
stockholders of KnowledgeBase Marketing. We have granted registration rights to
the stockholders of KnowledgeBase Marketing and they will have the right to
participate in the common stock offerings. We expect that the stockholders of
KnowledgeBase Marketing will elect to sell approximately 1.0 million shares in
the common stock offerings. The closing of the KnowledgeBase Marketing
acquisition is subject to satisfaction of a number of conditions, and it is
possible that the acquisition will not close.

On April 29, 1999, we announced our financial and operating results for the
quarter ended March 31, 1999. We also announced that our board of directors
declared a quarterly cash dividend of $0.025 per share of common stock, payable
on June 15, 1999 to all stockholders of record as of June 1, 1999.

The following table sets forth selected unaudited consolidated statement of
operations data for the three months ended March 31, 1999 and 1998.

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-------------------------------
1999 1998
-------------- --------------
(IN MILLIONS, EXCEPT SHARE AND
PER SHARE AMOUNTS)
<S> <C> <C>
Revenues ........................... $ 383.9 $ 348.2
Income from operations ............. 34.6 25.3
Net income ......................... 19.7 12.2

Earnings per share:
Basic ............................. $ 0.30 $ 0.24
Diluted ........................... $ 0.24 $ 0.19

Weighted average shares outstanding:
Basic ............................. 66,324,420 50,762,144
Diluted ........................... 81,892,192 64,453,134

</TABLE>

<PAGE>

USE OF PROCEEDS

We will not receive any of the proceeds from the sale of shares of common
stock by the selling stockholders.

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

The common stock has been listed on the New York Stock Exchange under the
symbol "YNR" since May 12, 1998. The following table sets forth the low and high
sales prices of the common stock for the fiscal quarters indicated as reported
on the New York Stock Exchange Composite Tape.

<TABLE>
<CAPTION>
LOW HIGH
--------- ----------
<S> <C> <C>
1998
Second Quarter (beginning May 12, 1998) ......... $26 1/2 $33 1/16
Third Quarter ................................... $28 3/8 $35 7/8
Fourth Quarter .................................. $19 3/4 $33 5/8
1999
First Quarter ................................... $31 1/4 $43 5/16
Second Quarter (through May 5, 1999) ............ $38 7/8 $44

</TABLE>

----------------------------------------------

On May 5, 1999, the closing price of the common stock as reported on the
New York Stock Exchange was $41 1/16. As of April 15, 1999, there were
approximately 1,005 holders of record of shares of common stock.

On April 29, 1999, we announced that our board of directors declared a
quarterly cash dividend of $0.025 per share of common stock, payable on June 15,
1999 to all stockholders of record as of June 1, 1999. The decision whether to
apply legally available funds to the payment of dividends on the common stock
will be made at the discretion of the board of directors and will depend upon,
among other factors, our results of operations, financial condition, capital
requirements and contractual restrictions under our credit facility. Our credit
facility contains financial and operating restrictions and covenant requirements
and permits the payment of cash dividends except in the event of a continuing
default under the credit agreement.

<PAGE>

CAPITALIZATION

The following table sets forth Y&R's consolidated cash and cash
equivalents, current portion of installment notes and loans payable and
capitalization as of December 31, 1998. Common stock issued and outstanding as
of December 31, 1998 excludes 30,077,642 shares of common stock issuable upon
exercise of options outstanding at a weighted average exercise price of $8.23 at
December 31, 1998. Of the shares of common stock offered by this prospectus,
1,832,379 shares will be issued upon the exercise of options with a weighted
average exercise price of $2.78.

<TABLE>
<CAPTION>
DECEMBER 31, 1998
------------------
(IN THOUSANDS)
<S> <C>
Cash and cash equivalents ................................................... $ 122,138
==========
Current portion of installment notes and loans payable ...................... $ 32,065
==========
Long-term debt:
Installment notes payable .................................................. $ 400
Loans payable .............................................................. 31,494
----------
Total long-term debt ....................................................... 31,894
----------
Stockholders' equity:

Money market preferred stock--cumulative variable dividend; liquidating
value of $115.00 per share; one-tenth of one vote per share; 50,000 shares
authorized; 87 shares issued and outstanding .............................. --
Cumulative participating junior preferred stock--minimum $1.00 dividend;
liquidating value of $1.00 per share; 100 votes per share; 2,500,000 shares
authorized; no shares issued and outstanding .............................. --
Common stock, $.01 par value per share; 250,000,000 shares authorized;
66,374,569 shares issued and outstanding (excluding 3,976,941 shares in
treasury) ................................................................. 704
Capital surplus ............................................................ 934,676
Accumulated deficit ........................................................ (758,292)
Cumulative translation adjustment .......................................... (10,810)
Pension liability adjustment ............................................... (1,738)
Common stock in treasury, at cost ........................................... (49,571)
----------
Total stockholders' equity ................................................ 114,969
----------
Total capitalization ...................................................... $ 146,863
==========
</TABLE>

<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated statement of operations data and
consolidated balance sheet data as of and for the years 1994 through 1998 have
been derived from Y&R's audited annual consolidated financial statements,
including the consolidated balance sheets at December 31, 1998 and 1997 and the
related consolidated statements of operations and of cash flows for the three
years ended December 31, 1998 and the notes thereto included in this prospectus.

The selected consolidated financial data set forth below should be read in
conjunction with the consolidated financial statements included in this
prospectus and the information under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------
1998 1997 1996 1995 1994
-------------- -------------- ------------- ------------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues .................................................. $ 1,522,464 $ 1,382,740 $1,222,139 $ 1,085,494 $959,275
Compensation expense, including employee benefits ......... 903,948 836,150 730,261 672,026 594,322
General and administrative expenses ....................... 455,578 463,936 391,617 356,523 323,087
Other operating charges (1) ............................... 234,449 11,925 17,166 31,465 4,507
Recapitalization-related charges (1) ...................... -- -- 315,397 -- --
----------- ----------- ---------- ----------- --------
Operating expenses ....................................... 1,593,975 1,312,011 1,454,441 1,060,014 921,916
----------- ----------- ---------- ----------- --------
(Loss) income from operations ............................. (71,511) 70,729 (232,302) 25,480 37,359
Interest income ........................................... 8,315 8,454 10,269 9,866 12,100
Interest expense .......................................... (26,001) (42,879) (28,584) (27,441) (23,027)
Other income .............................................. 2,200 -- -- -- --
----------- ----------- ---------- ----------- --------
(Loss) income before income taxes ......................... (86,997) 36,304 (250,617) 7,905 26,432
Income tax (benefit) provision ............................ (2,644) 58,290 (20,611) 9,130 12,998
----------- ----------- ---------- ----------- --------
(84,353) (21,986) (230,006) (1,225) 13,434
Equity in net income (loss) of unconsolidated
companies ................................................ 4,707 342 (9,837) 5,197 4,740
Minority interest in net (income) loss of consolidated
subsidiaries ............................................. (1,989) (2,294) 1,532 (3,152) (2,742)
----------- ----------- ---------- ----------- --------
(Loss) income before extraordinary charge ................. (81,635) (23,938) (238,311) 820 15,432
Extraordinary charge for early retirement of debt (net
of tax benefit of $2,834)................................. (4,433) -- -- -- --
----------- ----------- ---------- ----------- --------
Net (loss) income ......................................... $ (86,068) $ (23,938) $ (238,311) $ 820 $ 15,432
=========== =========== ========== =========== ========

Loss per share (basic and diluted) (2):
Loss before extraordinary charge ......................... $ (1.34) $ (0.51)
Extraordinary charge ..................................... (0.08) --
----------- ------------
Net loss ................................................. $ (1.42) $ (0.51)
=========== ============
Weighted average shares outstanding used to compute
basic and diluted loss per share ......................... 60,673,994 46,949,355

OTHER OPERATING DATA:
EBITDA (1)(3) ............................................. $ 223,548 $ 139,375 $ 147,221 $ 72,972 $ 77,662
Net cash provided by operating activities ................. 195,615 224,511 178,064 79,809 43,314
Net cash used in investing activities ..................... 99,683 67,142 76,094 45,821 49,941
Net cash used in financing activities ..................... 136,242 98,667 12,614 50,025 30,705
Capital expenditures ...................................... 76,378 51,899 51,792 42,096 33,196
International revenues as a % of total revenues ........... 49.1% 52.2% 53.3% 54.7% 53.6%
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------------------------------------------
1998 1997 1996 1995 1994
-------------- -------------- -------------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit) (4) ...................... $ (216,888) $ (106,169) $ (196,509) $ 27,827 $ 72,651
Total assets (5) ................................... 1,635,255 1,537,807 1,598,812 1,226,581 1,118,846
Total debt (6) ..................................... 63,959 351,051 267,238 230,831 256,032
Mandatorily redeemable equity securities (7) ....... -- 508,471 363,264 -- --
Total stockholders equity (deficit) ................ 114,969 (661,714) (480,033) (55,485) 69,982
</TABLE>

- ----------
(1) For a discussion of other operating charges and recapitalization-related
charges for the years ended December 31, 1998, 1997 and 1996, see notes 4, 6
and 9 to the consolidated financial statements included in this prospectus.

Earnings per share for 1996 and 1995 cannot be computed because Y&R's
capital structure prior to its recapitalization in 1996 consisted of both
common shares and limited partnership units in predecessor entities. For a
discussion of the recapitalization, see note 6 to the consolidated financial
statements included in this prospectus.

(3) EBITDA is defined as income (loss) from operations, before depreciation and
amortization, other non-cash charges and recapitalization-related charges.
EBITDA is presented because it is a widely accepted financial indicator and
is generally consistent with the definition used for covenant purposes
contained in Y&R's credit facilities; however, EBITDA may not be comparable
to other registrants' calculation of EBITDA or similarly titled items. You
should not consider EBITDA to be an alternative to net income (loss) as a
measure of operating results in accordance with generally accepted
accounting principles or as an alternative to cash flows as a measure of
liquidity. EBITDA for 1998 is before $234,449 of non-cash compensation
charges related to the vesting of restricted stock taken at the time of our
initial public offering in May 1998. EBITDA for 1997 and 1996 is before
$11,925 and $11,096, respectively, of non-cash charges primarily related to
impairment write-downs which are included in other operating charges. For a
discussion of other operating charges and recapitalization-related charges
for the years ended December 31, 1998, 1997 and 1996, see notes 4, 6 and 9
to the consolidated financial statements included in this prospectus.

(4) Working capital balances are significantly impacted by the seasonal media
spending patterns of advertisers, including the timing of payments made to
media and other suppliers on behalf of clients as well as the timing of cash
collection from clients to fund each expenditure.

(5) Total assets as of December 31, 1998 include net deferred tax assets of
$205,449 consisting primarily of federal, state and foreign net operating
loss carryforwards.

(6) Total debt includes current and non-current loans and installment notes,
which are discussed in notes 14 and 15 to the consolidated financial
statements included in this prospectus.

(7) From the date of completion of the recapitalization of Y&R in 1996 and
through the date of completion of the IPO, all outstanding shares of common
stock, exclusive of shares of common stock held in a restricted stock trust
under our restricted stock plan, were redeemable, subject to restrictions,
at the option of the stockholder. Accordingly, all of these shares of common
stock were recorded at their redemption values and classified as mandatorily
redeemable equity securities at December 31, 1997 and 1996. For a discussion
of the mandatorily redeemable equity securities, see note 17 to the
consolidated financial statements included in this prospectus.

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion in conjunction with the
consolidated financial statements.

OVERVIEW

Young & Rubicam Inc. is the fifth largest consolidated marketing and
communications organization in the world based on 1998 revenues.

Our revenues in 1998 totaled $1.5 billion, representing a compound annual
growth rate of 12.2% from 1994 to 1998.

Our revenues consist principally of commissions and fees received by us
from our clients. Commissions are derived using a percentage of an advertiser's
media and production spending through Y&R. Fees are based on hours spent and
costs incurred by agency staff plus a mark-up. We recognize commission revenue
primarily when media placements appear on television, on radio or in print, and
when labor and production costs are billed. We recognize fee revenue when
services are rendered.

We have also implemented incentive compensation arrangements with several
of our clients that we believe further strengthen our client relationships and
reward us for superior performance. These incentive arrangements create a range
of compensation that could result in either higher or lower revenues and
operating margins than a more traditional commission or fee arrangement.
Incentive levels are determined with reference to agreed upon operating,
performance and other benchmarks, with respect to both clients' businesses as
well as our performance. Although incentive arrangements have not materially
impacted our revenues, we believe that additional clients may request that we
institute incentive compensation arrangements in the future.

Our revenues are diversified across geographic regions, various sectors of
the economy and among many clients. In 1998, we derived 50.9% of our revenues
from our U.S. operations, with 35.0% coming from our European operations and the
remainder divided among our operations in Latin America, Australia/New Zealand,
Asia, Canada and Africa. For the years 1998, 1997 and 1996, our revenue from any
one country other than the United States did not exceed 10% of our consolidated
revenues. The United Kingdom, Germany, Brazil, France, Australia, the
Netherlands, Italy, Canada and Switzerland represent the largest sources of our
revenues by country, other than the United States. For information on our
worldwide operations, see note 12 to the consolidated financial statements
included in this prospectus.

We represent clients in various industries, including automotive, consumer
packaged goods, financial services, food and beverage, government services and
telecommunications. Our revenues are diversified across our approximately 5,500
client accounts. Our largest client account, Ford Motor Company, accounted for
10.5% of our consolidated revenues in 1998. In addition, our KCAs accounted for
48.6% of our revenues in 1998.

We have two principal categories of operating expenses: compensation
expense and general and administrative expenses. Our largest expense is
compensation, which includes the salaries, bonuses and benefits of all of our
employees, as well as fees paid to freelance contractors. General and
administrative expenses principally consist of facilities' costs, depreciation,
amortization, new business costs, travel expenses and professional fees.

From the time of our founding until 1996, we were wholly owned by our
employees. As further described in note 6 to the consolidated financial
statements included in this prospectus, in December 1996, we consummated a
recapitalization, which resulted in the recording of a pre-tax charge of $315.4
million in 1996. In connection with the recapitalization, we allocated shares of
restricted stock to employees, the vesting of which was subject to conditions.
On May 15, 1998, we completed our IPO of an aggregate of 19,090,000 shares of
common stock, of which 6,912,730 shares were sold by Y&R and 12,177,270 shares
were sold by selling stockholders. We used the net proceeds to Y&R, which
aggregated $158.6 million, together with $155 million of borrowings under a new
credit facility, to repay all of the outstanding borrowings under our prior
credit facilities.

<PAGE>

The completion of the IPO gave rise to non-recurring, non-cash, pre-tax
compensation charges of $234.4 million, or $169.8 million net of the related tax
benefit, from the vesting of an aggregate of 9,231,105 shares of restricted
stock allocated to employees as of the date of completion of the IPO. These
charges have been reflected as "other operating charges" in our consolidated
statements of operations for 1998.

Unless otherwise stated, all references to "Young & Rubicam", "Y&R", "we",
"our" and "us" refer to Young & Rubicam Inc., its predecessors and its
consolidated subsidiaries, including Young & Rubicam L.P.

RESULTS OF OPERATIONS

The following table sets forth, for the years indicated, items derived from
Y&R's consolidated statements of operations and the percentages of revenue
represented by these items. Totals may not add due to rounding.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------------------
% OF % OF % OF
1998 REVENUES 1997 REVENUES 1996 REVENUES
------------- ------------ ------------- ------------ ------------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Revenues ............................... $1,522.5 100.0% $1,382.7 100.0% $1,222.1 100.0%
Compensation expense, including
employee benefits ..................... 903.9 59.4% 836.2 60.5% 730.3 59.8%
General and administrative expense ..... 455.6 29.9% 463.9 33.6% 391.6 32.0%
--------- ----- --------- ----- --------- -----
Income before non-recurring
charges (1) ........................... 162.9 10.7% 82.7 6.0% 100.3 8.2%
Other operating charges ................ 234.4 15.4% 11.9 0.9% 17.2 1.4%
Recapitalization-related charges ....... -- 0.0% -- 0.0% 315.4 25.8%
--------- ----- --------- ----- --------- -----
(Loss) income from operations .......... (71.5) (4.7%) 70.7 5.1% (232.3) (19.0%)
Net loss ............................... $ (86.1) (5.7%) $ (23.9) (1.7%) $ (238.3) (19.5%)
========= ===== ========= ===== ========= =====
</TABLE>

- ----------------------
(1) We believe that income before non-recurring charges is an appropriate
measure for evaluating our operating performance; however, it should be
considered in addition to, not as a substitute for, operating income, net
income and other measures of financial performance reported in accordance
with generally accepted accounting principles.
------------------------------

1998 COMPARED TO 1997

Revenues for 1998 increased by $139.8 million, or 10.1%, to $1,522.5
million compared to 1997. This increase was primarily due to net new business,
including business from new clients and higher revenue from existing clients,
that we generated from clients such as Citibank and Ford. United States revenues
increased by 17.3% to $775.7 million for 1998 compared to 1997. International
revenues increased by 3.5% to $746.8 million for 1998 compared to 1997,
primarily due to strong performance in Europe, which was partially offset by
declines in Latin America and the impact of the overall strengthening of the
U.S. dollar against foreign currencies. Organic revenue growth, excluding
acquisitions and foreign currency fluctuations, was 12.2%. Excluding the effect
of foreign currency fluctuations, international revenues increased by 7.9%
compared to 1997.

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

General and administrative expenses decreased by $8.3 million to $455.6
million for 1998 compared to 1997. This decrease was primarily due to a $25.5
million write-off in

<PAGE>

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

Income before non-recurring charges increased by $80.2 million, or 97.0%,
to $162.9 million for 1998 compared to 1997. This increase was primarily due to
net new business gains in 1998, improved operating margins, and the
Burson-Marsteller write-off and deferred compensation charge in 1997.

Effective upon the completion of the IPO, we recognized other operating
charges of $234.4 million. These other operating charges consisted of
non-recurring, non-cash compensation charges resulting from the vesting of
shares of restricted stock allocated to employees. In 1997, we recognized $11.9
million of other operating charges for non-cash asset impairment write-downs
principally related to operations in the United States, Africa, Latin America
and Europe.

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

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

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

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

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

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

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

1997 COMPARED TO 1996

Revenues for 1997 increased by $160.6 million, or 13.1%, to $1,382.7
million compared to 1996. This increase was primarily due to net new business,
including business from new clients and higher revenues from existing clients,
generated from clients such as Campbell's Soup, Citibank, Merck and United
Airlines. United States revenues increased by 15.8% to $661.3 million for 1997
compared to 1996. International revenues for 1997 increased by 10.8% to $721.4
million for 1997 compared to 1996.

<PAGE>

Organic revenue growth was 13.6%. An additional 3.0% of the revenue
increase was due to the acquisition of majority interests in investments
previously accounted for under the equity method. These increases were partially
offset by a 3.5% decline related to a strengthening (on average) of the U.S.
dollar against foreign currencies.

Compensation expense increased by $105.9 million to $836.2 million for 1997
compared to 1996. The growth in compensation expense was generally in line with
revenue growth and also included a $12.3 million charge primarily for deferred
compensation awards granted to senior executives in 1997. Excluding the effect
of the 1997 deferred compensation charges, compensation expense in 1997
decreased as a percentage of revenues to 59.6% from 59.8% in 1996.

General and administrative expenses increased by $72.3 million to $463.9
million for 1997 compared to 1996. This increase included a $25.5 million
write-off in 1997 of accounts receivable, costs billable to clients and other
capitalized costs with respect to the operations of Burson-Marsteller in Europe
and Asia. The write-offs in Europe were primarily related to Burson-Marsteller's
implementation of a new management information system in 1997 which resulted in
delayed and inaccurate billing of some clients and necessitated the creation of
additional reserves against accounts receivable and costs billable to clients.
The write-offs in Asia were attributable to our evaluation of
Burson-Marsteller's recent operating performance in Asia and the determination
that Burson-Marsteller was unlikely to collect various accounts receivable and
costs billable to clients. As a result of its analysis of the circumstances
which led to these write-offs, we made management changes at Burson-Marsteller
in Europe and Asia and implemented additional financial control and reporting
requirements for these operations, including strengthening controls and
procedures regarding regional billing and collection practices. Excluding the
effect of the 1997 Burson-Marsteller write-off, general and administrative
expenses in 1997 decreased as a percentage of revenues to 31.7% from 32.0% in
1996.

Income before non-recurring charges decreased by $17.6 million, or 17.5%,
to $82.7 million for 1997 compared to 1996. This decrease was primarily due to
the inclusion of the deferred compensation charge and Burson-Marsteller
write-off in 1997, offset in part by net new business gains.

In 1997, we had income from operations of $70.7 million compared to a loss
from operations of $232.3 million in 1996, primarily due to charges of $315.4
million related to our recapitalization in 1996. Income from operations in 1997
included $11.9 million of other operating charges for asset impairment
write-downs principally related to operations in the United States, Africa,
Latin America and Europe.

Net interest expense increased by $16.1 million to $34.4 million for 1997
compared to 1996. The increase was primarily due to higher average borrowing
levels in 1997 as a result of the recapitalization.

We recognized income tax expense of $58.3 million for 1997 compared to an
income tax benefit of $20.6 million for 1996. The effective income tax rate for
1997 was 160.6%. The primary difference between the U.S. statutory tax rate and
Y&R's effective tax rate in 1997 resulted from incremental foreign taxes arising
from losses outside the United States which provided little or no tax benefit.
The effective income tax rate for 1996 was a benefit of 8.2%. This reflects the
tax benefit from recapitalization-related charges partially offset by foreign
income taxed at rates greater than the U.S. statutory rate. See Note 11 to the
consolidated financial statements.

Equity in net income of unconsolidated companies was $0.3 million in 1997
compared to a loss of $9.8 million in 1996. A $9.3 million charge to write down
an Australian equity investment was recorded in 1996.

Minority interest in net income of consolidated subsidiaries was $2.3
million in 1997 compared to minority interest in net loss of consolidated
subsidiaries of $1.5 million in 1996, primarily reflecting the minority interest
share of charges for asset impairment write-downs relating to an Italian
operation in 1996.

Net loss for 1997 was $23.9 million compared to a net loss of $238.3
million for 1996, primarily as a result of charges recorded in connection with
the recapitalization in 1996.

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

We historically have financed our working capital, capital expenditures,
acquisitions and equity repurchases from cash generated from operations and
third-party borrowings. In addition, in May 1998, we completed our IPO of an
aggregate of 19,090,000 shares of common stock. Of the total number of shares,
6,912,730 shares were sold by Y&R and 12,177,270 shares were sold by selling
stockholders. Net proceeds to Y&R were $158.6 million, after deducting
underwriting discounts and commissions and expenses paid by Y&R in connection
with the IPO. We used the net proceeds from the IPO together with $155 million
of borrowings under a new $400 million credit facility to repay all of the
outstanding borrowings under our then-existing $700 million senior secured
credit facility.

Cash and cash equivalents were $122.1 million and $160.3 million at
December 31, 1998 and 1997, respectively. Cash provided by operations in 1998
was $195.6 million, reflecting strong operating performance and our continued
focus on cash management. Operating cash flows are significantly impacted by the
seasonal media spending patterns of advertisers, including the timing of
payments made to media and other suppliers on behalf of clients as well as the
timing of cash collections from clients to fund these expenditures. Our practice
is to bill and collect from our clients in sufficient time to pay the amounts
due to the media.

Cash used in investing activities in 1998 was $99.7 million and consisted
of $76.4 million in capital expenditures and $23.3 million for net acquisitions
and investments. The majority of capital expenditures were for information
technology-related purchases and leasehold improvements. Acquisitions and
investments consisted primarily of the purchase of a multi-cultural advertising
agency and related assets in the United States and additional investment in
partially owned international affiliates. Capital expenditures are estimated to
be $80 million in 1999 primarily for additional information technology-related
purchases and leasehold improvements.

Cash used in financing activities in 1998 was $136.2 million. In 1998,
proceeds from our new credit facility and the IPO, along with cash generated by
operations, were used to repay our obligations under our prior credit
facilities.

During 1998, we announced that the board of directors had approved a plan
to repurchase an aggregate of up to 8.0 million shares of common stock over the
next two years. We may repurchase the shares from time to time in the open
market or in private transactions, possibly including transactions with
employees. Through December 31, 1998, we had repurchased 1.9 million shares of
common stock for an aggregate of $51.0 million under the plan. Prior to the
adoption of the plan, we had repurchased 0.7 million shares for an aggregate of
$10.0 million from employees in private transactions. As of May 3, 1999, Y&R had
repurchased 1.3 million additional shares of common stock in 1999 for an
aggregate of $50.9 million under the plan.

In 1997, cash provided by operations was $224.5 million, reflecting our
implementation of cash management improvements relating to the timing of
billings, accounts receivable collections and payments to media and other
suppliers.

In 1997, cash used in investing activities was $67.1 million and consisted
of $51.9 million in capital expenditures and $15.2 million for net acquisitions
and investments. The majority of capital expenditures were for information
technology-related purchases, while the remaining expenditures were for
leasehold improvements, furniture and equipment. Acquisitions and investments
consisted primarily of additional investments in partially owned domestic and
international affiliates.

In 1997, cash flows used in financing activities were $98.7 million. Net
proceeds from our prior credit facilities were more than offset by payments
incurred in connection with our recapitalization in 1996.

At December 31, 1998, we had $31.5 million in outstanding indebtedness
under our new credit facility. We expect to fund our payments of principal and
interest under the new credit facility with cash from operations. As of December
31, 1998, we had entered into interest rate protection agreements with respect
to our indebtedness under the credit facility, which effectively changed our
interest rate under the credit facility to fixed rate

<PAGE>

borrowings. The interest rate protection agreements mature at various times
through 2001.

At December 31, 1998, our net deferred tax assets were $205.4 million,
$110.4 million of which related to net operating loss carryforwards of $258.3
million for U.S. tax purposes which expire in the year 2018 and $91.4 million of
net operating loss carryforwards for foreign tax purposes with carryforward
periods ranging from one year to an indefinite time. The remaining net deferred
tax assets principally resulted from compensation payments made in connection
with our recapitalization in 1996 and the IPO. The completion of the IPO gave
rise to non-recurring, non-cash, pre-tax compensation charges of $234.4 million,
which resulted in additional tax benefits to Y&R of $64.6 million.

Our credit facility contains financial and operating restrictions and
covenant requirements, and permits the payment of cash dividends except in the
event of a continuing default under the credit agreement. Any determination to
pay dividends will be at the discretion of the board of directors and will
depend upon, among other factors, our results of operations, financial
condition, capital requirements and contractual restrictions pursuant to our
credit facility.

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

Management believes that cash provided by operations and funds available
under our credit facility will be sufficient to meet Y&R's anticipated cash
requirements as presently contemplated.

MARKET RISK MANAGEMENT

At December 31, 1998 and 1997, the carrying value of our financial
instruments approximated fair value in all material respects.

INTEREST RATE RISK

We enter into interest rate protection agreements in order to reduce our
exposure to changes in interest rates on our variable rate long-term debt. At
December 31, 1998 and 1997, we had entered into interest rate protection
agreements with respect to $31.5 million and $275 million of our indebtedness,
respectively, which expire at various times through 2001 and result in our
paying, on a quarterly basis, fixed interest amounts ranging from 6.0% to 6.5%.

FOREIGN EXCHANGE RATE RISK

Our consolidated financial statements are denominated in U.S. dollars. In
1998, we derived 49.1% of our revenues from operations outside of the United
States. Currency fluctuations may give rise to translation gains or losses when
financial statements of foreign operating units are translated into U.S.
dollars. Significant strengthening of the U.S. dollar against other major
foreign currencies could have a material adverse effect on our results of
operations. Most of our revenues are billed in the same currency as the costs
incurred to support the revenues, thereby reducing exposure to transaction gains
and losses. We typically do not hedge foreign currency profits into U.S.
dollars, believing that over time the costs of a hedging program would outweigh
any benefit of greater predictability in our U.S. dollar-denominated profits.
However, we selectively hedge some positions where management believes it is
economically beneficial to do so, and base our foreign subsidiary
capitalization, debt and dividend policies on minimizing currency risk. We also
seek, through pricing and other means, to anticipate and avoid economic currency
losses.

We enter into forward foreign exchange contracts to hedge some of our
assets and liabilities that are recorded in a currency different from that in
which they settle. These contracts are generally entered into in order to hedge
intercompany transactions. Gains and losses on these contracts generally offset
losses and gains on the related foreign currency denominated intercompany
transactions. The gains and losses on these positions are deferred and included
in the basis of the transaction upon settlement. The terms of these contracts
are generally a one-month maturity. At December 31, 1998, we had contracts for
the sale of $19.4 million and the purchase of $6.1 million of foreign currencies
at fixed rates, compared to contracts for the sale of $18.5 million and the
purchase of $12.8 million of foreign currencies at December 31, 1997.

<PAGE>

We believe that any losses resulting from market risk would not have a
material adverse impact on our consolidated financial position, results of
operations or cash flows.

INTERNATIONAL BUSINESS RISK

Economic prospects throughout Latin America may be adversely affected by
the devaluation of the Brazilian real which occurred in January 1999. Since its
devaluation, the value of the real has weakened by 40% against the U.S. dollar.
In addition, there was a significant economic downturn in the Asia/Pacific
region in 1998 which has continued into 1999. There can be no assurance as to
when the value of the Brazilian real or the conditions in the Asia/Pacific
region will improve. However, because we do not derive a significant amount of
our revenues from these regions, the above conditions are not expected to be
material to our consolidated financial position, results of operations or cash
flows.

On January 1, 1999, 11 of the member countries of the European Union
established fixed conversion rates between their existing currencies and the
European Union's common currency, the euro. The transition period for the
introduction of the euro began on January 1, 1999. Beginning January 1, 2002,
the participating countries will issue new euro-denominated bills and coins for
use in cash transactions. No later than July 1, 2002, the participating
countries will withdraw all bills and coins denominated in the legacy
currencies, so that the legacy currencies no longer will be legal tender for any
transactions, making the conversion to the euro complete.

We are addressing the issues involved with the introduction of the euro,
including converting information technology systems, reassessing currency risk
and negotiating and amending agreements. Based on progress to date, we believe
that the use of the euro will not have a significant impact on the manner in
which we conduct our business. Accordingly, conversion to the euro is not
expected to have a material effect on our consolidated financial position,
results of operations or cash flows.

SEASONALITY

Our revenues generally reflect the media buying patterns of advertisers and
are concentrated in the second and fourth quarters of the year.

YEAR 2000 COMPLIANCE

We are working to resolve the potential impact of the year 2000 on the
ability of our computer systems to accurately process information with dates
later than December 31, 1999, or to process date-sensitive information
accurately after the turn of the century, which we refer to as the "Year 2000"
issue. We have completed an assessment of our computer systems and are in the
process of completing the modification or replacement of all affected systems
for compliance with the Year 2000 issue. While we believe we have made
substantial progress in resolving any Year 2000 issues, the modifications and
testing necessary to fully validate readiness are still being conducted in some
operating units. We are also monitoring the adequacy of the processes and
progress of third-party vendors of systems that may be affected by the Year 2000
issue. We are dependent in part on third-party computer systems and
applications, particularly with respect to critical tasks such as accounting,
billing and buying, planning and paying for media, as well as on our own
computer systems. We have performed tests of major systems in this category and
continue to seek assurances from other less critical vendors that their systems
are Year 2000 compliant.

While we believe our process is designed to be successful, because of the
complexity of the Year 2000 issue and the interdependence of organizations using
computer systems, we may not satisfactorily complete our Year 2000 program in a
timely fashion. In addition, third parties with whom we interact and on whom we
rely may not satisfactorily complete their own Year 2000 programs in a timely
fashion. Our failure to satisfactorily address the Year 2000 issue could have a
material adverse effect on our prospects, business, financial position and
results of operations.

<PAGE>

We do not expect the costs of our Year 2000 compliance program to be
material, and we have funded all identified remedial projects in connection with
our program. However, we may experience cost overruns and delays as we replace
or modify systems, which could have a material adverse effect on our prospects,
business, financial position and results of operations.

We have not yet determined the extent of contingency planning that may be
required.

IMPACT OF RECENTLY ISSUED ACCOUNTING
STANDARD

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

<PAGE>

BUSINESS

INDUSTRY OVERVIEW

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

Traditional advertising services include the following:

o the development and planning of marketing and branding campaigns;

o the creative design and production of advertisements;

o the planning and buying of time and/or space in a variety of media,
including broadcast and cable television, radio, newspapers, general
interest/specialty magazines, billboards and the Internet; and

o the provision of consumer, product and other market research to clients
on an ongoing basis.

According to industry sources, growth in advertising expenditures has
accelerated in recent years following the economic recession in the early 1990s,
and worldwide advertising expenditures totaled approximately $415 billion in
1998.

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

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

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

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

Information regarding worldwide advertising expenditures, historical growth
in advertising expenditures and comparative rankings of the size of Young &
Rubicam Inc., its affiliates, subsidiaries and operating units has been obtained
from industry sources, principally Advertising Age, AdWeek, McCann-Erickson
Report, Med Ad News and Design Week.

INDUSTRY TRENDS

Several significant trends are changing the dynamics of the marketing and
communications industries, including the following:

o GROWTH IN UNITED STATES MARKETING AND COMMUNICATIONS MARKETS. According
to industry sources, advertising expenditures in the United States have
continued to grow, increasing from approximately $140 billion in 1993
to approximately $200 billion in 1998. In industries such as
telecommunications, where regulatory developments have encouraged
increased competition among industry participants, a growing number of
companies have sought to establish and enhance their brand images
through comprehensive marketing and communications programs. In the
healthcare industry, recent regulatory changes that eased restrictions
on direct-to-consumer communications by pharmaceutical companies have
also

<PAGE>

resulted in significant additional marketing and communications
expenditures.

o GROWTH OF INTERNATIONAL MARKETING AND COMMUNICATIONS MARKETS. The
globalization of markets and the deregulation of several sectors of
international markets have led to growth in demand for marketing and
communications services by large corporate clients. An increasing
number of companies are expanding globally and, where they deem it
appropriate, are seeking consistent brand images and market positions
for their products throughout the world. At the same time, however,
companies continue to rely on their marketing and communications
advisors to tailor their regional and local marketing approach to the
demands, tastes and desires of the local marketplace. As international
markets have expanded, particularly the markets in the Asia/Pacific and
Latin American regions, non-U.S. advertising expenditures have grown
more rapidly than U.S. expenditures. According to industry sources,
non-U.S. advertising expenditures have increased from 44% of worldwide
expenditures in 1986 to 52% in 1998.

o INVESTMENT IN BRAND DEVELOPMENT. In the 1980s, many advertisers focused
their marketing campaigns on promotional advertising that emphasized
price competition, often reducing brand loyalty. Over the last several
years, however, advertisers have focused on the image or brand identity
of their organizations, products and services in an effort to
differentiate themselves from competitors and increase brand loyalty.
This emphasis on brand development has increased the demand for
delivery of consistent messages and, as a result, companies are seeking
marketing and communications organizations which are able to coordinate
resources across multiple disciplines, geographies and media.

o DEMAND FOR INTEGRATED SERVICE OFFERINGS. Increasingly, some clients are
turning to large marketing and communications organizations to provide
integrated services across multiple disciplines. These clients are
seeking integrated services to ensure a consistent brand presence and
maximize the effectiveness of their messages around the world, better
coordinate their marketing activities and simplify and strengthen their
relationships with their marketing partners. The demand for
globally-integrated services has led to the creation of a small number
of global marketing and communications companies, including Y&R, that
strive to provide their clients with a full range of services in each
of the local markets in which their clients operate. In addition, a
substantial number of clients continue to require access to specialized
service providers. Y&R has over 20 years of experience in organizing
its companies to address this client need.

o INCREASED EMPHASIS ON TARGETED MARKETING. The desire of companies to
reach their target audiences and quantify the effectiveness of their
communications has resulted in greater demand for customized direct
marketing methods, such as database marketing, infomercials, in-store
promotions and interactive programs. These techniques enable companies
to quantify the success of their campaigns and monitor the return on
investment of their marketing expenditures through mechanisms such as
response rate tracking. The desire to create more targeted marketing
has been enhanced by the emergence of new media which permit more
interactive methods of customizing and delivering messages. In some
developing economies, the technology infrastructure is improving,
indicating increased potential for database marketing and
communications.

<PAGE>

STRATEGY

Our strategy consists of the following key components:

o INCREASE PENETRATION OF KEY CORPORATE ACCOUNTS. We believe that there
are significant opportunities to increase our share of KCA marketing
and communications expenditures by leveraging our global network to
provide integrated services to KCAs. We have successfully increased our
share of the marketing and communications expenditures of some KCAs
over the past few years. For example, we have significantly expanded
our relationship with Ford, winning new assignments in Brazil, Germany,
Canada and the United States for Young & Rubicam Advertising, Wunderman
Cato Johnson, Landor Associates and Brand Dialogue. KCAs also have
increased their use of multiple services offered by us over the same
period. During 1998, our 20 largest clients used an average of five of
our marketing and communications services.

We have implemented a team concept for several KCAs that utilize
advertising, direct marketing and other marketing and communications
services we offer. Each client team aligns Y&R employees from separate
disciplines within Y&R around KCAs and offers incentives to these
employees to provide the highest quality service to the client without
regard to Y&R's own internal corporate structure.

o DEVELOP NEW CLIENT RELATIONSHIPS. We believe that there are significant
opportunities for future revenue and profit growth by providing
services to new clients in targeted industry sectors and to those
clients seeking to build and maintain global, regional and local
brands. We have successfully used our integrated and global approach as
an effective tool in winning new business. Our win of the global
Citibank account in August 1997 exemplifies the success of this
strategy. We believe that the acquisition of this new business was due,
in part, to our ability to coordinate advertising and direct marketing
activities for Citibank around the world. We believe that Citibank
consolidated its advertising and direct marketing accounts with us in
order to establish a consistent brand identity around the world. In
addition to Citibank, in recent years we have won new business from
clients including Barilla Pasta, Campbell's Soup, Sony and United
Airlines, each of whom was designated as a KCA.

o LEVERAGE EXISTING GLOBAL NETWORK. With a worldwide presence in 76
countries (including 14 countries where we are represented by
non-equity affiliations with local partners), we believe that we are
well positioned to continue to benefit from the trend toward the
globalization of client marketing and communications needs and the
consolidation of those needs with a single international service
provider. For example, in May 1998, Groupe Danone consolidated the
global advertising for its Fresh Dairy Products division with Young &
Rubicam Advertising.

o CAPITALIZE ON EXISTING CAPABILITIES. We intend to continue the
development of our existing capabilities into more visible and
accessible client services. For example, in 1997, we launched our Brand
Dialogue unit to serve our clients in the areas of digital interactive
branding and digital commerce and in the development and implementation
of various interactive strategies, including website design, creation
and production. To create this integrated unit, we combined the
existing interactive capabilities of Young & Rubicam Advertising and
Wunderman Cato Johnson in the United States, Latin America, Europe and
Asia/Pacific. We believe that Brand Dialogue represents a growth
opportunity for us, and we intend to make significant investments in
new and emerging technologies to capitalize on this opportunity.

In July 1997, we consolidated the United States media planning, buying
and placement capabilities of Young & Rubicam Advertising, Wunderman
Cato Johnson and The Media Edge, a media company we acquired in 1996,
under the name The Media Edge. With this

<PAGE>

consolidation, we created a major United States media agency, thereby
enhancing our ability to negotiate effectively and secure discounts for
media purchases on behalf of our clients. In September 1998, we
announced the global launch of The Media Edge brand worldwide. We
believe that The Media Edge will provide a variety of media
alternatives in various markets to existing and future clients. We plan
to continue to identify and leverage strengths and capabilities that
can provide further differentiation for us and that can evolve into
businesses that generate incremental revenues and profits.

o UTILIZE SUPERIOR CONSUMER KNOWLEDGE AND BRAND INSIGHTS. To assist our
clients in building, leveraging, protecting and managing their brands,
we have developed and are maintaining extensive knowledge of consumer
brand perceptions. In 1994, we launched BrandAsset Valuator, a
proprietary database of consumer perceptions for building and managing
brands. In its first two phases, in 1994 and the second half of 1997,
the BrandAsset Valuator project involved the gathering of information
on approximately 10,000 brands, including over 9,000 local and regional
brands and 550 global brands. BrandAsset Valuator provides an
understanding of how consumers evaluate brands, how brands evolve over
time and how brands are managed successfully. We believe that
BrandAsset Valuator, in which we have made significant investments over
the past five years, is the first global consumer study that provides
an empirically derived model for how brands gain and lose their
strength. We further believe that BrandAsset Valuator, which reflects
the perceptions of over 95,000 consumers in 32 countries in the
Americas, Europe, Asia, Australia and Africa, is the most extensive
database of information concerning consumer perceptions of brands.
Management believes that Y&R's comprehensive research capabilities,
including BrandAsset Valuator, have become a significant factor in
attracting new clients and winning new assignments from existing
clients. We plan to continue to invest in BrandAsset Valuator, and
believe that knowledge of consumers' changing perceptions of brands
will continue to provide us with a significant competitive advantage.

o CULTIVATE CREATIVE EXCELLENCE. We intend to continue emphasizing the
importance of creative marketing and communications. Our creative
leadership has been recognized over the years through the receipt of
various industry awards, including Cannes Lions and Clio Awards for
excellence in television and print advertising, EFFIES, which are
awards for effective advertising, and a number of other awards for
direct marketing and design services. We also have created numerous
memorable marketing and communications programs for clients, including
"The Softer Side of Sears," "Everybody Needs a Little KFC," "It's All
Within Your Reach" for AT&T, "The Document Company" for Xerox, and "Be
All That You Can Be" for the United States Army, as well as identity
and design assignments, including the creation of corporate identities,
for Lucent Technologies, Netscape and the 2002 Salt Lake City Olympics.

o IMPROVE OPERATING EFFICIENCIES. We believe that opportunities exist to
further improve operating efficiencies in order to expand margins and
increase future profitability. For example, we have implemented
initiatives which have both improved productivity and reduced
compensation expense as a percentage of consolidated revenues.

o EXPAND CAPABILITIES THROUGH ACQUISITIONS AND INVESTMENTS. In order to
add new capabilities, enhance our existing capabilities and expand the
geographic scope of our operations, we regularly evaluate and intend to
pursue appropriate acquisition and investment opportunities. We believe
that significant opportunities exist to expand our businesses.
Historically, in order to expand capabilities beyond traditional
advertising, we have acquired well-established leaders in other
marketing and communications

<PAGE>

disciplines. More recently, we have acquired smaller niche agencies or
companies to enhance existing capabilities or expand geographic
coverage.

OPERATIONS

The following section contains a brief description of our main service
offerings.

YOUNG & RUBICAM ADVERTISING. Young & Rubicam Advertising is one of the
world's leading full-service consumer advertising agencies, offering expertise
in creative development, consumer research and marketing, and media buying and
planning. In 1998, based on billings, industry sources ranked Young & Rubicam
Advertising as the fourth largest advertising agency based in the United States.

Young & Rubicam Advertising provides services to KCAs such as AT&T,
Cadbury-Schweppes, Campbell's Soup, Citibank, Colgate-Palmolive, Ericsson, Ford,
Philip Morris, Sears, Sony and United Airlines. In June 1997, Young & Rubicam
Advertising extended its long-term relationship with the United States Army, an
account which is subject to a government-mandated review every five years. Since
1998, Young & Rubicam Advertising has expanded its relationships with AT&T,
Campbell's Soup, Ford and Sony and won new business from clients such as Barilla
Pasta and Jim Beam.

Young & Rubicam Advertising has long been involved in various public
interest and public service efforts. Young & Rubicam Advertising handles public
service accounts for The National Urban League, The United Negro College Fund
and, through its work with the Ad Council, has launched a series of programs to
benefit children throughout the United States and, separately, to assist
battered women.

Young & Rubicam Advertising operates in 86 cities in 61 countries
worldwide, in the Americas, Europe and Africa. Young & Rubicam Advertising
services clients through the Dentsu, Young & Rubicam Partnerships across
Asia/Pacific.

DENTSU, YOUNG & RUBICAM PARTNERSHIPS. The Dentsu, Young & Rubicam
Partnerships, or DY&R, are a network of full-service advertising agencies that
provide Young & Rubicam Advertising with access to major markets across the
Asia/Pacific region. DY&R was created as a joint venture between Y&R and Dentsu,
Inc. in 1991. DY&R is a series of local ventures in which Y&R typically has a
50% interest, and is jointly managed and operated by Y&R and Dentsu. To maximize
local brand equity and minimize conflicts, DY&R operates under different brand
names and management in each of its three regions--Asia, Australia/New Zealand
and the United States. DY&R primarily services major clients of Dentsu and Y&R
in Asia, including Y&R's KCAs, but also has its own local clients in each
region. In Asia/Pacific, DY&R has recently won regional business from Fuji and
Citibank and has been awarded additional work from Cadbury-Schweppes, Ericsson,
Ford and Sony, in specific markets. DY&R operates in 28 cities in 15 countries
across Asia/Pacific and the United States, where it operates as The Lord Group.

THE BRAVO GROUP AND KANG & LEE. The Bravo Group creates multi-cultural
marketing and communications programs targeted to the fast-growing U.S. hispanic
community. The Bravo Group's multi-disciplinary services include advertising,
promotion and event marketing, public relations, research and direct marketing.
The Bravo Group provides services for selected KCAs including American Home
Products-Whitehall, AT&T, Campbell's Soup, Clorox, Ford, Kraft, Sony and the
United States Postal Service. Y&R expanded its multi-cultural marketing and
communications capabilities in October 1998 with the acquisition of Kang & Lee,
an agency that creates Asian-language integrated marketing programs that are
designed to establish strong product positions in the Asian-American consumer
segments.

WUNDERMAN CATO JOHNSON. Wunderman Cato Johnson, or WCJ, is one of the
world's leading behavior-driven marketing and communications companies.
Behavior-driven marketing and communications are designed to assist clients in
producing immediate sales and building brand and customer equity. WCJ addresses
its clients' marketing objectives through direct marketing, sales promotion,
television commercials and infomercials, customer loyalty programs, relationship
marketing programs, database development and management, merchandising,
entertainment and sports marketing, lead generation and new product launches.

<PAGE>

Wunderman Cato Johnson focuses on converting "consumers" to "customers" and
mass markets to individual relationships. WCJ seeks to motivate behavior by
focusing on identifying and acquiring the most valuable customer prospects for
clients, building loyalty among its clients' most profitable customers and
managing the customer's interactions with the brand, the trade and the sales
force.

Wunderman Cato Johnson provides services to KCAs such as AT&T, DuPont,
Ford, Sony, Taco Bell and the United States Postal Service. Recent new business
projects include the creation of a global promotion for Ericsson, and, together
with Young & Rubicam Advertising, the launches of the Sears Home Services
Division and the Navigator for Ford's Lincoln-Mercury division.

Wunderman Cato Johnson was created by the 1992 merger of Wunderman
Worldwide, a direct marketing company acquired by Y&R in 1973, and Cato Johnson
Associates, a sales promotion company acquired by Y&R in 1976. Headquartered in
New York, WCJ operates in 47 cities in 31 countries worldwide. WCJ also has
major database facilities in Europe and Latin America.

BRAND DIALOGUE. Brand Dialogue specializes in digital interactive branding
and digital commerce. Brand Dialogue's primary offerings consist of:

o web advertising, including the design, creation and production of
websites, banners, home pages and comprehensive interactive campaigns;

o digital commerce applications;

o the development of corporate intranets to improve communications and
productivity within and among a defined set of users; and

o interactive marketing consulting services.

Brand Dialogue has obtained new business from both existing KCAs and other
clients, as well as new clients. Brand Dialogue has recently won notable and
varied assignments from clients such as Andersen Consulting, AT&T, Citibank,
Ericsson, Ford, Pfizer, Philip Morris, Seven Up/Dr Pepper, Sony and Xerox.

THE MEDIA EDGE. The Media Edge provides integrated media planning, buying
and placement services for both Young & Rubicam Advertising and Wunderman Cato
Johnson. In addition, The Media Edge provides planning and buying of both
traditional and direct response media. We believe that The Media Edge is
positioned to act as an independent full-service media provider, offering a
range of media-related services to clients other than those of Young & Rubicam
Advertising and Wunderman Cato Johnson, as well as to smaller independent
advertising and communications agencies. We believe that these capabilities will
enable The Media Edge to take advantage of opportunities presented by the trend
of clients separating media responsibility assignments from other advertising
services. The Media Edge has recently won significant new business, including a
number of agency of record assignments (a preferred media provider designation),
media research and modeling assignments and expanded its relationships with
Campbell's Soup, Celebrex, Fort James Corp., Glaxo-Wellcome and Pella.

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

Burson-Marsteller believes a shift is occurring in the perception
management and public relations field, away from a focus on executional delivery
based upon a client's specific instructions and towards a more consultative and
interactive relationship. To that end, in 1996 and 1997, Burson-Marsteller
implemented a client-focused practice structure in the United States. This
client-focused practice structure has replaced the traditional geographic
organizational model in the United States and helps ensure the firm's
professional client teams have the experience and insight required to provide
clients with the in-depth capabilities and knowledge to meet their needs. In
Europe and Asia, Burson-Marsteller intends

<PAGE>

to maintain a primarily geographic organizational model and to implement, where
feasible, elements of a client-focused practice structure. Burson-Marsteller's
functional and industry practice areas currently include corporate, healthcare,
marketing, advertising, media, public affairs, strategic consulting and
technology. Burson-Marsteller's resources include three kinds of specialists:

o industry specialists who are experienced in specific fields;

o practice specialists who are experienced in specific perception
management, public relations and public affairs disciplines; and

o creative and media specialists who are skilled in using a variety of
techniques and different technologies to deliver messages with impact.

Burson-Marsteller serves as counselor to a diverse body of clients ranging
from major corporations, business associations and professional organizations to
governmental bodies and non-profit institutions. Burson-Marsteller has recently
undertaken significant assignments for Ford, Pfizer, Qualcomm, Sun Microsystems,
Telefonica and Unilever. In addition, Burson-Marsteller has expanded and
strengthened relationships with existing clients such as Andersen Consulting,
Johnson & Johnson and Philip Morris.

Burson-Marsteller was founded in 1953 and was acquired by Y&R in 1979.
Burson-Marsteller is head-quartered in New York and operates in 49 cities in 33
countries around the world. The Burson-Marsteller network also includes:

o Black, Kelly, Scruggs & Healey Inc., a lobbying and public affairs firm
based in Washington D.C.;

o Marsteller Advertising, which specializes in corporate,
business-to-business and issues advertising campaigns, with offices in
New York, Chicago, Pittsburgh and London; and

o The Direct Impact Company, a grass roots issues management company,
located in Alexandria, Virginia, which Burson-Marsteller acquired in
March 1999.

COHN& WOLFE. Cohn & Wolfe is a full-service public relations firm that
provides creative, results-driven services to its clients. Cohn & Wolfe helps
its clients establish and communicate corporate and brand identity, launch new
products and expand sales. Areas of expertise include consumer marketing, sports
publicity and issues management, as well as healthcare, information technology
and business-to-business communications. Current clients include Coca-Cola,
Colgate-Palmolive, Deloitte Consulting, Eli Lilly, NEC, SmithKline Beecham,
Sony, the United States Army, the United States Postal Service and Visa
International.

Cohn & Wolfe was founded in 1970 and was acquired by Burson-Marsteller in
1984. Cohn & Wolfe operates in 12 cities in 7 countries in North America, Europe
and Australia.

LANDOR ASSOCIATES. Landor Associates, or Landor, is one of the world's
leading branding consultancies and strategic design firms. Landor creates,
builds and revitalizes clients' brands and helps position these brands for
continued success. Landor's branding and identity consultants, designers and
researchers work with clients on a full range of branding and identity projects,
including corporate identity, packaging and brand identity systems, retail
design and branded environments, interactive branding and design, verbal
branding and nomenclature systems, corporate literature, brand extensions and
new brand development.

Landor has broad international experience across various industries, and
clients include automobile manufacturers, banks and financial institutions,
commercial airlines, communications and information companies, consumer
products, entertainment industry concerns, hotels, major industrials, packaged
goods companies and petroleum retailers.

In recent years Landor has obtained the following new business assignments:

o corporate identity assignments for Andersen Consulting, Delta Airlines,
Lucent Technologies and the 2002 Salt Lake City Olympics;

o brand identity assignments for Walt Disney;

<PAGE>

o package design assignments for Frito-Lay; and

o branded environment assignments for Taco Bell, Pizza Hut and Shell.

In addition, Landor has expanded relationships with existing clients
including Coors Beer and Visteon, a Ford subsidiary that supplies component
parts to the automotive industry.

Landor was founded in 1941 and was acquired by Y&R in 1989. Landor is
headquartered in San Francisco and operates in 15 cities in 11 countries
worldwide, including multidisciplinary consulting and design studios in New
York, Seattle, Mexico City, Hamburg, London, Paris, Hong Kong and Tokyo.

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

Sudler & Hennessey's medical education division, IntraMed, develops
continuing educational programming on behalf of its pharmaceutical and consumer
care clients. These educational efforts bring credible third-party support to
healthcare professionals as well as patient educational communications.

The healthcare communications industry has experienced significant growth
in recent years, due both to a dramatic increase in direct-to-consumer
healthcare communications and numerous new product introductions. Sudler &
Hennessey has won new business, including product launch assignments from Abbott
Laboratories, Roche and Zeneca.

Sudler & Hennessey was founded in 1941 and was acquired by Y&R in 1973.
Sudler & Hennessey is headquartered in New York and operates in 15 cities in 10
countries in North America, Europe and Asia/Pacific.

COMPETITION

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

o creative reputation;

o knowledge of media;

o quality and breadth of services;

o geographical coverage and diversity;

o relationships with clients; and

o financial controls.

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

United States clients typically may cancel contracts with agencies upon 90
days' notice, and non-U.S. clients typically also may cancel contracts with
agencies on 90 to 180 days' notice. However, we believe that clients may

<PAGE>

find it increasingly difficult to terminate relationships with agencies that
represent their brands on a global basis because of the complexity of
coordinating creative, media and non-media services. In addition, clients
generally remain able to move from one agency to another with relative ease. As
is typical in the marketing and communications industry, we have lost or
resigned client accounts and assignments, including Blockbuster Video,
International Home Foods and Molson, for a variety of reasons, including
conflicts with newly acquired clients. Although typically we have replaced these
losses with new clients and assignments, we may not be successful in replacing
clients that may leave Y&R or in replacing revenues when a client significantly
reduces the amount of work given to Y&R. A significant reduction in the
marketing and communications spending by, or the loss of, one or more of our
largest clients, if not replaced by new client accounts or an increase in
business from existing clients, may cause our business and results of operations
to suffer and may weaken our financial condition.

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

REGULATION

The regulation of advertising takes several forms. The primary source of
governmental regulation in the United States is the Federal Trade Commission,
which is charged with administering the Federal Trade Commission Act. The
Federal Trade Commission Act covers a wide range of practices involving false,
misleading and unfair advertising. In the event of violations of federal laws
and regulations, the Federal Trade Commission may seek cease and desist orders,
may impose monetary penalties and may require other remedies. The Federal Food
and Drug Administration, the Federal Communications Commission and other
agencies also have regulatory authority that affects the advertising business.
In addition, many state and local governments have adopted statutes and
regulations similar in scope to the Federal Trade Commission Act and the
regulations thereunder.

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

Advertising is also subject to regulation in countries other than the
United States in which we and our affiliates do business. We have developed
internal review procedures to help ensure that our work product, as well as that
of our affiliates, is in compliance with standards of accuracy, fair disclosure
and ethical proprieties,

<PAGE>

including those established by federal, state and local laws and regulations and
the pre-clearance procedures of the broadcast media.

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

EMPLOYEES

We have approximately 13,000 employees, including part-time employees,
worldwide. Our U.S. employees are not covered by collective bargaining
agreements. We believe that our relations with employees are good.

PRINCIPAL PROPERTIES

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

<TABLE>
<CAPTION>
APPROXIMATE
SQUARE LEASE
LOCATION USE FOOTAGE EXPIRATION
- ----------------------------- ------------------------------------------ ------------ ------------
<S> <C> <C> <C>
285 Madison Avenue, Young & Rubicam Advertising, WCJ, Brand 370,000 N/A (owned)
New York, New York Dialogue and corporate headquarters

230 Park Avenue South, Burson-Marsteller, Bravo, Landor and WCJ 340,500 1/22/06
New York, New York
Gallus Park, Young & Rubicam Advertising, WCJ, 154,000 4/26/04
Frankfurt, Germany Burson-Marsteller, Cohn & Wolfe and
Sudler & Hennessey

825 Seventh Avenue The Media Edge 111,832 1/31/01
New York, New York
200 Renaissance Center Young & Rubicam Advertising and WCJ 96,000 11/30/99
Detroit, Michigan
675 Avenue of the Americas, WCJ 92,500 6/30/03
New York, New York
Greater London House, Young & Rubicam Advertising, WCJ and 80,000 5/31/13
London, U.K. Sudler & Hennessey
295 Madison Avenue Young & Rubicam Advertising 65,821 1/22/06
New York, New York
49-59 Avenue Andre Young & Rubicam Advertising and WCJ 65,000 3/30/08
Morizet, Paris, France
100 First Street, Young & Rubicam Advertising, WCJ, 65,000 4/30/03
San Francisco, California Burson-Marsteller and Bravo
One South Wacker Drive, Young & Rubicam Advertising, WCJ 63,000 11/30/99
Chicago, Illinois and Landor
1801 K Street N.W., Burson-Marsteller and Cohn & Wolfe 60,000 10/31/06
Washington, D.C.
7535 Irvine Center Drive Young & Rubicam Advertising and WCJ 53,794 12/14/09
Irvine, California
</TABLE>

Y&R's capital expenditures for 1999 include expenditures for leasehold
improvements of facilities. When completed, these improvements are expected to
result in a configuration of owned and leased facilities that we believe will be
adequate for our current and anticipated purposes. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."

Young & Rubicam, Y&R, Young & Rubicam Advertising, Y&R Advertising,

<PAGE>

Wunderman Cato Johnson, WCJ, The Bravo Group, Burson-Marsteller, Marsteller
Advertising, Cohn & Wolfe, Landor Associates, Sudler & Hennessey, BrandAsset
Valuator, Brand Dialogue, Kang & Lee, The Media Edge and The Direct Impact
Company are trademarks of Young & Rubicam Inc. Other trademarks referenced in
this prospectus are trademarks of their respective legal owners.

LEGAL PROCEEDINGS

We are involved from time to time in various claims and legal actions
incident to our operations, both as plaintiff and defendant. In the opinion of
management, none of these existing claims is expected to have a material adverse
effect on Y&R.

<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth information with respect to our executive
officers and directors:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------- ----- ----------------------------------------------------
<S> <C> <C>

Peter A. Georgescu ............... 60 Chief Executive Officer of Y&R and Chairman of the
Board of Directors
Edward H. Vick ................... 55 Chief Operating Officer of Y&R
Thomas D. Bell, Jr. .............. 49 Executive Vice President of Y&R, Chairman and Chief
Executive Officer of Young & Rubicam Advertising
and Director
Stephanie W. Abramson ............ 54 Executive Vice President and General Counsel of
Y&R

Michael J. Dolan ................. 52 Vice Chairman and Chief Financial Officer of Y&R
and Director
F. Warren Hellman ................ 64 Director
Philip U. Hammarskjold ........... 34 Director
Richard S. Bodman ................ 61 Director
Alan D. Schwartz ................. 49 Director
Sir Christopher Lewinton ......... 67 Director
John F. McGillicuddy ............. 68 Director
</TABLE>

------------------------------

The business address of each of our executive officers is 285 Madison
Avenue, New York, New York 10017. The business address of Messrs. Hellman and
Hammarskjold is One Maritime Plaza, San Francisco, California 94111. The
business address of Mr. Schwartz is c/o Bear, Stearns & Co. Inc., 245 Park
Avenue, New York, New York 10167. The business address of Mr. Bodman is c/o AT&T
Ventures, Chevy Chase Metro Building, 2 Wisconsin Circle, Suite 610, Chevy
Chase, Maryland 20815-7003. The business address of Sir Christopher Lewinton is
c/o TI Group plc, 50 Curzon Street, London W1Y 7PN, United Kingdom. The business
address of Mr. McGillicuddy is 270 Park Avenue, 32nd Floor, New York, New York
10017.

PETER A. GEORGESCU Mr. Georgescu has been Chairman and Chief Executive
Officer of Young & Rubicam Inc. since 1994. He has been a director of Y&R since
1980. Mr. Georgescu's career at Y&R spans 36 years with top management
experience both in the United States and Europe. Prior to becoming Chairman, Mr.
Georgescu was President of Y&R for four years. Mr. Georgescu joined Young &
Rubicam New York in 1963 as a trainee and has held various positions in
research, account management and marketing in New York, Chicago and Amsterdam.
Mr. Georgescu is a member of the board of directors of Briggs and Stratton
Company.

EDWARD H. VICK Mr. Vick has been Chief Operating Officer of Y&R since
November 1997 and a director of Y&R since February 1998. Mr. Vick was Chairman
and Chief Executive Officer of Young & Rubicam Advertising from April 1996 to
September 1998 and was President and Chief Executive Officer of Young & Rubicam
New York from February 1994 to April 1996. He began his career with Benton &
Bowles and was a Senior Vice President of Ogilvy & Mather. From 1985 to 1991, he
was President and Chief Operating Officer of Ammirati & Puris. In 1992, Mr. Vick
came to Y&R as President and Chief Executive Officer of its branding consultancy
and strategic design firm, Landor Associates. Mr. Vick is a member of the board
of directors of the United Negro College Fund and the American Foundation for
AIDS Research and a member of the advisory board of directors of the University
of North Carolina and of Northwestern University.

THOMAS D. BELL, JR. Mr. Bell has been Executive Vice President of Y&R since
1995, Chairman and Chief Executive Officer of Young & Rubicam Advertising since
September 1998, and a director of Y&R since February

<PAGE>

1998. From 1995 until September 1998, he was President and Chief Executive
Officer of Burson-Marsteller. From 1994 to 1995, Mr. Bell served as Vice
Chairman of Gulfstream Aerospace Corporation. Prior thereto, Mr. Bell was Vice
Chairman and Chief Operating Officer of Burson-Marsteller from 1991 to 1994.
Before initially joining Burson-Marsteller in 1989, Mr. Bell held senior
positions in business and government. Mr. Bell is a member of the board of
directors of Gulfstream Aerospace Corporation, Lincoln National Corporation and
Lincoln Life & Annuity of New York.

STEPHANIE W. ABRAMSON Ms. Abramson has been Executive Vice President and
General Counsel of Y&R since 1995. Ms. Abramson was a director of Y&R from 1995
until February 1998. From 1980 until joining Y&R in 1995, she was a partner with
Morgan, Lewis & Bockius LLP.

MICHAEL J. DOLAN Mr. Dolan has been Vice Chairman and Chief Financial
Officer and a director of Y&R since July 1996. From 1991 to 1996, he was
President and Chief Executive Officer of the joint venture, Snack Ventures
Europe, between PepsiCo Foods International and General Mills. Mr. Dolan also
served PepsiCo Foods International as Senior Vice President, Operations. From
1987 to 1991, Mr. Dolan was with Peter Kiewet Sons, Inc., or PKS, a construction
and mining conglomerate. While at PKS, he served as Corporate Executive Vice
President for Continental Can Company when it was acquired and restructured by
PKS.

F. WARREN HELLMAN Mr. Hellman has been a director of Y&R since December
1996. Mr. Hellman is Chairman of Hellman & Friedman LLC, a private investment
company he founded in 1984. Prior thereto, Mr. Hellman was President and a
Director of Lehman Brothers, as well as head of its Investment Banking Division,
and Chairman of Lehman Corporation, a closed-end investment company. Mr. Hellman
serves on our board of directors as a representative of the H&F investors. Mr.
Hellman is a member of the board of directors of Levi Strauss & Co., Franklin
Resources, Inc., Il Fornaio (America) Corp. and PowerBar Inc., as well as a
number of private and venture-backed companies.

PHILIP U. HAMMARSKJOLD Mr. Hammarskjold has been a director of Y&R since
December 1996. Mr. Hammarskjold is a Managing Director of Hellman & Friedman
LLC. Prior to joining Hellman & Friedman in 1992, Mr. Hammarskjold was employed
by Dominguez Barry Samuel Montagu in Australia and by Morgan Stanley & Co. in
New York. Mr. Hammarskjold serves on our board of directors as a representative
of the H&F investors. Mr. Hammarskjold is a member of the board of directors of
The Covenant Group, Inc.

RICHARD S. BODMAN Mr. Bodman has been a director of Y&R since April 1998.
Mr. Bodman has been Managing General Partner of AT&T Ventures, LLC, a company
which manages a venture capital pool investing in early stage businesses related
to telecommunications and information technology since May 1996. Prior to
joining AT&T Ventures, LLC, from 1990 until May 1996, Mr. Bodman was Senior Vice
President for Corporate Strategy & Development and a member of the Management
Executive Committee of AT&T. Mr. Bodman is a member of the board of directors of
Reed Elsevier plc, Tyco International Ltd. and ISS Group, Inc.

ALAN D. SCHWARTZ Mr. Schwartz has been a director of Y&R since December
1996. Mr. Schwartz has been Executive Vice President and Head of the Investment
Banking Department at Bear, Stearns & Co. Inc. since 1989. He is a member of the
Executive Committee of the parent company, The Bear Stearns Companies Inc. Mr.
Schwartz joined Bear Stearns in 1976. Mr. Schwartz is a member of the board of
directors of Unique Casual Restaurants, Inc.

SIR CHRISTOPHER LEWINTON Sir Christopher Lewinton has been a director of
Y&R since May 1, 1999. Sir Christopher is Chairman of TI Group plc, a position
he has held since 1989. He is a member of the board of directors of Reed
Elsevier plc and a member of the supervisory board of directors of Mannesmann
AG.

JOHN F. MCGILLICUDDY Mr. McGillicuddy has been a director of Y&R since May
1997. Mr. McGillicuddy was the Chairman and Chief Executive Officer of Chemical
Banking Corporation from 1992 to 1993 and Chairman and Chief Executive Officer
of Manufacturers Hanover Corporation and Manufacturers

<PAGE>

Hanover Trust Company from 1979 to 1991. Mr. McGillicuddy is a member of the
board of directors of UAL Corporation, USX Corporation and Southern Peru Copper
Corporation.

We intend that the board of directors will continue to be comprised of a
majority of directors who are independent of management.

Our board of directors is divided into three classes, as nearly equal in
number as is possible, serving staggered three-year terms, so that the
directors' initial terms will expire at the annual meetings of our stockholders
held in 1999, 2000 and 2001, respectively. At each annual meeting of our
stockholders, successors to the class of directors whose term expires at that
meeting will be elected to serve for three-year terms and until their successors
are elected and qualified. Messrs. Hellman, Schwartz and Vick are Class I
directors, with terms expiring in 1999. Messrs. Dolan, Georgescu and
Hammarskjold are Class II directors, with terms expiring in 2000. Messrs. Bell,
Bodman and McGillicuddy and Sir Christopher Lewinton are Class III directors,
with terms expiring in 2001.

The H&F investors have the right to nominate and elect two members of the
board of directors as long as they continue to hold in the aggregate at least
10% of the outstanding shares (as defined in the Stockholders' Agreement) and
one member of the board of directors as long as they continue to hold in the
aggregate at least 5% of the outstanding shares. See "Description of Capital
Stock--The Stockholders' Agreement" for additional information on the rights of
the H&F investors.

Executive officers are appointed by, and serve at the discretion of, the
board of directors.

COMMITTEES

Our compensation committee consists of Mr. Bodman, Chairman, and Mr.
Hammarskjold and Sir Christopher Lewinton. The compensation committee is
responsible for reviewing and making recommendations to the board of directors
concerning the compensation of Y&R's executive officers and other members of
senior management. The compensation committee also makes recommendations to the
board of directors and/or determinations with respect to awards to be granted
under our 1997 Incentive Compensation Plan, or 1997 ICP, and is responsible for
reviewing and administering the 1997 ICP.

Our audit committee consists of Messrs. Bodman, Schwartz and McGillicuddy,
Chairman. The audit committee is responsible for reviewing any transactions,
other than compensation arrangements, between Y&R and its executive officers and
directors, the plans for and results of audits of Y&R, and the results of any
internal audits, compliance with any written policies and procedures and the
adequacy of Y&R's systems of internal accounting controls. The audit committee
also considers annually the qualifications of Y&R's independent auditors.

The board of directors may create other committees as it may determine from
time to time.

LIMITATION OF LIABILITY AND INDEMNIFICATION

Our certificate of incorporation and by-laws contain provisions
indemnifying the directors and executive officers of Y&R to the fullest extent
permitted by law. Section 102(b)(7) of the Delaware general corporation law
provides that Delaware corporations may include in their certificates of
incorporation a provision eliminating or limiting the personal liability of
directors to the corporation or its stockholders for monetary damages for breach
of their fiduciary duty including acts constituting gross negligence, except
under specified circumstances, including breach of the director's duty of
loyalty, acts or omissions not in good faith or involving intentional misconduct
or a knowing violation of law or any transaction from which the director derived
improper personal benefit. Our certificate of incorporation provides that our
directors are not liable to us or our stockholders for monetary damages for
breach of their fiduciary duties, subject to the exceptions specified by
Delaware law.

COMPENSATION OF DIRECTORS

Y&R compensates only those members of the board of directors who are not
employees of Y&R for their participation as directors. During 1998, Richard S.
Bodman, Alan D. Schwartz and John C. McGillicuddy each received $50,000 in cash
as an annual stipend

<PAGE>

for serving as a member of the board of directors and each will receive $50,000
in cash or shares of common stock in 1999. Messrs. Hellman and Hammarskjold each
waived this fee in 1998 but have indicated that they intend to accept it in the
future. Sir Christopher Lewinton will receive $80,000 in cash or shares of
common stock as an annual stipend for serving as a member of the board of
directors. Out-of-pocket expenses for attendance at meetings of the board of
directors are reimbursed for all members.

EXECUTIVE COMPENSATION

The following table sets forth information about the cash and non-cash
compensation paid to, earned by or awarded to the chief executive officer and
the four other most highly compensated executive officers of Y&R for the year
ended December 31, 1998, who are collectively referred to in this prospectus as
the named executive officers. John P. McGarry, Jr. retired as President of Y&R
effective at the end of 1998.

<PAGE>

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------------ ---------------------------
RESTRICTED SECURITIES
STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) AWARDS(2) OPTIONS COMPENSATION (3)
- ----------------------------- ------ ----------- ------------- ------------ ------------ -----------------
<S> <C> <C> <C> <C> <C> <C>
Peter A. Georgescu . 1998 $950,000 $1,000,000 $601,272 -- $8,000
Chairman and Chief Executive 1997 $950,000 $ 598,500 -- -- $8,000
Officer

Edward H. Vick . 1998 $800,000 $ 600,000 $234,702 26,374 $8,199
Chief Operating Officer 1997 $700,000 $ 272,250 $740,000 172,500 $8,199

John P. McGarry, Jr. . 1998 $730,000 $ 300,000 $324,032 -- $8,000
President 1997 $730,000 $ 297,000 -- -- $8,000

Thomas D. Bell, Jr. ......... 1998 $575,000 $ 300,000 $168,305 -- $8,000
Chairman and Chief Executive 1997 $575,000 $ 168,750 -- 176,550 $8,000
Officer, Young & Rubicam
Advertising

Michael J. Dolan . 1998 $550,000 $ 300,000 $116,149 -- $7,919
Vice Chairman and Chief 1997 $550,000 $ 198,000 $555,000 150,000 $2,190
Financial Officer
</TABLE>

- ----------
(1) The named executive officers were awarded annual cash bonuses under the key
corporation managers bonus plan. These bonuses were generally based on Y&R's
achievement of target levels of operating profit and EBITA (earnings before
interest, taxes and amortization), each as defined in the plan, as well as
the achievement of individual objectives.

(2) The information in the table is based upon the value of the common stock on
the date of grant. All shares of restricted stock awarded to the named
executive officers under the Young & Rubicam Holdings Inc. Restricted Stock
Plan vested upon completion of the IPO in May 1998. As a result, none of the
named executive officers held any shares of restricted stock at December 31,
1998. Upon vesting, the shares of restricted stock awarded to the named
executive officers were distributed either to the recipients or to the Young
& Rubicam Inc. grantor trust, which we refer to as the deferral trust,
pursuant to the Young & Rubicam Inc. deferred compensation plan for tax
deferral purposes. The restricted stock awards set forth in the table above
with respect to 1997 were distributed to the deferral trust upon vesting
under the deferred compensation plan. The deferral trust will hold those
shares prior to their distribution to Messrs. Vick and Dolan. This
distribution will occur with respect to 33 1/3% of the shares on January 15,
2001, with respect to an additional 33 1/3% of the shares on January 15,
2002, and with respect to the remaining 33 1/3% of the shares on January 15,
2003. Some of the named executive officers voluntarily elected under the
deferred compensation plan to defer the receipt of other shares of
restricted stock and to have those shares distributed to them from the
deferral trust at specified times in the future.

(3) "All other compensation" for 1998 consisted of Y&R's contribution of: (1)
$8,000 on behalf of each of the named executive officers as matching
contributions under the Young & Rubicam employees' savings plan, a defined
contribution plan, except for Mr. Dolan, whose matching contribution was
$5,729 and (2) an additional $199 and $2,190 on behalf of Mr. Vick and Mr.
Dolan, respectively, as matching contributions under Y&R's Education
Incentive Plan. Under this plan, U.S. employees may elect to have limited
amounts of compensation, together with a match by Y&R, invested in a group
annuity insurance contract for purposes of meeting their children's future
education costs.

<PAGE>

The option grants in 1998 for the named executive officers under the 1997
ICP are shown in the following table.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------------------------
POTENTIAL REALIZABLE VALUE AT
NUMBER OF PERCENT OF ASSUMED ANNUAL RATES OF
SECURITIES TOTAL OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION ---------------------------
NAME GRANTED FISCAL YEAR PRICE DATE 5% 10%
- ------------------------ ------------------------ -------------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Peter A. Georgescu ..... -- -- -- -- -- --
Edward H. Vick ......... 26,374 (1) 1.07% $ 28.4375 12/15/08 $471,678 $1,195,324
John P. McGarry, Jr.. -- -- -- -- -- --
Thomas D. Bell, Jr...... -- -- -- -- -- --
Michael J. Dolan ....... -- -- -- -- -- --
</TABLE>

- ---------
(1) This represents a non-qualified option granted under the 1997 ICP. This
option has a ten-year term and will become exercisable with respect to 100%
of the shares subject to the option on December 15, 1999. This option will
also become fully exercisable with respect to 100% of the shares subject to
the option upon a change in control of Y&R, as defined in the 1997 ICP, or
termination of employment due to death or disability. Upon termination of
employment for any other reason, the portion of any option that was not
exercisable at that time will expire.

The following table summarizes for the named executive officers information
about the number of options held and their value at the end of 1998. None of the
named executive officers exercised any options during 1998.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE OPTIONS AT FISCAL YEAR END FISCAL YEAR END
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
- ------------------------------ ------------- ---------- ---------------------------- -----------------------------
<S> <C> <C> <C> <C>
Peter A. Georgescu ........... -- -- --/-- --/--
Edward H. Vick ............... -- -- 895,245 / 198,874 $27,264,686 / $3,561,610
John P. McGarry, Jr. ......... -- -- --/-- --/--
Thomas D. Bell, Jr. .......... -- -- 1,165,215 / 176,550 $35,486,623 / $3,538,945
Michael J. Dolan ............. -- -- 104,340 / 306,525 $2,577,720 / $6,873,700
</TABLE>

- ---------
(1) The value of unexercised in-the-money options equals the difference between
the option exercise price and the closing price of the common stock at the
fiscal year end, multiplied by the number of shares underlying the options.
The closing price of the common stock on December 31, 1998, as reported by
the New York Stock Exchange composite tape, was $32.375 per share.

-----------------------------

MANAGEMENT STOCK OPTION PLAN. At the time of the recapitalization of Y&R in
1996, non-qualified options to purchase shares of common stock were granted
under the Young & Rubicam Holdings Inc. management stock option plan, which we
refer to as the management stock option plan, to members of management of Y&R.
These options were granted to management in consideration of their surrender for
cancellation of all or a portion of their outstanding options to purchase equity
units of predecessor companies of Y&R. We refer to these options as rollover
options. As of May 3, 1999, assuming completion of the common stock offerings,
an aggregate of 8,357,133 rollover options remain outstanding. We refer to the
management stock option plan and the 1997 ICP as the stock option plans.

The rollover options were immediately vested and exercisable upon grant.
Each rollover option has an exercise price of $1.92

<PAGE>

per share of common stock subject to the rollover option, with limited
exceptions outside the United States. Each rollover option has a term of five
years with respect to 50% of the shares subject to the option and a term of
seven years with respect to the other 50%.

Immediately following the closing of the recapitalization of Y&R in 1996,
non-qualified options to purchase shares of common stock were granted by the
compensation committee to key employees of Y&R under the management stock option
plan. We refer to these options as closing options. We have granted additional
options since the recapitalization with the same terms and conditions as the
closing options, and we refer to all of these options as the executive options.
As of May 3, 1999, assuming completion of the common stock offerings, an
aggregate of 5,009,413 executive options remain outstanding.

Each executive option became exercisable immediately with respect to 40% of
the shares subject to the executive option and will become exercisable (1) on
the third anniversary of its grant date with respect to 30% of those shares and
(2) on the fifth anniversary of its grant date with respect to the remaining 30%
of those shares. The exercise price for the executive options is $7.67 per share
of common stock.

Executive options will not be exercisable after the expiration of ten years
from the date of grant. Upon termination of employment for any reason, all
rollover options and all executive options that are then exercisable will remain
exercisable for 30 days and will then be canceled if not exercised. All
executive options that have not yet become exercisable will be canceled
immediately on termination of employment.

Among other powers, the compensation committee has the authority to
accelerate the right to exercise any or all of the executive options. However,
with respect to the period during which the H&F investors and six other
investors not affiliated with Y&R (whom we refer to as, together with the H&F
investors, the recapitalization investors) own at least 20% of the outstanding
shares (which period we refer to as the extended consent period), this action
will only be effective with the written consent of the recapitalization
investors unless the acceleration involves only the waiver of terms or
conditions not expressly provided for by the management stock option plan.

The rollover options and executive options are transferable only by will or
intestate succession. Upon a transfer the transferee must agree to be bound by
the management stock option plan and to execute any other agreement that the
compensation committee may prescribe.

The compensation committee, with the written consent of the
recapitalization investors (during the extended consent period) and the
management voting trust, may at any time terminate the management stock option
plan or any rollover options or executive options then outstanding. Upon the
termination of an outstanding rollover option or executive option, Y&R would pay
cash consideration to the optionholder as set forth in the management stock
option plan. The compensation committee may amend the management stock option
plan and the terms and conditions of the rollover options and the executive
options with the written consent of the management voting trust. The written
consent of the recapitalization investors also would be needed during the
extended consent period for any amendment accelerating the right to exercise any
or all of the executive options or any other amendment improving the terms of
the rollover options or executive options unless the acceleration or amendment
involves the waiver or amendment of terms or conditions not expressly provided
for by the management stock option plan. However, no amendment may impair the
rights of a holder of a rollover option or executive option without the holder's
consent. The compensation committee is authorized to make appropriate
adjustments to the management stock option plan and any outstanding rollover
options or executive options in the event of a change in the capitalization of
Y&R due to corporate events specified in the management stock option plan.

Under the management stock option plan, upon exercise of a rollover option
or executive option, the employee may pay the exercise price either in cash or,
subject to the approval of the compensation committee, by delivering (1) a
number of shares of common stock already owned by the employee with the
appropriate value or (2) a recourse note to Y&R with terms and conditions that
the compensation

<PAGE>

committee may require, including a pledge of the related shares. Further, upon
exercise of a rollover option or executive option, the employee may pay the
withholding taxes or other similar charges that are incurred in connection with
the exercise, or, if the compensation committee consents, the optionholder's
estimated total taxes and charges incurred upon the exercise, by the same
methods and subject to the same approvals as for the payment of the exercise
price or, in addition, subject to the approval of the compensation committee, by
having Y&R withhold a number of shares of common stock of the appropriate value
from those to be distributed upon the exercise.

Y&R has adopted a new incentive compensation plan, the 1997 ICP, that has
superseded the management stock option plan with respect to all future grants of
options and that is described under "--1997 ICP" below.

THE RESTRICTED STOCK PLAN AND TRUST AGREEMENT. With respect to the
9,231,105 shares of restricted stock granted by the compensation committee to
members of management of Y&R held in a restricted stock trust under the Young &
Rubicam Holdings Inc. Restricted Stock Plan, the board of directors elected to
accelerate the vesting to the date on which the IPO was completed. As of May 3,
1999, 566,040 shares of this restricted stock remain in the restricted stock
trust either unallocated or with their distribution subject to additional
conditions set forth in the award agreements. As a result, upon completion of
the IPO, an aggregate of 8,665,065 shares of restricted stock in the restricted
stock trust were distributed to the employees or to the deferral trust under the
deferred compensation plan.

Recipients of 1,832,235 shares of restricted stock granted in December 1997
were required to place those shares in a deferral trust upon vesting, subject to
the claims of Y&R's creditors in the event of its insolvency. The deferral trust
will hold the shares prior to their distribution to the recipients, which will
occur with respect to one-third of the shares on January 15, 2001, with respect
to an additional one-third of the shares on January 15, 2002 and with respect to
the remaining one-third of the shares on January 15, 2003.

Upon termination of employment for any reason prior to vesting an employee
will forfeit all unvested restricted stock granted to him or her without
consideration on the date of termination.

While the management voting trust agreement is in effect, all restricted
stock is required to be delivered to the management voting trust and voted in
accordance with the provisions of the management voting trust agreement. After
the management voting trust agreement is no longer in effect, each employee who
has been awarded restricted stock will be entitled to instruct the trustee of
the restricted stock trust as to the voting of the restricted stock held in his
account. Restricted stock as to which no voting instructions are received by the
trustee or which have not been granted to any employee will be voted by the
trustee pro rata in accordance with the vote of the restricted stock that has
been granted and with respect to which voting instructions have been given.

Among other powers, the compensation committee has the authority to
accelerate the vesting of all awards and the release of the related restricted
stock.

Restricted stock granted to an employee and held in the restricted stock
trust is not transferable and any attempt to transfer that restricted stock may
lead to its forfeiture without consideration.

The compensation committee, with the written consent of the management
voting trust, may at any time terminate the restricted stock plan or any awards
of restricted stock then outstanding. Upon the termination of the restricted
stock plan or of an outstanding award of restricted stock, the compensation
committee may, with the written consent of the management voting trust, either
declare that a vesting event has occurred and release restricted stock to
employees or cause Y&R to pay an amount in cash equal to the value of the
restricted stock subject to the terminated award minus any applicable
withholding taxes or other similar charges. Within two years of any termination
of the restricted stock plan, the compensation committee will distribute any
unawarded restricted stock remaining in the restricted stock trust to those
employees that it designates. In no event will any restricted stock revert to
Y&R as a result of the termination of the restricted stock plan or any award of
restricted stock. The compensation committee

<PAGE>

may amend the restricted stock plan and the terms and conditions of any awards
of restricted stock with the written consent of the management voting trust, but
no amendment may impair the rights of a holder of any award without the holder's
consent. However, the compensation committee is authorized to make appropriate
adjustments to the restricted stock plan and any outstanding awards of
restricted stock in the event of a change in the capitalization of Y&R due to
corporate events specified in the restricted stock plan.

Y&R has adopted a new incentive compensation plan, the 1997 ICP, that has
amended and restated the restricted stock plan with respect to all grants made
subsequent to March 31, 1998, and that is described under "--1997 ICP" below. In
order to assist Y&R and its affiliates in meeting various cash compensation
obligations of Y&R and its affiliates, Y&R has amended the restricted stock
trust agreement. The amendments provide for cash distributions to be made from
the restricted stock trust to pay salaries and for the benefit of participants
in various annual bonus programs as the compensation committee may direct. These
amendments also permit the trustee of the restricted stock trust to require Y&R
to purchase unallocated shares of common stock held in the restricted stock
trust so that proceeds from the sale are sufficient to make those salary and
bonus payments. Under these amendments, Y&R repurchased 1,855,845 unallocated
shares of common stock in the restricted stock trust upon the completion of the
IPO.

1997 ICP. In December 1997, Y&R adopted, and in February 1998 subsequently
amended, the 1997 Incentive Compensation Plan. The 1997 ICP has superseded the
management stock option plan and has amended and restated the restricted stock
plan. We refer to the management stock option plan and the restricted stock
plan, prior to its amendment and restatement, as the preexisting plans. All
awards granted prior to the adoption of the 1997 ICP, and any grants of
restricted stock made after the adoption but on or prior to March 31, 1998, will
remain outstanding in accordance with their terms and be subject to the terms of
the preexisting plans.

As of May 3, 1999, an aggregate of 10,883,698 non-qualified options granted
by the compensation committee to members of management of Y&R under the 1997 ICP
remain outstanding. These options have exercise prices ranging from $12.33 per
share to $38.00 per share. All of these options will expire if not exercised ten
years after their date of grant. Substantially all of these options will be
fully exercisable with respect to 33 1/3% of the shares subject to these options
on the third, fourth and fifth anniversaries, respectively, of the date of
grant. However, all of these options will become fully exercisable with respect
to 100% of the shares subject to the options upon a change in control of Y&R, as
defined in the 1997 ICP, or termination of employment due to death or
disability. Upon termination of employment for any other reason, the portion of
any option that was not exercisable at that time will expire.

The following is a general description of the material features of the 1997
ICP.

Types of Awards. The terms of the 1997 ICP provide for grants of stock
options, stock appreciation rights, restricted stock, deferred stock, other
stock-related awards, and performance or annual incentive awards that may be
settled in cash, stock or other property, all of which we collectively refer to
as "awards".

Shares Subject to the 1997 ICP; Annual Per-Person Limitations. Under the
1997 ICP, the total number of shares of common stock reserved and available for
delivery to participants in connection with awards is (1) 19,125,000, plus (2)
the number of shares of common stock subject to awards under preexisting plans
that become available, generally due to cancellation or forfeiture of awards,
after the effective date of the 1997 ICP. However, the total number of shares of
common stock with respect to which incentive stock options may be granted shall
not exceed one million. Any shares of common stock delivered under the 1997 ICP
may consist of authorized and unissued shares or treasury shares.

The 1997 ICP imposes individual limitations on the amount of some awards in
order to comply with Section 162(m) of the Internal Revenue Code. Under these
limitations, during any fiscal year the number of options, stock appreciation
rights, shares of restricted stock, shares of deferred stock, shares

<PAGE>

of common stock issued as a bonus or in lieu of other obligations, dividend
equivalents, other stock-based awards, performance awards and annual incentive
awards granted to any one participant must not exceed 200,000 shares for each
type of these awards, subject to adjustment under the 1997 ICP. In addition, the
maximum cash amount that may be earned as a final annual incentive award or
other annual cash award in respect of any fiscal year by any one participant and
the maximum cash amount that may be earned as a final performance award or other
cash award in respect of a performance period other than an annual period by any
one participant may not exceed $10 million. Y&R intends for awards granted to
"covered employees" (as defined in Section 162(m)) under the 1997 ICP to qualify
as "performance-based compensation" (as defined in Section 162(m) and
regulations thereunder) for purposes of Section 162(m) to the extent these
awards may otherwise be subject to Section 162(m).

The compensation committee is authorized to adjust the number and kind of
shares subject to the aggregate share limitations and annual limitations under
the 1997 ICP and subject to outstanding awards, including adjustments to
exercise prices and number of shares underlying options and other affected terms
of awards, in the event that a dividend or other distribution, recapitalization,
forward or reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase, or share exchange, or other similar corporate
transaction or event affects the common stock so that an adjustment is
determined by the compensation committee to be appropriate. The compensation
committee is also authorized to adjust performance conditions and other terms
and conditions of awards in response to these kinds of events or in response to
changes in applicable laws, regulations, or accounting principles or in view of
any other circumstances deemed relevant by the compensation committee, subject
to limitations in light of Section 162(m).

Eligibility. Executive officers and other officers and employees of Y&R or
any affiliate, including persons who have accepted offers of employment from Y&R
or any affiliate, persons who may also be directors of Y&R, and each other
person who provides services to Y&R or any affiliate shall be eligible to be
granted awards under the 1997 ICP. An affiliate of Y&R for this purpose includes
any entity required to be aggregated with Y&R under Section 414 of the Internal
Revenue Code and any 10% owned joint venture or partnership of Y&R or an
affiliate.

Administration. The 1997 ICP is administered by the compensation committee
except to the extent the board of directors elects to administer the 1997 ICP.
Subject to the terms and conditions of the 1997 ICP, the compensation committee
is authorized to: (1) select participants, (2) determine the type and number of
awards to be granted and the number of shares of common stock underlying awards,
(3) specify times at which awards will be exercisable or settleable, including
performance conditions that may be required as a condition to exercise or
settlement, (4) set other terms and conditions of these awards, (5) prescribe
forms of award agreements, (6) interpret and specify rules and regulations
relating to the 1997 ICP, and (7) make all other determinations that may be
necessary or advisable for the administration of the 1997 ICP. The 1997 ICP
provides that compensation committee members shall not be personally liable, and
shall be fully indemnified, in connection with any action, determination, or
interpretation taken or made in good faith under the 1997 ICP.

Stock Options and Stock Appreciation Rights. The compensation committee is
authorized to grant stock options, including both incentive stock options that
can result in potentially favorable tax treatment to the participant and
non-qualified stock options, i.e., options not qualifying as incentive stock
options. The compensation committee is also authorized to grant stock
appreciation rights entitling the participant to receive the excess of the fair
market value of a share of common stock on the date of exercise over the grant
price of the stock appreciation right. The exercise price per share subject to
an option and the grant price of an stock appreciation right is determined by
the compensation committee, but must not be less than the fair market value of a
share of common stock on the date of grant, except as otherwise specified in the
1997 ICP. The maximum term of each option or stock appreciation right, the times
at which each option or stock appreciation right

<PAGE>

will be exercisable, and provisions requiring forfeiture of unexercised options
or stock appreciation rights at or following termination of employment generally
is fixed by the compensation committee, except no option or stock appreciation
right may have a term exceeding ten years. Options may be exercised by payment
of the exercise price in cash, common stock, outstanding awards, or other
property, possibly including notes or obligations to make payment on a deferred
basis, having a fair market value equal to the exercise price, as the
compensation committee may determine from time to time. Methods of exercise and
settlement and other terms of the stock appreciation rights are determined by
the compensation committee.

Restricted and Deferred Stock. The compensation committee is authorized to
grant restricted stock and deferred stock. Restricted stock is a grant of common
stock which may not be sold or disposed of, and which may be forfeited in the
event of some kinds of termination of employment and/or failure to meet
performance requirements prior to the end of a restricted period as specified by
the compensation committee. A participant granted restricted stock generally has
all of the rights of a Y&R stockholder, including the right to vote the shares
and to receive dividends, unless otherwise determined by the compensation
committee. An award of deferred stock gives a participant the right to receive
shares or cash or a combination of shares and cash at the end of a specified
deferral period, subject to possible forfeiture of the award in the event of
some kinds of termination of employment and/or failure to meet performance
requirements prior to the end of a specified period. Prior to settlement, an
award of deferred stock carries no voting or dividend rights or other rights
associated with stock ownership, although dividend equivalents may be granted,
as discussed below.

Dividend Equivalents. The compensation committee is authorized to grant
dividend equivalents giving participants the right to receive cash, shares,
other awards, or other property equal in value to dividends paid on a specific
number of shares, or other periodic payments. Dividend equivalents may be
granted on a free-standing basis or in connection with another award. They may
be paid currently or on a deferred basis, and, if deferred, may be deemed to
have been reinvested in additional shares, awards, or other investment vehicles
specified by the compensation committee.

Bonus Stock and Awards in Lieu of Cash Obligations. The compensation
committee is authorized to grant shares as a bonus free of restrictions, or to
grant shares or other awards in lieu of obligations to pay cash or deliver other
property under the 1997 ICP or other plans or compensatory arrangements, subject
to terms as the compensation committee may specify.

Other Stock-Based Awards. The 1997 ICP authorizes the compensation
committee to grant awards that are denominated or payable in, valued by
reference to, or otherwise based on or related to shares. These awards might
include convertible or exchangeable debt securities, other rights convertible or
exchangeable into shares, purchase rights for shares, awards with value and
payment contingent upon performance of Y&R or any other factors designated by
the compensation committee, and awards valued by reference to the book value of
shares or the value of securities of, or the performance of, specified
affiliates. The compensation committee determines the terms and conditions of
these awards, including consideration to be paid to exercise awards in the
nature of purchase rights, the period during which they will be outstanding, and
forfeiture conditions and restrictions.

Performance Awards, Including Annual Incentive Awards. The right of a
participant to exercise or receive a grant or settlement of an award, and the
timing thereof, may be subject to performance conditions specified by the
compensation committee, measurable over performance periods of up to 10 years.
In addition, the 1997 ICP authorizes specific annual incentive awards, which
represent a conditional right to receive cash, shares or other awards upon
achievement of preestablished performance goals during a specified one-year
period. Performance awards and annual incentive awards granted to persons the
compensation committee expects will, for the year in which a deduction arises,
be among the chief executive officer and four other most highly compensated
executive officers, will, if the compensation committee chooses, be subject

<PAGE>

to provisions that should qualify these awards as "performance-based
compensation." As a result, those awards would not be subject to the limitation
on tax deductibility by Y&R under Internal Revenue Code Section 162(m).

The performance goals to be achieved as a condition of payment or
settlement of a performance award or annual incentive award will consist of (1)
one or more business criteria and (2) a targeted level or levels of performance
with respect to each of these business criteria as specified by the compensation
committee. In the case of performance and annual incentive awards intended to
meet the requirements of Section 162(m), the business criteria used must be one
of those specified in the 1997 ICP. For other participants the compensation
committee may specify any other criteria. The following business criteria for
Y&R are specified in the 1997 ICP: (1) earnings per share; (2) increase in
revenues; (3) cash flow; (4) cash flow return on investment; (5) return on net
assets, return on assets, return on investment, return on capital, return on
equity; (6) economic value added; (7) operating margin; (8) net income, net
income before taxes, operating profits, earnings before interest, taxes and
amortization, earnings before interest, taxes, depreciation and amortization;
(9) total shareholder return; (10) ratio of staff cost to revenues or gross
margin; and (11) any of the above goals as compared to the performance of a
published or special index deemed applicable by the compensation committee
including, but not limited to, the Standard & Poor's 500 Stock Index or a group
of comparative companies. These criteria may be used on a consolidated basis,
and/or for specified affiliates or business units of Y&R, except with respect to
the total shareholder return and earnings per share criteria.

Subject to the requirements of the 1997 ICP, the compensation committee
will determine other performance award and annual incentive award terms,
including the required levels of performance with respect to the business
criteria, the corresponding amounts payable upon achievement of these levels of
performance, termination and forfeiture provisions, and the form of settlement.

Other Terms of Awards. Awards may be settled in the form of cash, common
stock, other awards, or other property, in the discretion of the compensation
committee. The compensation committee may require or permit participants to
defer the settlement of all or part of an award in accordance with terms and
conditions as the compensation committee may establish. The compensation
committee is authorized to place cash, shares, or other property in trusts or
make other arrangements to provide for payment of Y&R's obligations under the
1997 ICP. The compensation committee may condition any payment relating to an
award on the withholding of taxes and may provide that a portion of any shares
or other property to be distributed will be withheld, or previously acquired
shares or other property surrendered by the participant, to satisfy withholding
and other tax obligations. Awards granted under the 1997 ICP generally may not
be pledged or otherwise encumbered and are not transferable except by will or by
the laws of descent and distribution, or to a designated beneficiary upon the
participant's death. The compensation committee may, in its discretion, however,
permit transfers for estate planning or other purposes.

The compensation committee may cancel or rescind awards, or require
repayment of any profits resulting from awards, if the participant fails to
comply with restrictive or other covenants set forth in the 1997 ICP and/or an
award agreement.

Acceleration of Vesting. The compensation committee may, in its discretion,
accelerate the exercisability, the lapsing of restrictions, or the expiration of
deferral or vesting periods of any award. This accelerated exercisability,
lapse, expiration and vesting shall occur automatically in the case of a "change
in control" of Y&R except to the extent otherwise provided in an award
agreement. In addition, the compensation committee may provide that the
performance goals relating to any performance-based award will be deemed to have
been met upon the occurrence of any "change in control."

"Change in control" is defined in the 1997 ICP to include:

(1) any person (other than Y&R, some companies owned by the stockholders of
Y&R or any Y&R employee benefit plans) becoming the beneficial owner of
securities representing (a) 40% or more

<PAGE>

of the combined voting power of Y&R's then outstanding securities and
(b) so long as the management voting trust is still in existence,
representing a greater percentage of the combined voting power of Y&R's
then outstanding securities than is represented by securities held by
the management voting trust, provided, that all shares of common stock
subject to vested options under the 1997 ICP and the management stock
option plan, not including options which would vest on such change in
control, are counted as outstanding securities of Y&R;

(2) during a two-year period, individuals who constitute the board of
directors at the start of such period, and any new director whose
election or nomination for election to the board of directors was
approved by a vote of at least two-thirds of the directors then in
office who either were directors at the start of the two-year period or
whose election or nomination was previously so approved (excluding
directors whose elections were as a result of some proxy contests or
who were designated by any entity who had entered into a change in
control agreement with Y&R), ceasing to constitute a majority of the
board of directors;

(3) the completion of a merger or consolidation of Y&R with another entity
which would result in either (a) the voting securities of Y&R
outstanding immediately prior to such merger or consolidation failing
to represent (either by remaining outstanding or being converted into
voting securities of the surviving or resulting entity) 40% or more of
the combined voting power of the surviving or resulting entity
outstanding immediately after such merger or consolidation or (b) (i)
the voting securities of Y&R outstanding immediately prior to such
merger or consolidation continuing to represent at least 40% but less
than 60% of the combined voting power of the surviving or resulting
entity outstanding immediately after such merger or consolidation and
(ii) as a result of such merger or consolidation, there is an
acceleration of the vesting or exercisability of any material amount
of, or material percentage of, outstanding stock options or other stock
awards granted by the entity with which such merger or consolidation is
taking place or any of its affiliates;

(4) the stockholders of Y&R approve a plan or agreement for the sale or
disposition of all or substantially all of the consolidated assets of
Y&R, other than a sale or disposition immediately after which such
assets will be owned directly or indirectly by the stockholders of Y&R
in substantially the same proportions as their ownership of common
stock immediately prior thereto, in which case the board of directors
shall determine the effective date of the change in control; or

(5) any other event which the board of directors determines, in its
discretion, would materially alter the structure of Y&R or its
ownership.

A change in control will also be deemed to have occurred immediately prior
to the completion of (1) a tender offer for securities of Y&R representing more
than 50% of the combined voting power of Y&R's then outstanding securities in
which there is not disclosed an intention to follow the completion of the tender
offer with a merger, reorganization, consolidation, share exchange or similar
transaction or (2) a tender offer for securities of Y&R representing any
percentage of the combined voting power of Y&R's then outstanding securities in
which there is disclosed an intention to follow the completion of the tender
offer with a merger, reorganization, consolidation, share exchange or similar
transaction in which the value of the consideration to be offered for these
securities is lower than the value of the consideration offered for these
securities in the tender offer, as determined by the board of directors at the
time, in order to allow holders of previously unexercisable options the
opportunity to participate with respect to shares underlying the options.

<PAGE>

Amendment and Termination of the 1997 ICP. The board of directors may
amend, alter, suspend, discontinue, or terminate the 1997 ICP or the
compensation committee's authority to grant awards without the consent of
stockholders or participants, except stockholder approval must be obtained for
any amendment or alteration if required by law or regulation or under the rules
of any stock exchange or automated quotation system on which the shares are then
listed or quoted. Moreover, participant consent must be obtained if this action
would materially and adversely affect the rights of a participant under an
outstanding award. Stockholder approval will not be deemed to be required under
laws or regulations, such as those relating to incentive stock options, that
condition favorable treatment of participants on this approval. However, the
board of directors may, in its discretion, seek shareholder approval in any
circumstance in which it deems this approval advisable. Thus, stockholder
approval will not necessarily be required for amendments that might increase the
cost of the 1997 ICP or broaden eligibility. The compensation committee may
amend, alter, suspend, discontinue or terminate any outstanding award or award
agreement, except as otherwise provided in the 1997 ICP. Participant consent
must be obtained if this action would materially and adversely affect the rights
of a participant under the award. However, the compensation committee may
terminate any outstanding award in whole or in part, provided that upon
termination Y&R pays to the participant (1) with respect to an option or any
portion of an option, whether or not exercisable, an amount in cash for each
share of common stock subject to the option or portion being terminated equal to
the excess, if any, of (a) the value at which a share of common stock received
pursuant to the exercise of the option would have been valued by Y&R at that
time for purposes of determining applicable withholding taxes or other similar
charges, over (b) the sum of the exercise price per share of the option and
applicable withholding taxes and other similar charges, and (2) with respect to
any other type of award, an amount in common stock or cash (as determined by the
compensation committee in its sole discretion) equal to the value of the award
or portion being terminated as of the date of termination, assuming the
acceleration of the exercisability of the award, the lapsing of any restrictions
on the award or the expiration of any deferral or vesting period of the award,
as determined by the compensation committee in its sole discretion.

DEFERRED COMPENSATION PLAN. The deferred compensation plan permits members
of a select group of management or highly compensated employees of Y&R and its
affiliates to defer receipt of specified portions of cash, stock or stock-based
compensation and to have these deferred amounts treated as if invested in
specified investment vehicles, all in accordance with the terms of the deferred
compensation plan. Amounts deferred under the deferred compensation plan will be
distributed to a participant as soon as practicable after the date, dates or
occurrence of specified events, and in the number of installments, elected by
the participant or earlier in the case of retirement, disability or a change in
control as defined in the 1997 ICP. The deferred compensation plan will be
"unfunded." However, the compensation committee has authorized the creation of a
trust to aid in meeting Y&R's obligations under the deferred compensation plan.
This trust will be subject to the claims of the creditors of Y&R in the event of
Y&R's insolvency.

CAREER CASH BALANCE PLAN. The career cash balance plan is a defined benefit
plan available to all Y&R employees and its participating affiliates. Subject to
limitations, most vested retirement benefits available under the career cash
balance plan are insured by the Pension Benefit Guaranty Corporation. Y&R pays
the full cost of the benefit provided under the career cash balance plan.
Participants become vested in their career cash balance plan benefits after
completing five full years of service with Y&R. Under the career cash balance
plan, effective July 1, 1996, a participant's starting account balance equalled
the lump sum value of his benefit under prior plan provisions. Y&R annually
credits to each participant's account 3.2% of the participant's salary up to
$150,000. Salary is defined to include base salary or wages and excludes bonus,
overtime, commissions and other special compensation. Y&R will credit to each
account interest equal to the amount of the account on the first day of the plan
year multiplied by the average 1-year U.S. Treasury Bill interest rate for the
month of November for the previous calendar year, rounded up to the nearest
tenth of a percent. If the present

<PAGE>

value of the earned benefit at the time of termination is less than $3,500, the
participant receives a lump sum distribution from Y&R. If the earned benefit is
greater than $3,500, the cash balance account is payable as a lump sum in cash
or as an annuity under specified circumstances to the participant, for
reinvestment in other qualified plans prior to retirement at the participant's
election, or for distribution upon retirement. Career cash balance plan benefits
are not reduced by Social Security benefits. Loans cannot be taken from the
career cash balance plan.

The estimated annual benefits payable upon retirement at normal retirement
age for the named executive officers are as follows: Mr. Georgescu--$18,756, Mr.
Vick--$3,384, Mr. McGarry--$18,756, Mr. Bell--$4,632, and Mr. Dolan--$1,812.

SELECTED EXECUTIVE RETIREMENT INCOME PLAN. The selected executive
retirement income plan is a supplemental executive retirement arrangement for
selected members of senior management under separate contracts with Y&R. Subject
to non-competition and non-solicitation provisions, cash payments in a fixed
annual amount varying as to each individual will be made to a participant whose
rights have vested in accordance with his agreement when the participant's
employment terminates or when he reaches a specified age (typically 60),
whichever occurs later. Payments are made for the balance of the participant's
life and, if fewer than ten annual payments are made during the participant's
life, his beneficiary will receive the balance of the payments until ten annual
payments are made. Y&R's obligations to participants under the selected
executive retirement income plan are subordinate in right of payment to its
obligations to senior lenders and other creditors.

The estimated annual benefits payable upon retirement at normal retirement
age for the named executive officers are as follows: Mr. Georgescu--$1,050,000,
Mr. Vick-- $300,000, Mr. McGarry--$200,000, Mr. Bell--none, and Mr. Dolan--none.

EMPLOYMENT AND TERMINATION OF EMPLOYMENT ARRANGEMENTS. Y&R and Michael
Dolan entered into a letter agreement, as amended, regarding Mr. Dolan's
principal terms of employment with Y&R as Vice Chairman and Chief Financial
Officer. This letter agreement entitles Mr. Dolan to an annual base salary and
eligibility for a bonus under the Key Corporation Managers Bonus Plan as well as
to the same perquisites and benefits under Y&R policies as other employees of
the same rank.

Under the management voting trust agreement, Y&R has agreed to give each
management investor, including each named executive officer, six months
severance pay upon termination of employment for any reason other than for
cause, but each management investor is required to waive any possible right to
more than six months severance pay and any claims for damages under any
employment agreement. Upon termination of the management voting trust, in the
event of termination of employment, the named executive officers may be eligible
to receive severance pay of up to 13 weeks base salary, based upon length of
service, under a severance plan previously established for U.S. employees of
Y&R. In addition, under some stock option agreements with some of the named
executive officers, upon termination of employment by Y&R other than for cause,
the named executive officer may receive severance pay equal to six months base
salary in return for a release of claims against Y&R and in lieu of any other
severance payments.

The management voting trust has the unqualified right and power to vote and
to execute consents with respect to all shares of common stock held by the
management voting trust. The voting rights of the management voting trust will
be exercised by specified members of senior management of Y&R, as voting
trustees. The voting trustees are Peter A. Georgescu, Stephanie W. Abramson,
Thomas D. Bell, Jr., Michael J. Dolan, Satish Korde and Edward H. Vick. So long
as Peter A. Georgescu, or a successor chief executive officer elected with the
approval of the management voting trust, is a voting trustee, his or his
successor's decision will be binding unless he is outvoted by a super majority
of the other voting trustees. If at any time there is no chief executive
officer, or if the chief executive officer was not approved in advance by the
management voting trust, a majority vote of the voting trustees will constitute
the action of the management voting trust. The foregoing voting

<PAGE>

procedures will also apply to the election of voting trustees.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. The
compensation committee was established in 1996 and consists of Messrs. Bodman,
Hammarskjold and Sir Christopher Lewinton, none of whom was or had been an
officer or employee of Y&R or any of its subsidiaries. None of Y&R's executive
officers served on the board of directors of any entities whose directors or
officers serve on the compensation committee. Alan D. Schwartz, who was a member
of the compensation committee during a part of 1998, is an Executive Vice
President of Bear, Stearns & Co. Inc. Bear Stearns from time to time performs
investment banking and other financial services for Y&R, including as an
underwriter for Y&R's two public offerings during 1998, and is acting as an
underwriter in the common stock offerings. For these services, Bear Stearns may
receive advisory or transaction fees, as applicable, plus reimbursement of
out-of-pocket expenses, of the nature and in amounts customary in the industry
for these services.

<PAGE>

CERTAIN TRANSACTIONS

Upon the completion of the recapitalization of Y&R in 1996, several of the
recapitalization investors were granted an approval right over a number of
specified fundamental corporate actions, and were granted the right to nominate
and have elected three members of the board of directors. After the IPO, this
approval right terminated, and the H&F investors retained the right to nominate
and have elected (1) two members of the board of directors for so long as those
investors continue to hold, in the aggregate, at least 10% of the outstanding
shares and (2) one member of the board of directors for so long as the H&F
investors continue to hold, in the aggregate, at least 5% of the outstanding
shares.

In addition, several of the recapitalization investors have demand and
piggyback registration rights with respect to the common stock they hold. These
recapitalization investors have the right to require Y&R to register for resale
shares of common stock held by the recapitalization investors pursuant to demand
registration rights, and to have shares they hold included in any public
offering of common stock made by Y&R. Y&R is required to pay expenses incurred
by it and the reasonable fees and disbursements of one counsel to those
investors in connection with any demand as piggy-back registration. Y&R paid the
expenses incurred by the H&F investors in connection with the IPO as well as the
offering of common stock by the H&F investors (among other selling stockholders)
in November 1998, which totalled approximately $125,000. For a further
discussion of registration rights with respect to the common stock, see "Shares
Eligible for Future Sale."

For a discussion of other transactions between Y&R and directors or related
entities, see "Management--Compensation Committee Interlocks and Insider
Participation."

<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth information regarding beneficial ownership
of the common stock and vested options to purchase common stock as of May 3,
1999, including beneficial ownership by:

o each person who is known by Y&R to own beneficially 5% or more of the
outstanding shares of the common stock;

o each of the directors and named executive officers; and

o all directors and executive officers as a group.

The information in the table below has been calculated in accordance with
Rule 13d-3 under the Securities Exchange Act of 1934, and also includes shares
of common stock held in the deferral trust under the deferred compensation plan.
Except as described below, the persons named in the table have sole voting and
investment power with respect to all shares of common stock shown as
beneficially owned by them, subject to community property laws where applicable.
The shares of common stock held by Y&R employees, as well as a number of retired
and former employees, have been deposited into the management voting trust, and
the management voting trust exercises sole voting power over all those shares.
Beneficial ownership by the management voting trust includes an aggregate of
3,664,228 shares of common stock held in the deferral trust.

The business address of the management voting trust, the deferral trust,
our executive officers and our directors, other than Messrs. Bodman,
Hammarskjold, Hellman, McGillicuddy, Schwartz and Sir Christopher Lewinton, is
c/o Y&R at 285 Madison Avenue, New York, New York 10017. The business address of
Mr. Bodman is c/o AT&T Ventures, Chevy Chase Metro Building, 2 Wisconsin Circle,
Chevy Chase, Maryland 20815-7003. The business address of the H&F investors and
Messrs. Hammarskjold and Hellman is c/o Hellman & Friedman LLC, One Maritime
Plaza, San Francisco, California 94111. The business address of Mr. McGillicuddy
is 270 Park Avenue, 32nd Floor, New York, New York 10017. The business address
of Mr. Schwartz is c/o Bear, Stearns & Co. Inc., 245 Park Avenue, New York, New
York 10167. The business address of Sir Christopher Lewinton is c/o TI Group
plc, 50 Curzon Street, London W1Y 7PN, United Kingdom. All information set forth
below with respect to the H&F investors is based upon a Statement on Schedule
13G, dated February 12, 1999, filed on behalf of the H&F investors. For
information on the selling stockholders, see "Selling Stockholders."

<TABLE>
<CAPTION>
NAME SHARES AND VESTED OPTIONS VESTED OPTIONS PERCENT
- ------------------------------------------------------- --------------------------- ---------------- ----------
<S> <C> <C> <C>
Management voting trust ............................... 34,958,150 11,863,540 45.0%
Hellman & Friedman Capital Partners III, L.P. ......... 14,074,913 2,311,590 20.7%
H&F Orchard Partners III, L.P. ........................ 1,024,967 168,270 1.6%
H&F International Partners III, L.P. .................. 307,028 50,400 *
Deferral trust (1) .................................... 3,664,228 -- 5.6%
Peter A. Georgescu (2) ................................ 1,783,560 -- 2.7%
Edward H. Vick (2) .................................... 1,384,710 895,245 2.1%
Thomas D. Bell Jr. (2) ................................ 1,308,908 1,165,215 2.0%
Michael J. Dolan (2) .................................. 419,625 104,340 *
Richard S. Bodman ..................................... 2,000 -- *
Philip U. Hammarskjold (3) ............................ -- -- *
F. Warren Hellman (3) ................................. -- -- *
Sir Christopher Lewinton .............................. -- -- *
John P. McGarry, Jr. (4) .............................. 722,647 -- 1.1%
John F. McGillicuddy .................................. 13,035 -- *
Alan D. Schwartz (5) .................................. -- -- *
All directors and executive officers
as a group (11 persons) .............................. 5,365,833 2,190,885 7.9%
</TABLE>

- ----------
* Less than one percent.

<PAGE>

(1) Y&R established the deferral trust to aid in meeting Y&R's obligations to
employee and former employee participants under the deferred compensation
plan. The deferral trust is administered by a committee currently comprised
of Stephanie W. Abramson, Mark T. McEnroe and Rene'e E. Becnel, each of
whom, acting alone, has the power to act on behalf of the committee,
including to dispose of the common stock held in the deferral trust. The
common stock held in the deferral trust is voted solely by the voting
trustees of the management voting trust.

(2) This amount does not include any of the 34,958,150 shares beneficially owned
by the management voting trust prior to the common stock offerings in excess
of the amount reported as beneficially owned by the stockholder, which the
stockholder may be deemed to beneficially own as a result of the
stockholder's position as a voting trustee of the management voting trust.
The stockholder disclaims beneficial ownership of any of these shares in
excess of the amount reported above as beneficially owned by the
stockholder.

(3) Excludes 15,406,908 shares beneficially owned by the H&F investors prior to
the common stock offerings. The sole general partner of the H&F investors is
H&F Investors III, L.P. The managing general partner of H&F Investors III,
L.P. is Hellman & Friedman Associates III, L.P., and the general partners of
Hellman & Friedman Associates III, L.P. are H&F Management III, L.L.C. and
H&F Investors III, Inc. The sole shareholder of H&F Investors III, Inc. is
The Hellman Family Revocable Trust. The investment decisions of H&F
Management III, L.L.C. and H&F Investors III, Inc. are made by an executive
committee, of which Mr. Hellman is a member. Mr. Hammarskjold is a member of
H&F Management III, L.L.C. Mr. Hellman is a managing member of H&F
Management III, L.L.C., a director of H&F Investors III, Inc. and a trustee
of The Hellman Family Revocable Trust. H&F Investors III, L.P., Hellman &
Friedman Associates III, L.P., H&F Management III, L.L.C., H&F Investors
III, Inc., The Hellman Family Revocable Trust and Messrs. Hammarskjold and
Hellman exercise, directly or indirectly, voting and investment discretion
with respect to the shares held by the H&F investors and could be deemed to
beneficially own these shares, but each of them disclaims beneficial
ownership except to the extent of its or his indirect pecuniary interest in
these shares.

(4) Mr. McGarry retired as President of Y&R effective at the end of 1998.

(5) Excludes 133,652 shares held by BearTel Corp., a wholly owned subsidiary of
The Bear Stearns Companies Inc., the parent company of Bear Stearns, of
which Mr. Schwartz is an executive officer.

<PAGE>

SELLING STOCKHOLDERS

The following table sets forth the name of each selling stockholder and
information regarding the beneficial ownership of the common stock and options
to purchase common stock by the selling stockholders as of May 3, 1999, and as
adjusted to reflect the sale of shares of common stock in the common stock
offerings. The information in the table below has been calculated in accordance
with Rule 13d-3 under the Securities Exchange Act of 1934, and includes shares
of common stock held in the deferral trust under the deferred compensation plan.
Except as described below, the persons named in the table have sole voting and
investment power with respect to all shares of common stock shown as
beneficially owned by them, subject to community property laws where applicable.

Beneficial ownership by the management voting trust prior to the common
stock offerings includes an aggregate of 34,958,150 shares held by the
management voting trust (including shares issuable upon the exercise of options)
offered hereby by management investors who are selling stockholders. Other than
the H&F investors and BearTel Corp., all selling stockholders are management
investors who are officers, employees or former employees of Y&R and whose
shares of common stock are held by the management voting trust. See
"Management--Executive Officers and Directors." All of these shares offered
hereby will be delivered out of the management voting trust upon completion of
the common stock offerings. All shares of common stock held by management
investors have been deposited into the management voting trust, and the
management voting trust exercises sole voting power over all these shares.
Beneficial ownership by the management voting trust includes an aggregate of
3,664,228 shares of common stock held in the deferral trust. For information on
our principal stockholders, see "Principal Stockholders."

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERINGS AFTER OFFERINGS
----------------------------------- ------------------------------------
SHARES AND SHARES SHARES AND
VESTED VESTED BEING VESTED VESTED
OPTIONS OPTIONS PERCENT SOLD OPTIONS OPTIONS PERCENT
------------ ------------ --------- ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Management voting trust .................. 34,958,150 11,863,540 45.0% 6,455,928 28,502,222 10,031,161 36.7%
Hellman & Friedman Capital Partners
III, L.P. ............................... 14,074,913 2,311,590 20.7% 6,793,071 6,793,071 2,311,590 10.3%
H&F Orchard Partners III, L.P. ........... 1,024,967 168,270 1.6% 494,461 494,461 168,270 *
H&F International Partners III, L.P. ..... 307,028 50,400 * 147,966 147,966 50,400 *
BearTel Corp. ............................ 133,652 -- * 64,502 69,150 -- *
Stephanie W. Abramson (1) ................ 453,995 26,085 * 45,400 408,595 26,085 *
Stuart Agres ............................. 275,820 -- * 40,000 235,820 -- *
Stephen S. Aiello ........................ 137,811 51,560 * 20,672 117,139 51,560 *
Stig Albinus ............................. 23,250 -- * 10,000 13,250 -- *
Jean-Marc Bara ........................... 201,669 -- * 35,588 166,081 -- *
Bernard Barnett .......................... 13,050 13,050 * 1,050 12,000 12,000 *
Stephen Baum ............................. 8,400 -- * 3,120 5,280 -- *
Kimberly Bealle .......................... 91,355 49,995 * 20,000 71,355 49,995 *
Martin Beck .............................. 39,315 33,915 * 33,915 5,400 -- *
Urs Beer ................................. 69,195 -- * 25,000 44,195 -- *
Jed Beitler .............................. 74,835 15,660 * 11,225 63,610 4,435 *
Theodore A. Bell ......................... 713,810 334,065 1.1% 60,000 653,810 334,065 *
Thomas D. Bell, Jr. ...................... 1,308,908 1,165,215 2.0% 130,891 1,178,017 1,165,215 1.7%
Tom Benelli .............................. 38,760 34,785 * 7,000 31,760 27,785 *
Thomas Blach ............................. 19,050 19,050 * 19,050 -- -- *
Rene Boender ............................. 50,960 14,400 * 24,312 26,648 -- *
Bonnie Bohne ............................. 98,820 23,820 * 30,000 68,820 23,820 *
Etienne Boisrond ......................... 191,295 -- * 33,750 157,545 -- *
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERINGS AFTER OFFERINGS
-------------------------------- ------------------------------
SHARES AND SHARES SHARES AND
VESTED VESTED BEING VESTED VESTED
OPTIONS OPTIONS PERCENT SOLD OPTIONS OPTIONS PERCENT
------------ --------- --------- ---------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
William Borrelle ................ 13,184 -- * 1,841 11,343 -- *
Tiemen Bosma .................... 80,000 -- * 40,000 40,000 -- *
Heinz-Georg Brands .............. 22,712 -- * 22,712 -- -- *
Craig Branigan .................. 204,230 -- * 46,446 157,784 -- *
Howard Breen .................... 15,450 11,475 * 3,090 12,360 8,385 *
T. J. Broadbent ................. 20,357 17,385 * 15,500 4,857 1,885 *
David Butter .................... 61,262 24,465 * 24,465 36,797 -- *
Ignacio Cabezon ................. 37,290 22,005 * 10,720 26,570 22,005 *
Patricia Cafferata .............. 158,205 -- * 16,000 142,205 -- *
Roger Chiocchi .................. 62,807 25,875 * 14,361 48,446 11,514 *
Ira Chynsky ..................... 68,750 -- * 13,750 55,000 -- *
Michael Claes ................... 35,230 24,360 * 7,500 27,730 24,360 *
Neil Clark ...................... 75,651 52,170 * 23,481 52,170 52,170 *
Don Cogman ...................... 349,070 130,175 * 61,061 288,009 69,114 *
Thomas Coleman .................. 9,780 -- * 2,300 7,480 -- *
Janet Coombs .................... 127,521 104,355 * 16,428 111,093 93,093 *
David Coronna ................... 32,690 32,690 * 6,000 26,690 26,690 *
Jose Maria Costa ................ 60,000 -- * 12,000 48,000 -- *
Massimo Costa ................... 11,110 -- * 11,110 -- -- *
Charles Courtier ................ 52,000 46,965 * 10,000 42,000 36,965 *
Michael Cozens .................. 26,715 20,865 * 20,000 6,715 865 *
Dominique Damato ................ 73,050 73,050 * 15,000 58,050 58,050 *
Donald H. Davis ................. 76,320 50,685 * 19,080 57,240 50,685 *
Ferdinand de Bakker ............. 151,740 63,315 * 60,000 91,740 63,315 *
Pierre de Roualle ............... 131,550 97,980 * 25,000 106,550 72,980 *
Jerome Dean ..................... 93,570 35,310 * 18,000 75,570 35,310 *
Joseph E. Dedeo ................. 469,602 -- * 134,172 335,430 -- *
Lawrence Deutsch ................ 41,380 17,245 * 19,660 21,720 -- *
Shelley Diamond ................. 55,695 -- * 13,314 42,381 -- *
Michael J. Dolan (1) ............ 419,625 104,340 * 41,926 377,699 104,340 *
Terry Dukes ..................... 38,720 35,495 * 6,150 32,570 29,345 *
Daryl Elliott ................... 27,185 20,885 * 20,885 6,300 -- *
Daisy Exposito .................. 115,501 24,031 * 26,953 88,548 -- *
Michael Faems ................... 135,840 -- * 20,440 115,400 -- *
Charles P. Farley ............... 28,225 10,440 * 2,100 26,125 10,440 *
John Fenton ..................... 37,875 -- * 6,500 31,375 -- *
Ian Ferguson Brown .............. 44,537 -- * 2,250 42,287 -- *
Patrick Ford .................... 26,865 26,055 * 6,055 20,810 20,000 *
Richard Ford .................... 40,020 36,795 * 7,500 32,520 29,295 *
Clark J. Frankel ................ 104,352 -- * 30,000 74,352 -- *
Volker Franz .................... 25,085 25,085 * 16,385 8,700 8,700 *
John Frew ....................... 27,300 12,045 * 6,030 21,270 6,015 *
Josie Garber .................... 60,060 52,185 * 5,000 55,060 47,185 *
Enrico Gervasi .................. 71,220 -- * 12,033 59,187 -- *
Christopher Grabenstein ......... 50,940 46,965 * 10,188 40,752 36,777 *
William Green ................... 91,805 -- * 10,000 81,805 -- *
David E. Greene ................. 55,220 -- * 5,000 50,220 -- *
Victor Gutierrez ................ 30,390 -- * 27,145 3,245 -- *
Cynthia Hampton ................. 29,310 26,085 * 10,000 19,310 16,085 *
Tom Hansen ...................... 29,310 25,335 * 2,000 27,310 23,335 *
Peter Harleman .................. 45,095 15,660 * 16,000 29,095 15,660 *
Fred Hawrysh .................... 19,905 19,905 * 5,000 14,905 14,905 *
Jan Hedquist .................... 182,610 95,655 * 36,522 146,088 59,133 *
Per Heggenes .................... 87,255 66,960 * 17,451 69,804 49,509 *
Stefan Himpe .................... 5,500 -- * 3,000 2,500 -- *
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERINGS AFTER OFFERINGS
-------------------------------- ------------------------------
SHARES AND SHARES SHARES AND
VESTED VESTED BEING VESTED VESTED
OPTIONS OPTIONS PERCENT SOLD OPTIONS OPTIONS PERCENT
------------ --------- --------- ---------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Toby Hoare .................... 209,839 121,020 * 41,967 167,872 79,053 *
Barry Hoffman ................. 34,095 -- * 6,800 27,295 -- *
James W. Hood ................. 168,520 -- * 35,000 133,520 -- *
Penny Hooper .................. 93,945 23,595 * 14,000 79,945 23,595 *
Roseanne Horn ................. 28,560 12,660 * 12,675 15,885 12,660 *
Peter Horovitz ................ 41,373 37,398 * 32,828 8,545 4,570 *
Richard Hosp .................. 34,240 -- * 30,000 4,240 -- *
Eric Garrison Hoyt ............ 79,465 71,590 * 7,670 71,795 63,920 *
Brian Hubbard ................. 17,025 -- * 5,000 12,025 -- *
Jeff Hunt ..................... 81,463 29,856 * 17,014 64,449 12,842 *
Gigliola Ibba ................. 85,410 36,210 * 21,000 64,410 36,210 *
Robert Igiel .................. 208,690 208,690 * 52,170 156,520 156,520 *
Barbara Jack .................. 505,829 395,565 * 178,553 327,276 217,012 *
Paal Marius Jebsen ............ 13,745 13,695 * 11,085 2,660 2,610 *
William Johnston .............. 74,185 60,000 * 19,185 55,000 55,000 *
James Kaplove ................. 41,680 8,230 * 4,000 37,680 4,230 *
Mary Ellen Kenny .............. 67,458 5,535 * 14,796 52,662 5,535 *
Kevin King .................... 31,441 26,085 * 25,000 6,441 1,085 *
Edna Kissmann ................. 52,220 -- * 21,500 30,720 -- *
Jackie Koh .................... 27,535 27,535 * 27,535 -- -- *
Satish Korde (1) .............. 967,265 39,735 1.5% 111,726 855,539 39,735 1.3%
Philippe Krakowsky ............ 43,169 26,085 * 7,375 35,794 26,085 *
Ingo Krauss ................... 391,725 -- * 162,000 229,725 -- *
Kurt Krauss (2) ............... 32,000 -- * 3,120 28,880 -- *
Stephanie Kugelman ............ 307,277 88,485 * 46,092 261,185 88,485 *
Mitchell Kurz ................. 527,577 -- * 356,000 171,577 -- *
Jay Kushner ................... 68,960 37,000 * 11,994 56,966 37,000 *
Marta La Rock ................. 20,060 16,085 * 15,000 5,060 1,085 *
Jean-Paul Lafaye .............. 322,980 225,825 * 64,400 258,580 180,825 *
Timothy Laing ................. 35,000 35,000 * 25,000 10,000 10,000 *
Robert Lallamant .............. 97,830 -- * 19,566 78,264 -- *
Kevin Lavan ................... 49,807 12,000 * 9,000 40,807 12,000 *
Mark Levine ................... 76,095 -- * 15,219 60,876 -- *
Marco Lombardi ................ 105,205 20,865 * 16,680 88,525 20,865 *
Bennett R. Machtiger .......... 66,950 12,000 * 6,450 60,500 12,000 *
Duncan Mackinnon .............. 28,915 28,915 * 7,000 21,915 21,915 *
John F. Maltese ............... 67,932 13,575 * 13,575 54,357 -- *
Helmut Matthies ............... 367,090 -- * 166,000 201,090 -- *
Martin Maurice ................ 82,830 -- * 16,000 66,830 -- *
Robert M. McDuffey ............ 52,530 49,305 * 10,506 42,024 38,799 *
John P. McGarry, Jr. .......... 722,647 -- 1.1% 309,706 412,941 -- *
Austin McGhie ................. 64,365 56,490 * 22,875 41,490 33,615 *
David McLean .................. 159,270 42,600 * 31,853 127,417 34,081 *
Gordon McLean ................. 35,865 35,865 * 11,955 23,910 23,910 *
Bert Meerstadt ................ 88,315 -- * 14,440 73,875 -- *
William C. Melzer ............. 415,379 401,879 * 73,300 342,079 328,579 *
Diane Meskill-Spencer ......... 113,208 22,140 * 27,195 86,013 -- *
Craig Middleton ............... 204,974 26,085 * 34,700 170,274 26,085 *
David Minear .................. 162,045 111,855 * 40,000 122,045 111,855 *
Dominique Missoffe ............ 77,370 48,600 * 15,474 61,896 48,600 *
Fernan Montero ................ 658,000 -- 1.0% 282,000 376,000 -- *
Fred Moolhuijsen .............. 15,000 -- * 15,000 -- -- *
Frans Mootz ................... 106,488 -- * 26,622 79,866 -- *
John Morris ................... 57,603 47,388 * 14,007 43,596 33,381 *
Janice Muniz .................. 38,760 34,785 * 17,400 21,360 17,385 *
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERINGS AFTER OFFERINGS
-------------------------------- ------------------------------
SHARES AND SHARES SHARES AND
VESTED VESTED BEING VESTED VESTED
OPTIONS OPTIONS PERCENT SOLD OPTIONS OPTIONS PERCENT
------------ --------- --------- ---------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Bruce S. Nelson (2) .............. 166,000 105,000 * 28,250 137,750 105,000 *
Charles G. Newton, Jr. ........... 18,000 -- * 3,600 14,400 -- *
Lori Nicholson ................... 61,176 15,660 * 10,000 51,176 15,660 *
Lars Nordstrom ................... 17,025 13,050 * 13,050 3,975 -- *
Laurie Null ...................... 53,670 47,820 * 10,850 42,820 36,970 *
Hans Ohman ....................... 17,025 13,050 * 13,050 3,975 -- *
Steve Oroho ...................... 94,638 -- * 59,010 35,628 -- *
Stewart Owen ..................... 200,363 119,265 * 33,054 167,309 119,265 *
Santiago Alonso Paniagua ......... 52,184 35,055 * 38,715 13,469 10,590 *
Manuel Perez ..................... 171,535 -- * 40,704 130,831 -- *
Diane Perlmutter ................. 31,975 8,940 * 8,035 23,940 8,940 *
Graham Phillips (2) .............. 73,086 -- * 40,000 33,086 -- *
Dan Plouffe ...................... 3,300 -- * 3,300 -- -- *
Tim Pollak ....................... 625,557 -- * 264,000 361,557 -- *
Michael Porter ................... 17,000 17,000 * 2,500 14,500 14,500 *
William A. Power ................. 210,865 -- * 42,000 168,865 -- *
Tom Pratt ........................ 12,110 7,385 * 6,385 5,725 1,000 *
Joerg Puphal ..................... 12,970 6,960 * 9,745 3,225 -- *
John E. Putnam ................... 31,237 9,172 * 9,172 22,065 9,172 *
Matthias Quadflieg ............... 5,460 1,485 * 1,484 3,976 1 *
Serge Rancourt ................... 121,895 -- * 121,895 -- -- *
Sheila Raviv ..................... 36,240 -- * 20,000 16,240 -- *
Courtney Reeser .................. 56,388 50,088 * 10,017 46,371 40,071 *
Peter Rentschler ................. 27,573 24,348 * 4,800 22,773 19,548 *
Ken Rietz ........................ 125,650 117,390 * 31,000 94,650 86,390 *
Jorg Rindlisbacher ............... 45,640 -- * 19,500 26,140 -- *
Jorge Rodriguez .................. 104,235 90,315 * 1,755 102,480 90,315 *
Robert Rosiek .................... 52,170 -- * 2,170 50,000 -- *
John J. Ross ..................... 50,395 47,170 * 10,000 40,395 37,170 *
Maggie Ross ...................... 47,460 21,735 * 4,000 43,460 21,735 *
James Rossman .................... 58,410 11,955 * 38,580 19,830 11,955 *
Alain Rousset .................... 310,638 216,375 * 55,352 255,286 161,023 *
Amy Rubenstein ................... 73,680 15,660 * 14,736 58,944 15,660 *
Nicholas Rudd .................... 130,440 -- * 39,132 91,308 -- *
Michael Samet .................... 218,552 -- * 77,136 141,416 -- *
John Sanders ..................... 156,385 125,275 * 112,435 43,950 12,840 *
Chris Savage ..................... 54,795 54,795 * 52,000 2,795 2,795 *
Matthew Schetlick ................ 83,485 60,870 * 8,185 75,300 60,870 *
Angelika Schug ................... 6,085 6,085 * 3,400 2,685 2,685 *
Gertrude Schutz .................. 32,085 6,000 * 11,217 20,868 -- *
Tom Schwartz ..................... 29,310 8,700 * 3,500 25,810 8,700 *
James Scielzo .................... 94,932 23,052 * 23,052 71,880 -- *
Steve Seyferth ................... 86,510 86,510 * 17,300 69,210 69,210 *
Keith Sharp ...................... 70,968 8,352 * 14,194 56,774 8,352 *
Jessie Shaw ...................... 29,170 25,195 * 10,000 19,170 15,195 *
Thomas Shortlidge ................ 227,130 -- * 44,000 183,130 -- *
Richard Sinreich ................. 47,695 -- * 7,695 40,000 -- *
Robert Sive ...................... 53,590 50,365 * 13,236 40,354 37,129 *
Barbara Smith .................... 58,670 10,440 * 10,000 48,670 10,440 *
Sylvia Soler ..................... 87,510 75,225 * 5,000 82,510 75,225 *
Linda Srere ...................... 163,464 37,545 * 50,000 113,464 37,545 *
Christoph Stadeler ............... 93,580 -- * 40,000 53,580 -- *
Stanley Stefanski ................ 455,154 111,675 * 160,642 294,512 111,675 *
Peter Steigrad ................... 51,185 51,185 * 8,000 43,185 43,185 *
Debra Stern-Marrone .............. 90,655 -- * 10,000 80,655 -- *
</TABLE>

<PAGE>

- ----------
* Less than one percent.

(1) This amount does not include any of the 34,958,150 shares beneficially owned
by the management voting trust prior to the common stock offerings in excess
of the amount reported as beneficially owned by the stockholder, which the
stockholder may be deemed to beneficially own as a result of the
stockholder's position as a voting trustee of the management voting trust.
The stockholder disclaims beneficial ownership of any of these shares in
excess of the amount reported above as beneficially owned by the
stockholder.

(2) Beneficial ownership prior to and after the common stock offerings reflect
the vesting of additional shares of restricted stock to these stockholders
on May 15, 1999.

(3) We expect that the stockholders of KnowledgeBase Marketing will elect to
sell approximately 1.0 million shares in the common stock offerings.

<PAGE>

DESCRIPTION OF CAPITAL STOCK

Y&R is authorized to issue 250,000,000 shares of common stock, par value
$0.01 per share, and 10,000,000 shares of preferred stock, par value $0.01 per
share. As of May 3, 1999, Y&R's issued and outstanding capital stock consists of
65,745,672 shares of issued and outstanding common stock held by approximately
1,005 holders and 87 shares of issued and outstanding Money Market Preferred
Stock, par value $0.01 per share held by one holder. Also as of May 3, 1999, an
additional 28,805,728 shares of common stock are issuable upon exercise of
outstanding options. All of Y&R's issued and outstanding capital stock has been
fully paid.

The following description of Y&R's capital stock does not purport to be
complete and is subject to and qualified in its entirety by reference to our
certificate of incorporation and by-laws, which are included as exhibits to the
registration statement of which this prospectus forms a part, and by the
provisions of applicable Delaware law.

Our certificate of incorporation and by-laws contain provisions that are
intended to enhance the likelihood of continuity and stability in the
composition of the board of directors and which may have the effect of delaying,
deterring, or preventing a future takeover or change in control of Y&R unless
the takeover or change in control is approved by the board of directors.

COMMON STOCK

The holders of common stock are entitled to one vote for each share on all
matters voted on by stockholders, and the holders of common stock, together with
the holders of shares of money market preferred stock, possess all voting power,
except as otherwise required by law or as provided in the certificate of
incorporation. Holders of common stock who are employees of Y&R or its
affiliates are subject to the provisions of the management voting trust and the
amended stockholders' agreement. See "--The Management Voting Trust Agreement"
and "--The Stockholders' Agreement." The holders of common stock do not have
cumulative voting rights. Holders of common stock do not have any preemptive
right to subscribe for or purchase any kind or class of securities of Y&R.
Holders of common stock have no subscription, conversion or redemption rights,
and will not be subject to further calls or assessments. Subject to any
preferential or other rights of any outstanding series of preferred stock that
may be designated by the board of directors, the holders of common stock are
entitled to the dividends, if any, as may be declared from time to time by the
board of directors. Our credit facility permits the payment of cash dividends
except in the event of a continuing default under the credit agreement. See
"Price Range of Common Stock and Dividend Policy" for a discussion of our
dividend policy. In the event of the liquidation, dissolution or winding up of
Y&R, holders of common stock will be entitled to receive on a pro rata basis any
assets of Y&R remaining after provision for payment of creditors and after
payment of any liquidation preferences to holders of preferred stock.

PREFERRED STOCK

Y&R is authorized to issue 10,000,000 shares of preferred stock. The board
of directors has the authority to establish and designate series of the
preferred stock and, except with respect to the money market preferred stock, to
fix the number of shares constituting each series, to fix the designations and
the relative rights, preferences and limitations of the shares of each series
and the variations in the relative rights, preferences and limitations as
between series, and to increase and decrease the number of shares constituting
each series. See "--Authorized But Unissued Capital Stock" and "--Anti-Takeover
Effects of Provisions of the Certificate of Incorporation, the By-Laws, the
Rights Plan and Delaware Law--Preferred Stock."

The certificate of incorporation designates an initial series of preferred
stock, consisting of 50,000 shares, as the money market preferred stock. Holders
of money market preferred stock are entitled to receive, subject to declaration
by the board of directors, cumulative cash dividends that are payable quarterly
and calculated with reference to the interest rate for the three-month London
interbank deposit market. On or after December 12, 2001, any money market
preferred stock issued and outstanding for five years may, at the option of the
board of directors and subject to providing

<PAGE>

holders with notice of redemption, be redeemed by Y&R at a redemption price per
share of $115.00 together with all accrued and unpaid dividends. Redeemed money
market preferred stock may be reissued by the board of directors as shares of
the initial series or as shares of any other series of preferred stock. Shares
of money market preferred stock are not convertible, have a liquidation
preference of $115.00 per share together with all accrued and unpaid dividends
and have voting rights equal to one-tenth of one vote for each share of money
market preferred stock.

The certificate of incorporation authorizes a series of preferred stock
designated cumulative participating junior preferred stock, consisting of
2,500,000 shares, in connection with the rights plan. For a description of the
rights plan and the junior preferred stock, see "--Rights Plan" and
"--Anti-Takeover Effects of Provisions of the Certificate of Incorporation, the
By-Laws, the Rights Plan and Delaware Law."

AUTHORIZED BUT UNISSUED CAPITAL STOCK

Based on the calculations set forth above, Y&R estimates that, following
the completion of the common stock offerings, it will have approximately
182,421,949 shares of authorized but unissued common stock (including an
aggregate of 24,375,244 shares reserved for issuance upon the exercise of
options issued to employees and 2,598,105 shares reserved for issuance upon the
exercise of options issued to recapitalization investors) and 9,999,913 shares
of authorized but unissued preferred stock (including the 2,500,000 shares
designated as junior preferred stock and 49,913 shares designated as money
market preferred stock). Delaware law does not require stockholder approval for
the issuance of authorized shares. However, the listing requirements of the New
York Stock Exchange, which apply so long as the common stock is listed on the
New York Stock Exchange, require prior stockholder approval of specified
issuances, including issuances of shares bearing voting power equal to or
exceeding 20% of the pre-issuance outstanding voting power or pre-issuance
outstanding number of shares of common stock. These additional shares could be
used for a variety of corporate purposes, including future public offerings to
raise additional capital or to facilitate corporate acquisitions. Y&R currently
does not have any plans to issue additional shares of common stock or preferred
stock other than in connection with employee compensation plans. See
"Management-- Executive Compensation." One of the effects of the existence of
unissued and unreserved common stock and preferred stock may be to enable the
board of directors to issue shares to persons friendly to current management.
This type of issuance could render more difficult or discourage an attempt to
obtain control of Y&R by means of a merger, tender offer, proxy contest or
otherwise, and thereby protect the continuity of Y&R's management and possibly
deprive the stockholders of the opportunity to sell their shares of common stock
at prices higher than prevailing market prices. These additional shares also
could be used to dilute the stock ownership of persons seeking to obtain control
of Y&R pursuant to the operation of the rights plan, which is discussed below.
See "--Anti-Takeover Effects of Provisions of the certificate of incorporation,
the by-laws, the Rights Plan and Delaware Law."

THE MANAGEMENT VOTING TRUST AGREEMENT

Under the management voting trust agreement, the management investors and
the restricted stock trust are required to deposit with the management voting
trust all shares of common stock and all shares of money market preferred stock
acquired by them prior to the termination of the management voting trust,
including common stock acquired upon the exercise of options, distributions from
the restricted stock trust or otherwise. Common stock sold in the public market
by management investors and the restricted stock trust will be withdrawn from,
and delivered free of, the management voting trust.

The management voting trust has the unqualified right and power to vote and
to execute consents with respect to all shares of common stock and all shares of
money market preferred stock held by the management voting trust. The voting
rights of the management voting trust are exercised by members of senior
management of Y&R, in their capacities as voting trustees. The current voting
trustees are Peter A. Georgescu, Stephanie W. Abramson, Thomas D. Bell, Jr.,
Michael J. Dolan, Satish

<PAGE>

Korde and Edward H. Vick, each of whom is currently a member of the senior
management of Y&R. So long as Peter A. Georgescu, or a successor chief executive
officer elected with the approval of the management voting trust, is a voting
trustee, any action (1) approved in writing or at a meeting by Peter A.
Georgescu or his successor and any two other voting trustees and (2) any action
approved over the objection of Peter A. Georgescu or his successor at a meeting
of the voting trustees by an aggregate vote of voting trustees equal to not less
than the total number of voting trustees then in office minus two, shall
constitute the action of, and shall be binding upon, the management voting trust
(unless there shall be fewer than seven voting trustees then in office, in which
event any action under clause (2) shall require the vote of all the voting
trustees other than Peter A. Georgescu or his successor). The foregoing voting
procedures will also apply to the election and removal of voting trustees, to
proposals to increase or decrease the number of voting trustees and to proposals
to amend the foregoing voting procedures.

The management voting trust will terminate when:

o no person, including the recapitalization investors and the management
voting trust, is the owner of more than 20% of the outstanding shares;

o the number of shares of common stock held by the management voting
trust is less than 10% of the outstanding shares; or

o the voting trustees determine to terminate the management voting trust.

Under an irrevocable unanimous written consent of the voting trustees, the
management voting trust will terminate 24 months after the completion of the
IPO, which occurred on May 15, 1998, assuming no earlier termination in
accordance with its terms.

The management voting trust has issued and will issue voting trust
certificates representing the shares of common stock and money market preferred
stock deposited with it. The voting trust certificates are subject to the
transfer restrictions set forth in the amended stockholders' agreement. See
"--The Stockholders' Agreement."

Y&R has agreed to assume all liability and indemnify and defend all voting
trustees and their successors, assigns, agents and servants from any and all
losses incurred or asserted against any voting trustees relating to their
administration of the management voting trust, unless there is clear and
convincing evidence that these losses were proximately caused by an act or
omission that was not taken in good faith or not reasonably believed to be in
the best interest of Y&R and the management investors as a group. See
"Management--Limitation of Liability and Indemnification."

Under the management voting trust agreement and stock option and restricted
stock agreements, each of the management investors is subject to
non-competition, non-solicitation, confidentiality and notice requirements in
connection with the termination of that person's employment. They include the
following:

o for one year after termination of employment, a management investor may
not work for any competitor of Y&R on the account of any client of Y&R
or any of its affiliates with whom the management investor had a direct
relationship or as to which the management investor had a significant
supervisory responsibility or otherwise was significantly involved at
any time during the two years prior to termination;

o for six months after termination of employment, (1) a management
investor with principally corporate type job responsibilities that do
not principally involve client service related functions may not work
for a principal competitor of Y&R or any of its affiliates in any
substantially similar role as that held with Y&R or any of its
affiliates during the two years prior to termination, and (2) a
management investor with principally client service related
responsibilities may not work for a competitor of Y&R or its affiliates
on the account of or directly for any substantial competitor of any
client of Y&R or any of its affiliates for whom the management investor
had substantial responsibility during the two years prior to
termination;

<PAGE>

o for one year after termination of employment, a management investor may
not (1) directly or indirectly solicit or hire, or assist in the
soliciting or hiring of, any person employed by Y&R or any of its
affiliates as of the date of termination or any person who was then
being recruited by Y&R or any of its subsidiaries or (2) induce any Y&R
employee to terminate his or her employment with Y&R or any of its
affiliates;

o a management investor shall keep confidential information of Y&R, its
affiliates and their clients learned during his or her employment; and

o a management investor shall give six weeks written notice prior to
voluntary termination unless a shorter period is approved by Y&R.

Y&R has agreed, under the management voting trust agreement, to give each
management investor six months' severance pay upon termination of employment for
any reason other than for cause, as defined in the management voting trust
agreement, and each management investor is required to waive any possible right
to more than six months' severance pay or similar compensation and any claims
for damages under any employment agreement.

THE STOCKHOLDERS' AGREEMENT

In connection with the recapitalization of Y&R in 1996, the
recapitalization investors, the management investors, the restricted stock
trust, the management voting trust and Y&R entered into a stockholders'
agreement with respect to the restrictions on transferability of shares of
common stock and related voting trust certificates, and with respect to the
management of Y&R. Upon completion of the IPO, that stockholders' agreement was
terminated, and the H&F investors, the management investors, the management
voting trust and Y&R entered into an amended stockholders' agreement.

RIGHT TO NOMINATE DIRECTORS. Under the amended stockholders' agreement, the
H&F investors have the right to nominate and have elected two members of the
board of directors for so long as they continue to hold, in the aggregate, at
least 10% of the outstanding shares, and one member of the board of directors
for so long as they continue to hold, in the aggregate, at least 5% of the
outstanding shares. Outstanding shares is defined in the amended stockholders'
agreement to include all shares of common stock subject to vested options, not
including options that would vest on a change in control.

TRANSFER RESTRICTIONS. Under the amended stockholders' agreement, the
transfer restrictions described below apply. Purported transfers in violation of
these restrictions will be null and void.

H&F investors may not transfer shares of common stock, options to purchase
common stock or other voting capital stock:

o prior to termination of the management voting trust (which will occur
no later than the second anniversary of the completion of the IPO), if
at least 20% of the outstanding shares are then subject to the
management voting trust, to any party who as a result thereof would,
together with its affiliates, own a percentage of the outstanding
shares that is greater than the percentage then subject to the
management voting trust; or

o after the termination of the management voting trust and (1) prior to
the first anniversary of the termination, to any party who as a result
thereof would, together with its affiliates, own a percentage of the
outstanding shares that is greater than the greater of (a) 20% and (b)
the percentage of the outstanding shares subject to the management
voting trust upon termination thereof (the "termination percentage")
less 5% and (2) from and after the first anniversary of the termination
of the management voting trust until December 12, 2002, to any party
who as a result thereof would, together with its affiliates, own a
percentage of the outstanding shares that is greater than the greater
of (a) 20% and (b) the termination percentage less 10%,

unless, in any of these cases:

o Y&R fails to arrange for the sale of the shares to a third party for
the benefit of

<PAGE>

the H&F investors at a price to the H&F investors not less than the
price proposed to be paid by the proposed transferee; and

o the management voting trust, or, following its termination, Y&R,
consents to the proposed transfer, which consent may not be
unreasonably withheld.

Prior to termination of the management voting trust, proposed transfers of
shares of common stock, options to purchase common stock or other voting capital
stock by management investors, other than transfers by will or intestate
succession, to any party who as a result thereof, together with its affiliates,
would own more than 20% of the outstanding shares are subject to a right of
first refusal by each of Y&R and the H&F investors, exercisable in that order.

TRANSFER RESTRICTIONS

The following transfer restrictions apply to shares of common stock issued
to management investors under Regulation S under the Securities Act, but will
not apply to shares of common stock sold in the common stock offerings. Under
the by-laws, any direct or indirect sale, transfer, assignment, pledge,
hypothecation or other encumbrance or disposition, each referred to as a
"Transfer", of legal or beneficial ownership of any stock issued and sold by Y&R
under Regulation S under the Securities Act, may be made only under an effective
registration statement under the Securities Act or in a transaction that is
exempt from, or not subject to, the registration requirements of the Securities
Act. Neither Y&R nor any of its employees or agents will record any Transfer
prohibited by the preceding sentence, and the purported transferee of a
prohibited Transfer will not be recognized as a Y&R securityholder for any
purpose whatsoever in respect of the security or securities that are the subject
of the prohibited Transfer. The purported transferee in a prohibited Transfer
will not be entitled, with respect to the securities purported to be
transferred, to any rights of a Y&R securityholder, including without
limitation, in the case of common stock, the right to vote the common stock or
to receive dividends or distributions, if any, in respect of the common stock.
All certificates representing securities subject to the transfer restrictions
set forth in the by-laws will bear a legend to the effect that the securities
represented by the certificates are subject to these restrictions, unless and
until Y&R determines in its sole discretion that the legend may be removed
consistent with applicable law.

NO PREEMPTIVE RIGHTS

No holder of any class of stock of Y&R has any preemptive right to
subscribe for or purchase any kind or class of securities of Y&R.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the common stock is The Bank of New
York.

RIGHTS PLAN

Y&R has adopted the rights plan and entered into a rights agreement between
Y&R and The Bank of New York, as rights agent. Each outstanding share of common
stock has attached to it one associated right. The terms of the rights are set
forth in the rights agreement. The certificate of incorporation authorizes the
board of directors to adopt a stockholder rights plan such as the rights plan.

Each right entitles the registered holder under specified circumstances to
purchase from Y&R one one-hundredth of a share of junior preferred stock at a
purchase price of $87.50, subject to adjustment (the "purchase price"). The
purchase price is payable in cash or by certified check or bank draft.

Junior preferred stock purchasable upon exercise of the rights will not be
redeemable. Each share of junior preferred stock will be entitled to a minimum
preferential quarterly dividend payment of $1.00 per share but will be entitled
to an aggregate dividend of 100 times the dividend declared per share of common
stock. In the event of liquidation, the holders of shares of junior preferred
stock will be entitled to a minimum preferential liquidation payment of $1 per
share, plus an amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of the liquidation payment. Each
share of junior preferred stock will have 100 votes, voting together with the
common stock and the money

<PAGE>

market preferred stock and, in the event of specified dividend aggregates, will
also have the right, voting as a class, to elect one director. In the event of
any merger, consolidation or other transaction in which shares of common stock
are exchanged, each share of junior preferred stock will be entitled to receive
100 times the amount received per share of common stock. These rights are
protected by customary anti-dilution provisions. Because of the nature of their
dividend, liquidation and voting rights, the value of the one-one-hundredth
interest in a share of junior preferred stock purchasable upon exercise of each
right should approximate the value of one share of common stock.

Until the close of business on the distribution date, the rights will be
evidenced by the certificates representing shares of common stock and no
separate right certificates will be issued or distributed. All shares of common
stock issued prior to the earlier of the distribution date or the expiration
date will be issued with rights.

The term "distribution date" means the earlier of:

o the tenth business day after the stock acquisition date; and

o the tenth business day (or a later day as may be determined by action
of the board of directors prior to the time as any person becomes an
acquiring person) after the date of the commencement by any person
(other than any company entity) of, or the first public announcement of
the intent of any person (other than any company entity) to commence
(which intention to commence remains in effect for five business days
after this announcement), a tender or exchange offer the completion of
which would result in any person becoming an acquiring person.

The term "stock acquisition date" means the time and day of the first
public announcement, including by the filing of a report pursuant to the
Exchange Act, by Y&R or an acquiring person indicating that an acquiring person
has become an acquiring person.

The term "acquiring person" means:

(i) any person (other than the H&F investors and other than any Permitted
H&F 15% Transferee) who or which, together with all affiliates and
associates of that person, acquires beneficial ownership of 15% or
more of the then outstanding shares of common stock (other than as a
result of an approved offer);

(ii) the H&F investors if the H&F investors, together with all of their
affiliates and associates, acquire beneficial ownership of any
additional shares of common stock such that following this
acquisition (A) the H&F investors beneficially own in excess of 15%
of the then outstanding shares of common stock and (B) if the
management voting trust is then in existence, following this
acquisition the H&F investors beneficially own a greater percentage
of the diluted shares outstanding than the percentage of the diluted
shares outstanding subject to the management voting trust at the time
of this acquisition (it being understood that neither sales by, nor
termination of, the management voting trust will trigger this
provision absent a subsequent acquisition of beneficial ownership of
additional shares by the H&F investors or any of their affiliates or
associates); or

(iii) any Permitted H&F 15% Transferee if contemporaneously with or
subsequent to the transfer from the H&F investors that resulted in
that person becoming a Permitted H&F 15% Transferee, that Permitted
H&F 15% Transferee, together with all affiliates and associates of
that Permitted H&F 15% Transferee, acquires beneficial ownership of
any additional shares.

Notwithstanding the foregoing:

(1) a person shall not become an acquiring person if that person, together
with all of its affiliates and associates, becomes the beneficial owner
of 15% or more (in the case of clause (i) above) of the then
outstanding shares of common stock as a result of a reduction in the
number of shares of common stock

<PAGE>

outstanding due to the repurchase of shares of common stock by Y&R,
unless and until such time as that person purchases or otherwise
becomes (as a result of actions taken by that person or any of its
affiliates or associates) the beneficial owner of any additional shares
of common stock; and

(2) the term "acquiring person" shall not include any company entity; and

(3) the term "acquiring person" shall not include any person who or which,
together with all affiliates and associates of that person, becomes the
beneficial owner of 15% or more of the then outstanding shares of
common stock (in the case of clause (i) above) or any additional shares
of common stock (in the case of clauses (ii) and (iii) above) but who
acquired beneficial ownership of shares of common stock inadvertently,
and that person promptly (and in any event within 10 business days
after being so requested by Y&R) enters into an irrevocable commitment
satisfactory to the board of directors promptly (and in any event
within 20 business days or a shorter period as shall be determined by
the board of directors) to divest, and thereafter promptly divests as
required by the irrevocable commitment, sufficient shares of common
stock so that that person, together with all of its affiliates and
associates, ceases to be a beneficial owner of 15% or more of the then
outstanding shares of common stock (in the case of clause (i) above) or
any additional shares of common stock (in the case of clauses (ii) and
(iii) above).

The term "company entity" means any of Y&R, any wholly owned subsidiary of
Y&R, any employee benefit plan or employee stock plan of Y&R or any wholly owned
subsidiary of Y&R, any person or entity holding shares of common stock which was
organized, appointed or established by Y&R or any of its wholly owned subsidiary
for or under the terms of any employee benefit plan or employee stock plan, the
management voting trust, the restricted stock trust, the trustees under the
management voting trust or the restricted stock trust, any affiliate or
associate of the management voting trust or the restricted stock trust or any
trustee under either of these trusts and any group that includes the management
voting trust, the restricted stock trust, any trustee under either of these
trusts or any affiliate or associate thereof.

The term "Permitted H&F 15% Transferee" means any person who is a Permitted
H&F Transferee who or which, immediately after the transfer from the H&F
investors that resulted in that person becoming a Permitted H&F Transferee,
together with all affiliates and associates of that person, is the beneficial
owner of 15% or more of the then outstanding shares of common stock.

The term "Permitted H&F Transferee" means any person that acquires
beneficial ownership of shares of common stock from the H&F investors in a
transfer that is either not restricted under, or occurs in compliance with, the
transfer restrictions applicable to the H&F investors set forth in the amended
stockholders' agreement.

The term "approved offer" means a tender offer or exchange offer for all
the outstanding shares of common stock which is at a price and on terms
approved, prior to the acceptance for payment of shares under the tender or
exchange offer, by the board of directors.

The term "diluted shares outstanding" as of any given time means the sum of
(a) the number of shares of common stock then issued and outstanding (including
all shares of common stock held in the restricted stock trust) and (b) the
number of shares of common stock issuable upon exercise of the (1) HFCP options,
as defined in the amended stockholders' agreement, and the rollover options and
(2) all other options, warrants and rights to acquire, and the conversion of any
securities convertible into, shares of common stock, to the extent these rights
to acquire shares of common stock are then exercisable. For purposes of clause
(ii)(B) of the definition of "acquiring person" above, when calculating the
percentage of the diluted shares outstanding owned by the H&F investors or the
management voting trust, as the case may be, the H&F investors or the management
voting trust, as the case may be, shall be deemed to own all shares of common
stock beneficially owned by them assuming the exercise of all of their options,
warrants and

<PAGE>

rights to acquire, and the conversion by them of any securities convertible
into, shares of common stock to the extent, but only to the extent, these rights
to acquire shares of common stock are then exercisable by them. For purposes of
calculating the percentage of diluted shares outstanding owned by the management
voting trust, the management voting trust shall be deemed to own all shares of
common stock (including all shares of common stock required to be deposited
thereunder upon exercise of vested options) then subject to the management
voting trust.

The rights agreement provides that, until the distribution date, the rights
will be transferred with and only with the common stock. Certificates
representing shares of common stock issued prior to the earlier of the
distribution date and the expiration date will contain a legend incorporating
the rights agreement by reference. Until the distribution date, the surrender
for transfer of any of the certificates representing shares of common stock
issued prior to the distribution date will also constitute the transfer of the
rights associated with the common stock represented by that certificate. Until
the distribution date, the number of rights associated with each share of common
stock will be proportionately adjusted in the event of any dividend in common
stock on the common stock or subdivision, combination or reclassification of the
common stock. In the event that Y&R purchases or acquires any shares of common
stock prior to the distribution date, any rights associated with those shares of
common stock shall be deemed canceled and retired so that Y&R shall not be
entitled to exercise any rights associated with the shares of common stock that
are no longer outstanding. As soon as practicable following the distribution
date, separate certificates evidencing the rights will be mailed to holders of
record of common stock as of the close of business on the distribution date and
these separate rights certificates alone will evidence the rights. The rights
are not exercisable until the distribution date. The rights will expire at the
close of business on May 31, 2008, unless they have previously expired in
connection with an approved offer or have been previously exchanged for shares
of common stock or have been previously redeemed by Y&R as described below.

Immediately upon the stock acquisition date, proper provision shall be made
so that each holder of a right will thereafter have the right to receive, upon
exercise, common stock (or, in specified circumstances, cash, property or other
securities of Y&R) having a preexisting market value (as of shortly before the
stock acquisition date), equal to two times the then current purchase price of
the right. Notwithstanding any of the foregoing, following the occurrence of the
stock acquisition date, all rights that are, or (under circumstances specified
in the rights agreement) were, beneficially owned by any acquiring person and
specified related parties will become null and void.

To illustrate the rights described in the preceding paragraph, at a
purchase price of $87.50 per right, each right not owned by an acquiring person
(or by specified related parties) following an event set forth in the preceding
paragraph would entitle its holder to purchase common stock (or other
consideration, as noted above) with a preexisting market value of $175.00 for
$87.50. Assuming that the common stock has a preexisting market value of $25.00
per share at that time, the holder of each right would be entitled to purchase
seven shares of common stock for $87.50.

In the event that, at any time following the stock acquisition date, (1)
Y&R is acquired in a merger or other business consolidation transaction, (2) Y&R
is the surviving corporation in a merger or other business consolidation with
any person and the common stock is changed into or exchanged for stock or other
securities of any other person or cash or any other property (other than, in the
case of any transaction described in (1) or (2), a merger or consolidation that
would result in all of the voting securities of Y&R outstanding immediately
prior thereto continuing to represent all of the voting securities of Y&R or the
surviving entity outstanding immediately after the merger or consolidation and
holders of these securities not having changed as a result of the merger or
consolidation) or (3) 50% or more of Y&R's assets or earning power is sold or
transferred, each holder of a right (except rights that previously have been
voided as set forth above) shall thereafter have the right to receive, upon
exercise, common stock of the acquiring company having a market value equal to
two times the then current purchase price of the right.

<PAGE>

The purchase price payable, and the fraction of a share of junior preferred
stock or other securities or property issuable, upon exercise of the rights are
subject to adjustment from time to time to prevent dilution:

o in the event of a stock dividend on, or a subdivision, combination or
reclassification of, the junior preferred stock (prior to the
distribution date) or the common stock;

o if holders of the junior preferred stock are granted specified rights
or warrants to subscribe for junior preferred stock or convertible
securities at less than the current market price of the junior
preferred stock; or

o upon the distribution to holders of the junior preferred stock of
evidences of indebtedness or assets (excluding regular quarterly cash
dividends below specified levels or dividends payable in shares of
junior preferred stock) or of subscription rights or warrants, other
than those referred to above.

With exceptions, no adjustment in the purchase price will be required until
cumulative adjustments amount to at least 1% of the purchase price. In addition,
to the extent that Y&R does not have sufficient shares of common stock issuable
upon exercise of the rights following the stock acquisition date, Y&R may, in
some circumstances, reduce the purchase price. No fractional shares of junior
preferred stock (other than fractions which are integral multiples of one
one-hundredth) will be issued and, in lieu thereof, an adjustment in cash will
be made based on the market price of the junior preferred stock or the common
stock on the last trading date prior to the date of exercise.

At any time until the stock acquisition date, Y&R may redeem the rights in
whole, but not in part, at a price of $0.01 per right payable in cash, shares of
common stock or other consideration deemed appropriate by the board of
directors. Immediately upon the action of the board of directors ordering
redemption of the rights, the rights will terminate and thereafter the only
right of the holders of rights will be to receive the $0.01 redemption price. In
addition, at any time after the stock acquisition date, the board of directors
may elect to exchange all or part of the then-outstanding and exercisable rights
(other than rights that have become null and void as described above) for one
share of common stock. Both the redemption price and the exchange rate are
subject to adjustment.

Until a right is exercised, the holder thereof will have no rights as a
stockholder of Y&R, including, without limitation, the right to vote or to
receive dividends. While the distribution of the rights will not be taxable to
stockholders or to Y&R, stockholders may, depending upon the circumstances,
recognize taxable income in the event that the rights become exercisable for
common stock (or other consideration) or for common stock of an acquiring
company as set forth above.

Any of the provisions of the rights agreement may be amended by the board
of directors prior to the stock acquisition date. After the stock acquisition
date, the provisions of the rights agreement may be amended by the board of
directors in order to cure any ambiguity, to correct any defects or
inconsistencies, to make changes that do not adversely affect the interests of
holders of rights (excluding the interests of any acquiring person) or to
shorten or lengthen any time period under the rights agreement; provided,
however, that no amendment to adjust the time period governing redemption or to
modify the ability or inability of the board of directors to redeem the rights
may be made when the rights are not redeemable.

As long as the rights are attached to the common stock, Y&R will issue one
right for each share of common stock issued prior to the distribution date so
that all those shares will have attached rights. Two million five hundred
thousand shares of junior preferred stock initially have been reserved for
issuance upon exercise of the rights.

The rights have anti-takeover effects. See "--Anti-Takeover Effects of
Provisions of the Certificate of Incorporation, the By-Laws, the Rights Plan and
Delaware Law."

The foregoing summary of terms of the rights is qualified in its entirety
by reference to the rights agreement, which is filed as an exhibit to the
registration statement and is incorporated herein by reference.

<PAGE>

ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION, THE
BY-LAWS, THE RIGHTS PLAN AND DELAWARE LAW

The certificate of incorporation, the by-laws, the rights plan and the
Delaware general corporation law contain provisions that could make more
difficult the acquisition of control of Y&R by means of a tender offer, open
market purchases, a proxy contest or otherwise. Set forth below is a description
of these provisions in the certificate of incorporation, the by-laws, the rights
plan and the Delaware general corporation law. The following description is
intended as a summary only and is qualified in its entirety by reference to the
certificate of incorporation, the by-laws and the rights agreement, which have
been filed as exhibits to the registration statement of which this prospectus
forms a part, and to the Delaware general corporation law. Upon completion of
the common stock offerings, the management voting trust will hold 36.7% of the
outstanding shares of common stock (assuming the exercise of all currently
vested options held by management investors), which could discourage potential
acquisition proposals and could delay or prevent a change in control of Y&R. See
"Description of Capital Stock--The Management Voting Trust Agreement."

CLASSIFIED BOARD OF DIRECTORS; REMOVAL OF DIRECTORS. The certificate of
incorporation provides that the number of directors will be not less than five
nor more than fifteen, with the exact number of directors to be determined from
time to time by a majority of the entire board of directors. The directors will
be divided into three classes, as nearly equal in number as is possible, serving
staggered three-year terms so that directors' initial terms will expire at the
annual meeting of Y&R's stockholders held in 1999, 2000 and 2001, respectively.
Starting with the 1999 annual meeting of Y&R's stockholders, one class of
directors will be elected each year for a three-year term. See "Management."

Y&R believes that a classified board of directors will help to assure the
continuity and stability of the board of directors and Y&R's business strategies
and policies, since a majority of the directors at any given time will have had
prior experience as directors of Y&R. Y&R believes that this in turn will permit
the board of directors to represent more effectively the interests of
stockholders.

With a classified board of directors, at least two annual meetings of
stockholders, instead of one, will generally be required to effect a change in a
majority of the members of the board of directors. As a result, the
classification of the board of directors of Y&R may discourage proxy contests
for the election of directors, unsolicited tender offers or purchases of a
substantial block of the common stock because it could prevent an acquirer from
obtaining control of the board of directors in a relatively short period of
time. In addition, pursuant to the Delaware general corporation law and the
certificate of incorporation, a director may be removed only for cause and only
by the affirmative vote of holders of not less than 80% of the outstanding
shares of common stock entitled to vote thereon. As a result, a classified board
of directors delays stockholders who do not agree with the policies of the board
of directors from replacing directors, unless they can demonstrate that the
directors should be removed for cause and obtain the requisite vote. This delay
may help ensure that the board of directors, if confronted with a proxy contest
or an unsolicited proposal for an extraordinary corporate transaction, will have
sufficient time to review the proposal and appropriate alternatives to the
proposal and to act in what it believes is the best interest of Y&R's
stockholders.

FILLING VACANCIES ON THE BOARD OF DIRECTORS. The certificate of
incorporation provides that, subject to the rights of holders of any shares of
preferred stock, any vacancy in the board of directors that results from an
increase in the number of directors may be filled only by a majority of the
directors then in office, provided that a quorum is present. The certificate of
incorporation provides that any other vacancy in the board of directors may be
filled by a majority of the directors then in office, even if less than a
quorum, or by the sole remaining director. Accordingly, these provisions could
temporarily prevent any stockholder from obtaining majority representation on
the board of directors by enlarging the board of directors and filling the new
directorships with its own nominees.

WRITTEN CONSENTS AND SPECIAL MEETINGS. The certificate of incorporation
provides that no

<PAGE>

action required or permitted to be taken at any annual or special meeting of
stockholders may be taken by stockholders of Y&R except at an annual or special
meeting. The by-laws provide that special meetings of stockholders may be called
only by the chairman of the board of directors or the board of directors.
Stockholders are not permitted to call a special meeting or to require that the
board of directors call a special meeting of stockholders. Moreover, the
business permitted to be conducted at any special meeting of stockholders is
limited to the purpose or purposes specified in the written notice of the
meeting. The provisions of the certificate of incorporation prohibiting action
by written consent without a meeting and the provisions of the by-laws governing
the calling of and matters considered at special meetings may have the effect of
delaying consideration of a stockholder proposal until the next annual meeting.
These provisions also would prevent the holders of a majority of the voting
power of the outstanding shares of stock entitled to vote generally in the
election of directors from using the written consent procedure to take
stockholder action and from taking action by written consent without giving all
the stockholders entitled to vote on a proposed action the opportunity to
participate in determining the proposed action at a meeting.

ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS AND PROPOSALS. The
by-laws establish an advance notice provision with regard to the nomination,
other than by or at the direction of the board of directors, of candidates for
election as directors, or the bringing before any annual meeting of any
stockholder proposal, which we refer to as the notice of meeting provision.

The notice of meeting provision provides that, subject to any rights of
holders of any preferred stock, business other than that proposed by the board
of directors may be transacted and candidates for director other than those
selected by the board of directors may be nominated at the annual meeting only
if the Secretary of Y&R has received a written notice identifying the business
or candidates and providing specified additional information not less than
ninety nor more than one hundred twenty days before the first Tuesday in June
(or, if the board of directors has set a different date for the annual meeting,
not less than ninety nor more than one hundred twenty days before the other date
or, if the other date has not been publicly disclosed or announced at least one
hundred five days in advance, then not less than fifteen days after its public
disclosure or announcement). In addition, not more than ten days after receipt
by the sponsoring stockholder of the Secretary's written request, the sponsoring
stockholder must provide the Secretary with additional information as the
Secretary may reasonably require.

By requiring advance notice of nominations by stockholders, the notice of
meeting provision will afford the board of directors a meaningful opportunity to
consider the qualifications of the proposed nominees and, to the extent deemed
necessary or desirable by the board of directors, to inform the stockholders
about these qualifications. By requiring advance notice of proposed business,
the notice of meeting provision will provide the board of directors with a
meaningful opportunity to inform stockholders, prior to the meeting, of any
business proposed to be conducted at the meeting, together with any
recommendation or statement of the board of directors' position as to action to
be taken with respect to the proposed business, so as to enable stockholders
better to determine whether they desire to attend the meeting or to grant a
proxy to the board of directors as to the disposition of any proposed business.
Although the by-laws do not give the board of directors any power to approve or
disapprove stockholder nominations for the election of directors or proposals
for action, they may have the effect of precluding a contest for the election of
directors or the consideration of stockholder proposals if the proper procedures
are not followed, and of discouraging or deterring a third party from conducting
a solicitation of proxies to elect its own slate of directors or to approve its
proposal without regard to whether consideration of these nominees or proposals
might be harmful or beneficial to Y&R and its stockholders.

RESTRICTIONS ON AMENDMENT. The certificate of incorporation provides that
the approval of holders of at least 80% of the voting power entitled to vote
generally in the election of directors, voting together as a single class, is
required to adopt any charter provision inconsistent with or to alter, amend or
repeal the provisions of the certificate of incorporation:

<PAGE>

o classifying the board of directors;

o governing the removal of directors;

o establishing the minimum and maximum number of members of the board of
directors;

o eliminating the ability of stockholders to act by written consent;

o authorizing the board of directors to consider the interests of clients
and other customers, creditors, employees and other constituencies of
Y&R and its subsidiaries and the effect upon communities in which Y&R
and its subsidiaries do business, in evaluating proposed corporate
transactions;

o establishing the board of directors' authority to issue, without a vote
or any other action of the stockholders, any or all authorized shares
of stock of Y&R, securities convertible into or exchangeable for any
authorized shares of stock of Y&R and warrants, options or rights to
purchase, subscribe for or otherwise acquire shares of stock of Y&R for
any of these forms of consideration and on such terms as the board of
directors in its discretion lawfully may determine; and

o authorizing the by-laws of Y&R to establish procedures regulating the
submission by stockholders of nominations and proposals for
consideration at meetings of stockholders of Y&R. In addition, the
certificate of incorporation provides that the approval of the board of
directors or the affirmative vote of the holders of 80% of the voting
power entitled to vote generally in the election of directors, voting
together as a single class, is required to alter, amend or repeal the
above provisions of the certificate of incorporation or to adopt any
provision of the certificate of incorporation inconsistent with the
above provisions or to alter, amend or repeal specified provisions of
the by-laws or to adopt any provision of the by-laws inconsistent with
the above provisions.

PREFERRED STOCK. Subject to the certificate of incorporation and applicable
law, the authority of the board of directors with respect to each series of
preferred stock, excluding the money market preferred stock, includes but is not
limited to the authority to generally determine the following: the designation
of each series, the number of shares initially constituting each series and
whether to increase or decrease the number of shares, dividend rights and rates,
terms of redemption and redemption prices, liquidation preferences, voting
rights, conversion rights, whether a sinking fund will be provided for the
redemption of the shares of each series and, if so, the terms and conditions
thereof, and whether a purchase fund shall be provided for the shares of each
series and, if so, the terms and conditions thereof.

Y&R believes that the availability of the preferred stock will provide
increased flexibility in structuring possible future financings and acquisitions
and in meeting other corporate needs that might arise. Having these authorized
shares available for issuance will allow Y&R to issue shares of preferred stock
without the expense and delay of a special stockholders' meeting. The authorized
shares of preferred stock, as well as shares of common stock, will be available
for issuance without further action by the stockholders, unless further action
is required by applicable law or the rules of any stock exchange on which Y&R's
securities may be listed. Although the board of directors has no current
intention to do so, it would have the power, subject to applicable law, to issue
a series of preferred stock that could, depending on the terms of this series,
impede the completion of a merger, tender offer or other takeover attempt. For
instance, subject to applicable law, this series of preferred stock might impede
a business combination by including class voting rights that would enable the
holder to block the transaction. The board of directors will make any
determination to issue these shares based on its judgment as to the best
interests of Y&R and its stockholders. The board of directors, in so acting,
could issue preferred stock having terms which could discourage an acquisition
attempt or other transaction that some, or a majority, of the stockholders might
believe to be in their best interest or in which stockholders might receive a
premium for their stock over the then market price of the stock. See "--Rights
Plan."

<PAGE>

OTHER CONSIDERATIONS. Our certificate of incorporation generally provides
that, in determining whether to take or refrain from taking corporate action on
any matter, including proposing any matter to the stockholders of Y&R, the board
of directors may, but shall not be obligated to, take into account the interests
of clients and other customers, creditors, employees and other constituencies of
Y&R and its subsidiaries and the effect upon communities in which Y&R and its
subsidiaries do business.

EFFECTS OF THE RIGHTS PLAN. The rights plan is designed to protect
stockholders of Y&R in the event of unsolicited offers to acquire Y&R and other
coercive takeover tactics which, in the opinion of the board of directors, could
impair its ability to represent stockholder interests. The provisions of the
rights agreement may render an unsolicited takeover of Y&R more difficult or
less likely to occur or might prevent the takeover, even though the takeover may
offer Y&R's stockholders the opportunity to sell their stock at a price above
the then prevailing market rate and may be favored by a majority of Y&R's
stockholders. See "--Rights Plan." The certificate of incorporation authorizes
the board of directors to adopt a stockholder rights plan.

DELAWARE BUSINESS COMBINATION STATUTE. The terms of Section 203 of the
Delaware general corporation law apply to Y&R. With exceptions, Section 203
generally prohibits an "interested stockholder" from engaging in a broad range
of "business combination" transactions, including mergers, consolidations and
sales of 10% or more of a corporation's assets, with a Delaware corporation for
three years following the date on which the person became an interested
stockholder unless:

o the transaction that results in the person's becoming an interested
stockholder or the business combination is approved by the board of
directors of directors of the corporation before the person becomes an
interested stockholder;

o upon completion of the transaction which results in the stockholder
becoming an interested stockholder, the interested stockholder owns 85%
or more of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding shares owned by persons who are
directors and also officers and shares owned by employee stock plans;
or

o on or after the date the person becomes an interested stockholder, the
business combination is approved by the corporation's board of
directors of directors and by holders of at least two-thirds of the
corporation's outstanding voting stock, excluding shares owned by the
interested stockholder, at a meeting of stockholders.

Under Section 203, an "interested stockholder" is generally defined as any
person (and the affiliates and associates of that person), other than the
corporation and any direct or indirect majority-owned subsidiary, that is:

o the owner of 15% or more of the outstanding voting stock of the
corporation; or

o an affiliate or associate of the corporation and was the owner of 15%
or more of the outstanding voting stock of the corporation at any time
within the three-year period immediately prior to the date on which it
is sought to be determined whether that person is an interested
stockholder.

The restrictions contained in Section 203 do not apply to a corporation
that so provides in an amendment to its certificate of incorporation or by-laws
passed by a majority of its outstanding voting shares, but this stockholder
action generally does not become effective for 12 months following its adoption
and would not apply to persons who were already interested stockholders at the
time of the amendment. The certificate of incorporation and by-laws do not
exclude Y&R from the restrictions imposed under Section 203, but the certificate
of incorporation provides that in no case shall the H&F investors or any person
who is a Permitted H&F 15% Transferee, regardless of the total percentage of the
common stock or other voting stock owned by the H&F investors or the Permitted
H&F 15% Transferee, be deemed an interested stockholder for any purpose under
Section 203 whatsoever.

<PAGE>

In some circumstances, Section 203 makes it more difficult for a person who
would be an "interested stockholder" to effect various business combinations
with a corporation for a three-year period. The provisions of Section 203 may
encourage companies interested in acquiring Y&R to negotiate in advance with the
board of directors, because the stockholder approval requirement would be
avoided if the board of directors approves either the business combination or
the transaction which results in the stockholder becoming an interested
stockholder. These provisions also may have the effect of preventing changes in
the board of directors. It is further possible that these provisions could make
it more difficult to accomplish transactions which stockholders may otherwise
deem to be in their best interests.

<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of common stock in the public market following
the common stock offerings could adversely affect the market price of the common
stock and could impair Y&R's future ability to raise capital through the sale of
its equity securities.

Upon the closing of the common stock offerings, Y&R will have outstanding
67,578,051 shares of common stock. Of these shares, approximately:

o 48,942,383 shares will be freely tradeable by persons, other than
"affiliates" of Y&R, without restriction under the Securities Act; and

o 18,635,668 shares will be "restricted" securities, within the meaning
of Rule 144 under the Securities Act, and may not be sold in the
absence of registration under the Securities Act unless an exemption
from registration is available, including the exemption provided by
Rule 144.

In general, under Rule 144 as currently in effect, a person or persons
whose shares are aggregated, including any affiliate of Y&R, who has
beneficially owned restricted securities for at least one year, including the
holding period of any prior owner except an affiliate of Y&R, would be entitled
to sell within any three-month period, a number of shares that does not exceed
the greater of:

o one percent of the number of common stock then outstanding
(approximately 675,781 shares immediately after the common stock
offerings); or

o the average weekly trading volume of the common stock during the four
calendar weeks preceding the filing of a Form 144 with respect to the
sale.

Sales under Rule 144 are also subject to manner of sale and notice
requirements and to the availability of current public information about Y&R.
Under Rule 144(k), a person who is not deemed to have been an affiliate of Y&R
at any time during the 90 days preceding a sale, and who has beneficially owned
restricted securities for at least two years, including the holding period of
any prior owner except an affiliate of Y&R, is entitled to sell these shares
without complying with the manner of sale, public information requirements,
volume limitations or notice requirements of Rule 144. Sales of shares by
affiliates of Y&R will continue to be subject to these volume limitations, and
manner of sale, notice and public information requirements.

REGISTRATION RIGHTS AGREEMENT

In connection with the recapitalization of Y&R in 1996, Y&R, the
recapitalization investors and the management voting trust entered into a
registration rights agreement in favor of the recapitalization investors and, to
the extent necessary to permit a management investor to pay taxes when sales of
common stock by the management investor would not otherwise be permitted, the
management investors, under which registration rights are available after the
completion of the common stock offerings. Under the registration rights
agreement, Y&R has granted:

o the recapitalization investors the right to require, subject to the
terms and conditions set forth in the registration rights agreement,
Y&R to register shares of common stock held by them for sale in
accordance with their intended method of disposition of those shares;
and

o the management voting trust the right to require, subject to the terms
and conditions set forth in the registration rights agreement, Y&R to
register the number of shares of common stock as is necessary to permit
management investors to pay taxes as a result of the exercise by the
management investors of rollover options or closing options or the
vesting of restricted stock awarded to the management investors (each a
"demand registration"), provided that in the case of the management
voting trust this request may not be made without the consent of Y&R.

Subject to limitations set forth in the registration rights agreement, the
recapitalization investors may request up to four demand registrations and the
management voting trust may request up to two demand registrations. Y&R will not
be required to effect any demand registration if:

<PAGE>

o the aggregate market value of the shares of common stock proposed to be
registered is less than $100 million; or

o the demand registration is requested by the recapitalization investors
or the management voting trust within six months of the effective date
of a prior demand registration requested by the recapitalization
investors or the management voting trust, respectively.

Y&R may postpone the filing of a demand registration for up to 60 days in
some circumstances.

In addition, Y&R has granted the recapitalization investors and the
management voting trust (to the extent of the number of shares of common stock
as is necessary to permit management investors to pay taxes as a result of the
exercise by the management investors of rollover options or closing options or
the vesting of restricted stock awarded to the management investors) the right,
subject to exceptions set forth in the registration rights agreement, to
participate in registrations of common stock initiated by Y&R on its own behalf
or on behalf of any other stockholder (a "piggy-back registration"). The
recapitalization investors exercised these piggy-back registration rights in
connection with the offering of common stock completed on November 30, 1998.

The registration rights agreement provides that if requested by the
managing underwriter(s) of any underwritten offering of shares of common stock,
the recapitalization investors and the management voting trust will agree, on
the same terms applicable to officers and directors of Y&R, not to effect any
public sale or distribution of any shares of common stock for a period of up to
180 days following and 15 days prior to the date of the final prospectus
contained in the registration statement filed in connection with that offering.
See "Underwriting."

Y&R is required to pay expenses incurred by it and the reasonable fees and
disbursements of one counsel to the selling stockholders under the registration
rights agreement in connection with the demand and piggy-back registrations
under the registration rights agreement. In connection with any registration
under the registration rights agreement, Y&R has agreed to indemnify five of the
recapitalization investors against liabilities, including liabilities under the
Securities Act, and to contribute to payments they may be required to make. The
registration rights agreement will terminate on December 12, 2011.

<PAGE>

CERTAIN U.S. TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS

The following is a general discussion of U.S. federal income and estate tax
consequences of the ownership and disposition of common stock by a person that,
for U.S. federal income tax purposes, is not a U.S. person (a "non-U.S.
holder"). For purposes of this section a "U.S. person" means a citizen or
resident of the United States, a corporation, partnership or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof, an estate the income of which is subject to United States
federal income taxation regardless of its source or a trust if (1) a U.S. court
is able to exercise primary supervision over the trust's administration and (2)
one or more United States persons have the authority to control all of the
trust's substantial decisions, and the term "United States" means the United
States of America, including the States and the District of Columbia. The
discussion does not consider specific facts and circumstances that may be
relevant to a particular non-U.S. holder's tax position. Accordingly, each
non-U.S. holder is urged to consult its own tax advisor with respect to the U.S.
tax consequences of the ownership and disposition of common stock, as well as
any tax consequences that may arise under the laws of any state, municipality,
foreign country or other taxing jurisdiction.

DIVIDENDS

Dividends paid to a non-U.S. holder of common stock ordinarily will be
subject to withholding of U.S. federal income tax at a 30 percent rate, or at a
lower rate under an applicable income tax treaty that provides for a reduced
rate of withholding. However, if the dividends are effectively connected with
the conduct by the holder of a trade or business within the United States, then
the dividends will be exempt from the withholding tax described above and
instead will be subject to U.S. federal income tax on a net income basis.

GAIN ON DISPOSITION OF COMMON STOCK

A non-U.S. holder generally will not be subject to U.S. federal income tax
in respect of gain realized on a disposition of common stock, provided that (a)
the gain is not effectively connected with a trade or business conducted by the
non-U.S. holder in the United States and (b) in the case of a non-U.S. holder
who is an individual and who holds the common stock as a capital asset, the
holder is present in the United States for less than 183 days in the taxable
year of the sale and other conditions are met.

FEDERAL ESTATE TAXES

Common stock owned or treated as being owned by an individual non-U.S.
holder at the time of death will be included in the holder's gross estate for
U.S. federal estate tax purposes (and thereby may be subject to U.S. federal
estate tax), unless an applicable estate tax treaty provides otherwise.

U.S. INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX

U.S. information reporting requirements and backup withholding tax will not
apply to dividends paid on common stock to a non-U.S. holder address outside the
United States, except that with regard to payments made after December 31, 1999,
a non-U.S. holder will be entitled to this exemption only if it provides a Form
W-8 or satisfies certain documentary evidence requirements for establishing that
it is a non-United States person or otherwise establishes an exemption. As a
general matter, information reporting and backup withholding also will not apply
to a payment of the proceeds of a sale of common stock effected outside the
United States by a foreign office of a foreign broker. However, information
reporting requirements but not backup withholding will apply to a payment of the
proceeds of a sale of common stock effected outside the United States by a
foreign office of a broker if the broker (1) is a U.S. person, (2) derives 50
percent or more of its gross income for certain periods from the conduct of a
trade or business in the United States, (3) is a "controlled foreign
corporation" as to the United States, or (4) with respect to payments made after
December 31, 2000, is a foreign partnership that, at any time during its taxable
year is 50 percent or more (by income or capital interest) owned by U.S. persons
or is engaged in the conduct of a U.S. trade or business, unless in any such
case the broker has documentary

<PAGE>

evidence in its records that the holder is a non-U.S. holder and certain
conditions are met, or the holder otherwise establishes an exemption. Payment by
a United States office of a broker of the proceeds of a sale of common stock
will be subject to both backup withholding and information reporting unless the
holder certifies its non-United States status under penalties of perjury or
otherwise establishes an exemption.

<PAGE>

UNDERWRITING

Subject to the terms and conditions of an Underwriting Agreement, dated
, 1999 (the "Underwriting Agreement"), the U.S. Underwriters named below
(the "U.S. Underwriters"), who are represented by Bear, Stearns & Co. Inc.
("Bear Stearns"), Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"),
Goldman, Sachs & Co., ING Baring Furman Selz LLC, Morgan Stanley & Co.
Incorporated and Salomon Smith Barney Inc. (the "U.S. Representatives"), and the
International Managers named below (the "International Managers" and, together
with the U.S. Underwriters, the "Underwriters"), who are represented by Bear,
Stearns International Limited, Cazenove & Co., Donaldson, Lufkin & Jenrette
International, Goldman Sachs International, ING Barings Ltd. as agent for ING
Bank N.V., London Branch, Morgan Stanley & Co. International Limited and Salomon
Brothers International Limited (the "International Representatives", and
together with the U.S. Representatives, the "Representatives"), have severally
agreed to purchase from the selling stockholders the respective number of shares
of common stock set forth opposite their names below.

<TABLE>
<CAPTION>
NUMBER
U.S. UNDERWRITERS OF SHARES
- ------------------------------------------------------------------------- -------------
<S> <C>
Bear, Stearns & Co. Inc. ...........................................
Donaldson, Lufkin & Jenrette Securities Corporation ................
Goldman, Sachs & Co. ...............................................
ING Baring Furman Selz LLC .........................................
Morgan Stanley & Co. Incorporated ..................................
Salomon Smith Barney Inc. ..........................................
--------
Subtotal .......................................................... 12,000,000

INTERNATIONAL MANAGERS
- --------------------------------------------------------------------------
Bear, Stearns International Limited ................................
Cazenove & Co. .....................................................
Donaldson, Lufkin & Jenrette International .........................
Goldman Sachs International ........................................
ING Barings Ltd. as agent for ING Bank N.V., London Branch .........
Morgan Stanley & Co. International Limited .........................
Salomon Brothers International Limited .............................

Subtotal .......................................................... 3,000,000
----------
Total ............................................................ 15,000,000
==========
</TABLE>

------------------------

The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase and accept delivery of the shares of common stock
offered by this prospectus are subject to approval by their counsel of legal
matters and to other conditions set forth in the Underwriting Agreement. The
Underwriters are obligated to purchase and accept delivery of all the shares of
common stock offered hereby, other than those shares covered by the
over-allotment option described below, if any are purchased.

The Underwriters initially propose to offer the shares of common stock in
part directly to the public at the initial public offering price set forth on
the cover page of this prospectus and in part to certain dealers including the
Underwriters, at that price less a concession not in excess of $ per share. The
Underwriters may allow, and such dealers may re-allow, to certain other dealers
a concession not in excess of $ per share. After the initial offering of the
common stock, the public offering price and other selling terms may be changed
by the Representatives at any time without notice. The Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.

The H&F investors and certain other selling stockholders have granted to
the U.S. Underwriters an option, exercisable within 30 days after the date of
this prospectus, to purchase,

<PAGE>

from time to time, in whole or in part, up to an aggregate of 2,250,000
additional shares of common stock at the initial public offering price less
underwriting discounts and commissions. The U.S. Underwriters may exercise such
option solely to cover over-allotments, if any, made in connection with the
common stock offerings. To the extent that the U.S. Underwriters exercise such
option, each U.S. Underwriter will become obligated, subject to certain
conditions, to purchase its pro rata portion of these additional shares based on
the U.S. Underwriter's percentage underwriting commitment in the U.S. portion of
the common stock offerings as indicated in the preceding table.

Y&R and the selling stockholders have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act, or
to contribute to payments that the Underwriters may be required to make in
respect of those liabilities.

Each of Y&R, certain of the management investors and certain other
stockholders, including the selling stockholders, who upon completion of the
common stock offerings collectively will hold an aggregate of 34,505,663 shares
and shares subject to vested options, has agreed not to:

o offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock; or

o enter into any swap or other arrangement that transfers all or a
portion of the economic consequences associated with the ownership of
any common stock (regardless of whether any of these transactions are
to be settled by the delivery of common stock, or such other
securities, in cash or otherwise) for a period of 120 days after the
date of this prospectus without the prior written consent of Bear
Stearns and DLJ (and, in the case of management investors, Y&R),

except that:

o Y&R may grant stock options or stock awards under Y&R's existing
benefit or compensation plans;

o Y&R may issue shares of common stock upon the exercise of options,
warrants or rights or the conversion of currently outstanding
securities;

o the H&F investors may transfer shares of common stock to partners or
affiliates thereof in transactions not involving a public offering
provided that each transferee agrees in writing to be bound by the
restrictions set forth in this paragraph; and

o Y&R may issue, offer and sell shares of common stock or securities
convertible, exercisable or exchangeable therefor in transactions not
involving a public offering as consideration for the acquisition, by
merger or otherwise, of one or more entities provided that each
recipient of such securities agrees in writing to be bound by the
restrictions set forth in this paragraph).

In addition, during this period, Y&R has also agreed not to file any
registration statement with respect to, and each of its executive officers,
directors and certain stockholders of Y&R, including the selling stockholders,
has agreed not to make any demand for, or exercise any right with respect to,
the registration of any shares of common stock or any securities convertible
into or exercisable or exchangeable for common stock without the prior written
consent of Bear Stearns and DLJ.

Y&R has agreed with the Underwriters to enforce Y&R's rights under the
foregoing agreements to prohibit transfers of common stock and the making of
demands for registration of common stock. In addition, certain of the management
investors hold an aggregate of 3,664,228 shares of common stock in a deferral
trust under the deferred compensation plan, which shares are not transferable
for a period of at least 120 days.

Under an Agreement Between U.S. Underwriters and International Managers
(the "Intersyndicate Agreement"), each U.S. Underwriter has represented and
agreed that, with certain exceptions:

o it is not purchasing any shares of common stock offered by this
prospectus for the account of anyone other than a United States or
Canadian Person (as defined below); and

<PAGE>

o it has not offered or sold, and will not offer or sell, directly or
indirectly, any shares of common stock offered by this prospectus or
distribute any prospectus relating to such shares of common stock
outside the United States or Canada or to anyone other than a United
States or Canadian Person.

Under the Intersyndicate Agreement, each International Manager has
represented and agreed that, with certain exceptions:

o it is not purchasing any shares of common stock offered by this
prospectus for the account of any United States or Canadian Person; and

o it has not offered or sold, and will not offer or sell, directly or
indirectly, any shares of common stock offered by this prospectus or
distribute any prospectus relating to such shares of common stock in
the United States or Canada or to any United States or Canadian Person.

With respect to any Underwriter that is both a U.S. Underwriter and an
International Manager, the foregoing representations and agreements (1) made by
it in its capacity as a U.S. Underwriter apply only to it in its capacity as a
U.S. Underwriter and (2) made by it in its capacity as an International Manager
apply only to it in its capacity as an International Manager. The foregoing
limitations do not apply to stabilization transactions and to other transactions
specified in the Intersyndicate Agreement. As used herein, "United States or
Canadian Person" means any individual who is resident in the United States or
Canada, or any corporation, pension, profit-sharing or other trust or other
entity organized under or governed by the laws of the United States or Canada or
of any political subdivision thereof, other than the foreign branch of any
United States or Canadian Person, and includes any United States or Canadian
branch of a person other than a United States or Canadian Person.

Under the Intersyndicate Agreement, sales may be made between the
syndicates of U.S. Underwriters and International Managers of a number of the
shares of common stock offered by this prospectus as may be mutually agreed.
Unless otherwise determined by the Representatives, the per share price of any
shares of common stock so sold shall be the initial public offering price set
forth on cover page hereof, in United States dollars, less an amount not greater
than the per share amount of the concession to dealers set forth above.

Under the Intersyndicate Agreement, each U.S. Underwriter has represented
and agreed that:

o it has not offered or sold and will not offer or sell, directly or
indirectly, any shares of common stock offered by this prospectus in
any province or territory of Canada or to, or for the benefit of, any
resident of any province or territory of Canada in contravention of the
securities laws thereof; and

o without limiting the generality of the foregoing, any offer or sale of
such shares of common stock in Canada will be made only under an
exemption from the requirement to file a prospectus in the province or
territory of Canada in which such offer or sale is made.

Each U.S. Underwriter has further agreed to send to any dealer who
purchases from it any shares of common stock offered by this prospectus a notice
stating in substance that by purchasing those shares of common stock that dealer
represents and agrees that:

o it has not offered or sold and will not offer or sell, directly or
indirectly, any of those shares of common stock in any province or
territory of Canada or to, or for the benefit of, any resident of any
province or territory of Canada in contravention of securities laws
thereof;

o any offer or sale of those shares of common stock in Canada will be
made only under an exemption from the requirement to file a prospectus
in the province or territory of Canada in which such offer or sale is
made; and

o it will send to any other dealer to whom it sells any of those shares
of common stock a notice containing substantially the same statement as
is contained in this sentence.

Under the Intersyndicate Agreement, each International Manager has
represented and agreed that:

<PAGE>

o it has not offered or sold and, prior to the date six months after the
closing date for the sale of shares of common stock to the
International Managers under the Underwriting Agreement, will not offer
or sell, any shares of common stock offered by this prospectus to
persons in the United Kingdom except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances which have not resulted and
will not result in an offer to the public in the United Kingdom within
the meaning of the Public Offers of Securities Regulations 1995;

o it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in
relation to the shares of common stock offered by this prospectus in,
from or otherwise involving the United Kingdom; and

o it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the
common stock offerings to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom the
document may otherwise lawfully be issued or passed on.

Under the Intersyndicate Agreement, each International Manager has further
represented and agreed that it has not offered or sold and will not offer or
sell, directly or indirectly, any shares of common stock acquired in connection
with the distribution contemplated by this prospectus in Japan or to or for the
account of any resident thereof, except for offers or sales to Japanese
International Managers or dealers and except under an exemption from the
registration requirements of the Securities and Exchange Law of Japan and
otherwise in compliance with applicable provisions of Japanese law. Each
International Manager has further agreed to send to any dealer who purchases
from it any shares of common stock offered by this prospectus a notice stating
in substance that by purchasing such shares of common stock such dealer
represents and agrees that:

o it has not offered or sold and will not offer or sell, directly or
indirectly, any of those shares of common stock in Japan or to or for
the account of any resident thereof, except for offers or sales to
Japanese International Managers or dealers and except under an
exemption from the registration requirements of the Securities and
Exchange Law of Japan and otherwise in compliance with applicable
provisions of Japanese law; and

o it will send to any other dealer to whom it sells any of such shares of
common stock a notice containing substantially the same statement as is
contained in this sentence.

Other than in the United States, no action has been taken by Y&R, the
selling stockholders or the Underwriters that would permit a public offering of
the shares of common stock offered by this prospectus in any jurisdiction where
action for that purpose is required. The shares of common stock offered by this
prospectus may not be offered or sold, directly or indirectly, nor may this
prospectus or any other offering material or advertisements in connection with
the offer and sale of any such shares of common stock be distributed or
published in any jurisdiction, except under circumstances that will result in
compliance with the applicable rules and regulations of that jurisdiction.
Persons into whose possession this prospectus comes are advised to inform
themselves about and to observe any restrictions relating to the common stock
offerings and the distribution of this prospectus. This prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any shares of
common stock offered by this prospectus in any jurisdiction in which such an
offer or a solicitation is unlawful.

In order to facilitate the common stock offerings, the Underwriters
participating in the common stock offerings may engage in transactions that
stabilize, maintain or otherwise affect the price of the common stock during and
after the common stock offerings. Specifically, the Underwriters may over-allot
or otherwise create a short position in the common stock for their own account
by selling more shares of common stock than have been sold to them by Y&R. The
Underwriters may elect to cover this short position by purchasing shares of
common stock in the open market or by exercising the over-allotment options
granted to the

<PAGE>

Underwriters. In addition, the Underwriters may stabilize or maintain the price
of the common stock by bidding for or purchasing shares of common stock in the
open market and may impose penalty bids, under which selling concessions allowed
to syndicate members or other broker-dealers participating in the common stock
offerings are reclaimed if shares previously distributed in the common stock
offerings are repurchased in connection with stabilization transactions or
otherwise. The effect of these transactions may be to stabilize the market price
of the common stock at a level above that which might otherwise prevail in the
open market. The imposition of a penalty bid may also affect the price of the
common stock to the extent that it discourages resales of the common stock. No
representation is made as to the magnitude or effect of any stabilization or
other transactions. These transactions, if commenced, may be discontinued at any
time.

Bear Stearns and DLJ from time to time perform investment banking and other
financial services for Y&R and its affiliates for which Bear Stearns and DLJ may
receive advisory or transaction fees, as applicable, plus out-of-pocket
expenses, of the nature and in amounts customary in the industry for these
financial services. Alan D. Schwartz, an Executive Vice President and Head of
the Investment Banking Department of Bear Stearns, is a member of the board of
directors. BearTel Corp., a wholly owned subsidiary of The Bear Stearns
Companies Inc., the parent company of Bear Stearns, is a selling stockholder in
the common stock offerings. See "Selling Stockholders."

LEGAL MATTERS

The validity of the shares of common stock offered by this prospectus will
be passed upon for Y&R by Cleary, Gottlieb, Steen & Hamilton, New York, New
York. Certain legal matters in connection with the common stock offerings will
be passed upon for the Underwriters by Skadden, Arps, Slate, Meagher & Flom LLP,
New York, New York.

EXPERTS

The consolidated financial statements as of December 31, 1998 and 1997 and
for each of the three years in the period ended December 31, 1998 included in
this prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on authority of said
firm as experts in auditing and accounting.

AVAILABLE INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-1. This prospectus is a part of the registration statement
and does not contain all of the information set forth in the registration
statement. For further information with respect to Y&R and the common stock, you
should refer to the registration statement. Statements contained in this
prospectus as to the contents of any contract or other document referred to in
this prospectus are not necessarily complete. Where a contract or other document
is an exhibit to the registration statement, each of those statements is
qualified in all respects by the provisions of the exhibit, to which reference
is hereby made.

We are required to file annual, quarterly and current reports, proxy
statements and other information with the Securities and Exchange Commission.
You may review the registration statement, as well as reports and other
information we have filed, without charge at the Commission's public reference
room at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies may also be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates or at the Commission's web site
at http://www.sec.gov. These materials may also be inspected at the offices of
the New York Stock Exchange, 20 Broad Street, New York, New York 10005. For
further information on the operation of the public reference rooms, please call
1-800-SEC-0330. You may also review these statements at the regional offices of
the Commission at 7 World Trade Center, Suite 1300, New York, New York 10048 and
at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois,
60661-2511.

<PAGE>

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Accountants ........................................................ F-2
Consolidated Balance Sheets as of December 31, 1998 and 1997 ............................. F-3
Consolidated Statements of Operations for the three years ended December 31, 1998 ........ F-4
Consolidated Statements of Cash Flows for the three years ended December 31, 1998 ........ F-5
Consolidated Statements of Changes in Equity (Deficit) for the three years ended December
31, 1998 ................................................................................ F-6
Notes to Consolidated Financial Statements ............................................... F-7
Quarterly Financial Information .......................................................... F-26
Financial Statement Schedule II--Valuation and Qualifying Accounts ....................... S-1
</TABLE>

F-1

<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

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

In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of cash flows and of changes in
equity (deficit) present fairly, in all material respects, the financial
position of Young & Rubicam Inc. (the "Company") and its subsidiaries at
December 31, 1998 and 1997, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

PricewaterhouseCoopers LLP
New York, New York
February 16, 1999

F-2

<PAGE>

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1998 1997
-------------- --------------
(IN THOUSANDS, EXCEPT SHARE
AND PER SHARE AMOUNTS)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents ............................................................... $ 122,138 $ 160,263
Accounts receivable, net of allowance for doubtful accounts of $17,938 and $14,125 at
December 31, 1998 and 1997, respectively ............................................... 835,284 790,342
Costs billable to clients ............................................................... 55,187 60,267
Other receivables ....................................................................... 37,177 35,218
Deferred income taxes ................................................................... 46,803 32,832
Prepaid expenses and other assets ....................................................... 25,979 17,989
----------- -----------
Total Current Assets ................................................................... 1,122,568 1,096,911
----------- -----------
NONCURRENT ASSETS
Property and equipment, net ............................................................. 150,413 125,014
Deferred income taxes ................................................................... 158,646 124,192
Goodwill, less accumulated amortization of $84,292 and $80,166 at December 31, 1998
and 1997, respectively ................................................................. 120,075 116,637
Equity in net assets of and advances to unconsolidated companies ........................ 38,397 26,393
Other assets ............................................................................ 45,156 48,660
----------- -----------
Total Noncurrent Assets ................................................................ 512,687 440,896
----------- -----------
Total Assets ........................................................................... $ 1,635,255 $ 1,537,807
=========== ===========
CURRENT LIABILITIES
Loans payable ........................................................................... $ 31,365 $ 10,765
Accounts payable ........................................................................ 1,008,624 861,939
Accrued expenses and other liabilities .................................................. 203,099 235,253
Accrued payroll and bonuses ............................................................. 77,078 65,458
Income taxes payable .................................................................... 19,290 29,665
----------- -----------
Total Current Liabilities .............................................................. 1,339,456 1,203,080
----------- -----------
NONCURRENT LIABILITIES
Loans payable ........................................................................... 31,494 330,552
Deferred compensation ................................................................... 30,635 31,077
Other liabilities ....................................................................... 114,128 119,354
----------- -----------
Total Noncurrent Liabilities ........................................................... 176,257 480,983
----------- -----------
Commitments and Contingencies (Note 19) ..................................................
Minority Interest ........................................................................ 4,573 6,987
----------- -----------
MANDATORILY REDEEMABLE EQUITY SECURITIES
Common stock, par value $.01 per share; authorized--250,000,000 shares; issued
and outstanding--0 shares and 50,658,180 shares at December 31, 1998 and 1997,
respectively ........................................................................... -- 508,471
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT)
Money Market Preferred Stock--cumulative variable dividend; liquidating value
of $115 per share; one-tenth of one vote per share; authorized--50,000 shares; issued
and outstanding--87 shares at December 31, 1998 and 1997 ............................... -- --
Cumulative Participating Junior Preferred Stock--minimum $1.00 dividend;
liquidating value of $1.00 per share; 100 votes per share; authorized--2,500,000
shares; issued and outstanding--0 shares at December 31, 1998 and 1997 ................. -- --
Common stock, par value $.01 per share; authorized--250,000,000 shares; issued and
outstanding--66,374,569 shares and 11,086,950 shares at December 31, 1998 and
1997, respectively (excluding 3,976,941 shares and 1,115,160 shares in treasury) ....... 704 111
Capital surplus ......................................................................... 934,676 23,613
Accumulated deficit ..................................................................... (758,292) (522,866)
Cumulative translation adjustment ....................................................... (10,810) (16,577)
Pension liability adjustment ............................................................ (1,738) (706)
----------- -----------
164,540 (516,425)
Common stock in treasury, at cost ....................................................... (49,571) (8,550)
Unearned compensation--Restricted Stock ................................................. -- (136,739)
----------- -----------
Total Stockholders' Equity (Deficit) ................................................... 114,969 (661,714)
----------- -----------
Total Liabilities, Mandatorily Redeemable Equity Securities and Stockholders'
Equity (Deficit) .................................................................... $ 1,635,255 $ 1,537,807
=========== ===========
</TABLE>

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

F-3

<PAGE>

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

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1998 1997 1996
------------- ------------- -------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Revenues .................................................... $ 1,522,464 $ 1,382,740 $1,222,139
Compensation expense, including employee benefits ........... 903,948 836,150 730,261
General and administrative expenses ......................... 455,578 463,936 391,617
Other operating charges ..................................... 234,449 11,925 17,166
Recapitalization-related charges ............................ -- -- 315,397
----------- ----------- ----------
Operating expenses .......................................... 1,593,975 1,312,011 1,454,441
----------- ----------- ----------
(Loss) income from operations ............................... (71,511) 70,729 (232,302)
Interest income ............................................. 8,315 8,454 10,269
Interest expense ............................................ (26,001) (42,879) (28,584)
Other income ................................................ 2,200 -- --
----------- ----------- ----------
(Loss) income before income taxes ........................... (86,997) 36,304 (250,617)
Income tax (benefit) provision .............................. (2,644) 58,290 (20,611)
----------- ----------- ----------
(84,353) (21,986) (230,006)
Equity in net income (loss) of unconsolidated companies 4,707 342 (9,837)
Minority interest in net (income) loss of consolidated
subsidiaries ............................................... (1,989) (2,294) 1,532
----------- ----------- ----------
Loss before extraordinary charge ............................ (81,635) (23,938) (238,311)
Extraordinary charge for early retirement of debt, net of
tax benefit of $2,834 ...................................... (4,433) -- --
----------- ----------- ----------
Net loss .................................................... $ (86,068) $ (23,938) $ (238,311)
=========== =========== ==========
Loss per share (basic and diluted):
Loss before extraordinary charge ........................... $ (1.34) $ (0.51)
Extraordinary charge ....................................... (0.08) --
----------- -----------
Net loss ................................................... $ (1.42) $ (0.51)
=========== ===========
Weighted average shares outstanding (Note 3) ................ 60,673,994 46,949,355
=========== ===========
</TABLE>

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

F-4

<PAGE>

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

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------
1998
--------------
(IN THOUSANDS)
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................................................... $ (86,068)
Adjustments to reconcile net loss to net cash provided by operating activities:
Recapitalization-related charges ...................................................... --
Depreciation and amortization ......................................................... 60,610
Extraordinary charge, net ............................................................. 4,433
Other operating charges ............................................................... 234,449
Deferred income tax benefit ........................................................... (38,664)
Equity in net (income) loss of unconsolidated companies ............................... (4,707)
Dividends from unconsolidated companies ............................................... 3,467
Minority interest in net income (loss) of consolidated subsidiaries ................... 1,989
Change in assets and liabilities, excluding effects from acquisitions, dispositions,
recapitalization and foreign exchange:
Accounts receivable ................................................................... (29,398)
Costs billable to clients ............................................................. 5,418
Other receivables ..................................................................... (2,346)
Prepaid expenses and other assets ..................................................... (6,702)
Accounts payable ...................................................................... 87,290
Accrued expenses and other liabilities ................................................ (29,374)
Accrued payroll and bonuses ........................................................... 8,869
Income taxes payable .................................................................. (10,652)
Deferred compensation ................................................................. 3,234
Other ................................................................................. (6,233)
-----------
Net cash provided by operating activities .............................................. $ 195,615
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment ................................................... $ (76,378)
Acquisitions, net of cash acquired .................................................... (17,423)
Investment in net assets of and advances to unconsolidated companies .................. (7,072)
Proceeds from notes receivable ........................................................ 1,190
-----------
Net cash used in investing activities .................................................. $ (99,683)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans payable, long-term ................................................ 225,834
Repayment of loans payable, long-term ................................................. (524,883)
Proceeds from loans payable, short-term, net .......................................... 71,997
Proceeds from issuance of common stock in initial public offering, net ................ 158,637
Deferred financing costs .............................................................. (667)
Recapitalization cash contributions ................................................... --
Recapitalization payments ............................................................. --
Payments of non-recapitalization deferred compensation ................................ (3,535)
Common stock/LPUs issued .............................................................. 7,995
Common stock/LPUs repurchased ......................................................... (60,956)
Payment of installment notes, net ..................................................... (8,883)
Other financing activities ............................................................ (1,781)
-----------
Net cash used in financing activities .................................................. $ (136,242)
-----------
Effect of exchange rate changes on cash and cash equivalents ........................... 2,185
Net (decrease) increase in cash and cash equivalents ................................... (38,125)
Cash and cash equivalents, beginning of period ......................................... 160,263
-----------
Cash and cash equivalents, end of period ............................................... $ 122,138
===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid ......................................................................... $ 29,439
===========
Income taxes paid ..................................................................... $ 36,288
===========

NONCASH INVESTING ACTIVITY:
Common stock issued in acquisition .................................................... $ --
===========
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1996
-------------- ---------------
(IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................................................... $ (23,938) $ (238,311)
Adjustments to reconcile net loss to net cash provided by operating activities:
Recapitalization-related charges ...................................................... -- 315,397
Depreciation and amortization ......................................................... 56,721 53,030
Extraordinary charge, net ............................................................. -- --
Other operating charges ............................................................... 11,925 11,096
Deferred income tax benefit ........................................................... (384) (59,671)
Equity in net (income) loss of unconsolidated companies ............................... (342) 9,837
Dividends from unconsolidated companies ............................................... 2,728 2,691
Minority interest in net income (loss) of consolidated subsidiaries ................... 2,294 (1,532)
Change in assets and liabilities, excluding effects from acquisitions,
dispositions, recapitalization and foreign exchange:
Accounts receivable ................................................................... 42,144 (209,518)
Costs billable to clients ............................................................. 15,834 7,784
Other receivables ..................................................................... 13,930 (2,883)
Prepaid expenses and other assets ..................................................... 269 8,776
Accounts payable ...................................................................... 69,324 256,460
Accrued expenses and other liabilities ................................................ (15,368) (7,565)
Accrued payroll and bonuses ........................................................... 2,179 3,192
Income taxes payable .................................................................. 19,352 4,263
Deferred compensation ................................................................. 13,052 4,950
Other ................................................................................. 14,791 20,068
---------- -----------
Net cash provided by operating activities .............................................. $ 224,511 $ 178,064
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment ................................................... $ (51,899) $ (51,792)
Acquisitions, net of cash acquired .................................................... (11,281) (23,887)
Investment in net assets of and advances to unconsolidated companies .................. (5,640) (775)
Proceeds from notes receivable ........................................................ 1,678 360
---------- -----------
Net cash used in investing activities .................................................. $ (67,142) $ (76,094)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans payable, long-term ................................................ 226,770 319,282
Repayment of loans payable, long-term ................................................. (105,870) (252,496)
Proceeds from loans payable, short-term, net .......................................... 20,103 27,849
Proceeds from issuance of common stock in initial public offering, net ................ -- --
Deferred financing costs .............................................................. -- (9,157)
Recapitalization cash contributions ................................................... -- 242,007
Recapitalization payments ............................................................. (247,789) (323,920)
Payments of non-recapitalization deferred compensation ................................ (1,118) (11,624)
Common stock/LPUs issued .............................................................. 10,390 4,163
Common stock/LPUs repurchased ......................................................... (1,500) (8,971)
Payment of installment notes, net ..................................................... -- --
Other financing activities ............................................................ 347 253
---------- -----------
Net cash used in financing activities .................................................. $ (98,667) $ (12,614)
---------- -----------
Effect of exchange rate changes on cash and cash equivalents ........................... (8,619) (822)
Net (decrease) increase in cash and cash equivalents ................................... 50,083 88,534
Cash and cash equivalents, beginning of period ......................................... 110,180 21,646
---------- -----------
Cash and cash equivalents, end of period ............................................... $ 160,263 $ 110,180
========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid ......................................................................... $ 39,986 $ 28,612
========== ===========
Income taxes paid ..................................................................... $ 25,020 $ 20,732
========== ===========

NONCASH INVESTING ACTIVITY:
Common stock issued in acquisition .................................................... $ 1,126 $ --
========== ===========

</TABLE>

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

F-5

<PAGE>

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

<TABLE>
<CAPTION>
LIMITED
NON-VOTING VOTING PARTNERS'
PREFERRED COMMON COMMON CONTRIBUTED CAPITAL
STOCK STOCK STOCK EQUITY SURPLUS
----------- ------------ ----------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995 .............. $ 66 $ 4,000 $ -- $ 2,536 $ 57,103
==== ======== ===== ======== ==========
Net loss .................................. -- -- -- -- --
Foreign currency translation
adjustments .............................. -- -- -- -- --
Minimum pension liability adjustments. -- -- -- -- --
---- -------- ----- -------- ----------
Comprehensive income (loss) .............. -- -- -- -- --
Dividends paid ............................ -- -- -- -- --
Common stock/Limited Partnership
Units issued ............................. 3 -- -- 4,067 13,269
Limited Partnership Units
repurchased/capital distributions ........ -- -- -- (2,370) --
Common stock repurchased .................. (2) -- -- -- (14,699)
Recapitalization redemptions .............. (67) (3,900) -- (1,534) (36,435)
Recapitalization issuances ................ -- -- 427 -- 326,590
Recapitalization exchanges ................ -- (100) 158 (2,914) 122,732
Mandatorily Redeemable Equity
Securities ............................... -- -- (474) -- (362,790)
Equityholder loans ........................ -- -- -- 215 1,055
------ -------- ----- -------- ----------
BALANCE AT DECEMBER 31, 1996 .............. $ -- $ -- $ 111 $ -- $ 106,825
====== ======== ===== ======== ==========
Net loss .................................. -- -- -- -- --
Foreign currency translation
adjustments .............................. -- -- -- -- --
Minimum pension liability adjustments -- -- -- -- --
------ -------- ----- -------- ----------
Comprehensive income (loss) .............. -- -- -- -- --
Common stock issued ....................... -- -- -- -- 1,501
Common stock repurchased .................. -- -- -- -- --
Unearned compensation -- Restricted
Stock .................................... -- -- -- -- 51,739
Common stock options exercised ............ -- -- 44 -- 8,711
Accretion of Mandatorily Redeemable

Equity Securities ........................ -- -- (44) -- (145,163)
------ -------- ----- -------- ----------
BALANCE AT DECEMBER 31, 1997 .............. $ -- $ -- $ 111 $ -- $ 23,613
====== ======== ===== ======== ==========
Net loss .................................. -- -- -- -- --
Foreign currency translation
adjustments .............................. -- -- -- -- --
Minimum pension liability adjustments -- -- -- -- --
------ -------- ----- -------- ----------
Comprehensive income (loss) .............. -- -- -- -- --
Issuance of Restricted Stock .............. -- -- -- -- 94,039
Common stock options exercised and
other .................................... -- -- 17 -- 1,134
Common stock repurchased .................. -- -- -- -- --
Issuance of common stock in initial
public offering, net of expenses ......... -- -- 69 -- 158,568
Accretion of Mandatorily Redeemable
Equity Securities ........................ -- -- (3) -- (137,942)
Conversion of Mandatorily
Redeemable Equity Securities ............. -- -- 510 -- 795,264
------ -------- ------- -------- ----------
BALANCE AT DECEMBER 31, 1998 .............. $ -- $ -- $ 704 $ -- $ 934,676
====== ======== ======= ======== ==========
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
RETAINED AND
UNDISTRIBUTED ACCUMULATED
EARNINGS COMMON OTHER
(ACCUMULATED STOCK IN RESTRICTED COMPREHENSIVE
DEFICIT) TREASURY STOCK INCOME TOTAL
--------------- ------------- -------------- -------------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995 .............. $ 17,636 $ (3,317) $ -- $ (22,539) $ 55,485
=========== ========= =========== ========== ===========
Net loss .................................. (238,311) -- -- -- (238,311)
Foreign currency translation
adjustments .............................. -- -- -- (3,565) (3,565)
Minimum pension liability adjustments. -- -- -- 23,063 23,063
----------- --------- ----------- ---------- -----------
Comprehensive income (loss) .............. (238,311) -- -- 19,498 (218,813)
Dividends paid ............................ (696) -- -- -- (696)
Common stock/Limited Partnership
Units issued ............................. -- 61 -- -- 17,400
Limited Partnership Units
repurchased/capital distributions ........ (3,329) -- -- -- (5,699)
Common stock repurchased .................. (8,863) (123) -- -- (23,687)
Recapitalization redemptions .............. (265,365) 3,379 -- -- (303,922)
Recapitalization issuances ................ -- -- (85,000) -- 242,017
Recapitalization exchanges ................ -- -- -- -- 119,876
Mandatorily Redeemable Equity
Securities ............................... -- -- -- -- (363,264)
Equityholder loans ........................ -- -- -- -- 1,270
----------- --------- ----------- ---------- -----------
BALANCE AT DECEMBER 31, 1996 .............. $ (498,928) $ -- $ (85,000) $ (3,041) $ (480,033)
=========== ========= =========== ========== ===========
Net loss .................................. (23,938) -- -- -- (23,938)
Foreign currency translation
adjustments .............................. -- -- -- (14,255) (14,255)
Minimum pension liability adjustments -- -- -- 13 13
----------- --------- ----------- ---------- -----------
Comprehensive income (loss) .............. (23,938) -- -- (14,242) (38,180)
Common stock issued ....................... -- -- -- -- 1,501
Common stock repurchased .................. -- (8,550) -- -- (8,550)
Unearned compensation -- Restricted
Stock .................................... -- -- (51,739) -- --
Common stock options exercised ............ -- -- -- -- 8,755
Accretion of Mandatorily Redeemable

Equity Securities ........................ -- -- -- -- (145,207)
----------- --------- ----------- ---------- -----------
BALANCE AT DECEMBER 31, 1997 .............. $ (522,866) $ (8,550) $ (136,739) $ (17,283) $ (661,714)
=========== ========= =========== ========== ===========
Net loss .................................. (86,068) -- -- -- (86,068)
Foreign currency translation
adjustments .............................. -- -- -- 5,767 5,767
Minimum pension liability adjustments -- -- -- (1,032) (1,032)
----------- --------- ----------- ---------- -----------
Comprehensive income (loss) .............. (86,068) -- -- 4,735 (81,333)
Issuance of Restricted Stock .............. -- -- 136,739 -- 230,778
Common stock options exercised and
other .................................... -- 19,935 -- -- 21,086
Common stock repurchased .................. -- (60,956) -- -- (60,956)
Issuance of common stock in initial
public offering, net of expenses ......... -- -- -- -- 158,637
Accretion of Mandatorily Redeemable
Equity Securities ........................ (149,358) -- -- -- (287,303)
Conversion of Mandatorily
Redeemable Equity Securities ............. -- -- -- -- 795,774
----------- --------- ----------- ---------- -----------
BALANCE AT DECEMBER 31, 1998 .............. $ (758,292) $ (49,571) $ -- $ (12,548) $ 114,969
=========== ========= =========== ========== ===========
</TABLE>

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

F-6

<PAGE>

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

NOTE (1)--OPERATIONS AND BASIC OF PRESENTATION

NATURE OF OPERATIONS: Young and Rubicam Inc. (the "Company") is a global
marketing and communications enterprise with integrated services in advertising,
perception management and public relations, branding consultation and design,
sales promotion, direct marketing and healthcare communications. The Company
operates in the United States, Canada, Europe, Latin America and Asia/Pacific as
well as through certain affiliations in other parts of the world.

BASIC OF PRESENTATION: On December 12, 1996, the Company effected a
recapitalization (the "Recapitalization") of Young & Rubicam Inc., a New York
corporation (the "Predecessor Company"). As the equity holders prior to the
Recapitalization retained control of the Company, the financial statements
reflect the consolidated financial position, results of operations and cash
flows of the Company on a continuous basis (see Note 6). References herein to
the "Company" refer to the Predecessor Company prior to December 12, 1996 and
Young & Rubicam Inc. thereafter unless the context indicates otherwise. Certain
reclassifications have been made to the prior years' financial statements to
conform to the 1998 presentation.

NOTE (2)--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of the Company, a Delaware corporation, and all subsidiaries in
which it holds a controlling interest, including a Delaware limited partnership,
Young & Rubicam L.P. Investments in affiliates in which the Company has
significant influence, but not a controlling interest, are accounted for under
the equity method. All significant intercompany transactions are eliminated.

CASH EQUIVALENTS: The Company considers all highly liquid instruments with
an initial maturity of three months or less to be cash equivalents at the time
of purchase. The Company records book overdrafts in accounts payable. Accounts
payable included $51.8 million and $41.0 million of book overdrafts as of
December 31, 1998 and 1997, respectively.

REVENUE RECOGNITION: Revenue from advertising and related services is
comprised of commissions and fees derived from billings to clients for media and
production activities. Public relations, sales promotion and other services are
generally billed on the basis of fees. Commission revenue is recognized
primarily when media placements appear on television, on radio or in print and
when labor and production costs are billed. Fee revenue is recognized when
services are rendered.

DEPRECIATION AND AMORTIZATION: Depreciation and amortization are computed
using the straight-line method over the estimated useful life of the respective
asset. Leasehold improvements are amortized over the shorter of their estimated
useful life or the remaining term of the lease. Goodwill is amortized on a
straight-line basis over a period not exceeding forty years.

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

STOCK-BASED COMPENSATION: SFAS No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), encourages entities to account for employee stock
options or similar equity instruments using a fair value approach. However, it
also allows an entity to continue to measure compensation costs using the method
prescribed by Accounting Principles Bulletin ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees." The Company has elected to continue to

F-7

<PAGE>

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

account for such plans under the provisions of APB Opinion No. 25 and has
included, in Note 18, the required SFAS 123 pro forma disclosures of net income
(loss) and earnings (loss) per share as if the fair value-based method of
accounting had been applied.

FOREIGN CURRENCY: Assets and liabilities of certain non-U.S. subsidiaries
are translated at current exchange rates, and related revenues and expenses are
translated at average exchange rates in effect during the period. Resulting
translation adjustments are recorded as a separate component of stockholders'
equity. Financial results of non-U.S. subsidiaries in countries with highly
inflationary economies are translated using a combination of current and
historical exchange rates and recorded in general and administrative expenses.
Net remeasurement losses resulting from operations in highly inflationary
economies were $1.4 million, $2.6 million and $1.7 million in 1998, 1997 and
1996, respectively. Foreign currency transaction gains and losses are also
recorded in general and administrative expenses. The Company recorded net
foreign currency transaction losses of $12 thousand, $1.3 million and $0.9
million in 1998, 1997 and 1996, respectively.

DERIVATIVE FINANCIAL INSTRUMENTS: Derivative financial instruments are used
by the Company principally in the management of its interest rate and foreign
currency exposures. The Company does not hold or issue derivative financial
investments for trading purposes. Gains and losses on hedges of existing assets
and liabilities are included in the carrying amounts of those assets and
liabilities and are ultimately recognized in income as part of those carrying
amounts. Gains and losses related to hedges of firm commitments are also
deferred and included in the basis of the transaction when it is completed.
Amounts to be paid or received under interest rate swap agreements are accrued
as interest and are recognized over the life of the swap agreements as an
adjustment to interest expense.

LONG-LIVED ASSETS: In accordance with SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
management reviews long-lived assets and the related intangible assets for
impairment whenever events or changes in circumstances indicate the carrying
amount of such assets may not be recoverable. Recoverability of these assets is
determined by comparing the forecasted undiscounted net cash flows of the
operation to which the assets relate to the carrying amount, including
associated intangible assets of such operation. If the operation is determined
to be unable to recover the carrying amount of its assets, then intangible
assets are written down first, followed by the other long-lived assets of the
operation, to fair value. Fair value is determined based on discounted cash
flows or appraised values, depending upon the nature of the assets.

CONCENTRATIONS OF CREDIT RISK: The Company's clients are engaged in various
businesses located primarily in North America, Europe, Latin America and
Asia/Pacific. The Company performs ongoing credit evaluations of its clients.
Allowances for credit losses are maintained at levels considered adequate by
management. The Company invests its excess cash in deposits with major banks and
in money market securities. These securities typically mature within 90 days and
are highly rated instruments. Additionally, the Company is dependent upon a
relatively small number of clients who contribute a significant percentage of
revenues. The Company's largest client accounted for approximately 10%, 10% and
9% of consolidated revenues for the years ended December 31, 1998, 1997 and
1996, respectively.

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

RECENT ACCOUNTING PRONOUNCEMENTS: In June 1998, the Financial Accounting
Standards Board issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS

F-8

<PAGE>

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

133"), which is required to be adopted in years beginning after June 15, 1999.
The Company anticipates that the adoption of SFAS 133 will not have a
significant effect on the financial condition of the Company.

NOTE (3)--NET LOSS PER COMMON SHARE

Basic net loss per share is calculated by dividing net loss by the weighted
average shares of common stock outstanding during the years ended December 31,
1998 and 1997. Diluted earnings per share would reflect the dilutive effect of
stock options and other stock awards granted to employees under stock-based
compensation plans in periods where the effect would not be antidilutive.

As of December 31, 1998, there were approximately 30.1 million common stock
options outstanding that could potentially dilute basic earnings per share in
the future that were excluded from the computation of diluted net loss per share
because the effect would be antidilutive.

In computing basic net loss per share for the year ended December 31, 1997,
the Company's 11.1 million shares of restricted stock were excluded from the
weighted average number of common shares outstanding. Such shares vested upon
the consummation of the Company's initial public offering of common stock on May
15, 1998, a condition which was not satisfied at December 31, 1997 (see Note 4).

Earnings per share for the year ended December 31, 1996 cannot be computed
because the Company's capital structure prior to the Recapitalization consisted
of both common shares and limited partnership units in predecessor entities (see
Note 6).

NOTE (4)--INITIAL PUBLIC OFFERING

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

Upon the consummation of the Offering, 9,231,105 shares of common stock
("Restricted Stock") held in a restricted stock trust vested and resulted in
non-recurring, non-cash, pre-tax compensation charges of $234.4 million which
have been reflected as other operating charges in the Company's consolidated
statement of operations for the year ended December 31, 1998. The Company
redeemed the remaining 1,855,845 shares of Restricted Stock held in the
restricted stock trust upon the consummation of the Offering. At December 31,
1997, the Company had recorded unearned compensation of $136.7 million,
representing the fair value of the Restricted Stock.

NOTE (5)--COMMON STOCK DIVIDEND

On April 6, 1998, the Board of Directors declared a stock dividend of 14
shares (the "Stock Dividend") of common stock payable for each share of common
stock outstanding, which dividend became effective and was paid on May 11, 1998,
the effective date of the Registration Statement filed on Form S-1 for the
Offering. The Company's historical financial statements have been presented to
give retroactive effect to the Stock Dividend. In addition, the number of shares
of common stock the Company is authorized to issue was increased from 10,000,000
to 250,000,000 and the number of

F-9

<PAGE>

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

authorized preferred shares was increased from 50,000 to 10,000,000. Of the
authorized preferred shares, 50,000 shares have been designated as Money Market
Preferred Stock and 2,500,000 shares have been designated as Cumulative
Participating Junior Preferred Stock.

NOTE (6)--RECAPITALIZATION

On December 12, 1996, the Recapitalization of Young & Rubicam Inc., a New
York corporation (the "Predecessor Company") was effected, whereby (a) the
Predecessor Company, Young & Rubicam Holdings Inc. ("Holdings"), or subsidiaries
of the Predecessor Company (i) acquired 2,058,678 of the 2,458,102 outstanding
shares of Predecessor Company common stock for an amount equal to $115 per share
less the principal and accrued interest of any outstanding loans relating to
such shares (which loans were thereby repaid), (ii) acquired 760,232 of the
1,869,682 outstanding Limited Partnership Units of the LP ("LPUs") together with
any related subordinated promissory notes of the Predecessor Company for an
amount equal to $115 per LPU less the principal and accrued interest of any
outstanding loans relating to such LPUs (which loans were thereby repaid); (iii)
canceled 332,636 of the 690,249 common stock options and 596,448 of the
1,600,414 LPU options (collectively, the "Nonrollover Options") and all
outstanding Growth Participation Units ("GPUs") for cash consideration of $115
per unit less the aggregate option exercise price and (iv) exchanged for, or
canceled in consideration of, the remaining outstanding common stock, LPUs and
options on common stock and LPUs held by certain members of the management of
the Predecessor Company (the "Management Investors") for 15,815,985 shares of
Holdings common stock and 16,823,565 options on common stock of Holdings
("Rollover Options"); (b) Hellman & Friedman Capital Partners III, L.P. ("HFCP")
and certain other investors contributed $242 million in cash to Holdings in
exchange for 31,566,345 shares of Holdings common stock at a price of $7.67 per
share ($115 per share prior to the Stock Dividend) and 2,598,105 options to
purchase additional shares of Holdings common stock at $7.67 per share ($115 per
share prior to the Stock Dividend) (the "HFCP Options"), and (c) senior secured
credit facilities of $700 million were arranged.

Common stock, LPUs, Nonrollover Options on common stock and LPUs and GPUs
held by non U.S.-based equity holders were acquired or canceled prior to
December 31, 1996. Payment for previously tendered Nonrollover Options and GPUs
of $161.7 million held by U.S.-based equity holders occurred in March 1997.

Under a stockholders' agreement entered into in connection with the
Recapitalization (the "Stockholders' Agreement"), the Management Investors are
required to deposit all Company common stock currently held or acquired in the
future into a voting trust (the "Management Voting Trust") under which all
rights to vote such shares are assigned to certain members of the Company's
senior management as voting trustees.

As the equity holders of the Predecessor Company retained control of the
Company, the transaction has been reported as a recapitalization. The financial
statements reflect the financial position, results of operations and cash flows
of the Company and the Predecessor Company on a continuous basis. The excess of
the Predecessor common stock and LPUs repurchase transaction amount over the
stated amount of the Predecessor common stock and LPUs repurchased has been
reported as a distribution to equity holders and charged to limited partners'
contributed equity, capital surplus and accumulated deficit.

F-10

<PAGE>

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

As a result of the Recapitalization, the Company recorded charges of $315.4
million, primarily related to compensation. A summary of the significant
Recapitalization-related charges include the following:

(1) The cancellation of 1,244,647 GPUs outstanding for cash consideration
of $115 per unit. Compensation expense of $83.1 million represents the
difference between the cash consideration paid to GPU holders and the amount
of previously accrued compensation under the original terms of the GPU plan.

(2) The cancellation of 929,084 Nonrollover Options for cash
consideration. The cash consideration and the associated compensation expense
of $66.6 million represents the difference between the transaction price of
$115 and the $40.2 million aggregate exercise price of the Nonrollover
Options.

(3) Cancellation of the remaining outstanding options and award of
Rollover Options to acquire 16,823,565 shares of Company common stock at an
exercise price of $1.92 per share ($28.75 per share prior to the Stock
Dividend), with certain limited exceptions outside of the United States. As a
result of the change in the terms of the former stock option plan, which
resulted in a new measurement date, the Company recognized compensation
expense of $96.7 million representing the difference between the transaction
price per Rollover Option of $7.67 per share ($115 per share prior to the
Stock Dividend) and the aggregate exercise price of the Rollover Options.

(4) Professional fees and other charges amounted to approximately $69.0
million.

NOTE (7)--EQUITY IN NET ASSETS OF UNCONSOLIDATED COMPANIES

<TABLE>
<CAPTION>
1998 1997 1996
---------------------- ---------------------- -------------------------
EQUITY EQUITY EQUITY
EQUITY IN IN NET EQUITY IN IN NET EQUITY IN IN NET
OWNERSHIP NET INCOME NET INCOME NET INCOME
AFFILIATE INTEREST ASSETS (LOSS) ASSETS (LOSS) ASSETS (LOSS)
- ---------------------------------- --------------- ----------- ---------- ----------- ---------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Dentsu, Y&R Partnerships ......... Generally 50% $ 27,790 $ 2,389 $ 17,510 $ 2,587 $12,954 $ (9,181)
J.M.C. Creatividad Orientada
(Venezuela) ..................... 49% 1,474 412 953 (1,515) 2,471 (2,038)
Prolam (Chile) ................... 30% 3,075 950 2,851 825 2,656 262
Eco S.A. (Guatemala) ............. 40% 2,085 (75) 2,206 96 2,134 26
Cresswell, Munsell, Fultz &
Zirbel (United States) .......... 33% 2,183 500 1,922 508 1,635 624
National Public Relations
(Canada) ........................ 22% 527 (19) 647 98 607 204
Other ............................ 50% or less 1,263 550 304 (2,257) 2,762 266
-------- ------- -------- -------- ------- ---------
$ 38,397 $ 4,707 $ 26,393 $ 342 $25,219 $ (9,837)
======== ======= ======== ======== ======= =========
</TABLE>

F-11

<PAGE>

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

The summarized financial information below represents an aggregation of the
Company's unconsolidated companies.

FINANCIAL INFORMATION

<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
EARNINGS DATA
Revenues ....................... $ 218,973 $ 207,668 $ 238,810
Income from operations ......... 22,320 13,768 22,132
Net income (loss) .............. 15,424 4,347 (16,097)

BALANCE SHEET DATA
Current assets ................. $ 317,916 $ 321,372 $ 348,325
Noncurrent assets .............. 60,624 40,147 33,996
Current liabilities ............ 266,090 287,101 323,406
Noncurrent liabilities ......... 17,023 13,215 11,683
Equity ......................... 95,427 61,203 47,232
</TABLE>

NOTE (8)--ACQUISITIONS AND INVESTMENTS

The Company acquires and makes investments in certain entities related to
its business if it believes it is strategically beneficial to do so. The Company
acquired, both domestically and internationally, full or partial interests in
certain entities and obtained additional interests in certain partially owned
entities for an aggregate purchase price of $17.6 million, $14.7 million and
$26.8 million during 1998, 1997 and 1996, respectively. In 1998, acquisitions
included the Company's purchase of a multi-cultural advertising agency and
certain other assets located in the United States.

In addition, effective January 1, 1997, the Company acquired an additional
37.5% equity interest in the Australian and New Zealand joint ventures with
Dentsu. In consideration for this additional equity interest, the Company
contributed to Dentsu 12.5% of its equity interest in its advertising and direct
marketing agencies in Australia and New Zealand.

NOTE (9)--OTHER OPERATING CHARGES

During 1998, the Company recorded $234.4 million in other operating charges
incurred in connection with the Offering. During 1997 and 1996, the Company
recorded $11.9 million and $17.2 million, respectively, in other operating
charges for certain asset impairment writedowns.

F-12

<PAGE>

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

NOTE (10)--PROPERTY AND EQUIPMENT

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

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------
USEFUL LIVES 1998 1997
--------------------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Land and buildings ........................ 20-40 years $ 29,706 $ 29,716
Furniture, fixtures and equipment ......... 3-10 years 252,673 235,836
Leasehold improvements .................... Shorter of 10 years 93,797 77,804
or life of lease
Automobiles ............................... 3-5 years 5,892 6,609
--------- ---------
382,068 349,965
--------- ---------
Less--Accumulated depreciation and
amortization ............................ 231,655 224,951
--------- ---------
$ 150,413 $ 125,014
========= =========
</TABLE>

During 1998, 1997 and 1996, depreciation expense amounted to $49.2 million,
$47.6 million, and $42.0 million, respectively.

NOTE (11)--INCOME TAXES

The components of (loss) income before income taxes are as follows:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------
1998 1997 1996
--------------- ---------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C>
Domestic .............. $ (127,325) $12,304 $ (242,578)
Foreign ............... 40,328 24,000 (8,039)
----------- ------- -----------
Total ................. $ (86,997) $36,304 $ (250,617)
=========== ======= ===========
</TABLE>

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

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------
1998 1997 1996
------------ ----------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
CURRENT:
Federal .................................. $ 3,938 $ 18,195 $ 16,993
State and local .......................... 3,512 4,220 3,921
Foreign .................................. 28,570 36,259 18,146
--------- --------- ----------
36,020 58,674 39,060
========= ========= ==========
DEFERRED:
Federal .................................. (28,126) 7,547 (51,363)
State and local .......................... (6,415) 2,472 (22,111)
Foreign .................................. (4,123) (10,403) 13,803
--------- --------- ----------
(38,664) (384) (59,671)
--------- --------- ----------
(Benefit) provision for income taxes ..... $ (2,644) $ 58,290 $ (20,611)
========= ========= ==========
</TABLE>

F-13

<PAGE>

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

The reconciliation of the United States statutory rate to the effective
rate is as follows:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------
1998 1997 1996
------------- ---------- -------------
<S> <C> <C> <C>
PERCENT OF (LOSS) INCOME BEFORE INCOME TAXES
United States statutory rate ................................ (35.0)% 35.0% (35.0)%
Effect of Offering* ......................................... 32.1 -- --
State and local income taxes, net of federal tax effect ..... (6.3) 17.1 (4.5)
Foreign income taxed greater than the United States
statutory rate ............................................ 7.2 107.2 15.2
Change in valuation allowance and related components ........ (2.8) (13.1) 5.9
Amortization of goodwill .................................... 0.7 8.5 2.1
Travel, entertainment and other non-deductible expenses . 1.2 6.2 8.4
Other, net .................................................. (0.1) (0.3) (0.3)
----- ----- -----
Consolidated effective tax rate ............................. (3.0)% 160.6% (8.2)%
===== ===== =====
</TABLE>

- ----------
*Represents charges related to the Offering for which the Company has
determined it will receive little or no tax benefit.

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

The components of the Company's net deferred income tax assets are:

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------
1998 1997
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Allowance for doubtful accounts ............ $ 4,274 $ 3,118
Net operating loss carryforwards ........... 45,126 32,797
Deferred compensation ...................... 2,424 1,172
--------- ---------
51,824 37,087
Valuation allowance ........................ (5,021) (4,255)
--------- ---------
Current portion ............................ 46,803 32,832
Deferred compensation ...................... 53,501 40,650
Depreciable and amortizable assets ......... 30,417 30,561
Long-term leases ........................... 7,377 7,436
Postretirement benefits .................... 3,570 3,654
Other non-current items .................... 11,801 11,989
Net operating loss carryforwards ........... 65,300 42,338
Tax credit carryforwards ................... 3,658 3,658
--------- ---------
175,624 140,286
Valuation allowance ........................ (16,978) (16,094)
--------- ---------
Non-current portion ........................ 158,646 124,192
Net deferred income tax assets ............. $ 205,449 $ 157,024
========= =========
</TABLE>

F-14

<PAGE>

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

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

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

The Company is required to provide a valuation allowance against deferred
income tax assets when it is more likely than not that some or all of the
deferred tax assets will not be realized. Valuation allowances of $22.0 million
and $20.4 million were recorded at December 31, 1998 and 1997, respectively. The
valuation allowances represent a provision for uncertainty as to the realization
of certain deferred tax assets, including NOL carryforwards in certain
jurisdictions. The Company has concluded that based upon expected future
results, it is more likely than not that the net deferred tax asset balance will
be realized.

NOTE (12)--WORLDWIDE OPERATIONS

The Company conducts and manages its business using an integrated,
multi-disciplinary approach. It operates as a single agency network, allowing
the Company to centrally manage and utilize its resources. The Company operates
in one business segment: global marketing and communications. Amounts related to
specified geographic areas are as follows:

<TABLE>
<CAPTION>
UNITED STATES EUROPE OTHER TOTAL
--------------- ----------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1998
Revenues ............. $775,700 $532,404 $214,360 $1,522,464
Total assets ......... 844,070 589,128 202,057 1,635,255
1997
Revenues ............. $661,367 $472,225 $249,148 $1,382,740
Total assets ......... 697,250 582,424 258,133 1,537,807
1996
Revenues ............. $571,155 $444,644 $206,340 $1,222,139
Total assets ......... 819,828 533,318 245,666 1,598,812
</TABLE>

NOTE (13)--EMPLOYEE BENEFITS

The Company has a defined benefit pension plan ("the Plan") that covers all
full-time U.S. employees upon commencement of employment. Contributions to the
Plan are based upon current costs and prior service costs. Both costs are
actuarially computed and the latter are amortized over the average remaining
service period. Effective July 1, 1996, the Predecessor Company amended the
Plan. Benefits credited to each employee's account under the Plan are based on
3.2% of the employee's annual compensation up to $150,000. The Plan also credits
each employee's account with interest based on the average one-year U.S.
Treasury Bill interest rate multiplied by the account balance at the beginning
of the year. Subject to certain limitations, most vested retirement benefits

F-15

<PAGE>

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

available under the Plan are insured by the Pension Benefit Guaranty Corporation
("PBGC"). The Company is in compliance with the minimum funding standards
required by the Employee Retirement Income Security Act of 1974 ("ERISA").

Total contributions to the Plan made in 1998 and 1997 were $10.0 million
and $6.6 million, respectively. Pursuant to an agreement with the PBGC, the
Company has also agreed to make contributions to the Plan in an amount required
to cause the credit balance at the end of each Plan year to be at least equal to
$12.5 million plus interest. The Company is not required to make any payment
that would not be deductible under Internal Revenue Code section 404. The
Company's credit balance maintenance requirement terminates when the Company's
debt obtains specified rating levels (or, if there are no such ratings from
certain major ratings agencies, when the Company meets a fixed charge coverage
ratio test), but in no event earlier than December 31, 2001. In addition, such
credit balance maintenance requirements terminate if the Plan's unfunded benefit
liabilities are zero at the end of two consecutive Plan years.

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

A summary of the components of net periodic pension costs for the defined
benefit plans is as follows:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1998 1997
------------------------------------ --------------------------------
U.S. NON-U.S. TOTAL U.S. NON-U.S. TOTAL
------------ ---------- ------------ ---------- ---------- ----------
(IN THOUSANDS)

<S> <C> <C> <C> <C> <C> <C>
Service costs for benefits
earned during the period $ 3,801 $ 543 $ 4,344 $ 2,671 $ 550 $ 3,221
Interest costs on projected
benefit obligation ........... 9,151 722 9,873 8,804 789 9,593
Expected return on plan
assets ....................... (10,263) -- (10,263) (9,281) -- (9,281)
Amortization of prior
service benefit .............. (411) -- (411) (411) -- (411)
Amortization of transition
(asset)/obligation ........... (61) 80 19 (61) 82 21
Recognized actuarial loss ..... 1,910 69 1,979 1,057 68 1,125
---------- ------- ---------- -------- ------- --------
Net periodic pension cost
of the plans ................. $ 4,127 $ 1,414 $ 5,541 $ 2,779 $ 1,489 $ 4,268
========== ======= ========== ======== ======= ========

<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------
1996
--------------------------------
U.S. NON-U.S. TOTAL
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Service costs for benefits
earned during the period $ 2,834 $ 674 $ 3,508
Interest costs on projected
benefit obligation ........... 8,488 893 9,381
Expected return on plan
assets ....................... (7,561) -- (7,561)
Amortization of prior
service benefit .............. (107) -- (107)
Amortization of transition
(asset)/obligation ........... (61) 96 35
Recognized actuarial loss ..... 2,327 92 2,419
-------- ------- --------
Net periodic pension cost
of the plans ................. $ 5,920 $ 1,755 $ 7,675
======== ======= ========
</TABLE>

F-16

<PAGE>

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

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

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------------
1998
----------------------------------------
U.S. NON-U.S. TOTAL
------------ -------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year ................ $ 130,036 $ 10,753 $ 140,789
Service costs ......................................... 3,801 543 4,344
Interest costs ........................................ 9,151 722 9,873
Foreign currency exchange rate loss/(gain) ............ -- 888 888
Actuarial loss/(gain) ................................. 6,958 716 7,674
Benefits paid ......................................... (11,530) (717) (12,247)
--------- ---------- ---------
Benefit obligation at end of year ...................... 138,416 12,905 151,321
--------- ---------- ---------
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year,
primarily fixed income and equity securities .......... 129,421 -- 129,421
Actual return on plan assets .......................... 11,309 -- 11,309
Company contributions ................................. 10,000 717 10,717
Benefits paid ......................................... (11,530) (717) (12,247)
--------- ---------- ---------
Fair value of plan assets at end of year ............... 139,200 -- 139,200
--------- ---------- ---------
Funded status .......................................... 784 (12,905) (12,121)
Unrecognized net transition (asset) obligation ......... (103) 425 322
Unrecognized prior service benefit ..................... (2,131) -- (2,131)
Unrecognized net loss .................................. 20,354 2,029 22,383
Additional liability ................................... -- (1,738) (1,738)
--------- ---------- ---------
Prepaid (accrued) pension costs for defined benefit
plans ................................................. $ 18,904 $ (12,189) $ 6,715
========= ========== =========

<CAPTION>
AS OF DECEMBER 31,
--------------------------------------
1997
--------------------------------------
U.S. NON-U.S. TOTAL
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year ................ $ 114,710 $ 12,198 $ 126,908
Service costs ......................................... 2,671 550 3,221
Interest costs ........................................ 8,804 789 9,593
Foreign currency exchange rate loss/(gain) ............ -- (1,770) (1,770)
Actuarial loss/(gain) ................................. 10,874 (241) 10,633
Benefits paid ......................................... (7,023) (773) (7,796)
--------- --------- ---------
Benefit obligation at end of year ...................... 130,036 10,753 140,789
--------- --------- ---------
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year,
primarily fixed income and equity securities .......... 114,264 -- 114,264
Actual return on plan assets .......................... 15,558 -- 15,558
Company contributions ................................. 6,622 773 7,395
Benefits paid ......................................... (7,023) (773) (7,796)
--------- --------- ---------
Fair value of plan assets at end of year ............... 129,421 -- 129,421
--------- --------- ---------
Funded status .......................................... (615) (10,753) (11,368)
Unrecognized net transition (asset) obligation ......... (164) 471 307
Unrecognized prior service benefit ..................... (2,542) -- (2,542)
Unrecognized net loss .................................. 16,352 1,260 17,612
Additional liability ................................... -- (706) (706)
--------- --------- ---------
Prepaid (accrued) pension costs for defined benefit
plans ................................................. $ 13,031 $ (9,728) $ 3,303
========= ========= =========
</TABLE>

Assumptions used were:

<TABLE>
<CAPTION>
WEIGHTED-AVERAGE ASSUMPTIONS AS OF DECEMBER 31,
-------------------------------------------------------------------------------------
1998 1997 1996
-------------------------- --------------------------- --------------------------
U.S. NON-U.S. U.S. NON-U.S. U.S. NON-U.S.
--------- -------------- ---------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Discount and settlement rate ......... 7.0% 5.5%-6.0% 7.25% 6.5%-7.0% 8.0% 7.0%-8.0%
Rate of increase in compensation
levels .............................. 5.0% 2.5%-4.0% 5.0% 3.5%-5.0% 5.5% 3.5%-5.0%
Expected long-term rate of return on
assets .............................. 9.0% N/A 9.0% N/A 9.0% N/A
</TABLE>

The Company recorded liabilities of $1.7 million and $0.7 million at
December 31, 1998 and 1997, respectively, for the portion of its unfunded
pension liabilities that had not been recognized as expense with corresponding
adjustments to equity.

Contributions to foreign defined contribution plans were $7.2 million, $7.5
million and $6.2 million in 1998, 1997 and 1996, respectively.

The Company also has an employee savings plan that qualifies as a deferred
salary arrangement under section 401(k) of the Internal Revenue Code. Under the
plan, participating U.S. employees may defer a portion of their pre-tax earnings
up to the Internal Revenue Service annual contribution limit. The Company
currently matches 100% of each employee's contribution up to a maximum of 5% of
the employee's earnings up to $150,000. Amounts expensed by the Company for its
contributions to the plan were $8.4 million, $7.8 million and $7.0 million in
1998, 1997 and 1996, respectively.

F-17

<PAGE>

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

At December 31, 1998 and 1997, other non-current liabilities include $8.6
million and $7.9 million relating to postretirement and postemployment benefits
other than pensions.

The Company maintains certain deferred cash incentive plans which are
either tied to operating performance or contractual deferred compensation
agreements. The costs of these compensation plans were expensed over the
applicable service period. At December 31, 1998 and 1997, included in
non-current liabilities were deferred compensation liabilities of $30.6 million
and $31.1 million, respectively.

NOTE (14)--INSTALLMENT PAYMENT OBLIGATIONS

Effective through the closing of the Offering, pursuant to the
Stockholders' Agreement, the Company was able, at its election, to pay for
shares purchased from Management Investors pursuant to a call or put at the
applicable call price or applicable put price in up to four equal installments.
Pursuant to the Stockholders' Agreement, effective at the time of the Offering,
the Company no longer had the right or obligation to pay for shares purchased
from Management Investors pursuant to a call or put. The Company also
accelerated the payment of substantially all of the outstanding installment
notes to June 30, 1998. At December 31, 1998, other current and non-current
liabilities include installment notes payable of $0.7 million and $0.4 million,
respectively. At December 31, 1997, other current and non-current liabilities
include installment notes payable of $3.2 million and $6.5 million,
respectively.

NOTE (15)--LOANS PAYABLE

The Company's short term loans payable are primarily advances under bank
lines of credit and generally bear interest at prevailing market rates. The
Company's current loans payable of $31.4 million and $10.8 million include
short-term portions of long-term loans payable of $0.5 million and $1.2 million
at December 31, 1998 and 1997, respectively.

Long-term loans payable are comprised of the following at December 31:

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------
1998 1997
----------- ------------
(IN THOUSANDS)
<S> <C> <C>
Unsecured revolving credit facility ......... $ 31,460 $ --
Senior secured credit facility .............. -- 330,552
Capital lease obligations ................... 34 404
Other borrowings ............................ 462 818
-------- ---------
31,956 331,774
Less -- Current portion ..................... 462 1,222
-------- ---------
$ 31,494 $ 330,552
======== =========

</TABLE>

On May 15, 1998, the Company entered into a $400 million, five-year
unsecured multicurrency revolving credit facility (the "Credit Facility") and
used the net proceeds from the Offering together with $155 million of borrowings
under the Credit Facility to repay all outstanding borrowings outstanding under
its then existing $700 million senior secured credit facility. Approximately
$7.3 million of unamortized deferred financing costs related to the replaced
credit facility were charged to expense and have been reflected as an
extraordinary charge, net of an applicable tax benefit of approximately $2.8
million, in the Company's consolidated statement of operations for the year
ended December 31, 1998.

The Credit Facility permits borrowings of up to $400 million. Amounts due
under the Credit Facility are required to be repaid on May 15, 2003. The Company
is required to pay varying rates of interest, generally based on LIBOR plus an
applicable margin ranging from 0.275% to 0.3%

F-18

<PAGE>

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

depending on its leverage ratio, or the Federal Funds Rate plus 0.5%. The
Company is also required to pay a facility fee depending on its leverage ratio
ranging from 0.125% and 0.2% per annum. In 1998, the total facility fee under
the Credit Facility was $0.4 million.

Under the Credit Facility, the Company is subject to certain financial and
operating restrictions and covenant requirements, including a maximum leverage
ratio and a minimum interest coverage requirement.

At December 31, 1998 and 1997, the Company had entered into interest rate
protection agreements with respect to $31.5 million and $275 million of its
indebtedness, respectively, which expire at various times through 2001 and
result in the Company paying, on a quarterly basis, fixed interest amounts from
6.0% to 6.5%. The weighted average interest rate on outstanding debt, including
the effect of interest rate swap contracts, was 6.27% and 6.875% for the years
ended December 31, 1998 and 1997, respectively.

The interest expense amount for the year ended December 31, 1996 includes
prepayment penalties of $2.9 million related to certain prior outstanding
indebtedness.

At December 31, 1998, the Company had $543 million in availability under
its commercial lines of credit ($435 million in the United States and $108
million outside the United States). Unused commercial lines of credit at
December 31, 1998 were $480 million. The Company has no obligation to pay
commitment fees on the Credit Facility. During 1998, the Company paid commitment
fees of approximately $0.1 million on the unused portion of the replaced credit
facility. At December 31, 1997, the Company had $690 million in availability
under its commercial lines of credit ($449 million in the United States and $241
million outside the United States). Unused commercial lines of credit at
December 31, 1997 were $349 million. The Company paid commitment fees of
approximately $0.9 million in 1997.

NOTE (16)--EQUITY

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

<TABLE>
<CAPTION>
VOTING NON-VOTING LIMITED
PREFERRED COMMON COMMON PARTNERSHIPS COMMON STOCK
STOCK STOCK STOCK UNITS IN TREASURY
----------- --------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
BALANCE JANUARY 1, 1996 .......... 1,324 -- 16,000,000 2,032,010 13,266,072
----- -- ---------- --------- ----------
Issued ........................... 67 -- -- 83,993 (215,907)
Repurchased ...................... -- -- -- (246,321) 491,733
Recapitalization ................. (1,391) 58,469,280 (16,000,000) (1,869,682) (13,541,898)
------ ---------- ----------- ---------- -----------
BALANCE DECEMBER 31, 1996 ........ -- 58,469,280 -- -- --
------ ---------- ----------- ---------- -----------
Issued ........................... -- 4,391,010 -- -- --
Repurchased ...................... -- (1,115,160) -- -- 1,115,160
------ ---------- ----------- ---------- -----------
BALANCE DECEMBER 31, 1997 ........ -- 61,745,130 -- -- 1,115,160
------ ---------- ----------- ---------- -----------
Issued -- Offering ............... -- 6,912,730 -- -- --
Issued -- Option Exercises ....... -- 2,178,436 -- -- (1,599,946)
Restricted Stock Redeemed ........ -- (1,855,845) -- -- 1,855,845
Repurchased ...................... -- (2,605,882) -- -- 2,605,882
------ ---------- ----------- ---------- -----------
BALANCE DECEMBER 31, 1998 ........ -- 66,374,569 -- -- 3,976,941
====== ========== =========== ========== ===========
</TABLE>

The preferred stock of the Predecessor Company was owned by members of the
Predecessor Company's Board of Directors. On December 12, 1996, all outstanding
Predecessor Company equity was purchased for cash or exchanged for Company
common stock pursuant to the Recapitalization.

F-19

<PAGE>

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

In addition, all outstanding Predecessor Company options were canceled for cash
consideration or the award of Company options and all outstanding GPUs were
canceled for cash consideration (see Note 6). In addition, all treasury shares
were retired.

In connection with the consummation of the Recapitalization in December
1996, the Company created a class of preferred stock designated as Money Market
Preferred Stock (the "Money Market Preferred"). The Money Market Preferred
carries a variable rate dividend and is redeemable at the Company's election for
$115.00 per share following the fifth anniversary of the issuance thereof. At
December 31, 1998 and 1997, 50,000 shares of Money Market Preferred were
authorized and 87 shares were issued and outstanding.

NOTE (17)--MANDATORILY REDEEMABLE EQUITY SECURITIES

Concurrent with the Recapitalization, the Company entered into a
stockholders' agreement which included both put rights and calls on the
Company's common stock. Effective at the time of the Offering, such call and put
provisions were terminated and, accordingly, the carrying value of such
mandatorily redeemable equity securities was reclassified to stockholders'
equity. The carrying value of the mandatorily redeemable equity securities held
by the Management Investors was equivalent to the redemption value of $12.33 per
share at December 31, 1997. The carrying value of the mandatorily redeemable
equity securities for common shares held by HFCP was being accreted to
redemption value over the six-year period from the date of the Recapitalization.
Accordingly, the carrying value of mandatorily redeemable equity securities held
by HFCP was $8.47 per share at December 31, 1997.

NOTE (18)--OPTIONS

The Company has adopted the Young & Rubicam Inc. 1997 Incentive
Compensation Plan (the "ICP"). The ICP superseded the pre-existing stock option
plan maintained by the Company (the "Stock Option Plan"); however, all awards
granted under the Stock Option Plan will remain outstanding in accordance with
their terms and will be subject to the Stock Option Plan.

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

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

Generally, options granted under the ICP become exercisable over a
three-year vesting period beginning on the three-year anniversary of the date of
grant and expire ten years from the date of grant. However, the Board of
Directors may, at its discretion, accelerate the exercisability, the lapsing

F-20

<PAGE>

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

of restrictions, or the expiration of deferral or vesting periods of any award,
and such accelerated exercisability, lapse, expiration and vesting shall occur
automatically in the case of a "change in control" of the Company except to the
extent otherwise provided in the award agreement. In addition, the Board of
Directors may provide that the performance goals relating to any
performance-based awards will be deemed to have been met upon the occurrence of
any change in control.

At the closing of the Recapitalization, the Board of Directors granted the
Rollover Options which were immediately vested and exercisable. Each Rollover
Option has an exercise price of $1.92 per share, with certain limited exceptions
outside of the United States. Of the Rollover Options, 50% have a term of five
years and the remaining 50% have a term of seven years. In connection with the
issuance of the Rollover Options, the Company recognized compensation expense of
$96.7 million.

At the closing of the Recapitalization, the Board of Directors granted to
employees options to purchase 5,200,590 shares of Company common stock at $7.67
per share. In addition, from the closing of the Recapitalization through
December 31, 1997, the Board of Directors granted additional options to purchase
1,891,200 shares of Company common stock at $7.67 per share (the "Additional
Options"). As a result of the granting of the Additional Options, during 1997
the Company recognized a compensation charge of $1.3 million reflecting the
difference between the estimated fair market value of Company common stock on
the date of grant and the exercise price of the Additional Options. All options
granted to employees in connection with the Recapitalization were pursuant to
and are governed by the Stock Option Plan.

Additionally, at the closing of the Recapitalization, the Company granted
to HFCP options to purchase 2,598,105 shares of Company common stock at $7.67
per share which were exercisable immediately and expire on the seventh
anniversary of the closing. The HFCP Options are not governed by the Stock
Option Plan.

The Company has adopted SFAS 123 (see Note 2). In accordance with the
provisions of SFAS 123, the Company applies APB Opinion No. 25, and related
interpretations, in accounting for its plans. If the Company had elected to
recognize compensation expense based upon the fair value at the grant date for
awards under its plans consistent with the methodology prescribed by SFAS 123,
the Company's net loss would be increased by $7.8 million, $6.3 million and $9.4
million for the years ended December 31, 1998, 1997 and 1996, respectively, and
the net loss per common share would be increased by $0.13 for each of the years
ended December 31, 1998 and 1997.

F-21

<PAGE>

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

These SFAS 123 pro forma amounts may not be representative of future
disclosures since the estimated fair value of stock options is amortized to
expense over the vesting period, and additional options may be granted in future
years. The fair value for these options was estimated at the date of grant using
the Black-Scholes option-pricing model with the following assumptions for the
years ended December 31, 1998, 1997 and 1996, respectively:

<TABLE>
<CAPTION>
1998 1997 1996
---------------- ---------------- ----------------
<S> <C> <C> <C>
Expected term ................ 6 years 10 years 5-10 years
Risk-free rate ............... 4.26%-5.84% 5.59%-7.12% 5.92%-6.61%
Dividend yield ............... 0% 0% 0%
Expected volatility .......... 24.90% 0% 0%
</TABLE>

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

The weighted-average fair value and weighted average exercise price of
options granted on and subsequent to the Recapitalization for which the exercise
price equals the fair value of Company common stock on the grant date was $5.25
and $22.59 in 1998, respectively, $5.28 and $12.33 in 1997, respectively, and
$3.69 and $7.67 in 1996, respectively. The weighted-average fair value and
weighted average exercise price of options granted prior to the Recapitalization
for which the exercise price equals the fair value of Company common stock on
the grant date was $13.28 and $47.14 in 1996, respectively.

In 1997 and 1996, the Company granted options to certain executives at
exercise prices below the fair value of Company common stock on the date of
grant. The weighted-average fair value and weighted-average exercise price of
these options was $6.76 and $7.67 in 1997, respectively, and $6.30 and $1.97 in
1996, respectively.

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

F-22

<PAGE>

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Transactions involving options are summarized as follows:

<TABLE>
<CAPTION>
OPTIONS WEIGHTED-AVERAGE
OUTSTANDING* EXERCISE PRICE*
-------------- -----------------
<S> <C> <C>
JANUARY 1, 1996 ......................... 2,426,108 $ 42.99
--------- ---------
Granted ................................ 284,773 47.14
Exercised .............................. (252,278) 41.94
Cancellations .......................... (167,940) 42.83
Recapitalization cancellations ......... (2,290,663) 43.64
Recapitalization grants ................ 24,622,260 3.76
---------- ---------
DECEMBER 31, 1996 ....................... 24,622,260 3.76
---------- ---------
Granted ................................ 11,469,150 11.56
Exercised .............................. (4,250,790) 2.19
Cancellations .......................... (827,415) 4.50
---------- ---------
DECEMBER 31, 1997 ....................... 31,013,205 6.84
---------- ---------
Granted ................................ 2,472,933 22.59
Exercised .............................. (2,178,436) 3.10
Cancelled .............................. (1,230,060) 10.81
---------- ---------
DECEMBER 31, 1998 ....................... 30,077,642 $ 8.23
========== =========
</TABLE>

- ----------
* Options outstanding and related weighted-average exercise prices prior to the
Recapitalization have not been retroactively adjusted for the Stock Dividend.

At December 31, 1998, 1997 and 1996, the Company had exercisable options of
14,963,354, 17,242,995, and 21,501,900, respectively.

The following information is as of December 31, 1998:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------- ---------------------------
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
NUMBER REMAINING AVERAGE NUMBER AVERAGE
OUTSTANDING CONTRACTUAL EXERCISE EXERCISABLE EXERCISE
RANGE OF EXERCISE PRICES AT 12/31/98 LIFE PRICE AT 12/31/98 PRICE
- --------------------------- ------------- ------------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C>
$ 1.92 .................... 10,563,983 4.11 $ 1.92 10,563,983 $ 1.92
$ 7.67 .................... 8,297,586 7.24 7.67 4,369,371 7.67
$ 12.00 -- $15.00 ......... 9,734,850 9.11 12.46 30,000 12.33
$ 25.00 -- $31.00 ......... 1,481,223 9.95 28.55 -- --
---------- ---- -------- ---------- --------
Total ..................... 30,077,642 6.88 $ 8.23 14,963,354 $ 3.62
========== ==== ======== ========== ========
</TABLE>

NOTE (19)--LITIGATION, COMMITMENTS AND CONTINGENT LIABILITIES

The Company has performed, and continues to perform, services for clients
in a wide range of businesses, including tobacco products manufacturers. As a
result, the Company may from time to time be joined as a defendant in litigation
brought against its clients and others by third parties, including its
competitors, governmental and regulatory bodies, or consumers, alleging that
advertising claims made through the Company with respect to such clients'
products are false, deceptive or misleading; that such clients' products are
defective, injurious or pose some manner of threat to the public generally; or
that marketing or communications materials created for such clients infringe
upon the proprietary rights of third parties. The Company's practice is to
attempt to minimize such potential liabilities through insurance coverage and/or
indemnification provisions in its agreements with clients and others.

F-23

<PAGE>

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

The Company is also named as party in litigation matters which arise from
time to time in the ordinary course of its business, including without
limitation claims by former employees for money damages and other relief based
upon the circumstances or consequences of their separation from employment. The
Company believes that it has meritorious defenses to these claims, and is
contesting such claims vigorously. In addition, the Company is covered by
insurance with respect to some of such claims. Accordingly, the Company does not
expect such current matters to have a material adverse effect on its
consolidated financial position, results of operations or cash flows.

Net rental expense was $75.5 million, $74.4 million, and $62.9 million in
1998, 1997 and 1996, respectively. Future minimum rental commitments as of
December 31, 1998 are as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1999 ................ $ 68,060
2000 ................ 54,613
2001 ................ 50,137
2002 ................ 47,056
2003 ................ 41,114
Thereafter .......... 131,018

</TABLE>

Certain leases contain renewal options calling for increased rentals.
Others contain certain escalation clauses relating to taxes and other operating
expenses.

The Company had outstanding guarantees of $8.6 million and $7.6 million at
December 31, 1998 and 1997, respectively, primarily in support of credit lines
of unconsolidated companies.

The Company and its corporate affiliates conduct business in various
developing countries in Asia, Africa, Latin America and Eastern Europe, where
the systems and bodies of commercial law and trade practices arising thereunder
are in a continuing state of evolution. Commercial laws in such countries are
often vague, arbitrary, contradictory, inconsistently administered and
retroactively applied. Under such circumstances, it is difficult for the Company
to determine with certainty at all times the exact requirements of such local
laws. Nevertheless, the Company believes that any difficulty in compliance with
local laws in such developing countries will not have a materially adverse
impact on the consolidated financial position, results of operations or cash
flows of the Company.

NOTE (20)--FAIR VALUE OF FINANCIAL INSTRUMENTS AND HEDGING ACTIVITY

At December 31, 1998 and 1997, the carrying value of the Company's
financial instruments approximated fair value in all material respects.

The Company enters into interest rate protection agreements with
off-balance sheet risk in order to reduce its exposure to changes in interest
rates on its variable rate long-term debt. These interest rate protection
agreements included interest rate swaps, interest rate floors and interest rate
caps. At December 31, 1998 and 1997, the Company had entered into interest rate
protection agreements with respect to $31.5 million and $275 million of its
indebtedness.

The Company enters into forward foreign exchange contracts to hedge certain
assets and liabilities which are recorded in a currency different from that in
which they settle. These contracts are generally entered into in order to hedge
intercompany transactions. Gains and losses on these contracts generally offset
losses and gains on the related foreign currency denominated intercompany
transactions. The gains and losses on these positions are deferred and included
in the basis of the transaction upon settlement. The terms of these contracts
are generally a one-month maturity. At December 31, 1998, the Company had
contracts for the sale of $19.4 million and the purchase of $6.1 million of
foreign currencies at fixed rates, compared to contracts for the sale of $18.5
million and the purchase of $12.8 million of foreign currencies at December 31,
1997.

F-24

<PAGE>

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

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

NOTE (21) -- SUBSEQUENT EVENTS (UNAUDITED)

ACQUISITION: On April 5, 1999, the Company announced that it had agreed to
acquire KnowledgeBase Marketing, Inc. ("KBM"), a leading customer relationship
marketing service that specializes in gathering and analyzing marketing data, in
a stock and cash transaction valued at approximately $175 million. The Company
expects to issue approximately 2.1 million shares of common stock in connection
with this transaction. The transaction is expected to close in the second
quarter of 1999.

CASH DIVIDEND: On April 29, 1999, the Board of Directors of the Company
declared a quarterly cash dividend of $0.025 per common share, payable on June
15, 1999 to all stockholders of record as of June 1, 1999.

F-25

<PAGE>

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>
EARNINGS PER SHARE
INCOME (LOSS) BEFORE EXTRAORDINARY
INCOME (LOSS) BEFORE CHARGE COMMON STOCK
FROM EXTRAORDINARY ----------------------- NET INCOME -------------------
QUARTER REVENUES OPERATIONS CHARGE BASIC DILUTED (LOSS) HIGH LOW
- ------------------- ------------ --------------- --------------- ----------- ----------- ------------- ---------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1998
1st ............... $ 348,173 $ 25,333 $ 12,190 $ 0.24 $ 0.19 $ 12,190 $ -- $ --
2nd(1)(2) ......... 372,128 (190,472) (145,391) (2.45) (2.45) (149,824) 33 1/16 26 1/2
3rd ............... 375,419 42,178 24,306 0.36 0.29 24,306 35 7/8 28 3/8
4th ............... 426,744 51,450 27,260 0.41 0.34 27,260 33 5/8 19 3/4
---------- ---------- ---------- ----------
Year .............. 1,522,464 (71,511) (81,635) (1.34) (1.34) (86,068) 35 7/8 19 3/4
========== ========== ========== ==========
1997
1st ............... $ 298,206 $ 14,093 $ 4,089 $ 0.09 $ 0.07 $ 4,089
2nd ............... 345,474 35,156 13,516 0.29 0.22 13,516
3rd ............... 333,387 (4,302) (5,700) (0.12) (0.12) (5,700)
4th ............... 405,673 25,782 (35,843) (0.77) (0.77) (35,843)
---------- ---------- ---------- ----------
Year .............. 1,382,740 70,729 (23,938) (0.51) (0.51) (23,938)
========== ========== ========== ==========
</TABLE>

- ----------
(1) Income from operations for the second quarter of 1998 includes $234.4
million of non-recurring, non-cash, pre-tax compensation charges recognized
upon the consummation of the Offering resulting from the vesting of shares
of restricted stock allocated to employees. Net income for the second
quarter of 1998 also includes an extraordinary charge of $4.4 million, which
is net of a tax benefit of $2.8 million, due to the write-off of unamortized
deferred financing costs related to the Company's replaced credit facility.

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

F-26

<PAGE>

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADDITIONS
-----------------------------
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND CHARGED TO END OF
DESCRIPTION OF PERIOD EXPENSES OTHER ACCOUNTS DEDUCTIONS PERIOD
- ----------------------------------------- ------------ ------------ ---------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998
Allowance for Doubtful Accounts ......... $14,125 $ 9,404 -- $ 5,591 $17,938
======= ======= == ======= =======

YEAR ENDED DECEMBER 31, 1997
Allowance for Doubtful Accounts ......... $ 9,849 $14,269 -- $ 9,993 $14,125
======= ======= == ======= =======

YEAR ENDED DECEMBER 31, 1996
Allowance for Doubtful Accounts ......... $11,526 $11,411 -- $13,088 $ 9,849
======= ======= == ======= =======
</TABLE>

S-1

<PAGE>

========================================================================================
NO DEALER, SALESPERSON OR OTHER PERSON IS
AUTHORIZED TO GIVE ANY INFORMATION OR TO
REPRESENT ANYTHING NOT CONTAINED IN THIS
PROSPECTUS. YOU MUST NOT RELY ON ANY [GRAPHIC OMITTED]
UNAUTHORIZED INFORMATION OR REPRESENTATIONS.
THIS PROSPECTUS IS AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ONLY THE SHARES
OFFERED BY THIS PROSPECTUS, BUT ONLY UNDER 15,000,000 SHARES
CIRCUMSTANCES AND IN JURISDICTIONS WHERE IT IS COMMON STOCK
LAWFUL TO DO SO. THE INFORMATION CONTAINED IN
THIS PROSPECTUS IS CURRENT ONLY AS OF ITS DATE. -----------
PROSPECTUS
----------------- -----------
TABLE OF CONTENTS
-----------------

PAGE
----
Prospectus Summary ........................ 1
Risk Factors .............................. 7
Recent Developments ....................... 14
Use of Proceeds ........................... 15
Price Range of Common Stock and BEAR, STEARNS & CO. INC.
Dividend Policy ........................ 15
Capitalization ............................ 16 DONALDSON, LUFKIN & JENRETTE
Selected Consolidated Financial Data ...... 17
Management's Discussion and --------------
Analysis of Financial Condition and
Results of Operations .................. 19 GOLDMAN, SACHS & CO.
Business .................................. 27
Management ................................ 38 ING BARING FURMAN SELZ LLC
Certain Transactions ...................... 54
Principal Stockholders .................... 55
Selling Stockholders ...................... 57 MORGAN STANLEY DEAN WITTER
Description of Capital Stock .............. 62
Shares Eligible for Future Sale ........... 76 SALOMON SMITH BARNEY
Certain U.S. Tax Consequences to
Non-United States Holders .............. 78
Underwriting .............................. 80
Legal Matters ............................. 84 , 1999
Experts ................................... 84
Available Information ..................... 84
Index to Consolidated Financial
Statements ............................. F-1
========================================================================================
</TABLE>

<PAGE>

[INTERNATIONAL COVER PAGE]

SUBJECT TO COMPLETION, DATED MAY 6, 1999

PROSPECTUS

15,000,000 SHARES

[GRAPHIC OMITTED]

COMMON STOCK
-------------------
This is an offering of 15,000,000 shares of common stock of Young & Rubicam
Inc. This prospectus relates to an international offering of 3,000,000 shares
outside the United States and Canada. In addition, 12,000,000 shares are being
offered in a concurrent offering in the United States and Canada.

The last reported sale price of the common stock, which is listed on the
New York Stock Exchange under the symbol "YNR", on May 5, 1999, was $41.06 per
share.

INVESTING IN COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 7 TO READ ABOUT RISKS THAT YOU SHOULD CONSIDER BEFORE BUYING SHARES OF THE
COMMON STOCK.

-------------------

The underwriters expect to deliver the shares in New York, New York on
, 1999.

-------------------
BEAR, STEARNS INTERNATIONAL LIMITED
CAZENOVE & CO.
DONALDSON, LUFKIN & JENRETTE

-------------------
GOLDMAN SACHS INTERNATIONAL
ING BARINGS
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY INTERNATIONAL

The date of this prospectus is , 1999

<PAGE>

<TABLE>
<S> <C>
[INTERNATIONAL BACK COVER PAGE]
====================================================================================================
NO DEALER, SALESPERSON OR OTHER PERSON IS
AUTHORIZED TO GIVE ANY INFORMATION OR TO
REPRESENT ANYTHING NOT CONTAINED IN THIS
PROSPECTUS. YOU MUST NOT RELY ON ANY
UNAUTHORIZED INFORMATION OR REPRESENTATIONS.
THIS PROSPECTUS IS AN OFFER TO SELL OR A [GRAPHIC OMITTED]
SOLICITATION OF AN OFFER TO BUY ONLY THE SHARES
OFFERED BY THIS PROSPECTUS, BUT ONLY UNDER
CIRCUMSTANCES AND IN JURISDICTIONS WHERE IT IS
LAWFUL TO DO SO. THE INFORMATION CONTAINED IN 15,000,000 SHARES
THIS PROSPECTUS IS CURRENT ONLY AS OF ITS DATE. COMMON STOCK

------------------ -----------
TABLE OF CONTENTS PROSPECTUS
------------------ -----------

PAGE
----

Prospectus Summary ....................... 1 BEAR, STEARNS INTERNATIONAL LIMITED
Risk Factors ............................. 7
Recent Developments ...................... 14 CAZENOVE & CO.
Use of Proceeds .......................... 15
Price Range of Common Stock and DONALDSON, LUFKIN & JENRETTE
Dividend Policy ....................... 15
Capitalization ........................... 16 -------------
Selected Consolidated Financial Data. 17
Management's Discussion and GOLDMAN SACHS INTERNATIONAL
Analysis of Financial Condition and
Results of Operations ................. 19 ING BARINGS
Business ................................. 27
Management ............................... 38 MORGAN STANLEY DEAN WITTER
Certain Transactions ..................... 54
Principal Stockholders ................... 55 SALOMON SMITH BARNEY INTERNATIONAL
Selling Stockholders ..................... 57
Description of Capital Stock ............. 62
Shares Eligible for Future Sale .......... 76
Certain U.S. Tax Consequences to , 1999
Non-United States Holders ............. 78
Underwriting ............................. 80
Legal Matters ............................ 84
Experts .................................. 84
Available Information .................... 84
Index to Consolidated Financial
Statements ............................ F-1
====================================================================================================
</TABLE>

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the estimated expenses in connection with
the issuance and distribution of the common stock being registered, other than
underwriting discounts and commissions.

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee ................. $ 203,378
National Association of Securities Dealers, Inc. filing fee ......... 30,500
Legal fees and expenses ............................................. *
Accounting fees and expenses ........................................ *
Blue Sky fees and expenses .......................................... *
Printing and engraving expenses ..................................... *
Registrar and transfer agent's fee .................................. *
Miscellaneous ....................................................... *
---------
Total .............................................................. $ *
=========
</TABLE>

- ----------
* To be filed by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Article XI of Young & Rubicam Inc.'s Amended and Restated Certificate of
Incorporation provides substantially as follows:

Section 1. Elimination of Certain Liability of Directors. A director of the
Company shall not be personally liable to Y&R or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the General
Corporation Law of the State of Delaware, or (iv) for any transaction from which
the director derived an improper personal benefit.

Section 2. Indemnification and Insurance.

(a) Right to indemnification. Each person who was or is made a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer
of the Company or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether the basis of such proceeding is alleged action in an
official capacity as a director, officer, employee or agent or in any other
capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Company to the fullest extent authorized by
the General Corporation Law of the State of Delaware, as the same exists or may
hereafter be amended but, in the case of any such amendment, to the fullest
extent permitted by law, only to the extent that such amendment permits the
Company to provide broader indemnification rights than said law permitted the
Company to provide prior to such amendment), against all expense, liability and
loss (including, without limitation, attorneys' fees, judgments, fines, amounts
paid or to be paid in settlement, and excise taxes or penalties arising under
the Employee Retirement Income Security Act of 1974) reasonably incurred or
suffered by such person in connection therewith and such indemnification shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, except as provided in paragraph (b)
hereof, the Company shall indemnify any such person seeking indemnification in
connection with a proceeding (or part

II-1

<PAGE>

thereof) initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Company. The right to
indemnification conferred in this Section shall be a contract right and shall
include the right to be paid by the Company the expenses incurred in defending
any such proceeding in advance of its final disposition; provided, however,
that, if the General Corporation Law of the State of Delaware requires, the
payment of such expenses incurred by a director or officer in his or her
capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding, shall be made only upon delivery to
the Company of an undertaking, by or on behalf of such director or officer, to
repay all amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this Section or
otherwise. The Company may, by action of the Board of Directors, provide
indemnification to employees and agents of the Company with the same scope and
effect as the foregoing indemnification of directors and officers.

(b) Right of Claimant to Bring Suit. If a claim under paragraph (a) of this
Section is not paid in full by the Company within thirty days after a written
claim has been received by the Company, the claimant may at any time thereafter
bring suit against the Company to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the Company) that the
claimant has not met the standards of conduct which make it permissible under
the General Corporation Law of the State of Delaware for the Company to
indemnify the claimant for the amount claimed, but the burden of proving such
defense shall be on the Company. Neither the failure of the Company (including
its Board of Directors, independent legal counsel, or its stockholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he or she
has met the applicable standard of conduct set forth in the General Corporation
Law of the State of Delaware, nor an actual determination by the Company
(including its Board of Directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.

(c) Non-Exclusivity of Rights. The right to indemnification and the payment
of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Section shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, provision of
the Certificate of Incorporation, By-law, agreement, vote of stockholders or
disinterested directors or otherwise.

(d) Insurance. The Company may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Company or
another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Company would
have the power to indemnify such person against such expense, liability or loss
under the General Corporation Law of the State of Delaware.

Section 145 of the General Corporation Law of the State of Delaware
provides as follows:

(a) A corporation shall have power to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the corporation) by reason of the fact that the person is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by the person in
connection with such action, suit or proceeding if the person acted in good
faith and in a manner the person reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to any criminal

II-2

<PAGE>

action or proceeding, had no reasonable cause to believe the person's conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed to
be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had reasonable cause to believe
that the person's conduct was unlawful.

(b) A corporation shall have power to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or
settlement of such action or suit if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person
is fairly and reasonably entitled to indemnity for such expenses which the
Court of Chancery or such other court shall deem proper.

(c) To the extent that a present or former director or officer of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, such person
shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by such person in connection therewith.

(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of
the present or former director, officer, employee or agent is proper in the
circumstances because the person has met the applicable standard of conduct
set forth in subsections (a) and (b) of this section. Such determination
shall be made, with respect to a person who is a director or officer at the
time of such determination, (1) by a majority vote of the directors who are
not parties to such action, suit or proceeding, even though less than a
quorum, or (2) by a committee of such directors designated by majority vote
of such directors, even though less than a quorum, or (3) if there are no
such directors, or if such directors so direct, by independent legal counsel
in a written opinion, or (4) by the stockholders.

(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount
if it shall ultimately be determined that such person is not entitled to be
indemnified by the corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by former directors and officers or
other employees and agents may be so paid upon such terms and conditions, if
any, as the corporation deems appropriate.

(f) The indemnification and advancement of expenses provided by, or
granted under, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in
such person's official capacity and as to action in another capacity while
holding such office.

(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another

II-3

<PAGE>

corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against such person and incurred by such person in
any such capacity, or arising out of such person's status as such, whether
or not the corporation would have the power to indemnify such person against
such liability under this section.

(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers, and
employees or agents, so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at
the request of such constituent corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under this section with respect
to the resulting or surviving corporation as such person would have respect
to such constituent corporation if its separate existence had continued.

(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit plan;
and references to "servicing at the request of the corporation" shall
include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner such person reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section.

(j) The indemnification and advancement of expense proved by, or granted
pursuant to, this section shall, unless otherwise provided when authorized
or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.

(k) The Court of Chancery is hereby vested with exclusive jurisdiction to
hear and determine all actions for advancement of expenses or
indemnification brought under this section or under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise. The Court of
Chancery may summarily determine a corporation's obligation to advance
expenses (including attorneys' fees).

Section 5 of the Management Voting Trust Agreement provides substantially
as follows:

The Company hereby agrees to assume liability for and does hereby
indemnify, protect, save and hold harmless the Voting Trustees and their
successors, assigns, agents and servants to the full extent lawful from and
against any and all liabilities, obligations, losses, damages, penalties, taxes,
claims, actions, suits, costs, expenses or disbursements (including legal fees
and expenses) of any kind and nature whatsoever ("Losses") that may be imposed,
incurred by or asserted against the Voting Trustees or any of them individually
in any way relating to or arising under the Management Voting Trust Agreement or
the enforcement of any of the terms thereof or in any way relating to or arising
out of the administration of the trusts created thereby or the action or
inaction of the Management Voting Trust thereunder, unless the Company shall
sustain the burden of proving by clear and convincing evidence that such Losses
were proximately caused by an act or omission on the part of such Voting Trustee
or Voting Trustees that was not taken in good faith or that was not reasonably
believed to be in or not opposed to the best interests of the Company and the
Management Investors as a group. The Company shall advance to any Voting Trustee
all reasonable expenses in connection with litigation arising under the
Management Voting Trust Agreement or the enforcement of any of the terms thereof
or in any way relating to or arising out of the administration of the trusts
created thereby or the action or inaction of the Management Voting Trust
thereunder, including, but not limited to, expenses in connection with
litigation in which such Voting Trustee purports to seek to enforce any portion
of the Management Voting Trust Agreement. A Voting Trustee shall be required to
execute an undertaking agreeing to repay the Company the amount so advanced in
the event it is

II-4

<PAGE>

ultimately determined that such Voting Trustee is not entitled to
indemnification with respect to such Losses, but the Voting Trustee shall not be
required to give a bond or any security for the advancement of such expenses. To
the extent insurance is available on commercially reasonable terms, the Company
will procure and maintain (for the benefit of the Company and the Voting
Trustees) insurance covering the Voting Trustees at least to the extent their
conduct would give rise to indemnification under the Management Voting Trust
Agreement. The provisions contained in this indemnification section shall
survive the termination of the Management Voting Trust Agreement.

The Restricted Stock Plan and the Management Stock Option Plan each provide
that no member of the Compensation Committee of the board of directors or of the
board of directors shall be liable for any action or determination made in good
faith with respect to such plan or any grant under such plan. The Restricted
Stock Plan and the Management Stock Plan each provide that to the fullest extent
permitted by law, the Company shall indemnify and save harmless each person made
or threatened to be made a party to any civil or criminal action or proceeding
by reason of the fact that such person, or such person's testator or intestate,
is or was a member of the Compensation Committee of the board of directors. The
1997 ICP provides that no member of the Compensation Committee or any officer or
employee of the Registrant or an affiliate acting at the direction or on behalf
of the Compensation Committee shall be personally liable for any action or
determination taken or made in good faith with respect to the 1997 ICP, and
shall, to the extent permitted by law, be fully indemnified and protected by the
Registrant with respect to any such action or determination.

Young & Rubicam Inc. also carries liability insurance covering officers
and directors.

Pursuant to the proposed form of Underwriting Agreement, the Underwriters
have agreed to indemnify the directors and officers of Young & Rubicam Inc. in
certain circumstances.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

In December 1996, in connection with its recapitalization, Y&R (1) issued
and sold 30,228,195 shares of common stock to the Recapitalization Investors and
one entity affiliated with an independent member of the board of directors for
cash consideration of $231,749,495, (2) issued and sold 17,154,135 shares of
common stock to 182 employees in exchange for a combination of cash, notes,
shares of common stock, $.25 par value, of Young & Rubicam Inc., a New York
corporation, and limited partnership units of Young & Rubicam L.P., a Delaware
limited partnership, (3) granted 16,823,565 Rollover Options to its employees in
consideration of the surrender for cancellation of all or a portion of their
outstanding employee options, and (4) granted 5,200,590 Executive Options to its
employees without consideration pursuant to the Management Stock Option Plan.

In August 1997, two members of management of Y&R purchased an aggregate of
12,900 shares of common stock for an aggregate purchase price of $98,900. In
October 1997, four members of management of Y&R purchased an aggregate of 36,000
shares of common stock for an aggregate purchase price of $276,000. In November
1997, Y&R purchased additional equity interests in two of its Argentine
subsidiaries using an aggregate of 91,320 shares of common stock as part of the
consideration.

During 1997, management investors whose employment with Y&R was terminated
exercised Rollover Options to purchase an aggregate of 463,065 shares of common
stock at $1.92 per share, or an aggregate of $887,541. All of these shares of
common stock were repurchased by Y&R pursuant to the call provisions of the
Stockholders Agreement at a price equal to $7.67 per share.

In December 1997, Y&R issued and sold 4,250,790 shares of common stock to
its employees for an aggregate amount of $9,314,483 pursuant to the exercise of
Rollover Options and Executive Options. In March 1998, Y&R issued and sold
135,885 shares of common stock to its employees for an aggregate amount of
$864,196 pursuant to the exercise of Rollover Options and Executive Options.

In March 1999, Y&R purchased additional equity interests in a Dutch
subsidiary using an aggregate of 27,465 shares of common stock as part of the
consideration.

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<PAGE>

All of the sales of Y&R securities described above were deemed to be exempt
from the registration requirements under the Securities Act pursuant to Section
4(2) thereof, and in reliance on Rule 701 promulgated under Section 3(b) thereof
and Regulation D and Regulation S thereunder. Each recipient of such securities
represented in each transaction such recipient's intention to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution of the securities and appropriate legends were affixed to
the share certificates issued in such transactions.

II-6

<PAGE>

ITEM 16. EXHIBITS.

(a) Exhibits

1.1 Form of Underwriting Agreement.*

3.1 Amended and Restated Certificate of Incorporation of Registrant
(incorporated by reference from Exhibit 4.4 to the Registration
Statement on Form S-8 (File No. 333-57605) filed by the Company).

3.2 Amended and Restated Bylaws of Registrant (incorporated by reference
from Exhibit 4.5 to the Registration Statement on Form S-8 (File No.
333-57605) filed by the Company).

4.1 Specimen Certificate of Common Stock of Registrant (incorporated by
reference from Exhibit 4.1 to the Registration Statement on Form S-1
(File No. 333-46929) filed by the Company).

4.2 Rights Agreement, dated as of May 1, 1998 (incorporated by reference
from Exhibit 4.9 to the Registration Statement on Form S-8 (File No.
333-57605) filed by the Company).

4.3 Certificate of Designation for Registrant's Cumulative Participating
Junior Preferred Stock (incorporated by reference from Exhibit 4.3 to
the Registration Statement on Form S-1 (File No. 333-66883) filed by
the Company).

5.1 Opinion of Cleary, Gottlieb, Steen & Hamilton, counsel to the
Registrant, as to the legality of the shares of Common Stock being
registered.*

9.1 Management Voting Trust Agreement, dated as of December 12, 1998
(incorporated by reference from Exhibit 9.1 to the Registration
Statement on Form S-1 (File No. 333-46929) filed by the Company).

9.2 Young & Rubicam Inc. Restricted Stock Trust Agreement, dated as of
December 12, 1996 (incorporated by reference from Exhibit 9.2 to the
Registration Statement on Form S-1 (File No. 333-46929) filed by the
Company).

10.1 Stockholders' Agreement, dated as of May 8, 1998 (incorporated by
reference from Exhibit 4.8 to the Registration Statement on Form S-8
(File No. 333-57605) filed by the Company).

10.2 Contribution Agreement dated October 30, 1996 (incorporated by
reference from Exhibit 10.3 to the Registration Statement on Form S-1
(File No. 333-46929) filed by the Company).

10.3 Young & Rubicam Holdings Inc. Restricted Stock Plan (incorporated by
reference from Exhibit 10.4 to the Registration Statement on Form S-1
(File No. 333-46929) filed by the Company).

10.4 Young & Rubicam Holdings Inc. Management Stock Option Plan
(incorporated by reference from Exhibit 10.5 to the Registration
Statement on Form S-1 (File No. 333-46929) filed by the Company).

10.5 Young & Rubicam Inc. 1997 Incentive Compensation Plan (incorporated by
reference from Exhibit 10.6 to the Registration Statement on Form S-1
(File No. 333-46929) filed by the Company).

10.6 Young & Rubicam Inc. Select Executive Retirement Income Plan, dated as
of December 19, 1997, with Peter Georgescu (incorporated by reference
from Exhibit 10.7 to the Registration Statement on Form S-1 (File No.
333-46929) filed by the Company).

10.7 Young & Rubicam Inc. Select Executive Retirement Income Plan, dated as
of January 1, 1995, with Peter Georgescu (incorporated by reference
from Exhibit 10.8 to the Registration Statement on Form S-1 (File No.
333-46929) filed by the Company).

</TABLE>

II-7

<PAGE>

10.8 Young & Rubicam Inc. Select Executive Retirement Income Plan, dated as
of January 1, 1986, with Peter Georgescu (incorporated by reference
from Exhibit 10.9 to the Registration Statement on Form S-1 (File No.
333-46929) filed by the Company).

10.9 Young & Rubicam Inc. Select Executive Retirement Income Plan, dated as
of December 19, 1997, with John P. McGarry, Jr. (incorporated by
reference from Exhibit 10.10 to the Registration Statement on Form S-1
(File No. 333-46929) filed by the Company).

10.10 Young & Rubicam Inc. Select Executive Retirement Income Plan, dated as
of January 1, 1986, with John P. McGarry, Jr. (incorporated by
reference from Exhibit 10.11 to the Registration Statement on Form S-1
(File No. 333-46929) filed by the Company).

10.11 Young & Rubicam Inc. Select Executive Retirement Income Plan, dated as
of December 31, 1994, with John P. McGarry, Jr. (incorporated by
reference from Exhibit 10.12 to the Registration Statement on Form S-1
(File No. 333-46929) filed by the Company).

10.12 Young & Rubicam Inc. Select Executive Retirement Income Plan, dated as
of December 19, 1997, with Edward Vick (incorporated by reference from
Exhibit 10.13 to the Registration Statement on Form S-1 (File No.
333-46929) filed by the Company).

10.13 Young & Rubicam Inc. Select Executive Retirement Income Plan, dated as
of January 1, 1995, with Edward Vick (incorporated by reference from
Exhibit 10.14 to the Registration Statement on Form S-1 (File No.
333-46929) filed by the Company).

10.14 Young & Rubicam Inc. Select Executive Retirement Income Plan, dated as
of December 19, 1997, with Alan J. Sheldon (incorporated by reference
from Exhibit 10.15 to the Registration Statement on Form S-1 (File No.
333-46929) filed by the Company).

10.15 Young & Rubicam Inc. Select Executive Retirement Income Plan, dated as
of January 1, 1995, with Alan J. Sheldon (incorporated by reference
from Exhibit 10.16 to the Registration Statement on Form S-1 (File No.
333-46929) filed by the Company).

10.16 Young & Rubicam Inc. Select Executive Retirement Income Plan, dated as
of January 1, 1988, with Alan J. Sheldon (incorporated by reference
from Exhibit 10.17 to the Registration Statement on Form S-1 (File No.
333-46929) filed by the Company).

10.17 Registration Rights Agreement, dated as of December 12, 1996
(incorporated by reference from Exhibit 10.18 to the Registration
Statement on Form S-1 (File No. 333-46929) filed by the Company).

10.18 Letter Agreement dated as of October 16, 1997 by and between Young &
Rubicam Inc. and Michael J. Dolan (incorporated by reference from
Exhibit 10.19 to the Registration Statement on Form S-1 (File No.
333-46929) filed by the Company).

10.19 Letter Agreement dated June 28, 1996 by and between Young & Rubicam
Inc. and Michael J. Dolan (incorporated by reference from Exhibit
10.20 to the Registration Statement on Form S-1 (File No. 333-46929)
filed by the Company).

10.20 Lease agreement for 230 Park Avenue South (incorporated by reference
from Exhibit 10.21 to the Registration Statement on Form S-1 (File No.
333-46929) filed by the Company).

10.21 H&F Option Agreement, dated as of December 12, 1996, among Young &
Rubicam Holdings Inc., a New York corporation ("Holdings"), Young &
Rubicam Inc., a New York corporation, Young & Rubicam Inc., a Delaware
corporation and a wholly-owned subsidiary of Holdings, and Hellman &
Friedman Capital Partners III, L.P. (incorporated by reference from
Exhibit 10.22 to the Registration Statement on Form S-1 (File No.
333-46929) filed by the Company).

</TABLE>

II-8

<PAGE>

<TABLE>

<S> <C>

10.22 H&F Option Agreement, dated as of December 12, 1996, among Young &
Rubicam Holdings Inc., a New York corporation ("Holdings"), Young &
Rubicam Inc., a New York corporation, Young & Rubicam Inc., a Delaware
corporation and a wholly-owned subsidiary of Holdings, and H&F Orchard
Partners III, L.P. (incorporated by reference from Exhibit 10.23 to the
Registration Statement on Form S-1 (File No. 333-46929) filed by the
Company).

10.23 Form of Young & Rubicam Inc. Key Corporation Managers Bonus Plan
(incorporated by reference from Exhibit 10.24 to the Registration
Statement on Form S-1 (File No. 333-46929) filed by the Company).

10.24 Amendment No. 1 to Restricted Stock Trust Agreement dated as of March
13, 1998 (incorporated by reference from Exhibit 10.25 to the
Registration Statement on Form S-1 (File No. 333-46929) filed by the
Company).

10.25 Young & Rubicam Inc. Deferred Compensation Plan (incorporated by
reference from Exhibit 10.26 to the Registration Statement on Form S-1
(File No. 333-46929) filed by the Company).

10.26 Amendment No. 1 to Young & Rubicam Inc. Deferred Compensation Plan
effective as of November 19, 1997 (incorporated by reference from
Exhibit 10.26 to the Annual Report on Form 10-K (File No. 001--14093)
filed by the Company).

10.27 Amendment No. 2 to Young & Rubicam Inc. Deferred Compensation Plan
Effective as of January 1, 1999 (incorporated by reference from Exhibit
10.27 to the Annual Report on Form 10-K (File No. 001--14093) filed by
the Company).

10.28 Young & Rubicam Inc. Grantor Trust Agreement (incorporated by reference
from Exhibit 10.27 to the Registration Statement on Form S-1 (File No.
333-46929) filed by the Company).

10.29 Amendment to Young & Rubicam Inc. 1997 Incentive Compensation Plan
(incorporated by reference from Exhibit 10.28 to the Registration
Statement on Form S-1 (File No. 333-46929) filed by the Company).

10.30 Credit Agreement (incorporated by reference from Exhibit 10.28 to the
Registration Statement on Form S-1 (File No. 333-66883) filed by the
Company).

21.1 List of Subsidiaries (incorporated by reference from Exhibit 10.28 to
the Registration Statement on Form S-1 (File No. 333-66883) filed by
the Company).

23.1 Consent of PricewaterhouseCoopers LLP.

23.2 Consent of Cleary, Gottlieb, Steen & Hamilton (included in opinion to
be filed as Exhibit 5.1).*

24.1 Power of Attorney (included on signature pages).
</TABLE>

- ----------
* To be filed by amendment.

II-9

<PAGE>

(b) Financial Statement Schedules

All required financial statement schedules are included in the consolidated
financial statements included in the prospectus.

ITEM 17. UNDERTAKINGS

The undersigned registrant hereby undertakes:

(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

(b) (1) That for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed
to be part of this Registration Statement as of the time it was declared
effective.

(2) That for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-10

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York, on May 5,
1999.

YOUNG & RUBICAM INC.

By: /s/ STEPHANIE W. ABRAMSON
------------------------------------
Name: Stephanie W. Abramson
Title: Executive Vice President and
General Counsel

POWER OF ATTORNEY

We, the undersigned officers and directors of Young & Rubicam Inc., hereby
severally and individually constitute and appoint Michael J. Dolan, Stephanie W.
Abramson and John A. Wozniak and each of them, the true and lawful
attorneys-in-fact and agents of each of us to execute in the name, place and
stead of each of us (individually and in any capacity stated below) (1) any and
all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
or instruments necessary or advisable in connection therewith, and (2) a
Registration Statement, and any and all amendments thereto, relating to the
offering covered hereby filed pursuant to Rule 462(b) under the Securities Act
of 1933, with the Securities and Exchange Commission, each of said
attorneys-in-fact and agents to have the power to act with or without the others
and to have full power and authority to do and perform in the name and on behalf
of each of the undersigned every act whatsoever necessary or advisable to be
done in and about the premises, as fully to all intents and purposes as any of
the undersigned might or could do in person, and we hereby ratify and confirm
our signatures as they may be signed by our said attorneys-in-fact and agents or
each of them to any and all such amendments and instruments.

This Power of Attorney may be executed in multiple counterparts, each of
which shall be deemed an original, but which taken together shall constitute one
instrument.

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.

II-11

<PAGE>

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------- ---------------------------------------- ------------
<S> <C> <C>
* Chairman of the Board and Chief May 5, 1999
- --------------------------- Executive Officer
Peter A. Georgescu (principal executive officer)

* Vice Chairman, Chief Financial Officer May 5, 1999
- --------------------------- and Director
Michael J. Dolan (principal financial officer)

* Senior Vice President, Finance May 5, 1999
- --------------------------- (principal accounting officer)
John A. Wozniak

* Chief Operating Officer May 5, 1999
- --------------------------- and Director
Edward H. Vick

* Executive Vice President May 5, 1999
- --------------------------- and Director
Thomas D. Bell, Jr.

* Director May 5, 1999
- ---------------------------
F. Warren Hellman

* Director May 5, 1999
- ---------------------------
Richard S. Bodman

* Director May 5, 1999
- ---------------------------
Philip U. Hammarskjold

* Director May 5, 1999
- ---------------------------
John F. McGillicuddy

/s/ ALAN D. SCHWARTZ Director May 5, 1999
- ---------------------------
Alan D. Schwartz

</TABLE>

*By: /s/ STEPHANIE W. ABRAMSON
-------------------------
Name: Stephanie W. Abramson
Title: Attorney-in-Fact

II-12

<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
--- -----------
<S> <C>